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): August 10, 2017

 

HELIOS AND MATHESON ANALYTICS INC.

(Exact name of Registrant as specified in charter)

 

Delaware

(State or other jurisdiction
of incorporation)

 

0-22945
(Commission File Number)

 

13-3169913
(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)

 

 

 

 

 

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.

 

MoviePass Transaction

 

The following does not purport to be a complete description of the MoviePass SPA, the NPA, the MoviePass Note, the Helios Note, Form of Investors’ Rights Agreement, Form of Voting Agreement, Form of MoviePass Voting and Support Agreement, Form of HMNY Voting and Support Agreement, Form of MoviePass Lockup Agreement, Form of HMNY Lockup Agreement, Form of HMNY Voting Proxy and the Form of MoviePass Voting Proxy described in this Current Report on Form 8-K (this “Current Report”) and each is qualified in its entirety by reference to the full text of such document. Such documents are attached as exhibits to this Current Report and are incorporated herein by reference.

 

MoviePass SPA

 

On August 15, 2017 (the “Signing Date”), Helios and Matheson Analytics Inc., a Delaware corporation (“HMNY”), and MoviePass Inc., a privately held Delaware corporation (“MoviePass”), entered into a Securities Purchase Agreement (the “MoviePass SPA”), pursuant to which HMNY agreed to purchase shares of common stock of MoviePass (the “MoviePass Shares”) equal to fifty one percent (51%) of the then outstanding shares of MoviePass’ common stock (“MoviePass Common Stock”) for an aggregate purchase price of up to $27,000,000 (the “Maximum Purchase Price”), subject to the satisfaction or waiver of certain conditions set forth in the MoviePass SPA (the “MoviePass Transaction”). MoviePass is a subscription-based service that allows moviegoers to see a number of movies in movie theaters for a monthly fee.

 

MoviePass further agreed that upon conversion of convertible notes to be purchased by Helios for $1,000,000 in connection with the Closing (as defined below), MoviePass will issue the shares of MoviePass Common Stock issuable under such notes; provided, that in the event that the number of shares of MoviePass Common Stock to be issued thereunder is less than two percent (2%) of the then outstanding shares of MoviePass Common Stock (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 MoviePass Common Stock and warrants to purchase shares of MoviePass’s capital stock and the shares of MoviePass Common Stock issuable upon conversion of the Kelly Note), MoviePass agreed that such notes will be convertible into such number of shares of MoviePass Common Stock to provide HMNY with the foregoing two percent (2%) interest under such notes.

 

Upon the approval of the MoviePass Transaction by the stockholders of MoviePass holding at least a majority of the outstanding shares of MoviePass Common Stock, HMNY will loan MoviePass $4,950,000 in cash, pursuant to a Second Amended and Restated Subordinated Convertible Note Purchase Agreement (the “NPA”), whereby in exchange for such cash payment, HMNY will receive a subordinated convertible promissory note of MoviePass (the “MoviePass Note”) in the principal amount of $5,000,000, which includes an additional $50,000, which was advanced by HMNY to MoviePass prior to the Signing Date for legal and audit expenses (the “Initial Cash Payment”). The MoviePass Note will bear interest at a rate of 6% per annum. Pursuant to the MoviePass Note, HMNY will have (i) a right of first refusal with respect to any Next Equity Securities (as defined therein) and (ii) a right of first look and a right of last look with respect to transactions in which MoviePass solicits, initiates or encourages (including by way of furnishing nonpublic information), or takes any other action to knowingly facilitate, any inquiries or the makings of any proposal or offer (including, without limitation, any proposal or offer to its stockholders) that constitutes, or may reasonably be expected to lead to, any Acquisition Transaction (as defined therein).

 

At the closing of the MoviePass Transaction (the “Closing”), in exchange for the MoviePass Shares, Helios will issue MoviePass (i) 3,333,334 unregistered shares (the “HMNY Closing Shares”) of HMNY’s common stock, par value $.01 per share (“HMNY Common Stock”), for a total agreed upon value of approximately $10,000,000; and (ii) a promissory note in the principal amount of $10,000,000 (the “Helios Note”). Of the Helios Closing Shares, 666,667 shares shall be subject to forfeiture by MoviePass if MoviePass fails to achieve either of the following two milestones within the specified time frame: (A) within one year after the Closing, subscribers to MoviePass’ MoviePass product shall have exceeded on at least one (1) day 100,000 subscribers (such number of subscribers to be determined based upon the number of registered accounts on the MoviePass server that have contracted with MoviePass (through a 3rd party or otherwise) to use the MoviePass product not including any account that has notified MoviePass that it desires to cancel its use of the MoviePass product), and (B) the Common Stock shall have been listed on The Nasdaq Stock Market (“Nasdaq”) or New York Stock Exchange (“NYSE”) by January 31, 2018 (unless such failure to be listed is remedied within sixty (60) calendar days thereafter)

 

 
 

 

 

Pursuant to the Helios Note, Helios has agreed to (i) fund $5,000,000, plus all accrued interest thereon, on the 90th calendar day following the Closing and (ii) pay $5,000,000, plus all accrued interest thereon, on the later of the 180th calendar day following the Closing or when the MoviePass Common Stock becomes listed on Nasdaq or NYSE. 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, HMNY will redeem the outstanding principal (not to exceed $5,000,000) and accrued unpaid interest thereon as of the Extended Listing Maturity Date (the “ Redemption Amount ”) in exchange for HMNY tendering to MoviePass for immediate cancellation such number of MoviePass Shares in consideration of the immediate and automatic cancellation of HMNY’s obligation to repay any outstanding principle and accrued interest thereunder.

 

In addition, at the Closing, the MoviePass Note will automatically be deemed satisfied in full pursuant to the issuance of the MoviePass Shares and will no longer be outstanding. To the extent the MoviePass Transaction is not consummated prior to the termination of the MoviePass SPA, then the MoviePass Note will remain outstanding in accordance with its terms.

 

If MoviePass’ subscription service exceeds 150,000 subscribers on at least one (1) day within 15 months after the Closing, then, in addition to the HMNY Closing Shares, HMNY will issue to MoviePass 666,667 additional unregistered shares of HMNY Common Stock for a total agreed upon value of $2,000,000 (the “HMNY Milestone Shares” and together with the HMNY Closing Shares, the “HMNY Shares”) (the agreed upon value per share and number of shares are subject to appropriate adjustment in the event of any stock dividend, stock split, combination or similar recapitalization affecting the HMNY Common Stock). HMNY plans to issue the HMNY Shares described herein in reliance upon the exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

 

From the Closing until the first anniversary of the Closing, if MoviePass issues and/or sells any shares of MoviePass Common Stock, including upon exercise or conversion of any Common Stock Equivalents (as defined in the MoviePass SPA), MoviePass will promptly issue to HMNY a certificate or certificates evidencing such number of shares of MoviePass Common Stock as is necessary for HMNY to maintain its ownership percentage of fifty-one percent (51%) of the then outstanding shares of MoviePass Common Stock. If HMNY sells or otherwise transfers any of the MoviePass Shares during the period from the Closing until the first anniversary of the Closing the above fifty-one percent (51%) ownership percentage will be adjusted to reflect the MoviePass Shares transferred.

 

At or prior to the Closing, HMNY and MoviePass will each enter into a lock-up agreement (with respect to HMNY, the “HMNY Lock-Up Agreement” and with respect to MoviePass, the “MoviePass Lock-Up Agreement” and collectively, the “Lock-Up Agreements”). Pursuant to the Lock-Up Agreements, each of MoviePass and HMNY will agree that from the date of the lock-up agreement and ending on the later of one (1) year from the date thereof or six (6) months after the date on which shares of MoviePass Common Stock began trading on The Nasdaq Stock Market or New York Stock Exchange, neither MoviePass nor HMNY (i) shall sell, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of, or (iii) permit to exist any security interest, lien, claim, pledge, option, right of first refusal, agreement, limitation on MoviePass’ or HMNY’s voting rights, engage in any hedging or other transaction which is designed to, or which reasonably could be expected to lead to or result in a sale or disposition of, the HMNY Shares or the MoviePass Shares.

 

At or prior to the Closing, HMNY and MoviePass will enter into a voting proxy agreement, pursuant to which HMNY will grant a proxy in favor of Mitch Lowe, in his capacity as the Chief Executive Officer of MoviePass, with respect to the MoviePass Shares (the “HMNY Voting Proxy”). At or prior to the Closing, HMNY and MoviePass will also enter into a voting proxy agreement, pursuant to which MoviePass will grant a proxy in favor of Theodore Farnsworth , in his capacity as the Chief Executive Officer of HMNY, with respect to the HMNY Shares (the “MoviePass Voting Proxy”).

 

The obligation of the parties to consummate the MoviePass Transaction is subject to a number of closing conditions, including, among other conditions:

 

 

HMNY’s stockholders shall have approved the MoviePass Transaction, the Financing (as defined below) and the other transactions contemplated by the MoviePass SPA (the “HMNY Stockholder Approval”);

 

 

MoviePass’ stockholders shall have approved the MoviePass Transaction and the other transactions contemplated by the MoviePass SPA (the “MoviePass Stockholder Approval”);

     
 

HMNY shall have consummated the Financing; and

 

 

the approval of the Nasdaq to list the HMNY Shares to be issued in the MoviePass Transaction.

 

 
 

 

 

The MoviePass SPA contains certain other termination rights for each of HMNY and MoviePass, including the right of each party to terminate the MoviePass SPA if the MoviePass Transaction has not been completed within twelve months after the Signing Date. In the event that either HMNY or MoviePass terminate the MoviePass SPA due to (i) a breach by the other party of any of its representations, warranties, covenants or agreements contained in the MoviePass SPA or (ii) any representation or warranty of such party becoming untrue or inaccurate, in any case, which would result in a failure of a condition to be satisfied and the breach or inaccuracy is incapable of being cured or is not cured within the earlier of twenty (20) days after written notice of such breach or inaccuracy is provided by such terminating party or twelve months after the Signing Date, the breaching party will be required to pay the terminating party’s actual, reasonable out-of-pocket costs and expenses incurred in connection with the MoviePass Transaction in an amount up to $250,000.

 

Pursuant to the terms of a voting agreement (the “Voting Agreement”) to be entered into at or prior to the Closing by HMNY, MoviePass and certain stockholders of MoviePass, subject to applicable rules and regulations, the Chief Executive Officer of HMNY will have the right to designate two directors to the board of directors of MoviePass and the Chief Executive Officer of MoviePass will have the right to designate three directors of the board of directors of MoviePass. In accordance with the terms of the Voting Agreement, each party will be required to vote in favor of such designees. HMNY has also agreed to appoint Mitch Lowe as a director on the board of directors of HMNY in connection with the Closing.

 

Pursuant to the terms of an investors’ rights agreement (the “Investors’ Rights Agreement”) to be entered into at or prior to the Closing by HMNY, MoviePass and certain stockholders of MoviePass, HMNY and the stockholders party to such agreement will be entitled to certain information rights, including access to financial information and inspections rights. In addition, HMNY will receive the right to approve certain MoviePass corporate actions.

 

Transaction Voting and Support Agreements of Certain HMNY Stockholders and MoviePass Stockholders

 

Concurrently with the execution of the MoviePass SPA, the holders of approximately 49% of the outstanding shares of HMNY Common Stock entered into transaction voting and support agreements (the “HMNY Voting and Support Agreements”) and the majority stockholders of MoviePass have also entered into transaction voting and support agreements (the “MoviePass Voting and Support Agreements” and together with the HMNY Voting and Supports Agreements, the “Voting and Support Agreements”), pursuant to which such stockholders have agreed to vote in favor of or consent in writing to the MoviePass Transaction and the other transactions contemplated by the MoviePass SPA (the “Voting and Support Agreements”).

 

Under the Voting and Support Agreements, such stockholders also agreed not to transfer, sell, offer to sell, exchange, assign, pledge or otherwise dispose of or encumber any of HMNY Common Stock or MoviePass Common Stock held by such holder (unless, with respect to any proposed transfer of the MoviePass Common Stock, the transferee agrees, in writing with HMNY, to be bound by the terms of the Voting and Support Agreement) prior to (i) the Closing; (ii) the termination of the MoviePass SPA in accordance with its terms; (iii) or a voluntary termination of such holder’s Voting and Support Agreement by the holder if the terms and conditions described in the MoviePass SPA or in any of the exhibits attached thereto are modified in any manner the result of which requires the company to seek stockholder approval for such modification.

 

The MoviePass SPA has been filed herewith as required by applicable regulations of the U.S. Securities and Exchange Commission (the “SEC”) and solely to inform investors of its terms. The MoviePass SPA contains representations, warranties and covenants, which were made only for the purposes of such agreement and as of specific dates, that were made solely for the benefit of the parties to the MoviePass SPA and are intended not as statements of fact, but rather as a way of allocating risk to one of the parties if those statements prove to be inaccurate. In addition, such representations, warranties and covenants may have been qualified by certain disclosures not reflected in the text of the MoviePass SPA and may apply standards of materiality in a way that is different from what may be viewed as material by stockholders of, or other investors in, HMNY. The holders of HMNY Common Stock and other investors are not third-party beneficiaries under the MoviePass SPA and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or conditions of HMNY or MoviePass or any of their respective subsidiaries or affiliates.

 

Sale of Senior Secured Convertible Notes and Warrants

 

The following does not purport to be a complete description of the Securities Purchase Agreement, the Senior Secured Convertible Notes, the Investor Warrant, the Investor Note, the Registration Rights Agreement, the Security and Pledge Agreement, the Guaranty, and the Voting and Lockup Agreements described in this Current Report and each is qualified in its entirety by reference to the full text of such document. Such documents are attached as exhibits to this Current Report and are incorporated herein by reference.

 

 
 

 

 

Capitalized terms used in the discussion below but not defined are defined in the form of Senior Secured Convertible Notes attached as Exhibit 4.3 to this Current Report.

 

Securities Purchase Agreement

 

On August 15, 2017, pursuant to a Securities Purchase Agreement (“SPA”) entered into by HMNY and an institutional investor (the “Investor”), HMNY agreed to sell and issue (1) Senior Secured Convertible Notes to the Investor in the aggregate principal amount of $10,300,000 (each, a “Note” and collectively, the “Notes”), consisting of (i) a Series A Note in the principal amount of $1,250,000 (the “Initial Series A Note”), (ii) a second Series A Note in the principal amount of $8,800,000 (the “Additional Series A Note”, collectively with the Initial Series A Note, the “Series A Notes”), and (iii) a Series B Note in the principal amount of $250,000, and (2) a warrant to purchase shares of HMNY Common Stock that would be issuable upon full conversion of the February Notes (as defined herein) immediately following the Closing Date (as defined herein), exercisable for a period of five years at an exercise price of $3.25 per share (the “Investor Warrant”), for consideration consisting of (i) a cash payment of $220,000, and (ii) a secured promissory note payable by the Investor to HMNY (the “Investor Note”) in the principal amount of $8,800,000 (the “Investor Note Principal”) (collectively, the “Financing” and together with the MoviePass Transaction, the “Transactions”). The Financing will be consummated pursuant to the exemption from registration provided by Rule 506(b) promulgated under the Securities Act.

 

If HMNY proposes to undertake a subsequent offering of its securities, subject to certain customarily exempt securities, at any time on or prior to the later of (x) the date the Notes held by the Investor are no longer outstanding and (y) the second anniversary of the Closing Date, the Investor will have the right to subscribe for up to 50% of the securities offered.

 

Immediately prior to the closing of the Financing, the Investor will prepay (i) $5,000,000 of that certain promissory note of the Investor (the “February Investor Note”) issued as payment of the purchase price of the secured senior convertible notes issued by HMNY to the Investor (the “February Notes”) pursuant to a Securities Purchase Agreement dated February 7, 2017 (the “February SPA”) and (ii) $230,000 of that certain promissory note of the Investor (the “December Investor Note”) issued as payment of the purchase price of the secured convertible notes issued by HMNY to the Investor (the “December Notes”) pursuant to a Securities Purchase Agreement dated December 1, 2016 (the “December SPA”). In consideration of the prepayment, HMNY agreed that the Series B Note, upon issuance, constitutes a Variable Price Security (as defined in the February Notes and the December Notes) and, from and after the closing, any holder of a February Note shall have the right to substitute the Alternate Conversion Price as defined in the Series B Note for the conversion price in the February Notes, and any holder of a December Note shall have the right to substitute the Alternate Conversion Price as defined in the Series B Note for the conversion price in the December Notes. The Investor agreed that MoviePass shall not be required to be a Grantor under the security agreements pursuant to the February SPA and the December SPA.

 

The SPA requires HMNY to reimburse the Investor for all reasonable costs and expenses incurred by the Investor or its affiliates in connection with the structuring, documentation, negotiation and closing of the Financing. HMNY will use the net proceeds from the sale of the Notes and the Investor Warrant and the prepayment under the February Investor Note and the December Investor Note to pay (i) $5,000,000 in cash to MoviePass upon signing of the MoviePass SPA in exchange for a convertible note of MoviePass; (ii) up to $10,000,000 to MoviePass pursuant to a subordinated convertible promissory note to be issued by HMNY to MoviePass upon the closing of the transactions contemplated by the MoviePass SPA, in accordance with the terms thereof; and (iii) for general corporate purposes.

 

On or prior to October 31, 2017, HMNY will convene a special meeting of stockholders, subject to and in accordance with Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to approve resolutions providing for the issuance of all of the Notes, the Investor Warrant, and the shares of HMNY Common Stock convertible pursuant to the Notes or exercisable pursuant to the Investor Warrant (collectively, the “Securities”) in accordance with Nasdaq Listing Rule 5635 (the “Financing Stockholder Approval”). If HMNY fails to obtain the Financing Stockholder Approval by October 31, 2017, HMNY shall cause an additional stockholder meeting to be held on or prior to December 31, 2017. If HMNY fails to obtain the Financing Stockholder Approval by December 31, 2017, it shall cause an additional stockholder meeting to be held semi-annually thereafter until such Financing Stockholder Approval is obtained.

 

Investor Note

 

The Investor Note will be payable in full eight months from the date of issuance (the “Closing Date”). The Investor’s obligation to pay HMNY the Investor Note Principal pursuant to the Investor Note is to be secured by $8,800,000, in the aggregate, in cash, cash equivalents, any Group of Ten (“G10”) currency and any notes or other securities issued by any G10 country. HMNY will receive the applicable portion of the Investor Note Principal then due upon each voluntary or mandatory prepayment of the Investor Note. On or after August 31, 2017 (or earlier if HMNY permits), the Investor may, at its option and at any time, voluntarily prepay the Investor Note, in whole or in part. The Investor Note is also subject to mandatory prepayment, in whole or in part, upon the occurrence of one or more of the following mandatory prepayment events:

 

 
 

 

 

(1) Mandatory Prepayment upon Conversion of Notes – At any time (i) if HMNY receives a conversion notice from the Investor in which all, or any part of the Notes to be converted included any Restricted Principal (as defined herein), and (ii) the Investor receives a confirmation from HMNY’s transfer agent that it has been irrevocably instructed by HMNY to deliver to the Investor the shares of HMNY Common Stock to be issued pursuant to the conversion notice.

 

(2) Mandatory Prepayment upon Mandatory Prepayment Notices – HMNY may require the Investor to prepay the Investor Note by delivering a mandatory prepayment notice to the Investor, subject to (i) the satisfaction of certain equity conditions, and (ii) the Investor’s receipt of a valid written notice by HMNY electing to effect a mandatory conversion of Restricted Principal (defined as $8,800,000 of the principal amount of the Additional Series A Note), not in excess of the Maximum Mandatory Share Amount or the Maximum Mandatory Conversion Amount (each as defined below under the heading Conversion of the Notes ).

 

The Investor Note also contains certain optional offset rights of HMNY and the Investor, which if exercised, would reduce the amount outstanding under the Notes and the Investor Note by the same amount and, accordingly, the cash proceeds received by HMNY from the Investor pursuant to the Financing.

 

The Notes

 

Principal Amount

 

The aggregate principal amount of the Notes will be $10,300,000.

 

Maturity Date

 

Unless earlier converted or redeemed, the Notes mature 8 months from the Closing Date.

  Interest and Payment of Interest

 

The Notes will bear interest at a rate of 6% per annum, subject to an increase to 12% during the first 30 days following the occurrence and continuance of an Event of Default and to 18% thereafter (the “Default Rate”). Interest on the Notes is computed on the basis of a 360-day year and twelve 30-day months.

 

No interest shall accrue under the Initial Series A Note unless and until an Event of Default has occurred, in which event the Default Rate will apply. Accrued and unpaid interest is payable by way of inclusion of such interest in the Conversion Amount or upon any redemption or any required payment upon any Bankruptcy Event of Default. Interest shall cease to accrue on the calendar day immediately following the date of cure.

 

Interest on the Additional Series A Note and the Series B Note will be payable in arrears commencing on October 1, 2017 and on the first Trading Day of each calendar quarter thereafter and, so long as the Equity Conditions have been satisfied, may be paid in shares of HMNY Common Stock at HMNY’s option. HMNY may also elect to pay interest in whole or in part in cash.

 

Conversion of the Notes

 

Subject to certain beneficial ownership limitations described below, the Investor may, at any time, elect to convert the Notes into shares of HMNY Common Stock at the Conversion Price, provided that the conversion under the Additional Series A Note may not commence until no December Notes, February Notes, Series B Notes or Initial Series A Notes remain outstanding. The Conversion Price is $4.00 under the Series A Notes and $3.00 under the Series B Note.

 

The Investor also will have the right to convert the Notes into shares of HMNY Common Stock at the Alternate Conversion Price, subject to certain beneficial ownership limitations described below. The Alternate Conversion Price is defined as the lowest of :

 

(1) (i) the Conversion Price of $4.00, and (ii) the Floor Price then in effect, for the Initial Series A Note;

 

(2) (i) the Conversion Price of $4.00, and (ii) the greater of (I) the Floor Price then in effect and (II) 85% of the quotient of (x) the sum of the volume weighted average price of HMNY Common Stock for each of the five consecutive Trading Days ending and including the Trading Day immediately preceding the delivery or deemed delivery of the applicable conversion notice, divided by (y) 5, for the Additional Series A Note;

 

(3) (i) the Conversion Price of $3.00, and (ii) during the period commencing on the Closing Date through the Adjustment Date, the greater of (A) the Floor Price of $3.00 and (B) 85% of the lowest VWAP of any Trading Day during the twenty consecutive Trading Day period ending and including the applicable Alternate Conversion Date, and (iii) after the Adjustment Date, the greater of (I) the Floor Price of $0.50 and (II) 85% of the quotient of (x) the sum of the VWAP of HMNY Common Stock for each of the five consecutive Trading Days ending and including the applicable Alternate Conversion Date, divided by (y) 5, for the Series B Note.

 

 
 

 

 

The “Adjustment Date” is (x) the fortieth (40 th ) calendar day anniversary of the Closing Date if HMNY obtains the approval of the Principal Market (the “Nasdaq Approval”) or, (y) otherwise, the fiftieth (50 th ) calendar day anniversary of the Closing Date. The “Floor Price” is $4.00 (or, solely with respect to the calculation of the aggregate number of Interest Shares to be delivered to the Investor on any given Interest Date at any time either a Price Failure or Volume Failure exists, $0.50) for the Series A Notes; or (i) during the period commencing on the Closing Date through and including the Adjustment Date, $3.00 or (ii) after the Adjustment Date, $0.50, for the Series B Notes.

 

If the Equity Conditions are satisfied, HMNY may require the Investor to convert all or any part of the Notes, up to the Maximum Mandatory Share Amount and the Maximum Mandatory Conversion Amount (each, a “Mandatory Conversion”). If on the fifth Trading Day immediately following a Mandatory Conversion Date and on each fifth Trading Day thereafter through and including the fifteenth Trading Day immediately following such Mandatory Conversion Date (each, a “True-Up Date”), the True-Up Price is less than the applicable Mandatory Conversion Price, HMNY must deliver to the Investor an additional number of shares of HMNY Common Stock equal to the difference between the number of shares of HMNY Common Stock delivered to the Investor as a result of the Mandatory Conversion and the number of shares determined by dividing the principal, interest and late charges converted by the True-Up Price. The “True-Up Price” is defined as 85% of the lowest volume weighted average price of HMNY Common Stock on the Trading Day with the lowest volume weighted average price during the 15 consecutive Trading Days following the Mandatory Conversion.

 

“Mandatory Conversion Date” means the third Trading Day following the delivery by HMNY of a Mandatory Conversion Notice.

 

“Mandatory Conversion Price” means, with respect to any Mandatory Conversion that price which shall be the lowest of (i) the applicable Conversion Price as in effect on the applicable Mandatory Conversion Date, and (ii) 80% of the sum of (A) the volume weighted average price of HMNY Common Stock for each of the 3 Trading Days with the lowest volume weighted average price of HMNY Common Stock during the 20 consecutive Trading Day period ending on and including the Trading Day immediately prior to the applicable Mandatory Conversion Date divided by (B) 3.

 

“Maximum Mandatory Share Amount” with respect to any Mandatory Conversion Date means 100% of the quotient of (x) the sum of the composite aggregate daily share trading volume of the common stock for each Trading Day during the 5 Trading Day period ending and including the Trading Day immediately prior to the applicable Mandatory Conversion Notice Date, divided by (y) 5. 

 

“Maximum Mandatory Conversion Amount” with respect to any Mandatory Conversion Date means the difference of (x) $500,000 less (y) the sum of each Conversion Amount converted under the applicable Note during the 5 Trading Day period ending and including the applicable Mandatory Conversion Date.

 

Beneficial Ownership Limitations on Conversion and Issuance

 

In addition to the conversion limitations described above, the Notes may not be converted and shares of HMNY Common Stock may not be issued under the Notes if, after giving effect to the conversion or issuance, the Investor together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of HMNY Common Stock. At the Investor’s option, the ownership limitation blocker may be raised or lowered to any other percentage not in excess of 9.99%, as applicable, except that any raise will only be effective upon 61-days’ prior notice to HMNY.

 

Redemption of the Notes

 

Provided there has been no Equity Conditions Failure, HMNY will have the right to redeem all, but not less than all, of the amounts remaining unpaid under the Notes. The portion of the Notes subject to redemption can be redeemed by HMNY in cash at a price equal to 115% of the amount being redeemed. In the event of a Change of Control, the Investor may require HMNY to redeem the Notes in cash at the Change of Control Redemption Price (as defined in the Notes).

 

Events of Default

 

The Notes contain standard and customary Events of Default including but not limited to: (i) failure to register HMNY Common Stock within certain time periods or failure to keep the registration statement effective as required by the Registration Rights Agreement; (ii) failure to maintain the listing of HMNY Common Stock; (iii) failure to make payments when due under the Notes; (iv) breaches of covenants and (iv) bankruptcy or insolvency.

 

 
 

 

 

Following an Event of Default, the Investor may require HMNY to redeem all or any portion of the Notes. The redemption amount may be paid in cash or with shares of HMNY Common Stock, at the election of the Investor, at a price equal to the Event of Default Redemption Price.

 

HMNY must immediately redeem the Notes in cash upon the occurrence of a Bankruptcy Event of Default.

 

The Event of Default Redemption Price will be computed as a price equal to the greater of (i) 125% of the principal, interest and late charges to be redeemed and (ii) the product of (X) the principal, interest and late charges to be redeemed divided by the Conversion Price multiplied by (Y) the product of (1) 125% multiplied by (2) the greatest Closing Sale Price of HMNY Common Stock on any Trading Day during the period commencing on the date preceding such Event of Default and ending on the date HMNY makes the entire payment required to be made under the Notes.

 

In addition, following an Event of Default, the Investor will have the right to convert the Notes at the “Alternate Conversion Event of Default Price” which means, with respect to any Alternate Conversion, that price which shall be the lowest of (i) the applicable Conversion Price as in effect on the applicable Conversion Date of the applicable Alternate Conversion, and (ii) 75% of the lowest volume weighted average price of HMNY Common Stock for each of the 30 consecutive Trading Days ending and including the Trading Day of delivery or deemed delivery of the applicable Conversion Notice.

 

Fundamental Transactions

 

The Notes will prohibit HMNY from entering into specified transactions involving a change of control unless the successor entity, which must be a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market, assumes in writing all of HMNY’s obligations under the Notes. The transactions contemplated under the Purchase Agreement shall not be deemed, either individually or collectively, as a “Fundamental Transaction” under the Notes.

 

New Debt

 

With the exception of Permitted Indebtedness HMNY will agree that for a period of 90 days following payment in full of the Notes, it will not incur any other debt.

 

Security and Pledge Agreements and Guaranty

 

On the Closing Date, HMNY and its wholly-owned subsidiaries Zone Technologies, Inc. (“Zone”) and HMNY Zone Loan LLC will each enter into a Security and Pledge Agreement in favor of the Investor as Collateral Agent. Pursuant to such Security and Pledge Agreements, the Notes will be secured by a perfected first priority security interest in all of the assets of HMNY, Zone and HMNY Zone Loan LLC, subject to Permitted Liens.

 

Zone and HMNY Zone Loan LLC will also provide a Guaranty to the Investor as Collateral Agent whereby they guarantee the punctual payment of all obligations that accrue after the commencement of any insolvency proceeding of HMNY, whether or not the payment of such obligations are enforceable or allowable in the insolvency proceeding, and all fees, interest, premiums, penalties, causes of actions, costs, commissions, expense reimbursements, indemnifications and all other amounts due or to become due under any of the Financing documents, and agree to pay any and all costs and expenses (including counsel fees and expenses) incurred by the Collateral Agent in enforcing any rights under the Guaranty or any other Financing document.

 

Investor Warrant

 

In addition to the Notes, HMNY will issue a 5-year warrant to the Investor on the Closing Date (the “Investor Warrant”) for the purchase of 60% (or, if the Nasdaq Approval is not obtained, 80%) shares of HMNY Common Stock that would be issuable upon full conversion of the February Notes immediately following the Closing Date (the “Warrant Shares”), at an exercise price of $3.25 per share, subject to adjustment provided under the Investor Warrant. If, after the six-month anniversary of the issuance date of the Investor Warrant, there is no effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Investor, then the Investor Warrant may also be exercised, in whole or in part, by means of a “cashless exercise”. The Investor Warrant may not be exercised if, after giving effect to the exercise the Investor, together with its Attribution Parties (as defined in the Investor Warrant), would beneficially own in excess of 9.99% of the number of shares of HMNY Common Stock outstanding immediately after giving effect to the issuance of the Warrant Shares. At the Investor’s option, the ownership limitation blocker may be raised or lowered to any other percentage not in excess of 9.99%, as applicable, except that any raise will only be effective upon 61-days’ prior notice to HMNY.

 

 
 

 

 

On or after the date of the SPA (the “Subscription Date”) and on or prior to the forty-second month anniversary of the Closing Date if the Nasdaq Approval is obtained, if HMNY issues or sells common stock, or convertible securities or options issuable or exchangeable into HMNY Common Stock (a “New Issuance”), under which such common stock is sold for a consideration per share less than the exercise price then in effect, the exercise price of the Investor Warrant will be adjusted to the New Issuance price in accordance with the formulas provided in the Investor Warrant. Upon any adjustment to the exercise price, the number of Warrant Shares that may be purchased upon exercise of the Investor Warrant will be increased or decreased proportionately, so that after such adjustment the aggregate exercise price payable for the adjusted number of Warrant Shares will be the same as the aggregate exercise price in effect immediately prior to such adjustment. In addition, if HMNY sells Variable Price Securities (as defined in the Investor Warrant) after the Subscription Date, the Investor will have a right to substitute the Variable Price (as defined in the Investor Warrant) for the exercise price under the Investor Warrant.

 

Registration Rights Agreement

 

Under the terms of a Registration Rights Agreement that will be entered into with the Investor on the Closing Date, HMNY is required to register for resale the shares of common stock that are issuable upon conversion of the Notes or upon exercise of the Investor Warrant, additional shares that could be used as payment of monthly interest plus an additional number of shares so that the total number of shares of common stock registered equals 125% of (i) the sum of the maximum number of shares issuable upon conversion of the Notes and (ii) the sum of the maximum number of shares issuable upon exercise of the Investor Warrant. The Registration Rights Agreement requires HMNY to file the registration statement within 30 days after the Closing Date and to have the registration statement declared effective 90 days after the Closing Date (or 120 days after the Closing Date if the registration statement is subject to review by the SEC).

 

The Registration Rights Agreement provides for the payment of liquidated damages of 1.5% of the product of (x) the number of shares of common stock required by the Registration Rights Agreement to be included in the registration statement and (y) the Closing Sale Price as of the Trading Day immediately prior to the date a Registration Delay Payment, defined as the failure to file the registration statement in the time required, the failure to have the registration statement declared effective in the time required, the failure to maintain the effectiveness of the registration statement or the failure to keep current public information in the marketplace. 

 

HMNY is required to keep the registration statement effective (and the prospectus contained therein available for use) pursuant to Rule 415 for resales on a delayed or continuous basis at then-prevailing market prices at all times until the earlier of (i) the date as of which the Investor may sell all of the common stock issuable pursuant thereto without restriction pursuant to Rule 144 or (ii) the date on which all of the common stock covered by the registration statement shall have been sold.

 

Voting and Lockup Agreements

 

As a condition to closing the Financing, Theodore Farnsworth, the Chief Executive Officer and Chairman of the Board of HMNY and Helios & Matheson Information Technology Ltd. (“HMIT”), of which Muralikrishna Gadiyaram, a director of HMNY, is the chief executive officer, and its wholly-owned subsidiary, Helios & Matheson Inc. (collectively, the “Principal Stockholders”), who collectively own approximately 49% of the issued and outstanding HMNY Common Stock, will execute Voting and Lockup Agreements with HMNY. Pursuant to the Voting and Lockup Agreements, the Principal Stockholders agree to vote in favor of HMNY’s issuance of the Securities. The Voting and Lockup Agreements also require that, for a period beginning on the Closing Date and ending on the date when all of the principal outstanding under the Notes issued to the Investor consists of Restricted Principal thereunder, the Principal Stockholders will not (i) dispose of or agree to dispose of, directly or indirectly, any securities of HMNY, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any securities of HMNY owned directly by the Principal Stockholders (including holding as a custodian) or (iii) permit to exist any security interest, lien, claim, pledge, option, right of first refusal, agreement, or limitation on the Principal Stockholders’ voting rights, charge or other encumbrance of any nature with respect to the Principal Stockholders’ securities in HMNY or (iv) engage in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of the Principal Stockholders’ securities in HMNY or (v) directly or indirectly initiate, solicit or encourage any person to take actions which could reasonably be expected to lead to the occurrence of any of the foregoing. Notwithstanding the foregoing, 100,000 shares of the shares owned by HMIT shall not be subject to the restriction on transfer or voting requirement under its Voting and Lockup Agreement once HMNY obtains the Financing Stockholder Approval, provided that such shares cannot be transferred on the day of the Financing Stockholder Approval or the day thereafter. .

 

 
 

 

 

Placement Agent Warrants

 

As partial payment for its placement agent services, Palladium Capital Advisors LLC (“Palladium”) will receive 5-year warrants (the “Placement Agent Warrants”) for the purchase of 8% of the number of shares of HMNY Common Stock into which the unrestricted principal of the Notes becomes convertible (the “Palladium Warrant Shares”), as and when applicable, at an exercise price equal to the greater of (i) the conversion price as applicable and (ii) the consolidated closing bid price of Company’s common stock on The NASDAQ Capital Market on the date Palladium becomes entitled to the warrant, without regard to any increase in shares issuable under a ratchet, “true up” or similar provision of the Notes. The Placement Agent Warrants cannot be exercised for a period of 6 months from the applicable date of issuance. If, after the first anniversary of the applicable issuance date of each Placement Agent Warrant, there is no effective registration statement registering, or no current prospectus available for, the resale of the Palladium Warrant Shares by Palladium, then the Placement Agent Warrant may also be exercised, in whole or in part, by means of a “cashless exercise”. The Placement Agent Warrants may not be exercised if, after giving effect to the exercise Palladium, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of HMNY Common Stock outstanding immediately after giving effect to the issuance of the Palladium Warrant Shares. Upon not less than 61 days’ prior notice to HMNY, Palladium may increase or decrease the ownership limitation, provided that the ownership limitation in no event exceeds 9.99% of the number of shares of HMNY Common Stock outstanding immediately after giving effect to the issuance of the Palladium Warrant Shares.

 

Palladium will also receive 8% of the gross cash proceeds actually received by HMNY pursuant to payments by the Investor under the Notes and the Investor Warrant. 

 

Item 2.03     Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The information included in Item 1.01 of this Current Report is hereby incorporated by reference into this Item 2.03.

 

Item 3.02.     Unregistered Sales of Equity Securities.

 

The information included in Item 1.01 of this Current Report is hereby incorporated by reference into this Item 3.02.

 

Item 5.02.     Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

On August 10, 2017, the board of directors of HMNY approved the grant of 500,000 unregistered shares of HMNY Common Stock to each of Theodore Farnsworth, Chief Executive Officer and Chairman of the board, and Muralikrishna Gadiyaram, a non-independent director and consultant of HMNY. Such unregistered shares will be issued upon completion of the transactions contemplated by the MoviePass SPA and stockholder approval, to the extent stockholder approval is required in accordance with Nasdaq Listing Rule 5635(c), and such shares will be subject to an 18 month lockup agreement. On that same day, the board of directors of HMNY also approved the grant of 50,000 unregistered shares of HMNY Common Stock to Parthasarathy (Pat) Krishnan, the Chief Innovation Officer of HMNY, which shall be subject to an 18 month lockup agreement.

 

Item 7.01.     Regulation FD.

 

On August 15, 2017, HMNY issued a press release relating to the MoviePass Transaction. 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 9.01.     Financial Statements and Exhibits.

 

Exhibit No.

Description

  

  

2.1*

Securities Purchase Agreement, dated August 15, 2017, by and between HMNY and MoviePass.(1)

4.1*

Form of MoviePass Note.

4.2*

Form of Helios Note.

4.3*

Form of Senior Secured Convertible Notes to be issued by HMNY.

4.4*

Form of Investor Note to be issued by the Investor.

4.5*

Form of Investor Warrant.

10.1*

Form of Investors’ Rights Agreement.

10.2*

Form of Voting Agreement.

10.3*

Form of MoviePass Transaction Voting and Support Agreement.

 

 
 

 

 

10.4*

Form of HMNY Transaction Voting and Support Agreement.

10.5*

Form of MoviePass Lock-Up Agreement.

10.6*

Form of HMNY Lock-Up Agreement.

10.7*

Form of HMNY Voting Proxy.

10.8*

Form of MoviePass Voting Proxy.

10.9*

Form of Second Amended and Restated Note Purchase Agreement.

10.10*

Securities Purchase Agreement, dated August 15, 2017, by and between HMNY and the Investor.

10.11*

Form of Registration Rights Agreement.

10.12*

Form of Security and Pledge Agreement.

10.13*

Form of Guaranty.

99.1**

Press Release issued on August 15, 2017.

 

* 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 SPA. HMNY 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 document relates to the MoviePass Transaction and the Financing, which will become the subject of separate proxy statements to be filed with the SEC by HMNY, and may be deemed to be solicitation material in respect of the Transactions. This document is not a substitute for the proxy statements that HMNY will file with the SEC or any other documents that HMNY may file with the SEC or send to stockholders in connection with the Transactions. Before making any voting decision, investors and security holders are urged to read the proxy statements and all other relevant documents filed or that will be filed with the SEC in connection with the Transactions 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 statements and all other relevant documents filed or that will be filed with the SEC by HMNY 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 HMNY by accessing HMNY’s 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

 

HMNY, MoviePass and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from HMNY’s stockholders in connection with the Transactions, as applicable. Information regarding HMNY’S directors and executive officers is contained in the annual report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on April 14, 2017. You can obtain a free copy of this document at the SEC’s website at www.sec.gov or by accessing HMNY’S website at www.hmny.com. Additional information regarding the interests of those persons and other persons who may be deemed participants in the Transactions may be obtained by reading the proxy statement regarding the MoviePass Transaction and the Financing, as applicable, 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 statements in this Current Report and its exhibits contain forward-looking statements 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” and similar expressions. All statements other than statements of historical fact included in this communication are forward-looking statements, including statements regarding the expected completion of the transactions contemplated by the MoviePass SPA and the Financing and the time frame in which the completion of such transactions will occur. Statements regarding future events are based on the parties’ current expectations and are necessarily subject to associated risks related to, among other things, conditions to the Closing may not be satisfied, the occurrence of any event, change or other circumstances that could give rise to the termination of the MoviePass SPA, and general economic conditions.

 

 
 

 

 

Such forward-looking statements are based on a number of assumptions. Although management of HMNY 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 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 HMNY’s current expectations and HMNY 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.

 

 
 

 

 

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: August 15, 2017

 

 

HELIOS AND MATHESON ANALYTICS INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Stuart Benson

 

 

 

Stuart Benson, Chief Financial Officer

 

 

 
 

 

 

EXHIBIT INDEX

 

Exhibit No.

Description

  

  

2.1*

Securities Purchase Agreement, dated August 15, 2017, by and between HMNY and MoviePass.(1)

4.1*

Form of MoviePass Note.

4.2*

Form of Helios Note.

4.3*

Form of Senior Secured Convertible Notes to be issued by HMNY.

4.4*

Form of Investor Note to be issued by the Investor.

4.5*

Form of Investor Warrant.

10.1*

Form of Investors’ Rights Agreement.

10.2*

Form of Voting Agreement.

10.3*

Form of MoviePass Transaction Voting and Support Agreement.

10.4*

Form of HMNY Transaction Voting and Support Agreement.

10.5*

Form of MoviePass Lock-Up Agreement.

10.6*

Form of HMNY Lock-Up Agreement.

10.7*

Form of HMNY Voting Proxy.

10.8*

Form of MoviePass Voting Proxy.

10.9*

Form of Second Amended and Restated Note Purchase Agreement.

10.10*

Securities Purchase Agreement, dated August 15, 2017, by and between HMNY and the Investor.

10.11*

Form of Registration Rights Agreement.

10.12*

Form of Security and Pledge Agreement.

10.13*

Form of Guaranty.

99.1**

Press Release issued on August 15, 2017.

 

* 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 SPA. HMNY hereby agrees to furnish a copy of any such omitted schedule or similar attachment to the SEC upon request. 

 

 

Exhibit 2.1

 

 

MOVIEPASS INC.

 

 

 

SECURITIES PURCHASE AGREEMENT

 

 

 

August 15, 2017

 

 

 

 
 

 

 

TABLE OF CONTENTS

 

Page

 

1.

Purchase and Sale of MoviePass Securities.

1

 

1.1

Sale and Issuance of Common Stock to Helios

1

 

1.2

Closing; Delivery

3

 

1.3

Use of Proceeds

3

 

1.4

Defined Terms Used in this Agreement

3

       
2.

Representations and Warranties of MoviePass

5

 

2.1

Organization, Good Standing, Corporate Power and Qualification

6

 

2.2

Capitalization.

6

 

2.3

Subsidiaries

8

 

2.4

Authorization

8

 

2.5

Valid Issuance of Securities

8

 

2.6

Governmental Consents and Filings

9

 

2.7

Litigation

9

 

2.8

Intellectual Property

9

 

2.9

Compliance with Other Instruments

10

 

2.10

Agreements; Actions

10

 

2.11

Certain Transactions

10

 

2.12

Rights of Registration and Voting Rights

11

 

2.13

Property

11

 

2.14

Financial Statements

11

 

2.15

Changes

12

 

2.16

Employee Matters

13

 

2.17

Tax Returns and Payments.

14

 

2.18

Insurance

14

 

2.19

Employee Agreements

14

 

2.20

Permits

15

 

2.21

Corporate Documents

15

 

2.22

83(b) Elections

15

 

2.23

Real Property Holding Corporation

15

 

2.24

Environmental and Safety Laws

15

 

2.25

Foreign Corrupt Practices Act

16

 

2.26

Data Privacy

16

 

2.27

Purchase Entirely for Own Account

16

 

2.28

Disclosure of Information

16

 

2.29

Restricted Securities

17

 

2.30

No Public Market

17

 

2.31

Legends

17

 

2.32

Sophisticated Investor

17

 

2.33

No General Solicitation

17

 

2.34

Exculpation

18

 

2.35

Residence

18

       
3.

Representations and Warranties of Helios

18

 

3.1

Organization, Good Standing, Corporate Power and Qualification

18

 

3.2

Authorization

18

 

3.3

Capitalization

19

 

 

 

 

TABLE OF CONTENTS
(continued)

 

Page

 

 

3.4

Subsidiaries

19

 

3.5

Valid Issuance of Securities

19

 

3.6

Governmental Consents and Filings

20

 

3.7

Litigation

20

 

3.8

Intellectual Property

20

 

3.9

Compliance with Other Instruments

21

 

3.10

Public Reports; Financial Statements

21

 

3.11

Changes

22

 

3.12

Tax Returns and Payments

22

 

3.13

Permits

23

 

3.14

Sarbanes-Oxley; Internal Accounting Controls

23

 

3.15

Investment Company

23

 

3.16

Foreign Corrupt Practices Act

23

 

3.17

Purchase Entirely for Own Account

24

 

3.18

Disclosure of Information

24

 

3.19

Restricted Securities

24

 

3.20

No Public Market

24

 

3.21

Legends

24

 

3.22

Sophisticated Investor

25

 

3.23

No General Solicitation

25

 

3.24

Exculpation

25

 

3.25

Residence

25

       
4.

Covenants; Other Agreements

25

 

4.1

MoviePass Employment Agreements

25

 

4.2

Dilutive Issuances

25

 

4.3

Listing of Helios Shares

26

 

4.4

Helios Offering

26

 

4.5

Helios Employment Agreements

26

 

4.6

Appointment of Director

26

 

4.7

Publicity

26

 

4.8

Confidentiality

26

 

4.9

Commercially Reasonable Efforts

26

 

4.10

Proxy Statement

27

       
5.

Conditions to Helios’ Obligations at Closing

28

 

5.1

Representations and Warranties

28

 

5.2

Performance

28

 

5.3

Compliance Certificate

28

 

5.4

Qualifications

28

 

5.5

Opinion of MoviePass Counsel

28

 

5.6

Board of Directors

28

 

5.7

Indemnification Agreement

28

 

5.8

Investors’ Rights Agreement

28

 

5.9

Voting Agreement

28

 

5.10

Restated Certificate

28

 

5.11

Secretary’s Certificate

29

 

5.12

Preemptive Rights

29

 

5.13

Exchange of Preferred Stock and Convertible Notes

29

 

 
ii 

 

 

TABLE OF CONTENTS
(continued)

 

Page

 

 

5.14

Debt Repayment

29

 

5.15

MoviePass Audited Financial Statements

29

 

5.16

Approval of the Stockholders of Helios

29

 

5.17

Approval of Hudson Bay Master Fund Ltd

29

 

5.18

Listing of Additional Shares (Helios Shares)

29

 

5.19

No Material Adverse Effect

29

 

5.20

Completion of $10 Million Offering

29

 

5.21

Lock-Up Agreements

29

 

5.22

Voting Proxy

30

 

5.23

MoviePass Stockholder Approval

30

       
6.

Conditions of MoviePass’ Obligations at Closing

30

 

6.1

Representations and Warranties

30

 

6.2

Performance

30

 

6.3

Compliance Certificate

30

 

6.4

Qualifications

30

 

6.5

Investors’ Rights Agreement

30

 

6.6

Voting Agreement

30

 

6.7

Restated Certificate

30

 

6.8

Secretary’s Certificate

30

 

6.9

No Material Adverse Effect

31

 

6.10

Lock-Up Agreements

31

 

6.11

Purchase of Kelly Note and Conversion of Kelly Note Following Closing

31

 

6.12

Approval of the Stockholders of MoviePass

31

 

6.13

Appointment of Mitch Lowe as Director

31

 

6.14

Registration Rights

31

 

6.15

Approval of the Stockholders of Helios

31

 

6.16

Listing of Additional Shares (Helios Shares)

31

 

6.17

Completion of $10 Million Offering

31

 

6.18

Voting Proxy

31

 

6.19

Opinion of Helios Counsel

31

       
7.

Other Agreements; Miscellaneous.

32

 

7.1

Survival of Warranties; Damages Under this Agreement

32

 

7.2

Successors and Assigns; Third Party Beneficiaries

32

 

7.3

Governing Law

32

 

7.4

Counterparts

32

 

7.5

Titles and Subtitles; Interpretation

32

 

7.6

Notices

33

 

7.7

No Finder’s Fees

33

 

7.8

Specific Performance

33

 

7.9

Fees and Expenses

33

 

7.10

Attorneys’ Fees

33

 

7.11

Amendments and Waivers

34

 

7.12

Severability

34

 

7.13

Delays or Omissions

34

 

7.14

Entire Agreement

34

 

7.15

Governing Law; Dispute Resolution

34

 

7.16

WAIVER OF JURY TRIAL

35

 

7.17

No Commitment for Additional Financing

35

 

7.18

Termination

36

 

 
iii 

 

 

Exhibits

 

Exhibit A

Form of RESTATED CERTIFICATE

   

EXHIBIT B-1

form of amended NOTE purchase agreement

   

Exhibit B-2

Form of moviepass Note

   

Exhibit C

Form of Helios Note

   

Exhibit D

Disclosure Schedule

   

EXHIBIT E

Form of indemnification agreement

   

Exhibit f

Form of Investors Rights Agreement

   

Exhibit g

Form of Voting Agreement

   

Exhibit h-1

FORM OF TRANSACTION VOTING AND SUPPORT AGREEMENT

   

Exhibit h-2

FORM OF helios TRANSACTION VOTING AND SUPPORT AGREEMENT

   

Exhibit I

HELIOS Disclosure Schedule

   

EXHIBIT J-1

foRM OF lOCK-UP AGREEMENT

   

EXHIBIT J-2

foRM OF HELIOS lOCK-UP AGREEMENT

   

EXHIBIT K-1

FORM OF VOTING PROXY IN FAVOR OF HELIOS CEO

   

EXHIBIT K-2

FORM OF VOTING PROXY IN FAVOR OF MOVIEPASS CEO

 

 
iv 

 

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (this “ Agreement ”) is made as of the 15th day of August, 2017 by and between MoviePass Inc., a Delaware corporation (“ MoviePass ”), and Helios and Matheson Analytics Inc., a Delaware corporation (“ Helios ”).

 

The parties hereby agree as follows:

 

1.             Purchase and Sale of MoviePass Securities .

 

1.1           Sale and Issuance of Common Stock to Helios .

 

(a)          MoviePass shall adopt and file with the Secretary of State of the State of Delaware at or before the Closing (as defined below) the Amended and Restated Certificate of Incorporation in the form of Exhibit A attached to this Agreement (the “ Restated Certificate ”).

 

(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 fifty one percent (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’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 $27,000,000 (the “ Maximum Purchase Price ”), payable as provided in Subsection 1.1(c) below.  The shares of Common Stock issued to Helios pursuant to this Agreement (excluding, for the avoidance of doubt the Kelly Conversion Shares (as defined below)) shall be referred to in this Agreement as the “ Shares .”  MoviePass further agrees that upon conversion of the Kelly Note by Helios in connection with the Closing, it will issue the shares of Common Stock issuable under the Kelly Note; provided, that in the event that the number of shares of Common Stock to be issued thereunder is less than two percent (2%) 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), MoviePass hereby agrees that the Kelly Note will be convertible into such number of shares of Common Stock to provide Helios with the foregoing two percent (2%) interest under the Kelly Note (the shares of Common Stock to be issued under the Kelly Note, the “ Kelly Conversion Shares ”).

 

(c)           The Maximum Purchase Price shall consist of:

 

(i)     3,333,334 unregistered shares of Helios Common Stock (as defined below), based on an agreed upon value of $3.00 per share, for a total agreed upon value of approximately $10,000,000 (the “ Helios Closing Shares ”), to be issued by Helios to MoviePass in book-entry (uncertificated) form at the Closing; provided , however , that 666,667 of the Helios Closing Shares shall be subject to forfeiture by MoviePass if MoviePass fails to achieve either of the following two milestones within the specified time frame: (A) within one year after the Closing, subscribers to MoviePass’ MoviePass product shall have exceeded on at least one (1) day 100,000 subscribers (such number of subscribers to be determined based upon the number of registered accounts on the MoviePass server that have contracted with MoviePass (through a 3 rd party or otherwise) to use the MoviePass product not including any account that has notified MoviePass that it desires to cancel its use of the MoviePass product), and (B) the Common Stock shall have been listed on The Nasdaq Stock Market (“ Nasdaq ”) or New York Stock Exchange (“ NYSE ”) by January 31, 2018 (unless such failure to be listed is remedied within sixty (60) calendar days thereafter) (the foregoing agreed upon value per share and share numbers are subject to appropriate adjustment in the event of any stock dividend, stock split, combination or similar recapitalization affecting the Helios Common Stock);

 

 
 

 

 

(ii)     up to $17,000,000, payable as follows:

 

(A)     $4,950,000 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 $5,000,000 (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 $5,000,000, 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 ”). MoviePass shall deliver the MoviePass Note to Helios upon receipt in full of the Initial Cash Payment (as hereinafter defined) and at Closing shall be deemed satisfied in full by its terms pursuant to the issuance of the Shares (it being understood that if this Agreement is terminated prior to Closing, such MoviePass Note shall remain outstanding in accordance with its terms). The parties hereby acknowledge that prior to execution of this Agreement, Helios paid to MoviePass $50,000 in cash (the “ Expense Payment ”) for legal and audit expenses (such cash payments, collectively, the “ Initial Cash Payment ”);

 

(B)     a promissory note in the principal amount of $10,000,000, in the form of Exhibit C attached to this Agreement, to be delivered by Helios to MoviePass at the Closing (the “ Helios Note ”); and

 

(C)     if, and only if, MoviePass’ MoviePass product shall have exceeded on at least one (1) day 150,000 subscribers within 15 months after the Closing (such number of subscribers to be calculated in the same manner as calculated in Subsection 1.1(c)(i) ), then, in addition to the Helios Closing Shares, Helios shall issue to MoviePass 666,667 additional unregistered shares of Helios Common Stock based on an agreed upon value of $3.00 per share, for a total agreed upon value of $2,000,000 (the “ Helios Milestone Shares ” and together with the Helios Closing Shares, the “ Helios Shares ”) (the foregoing agreed upon value per share and number of shares are subject to appropriate adjustment in the event of any stock dividend, stock split, combination or similar recapitalization affecting the Helios Common Stock). The Helios Milestone Shares shall be issued within five (5) business days following the date on which MoviePass provides notice to Helios in accordance with Subsection 1.1(d) of its achievement of the conditions in Subsection 1.1(c)(ii)(C) .

 

(d)     MoviePass shall notify Helios promptly of the achievement of or failure to achieve each of the events identified as a milestone in Subsection 1.1(c)(i) or Subsection 1.1(c)(ii)(C) . With respect to a milestone related to the number of subscribers of MoviePass’ MoviePass product, MoviePass shall provide Helios with a certificate duly executed by the Chief Executive Officer and Chief Financial Officer of MoviePass, certifying that such milestone has or has not been achieved (as applicable), together with evidence of the same reasonably acceptable to Helios (it being agreed upon that evidence depicting the number of registered accounts on MoviePass’ server, together with copies of all written notices from registered accounts that have notified MoviePass of their desire to cancel use of the MoviePass Product, shall be satisfactory). Any dispute under this Subsection 1.1(d) regarding whether or not such a milestone has been achieved shall be subject to resolution in accordance with Subsection 7.15(b) and 7.16 .

 

 
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1.2           Closing; Delivery .

 

(a)     The purchase and sale of the Shares shall take place remotely via the exchange of documents and signatures, at 10:00 a.m. Pacific Time, on the third business day following the date when all of the conditions to closing set forth in Sections 5 and 6 hereof are satisfied in full or otherwise waived in writing by the party or parties to be charged, or at such other time and place as MoviePass and Helios mutually agree upon, orally or in writing (which time and place are designated as the “ Closing ”).

 

(b)     At the Closing, MoviePass shall deliver to Helios a certificate representing the Shares against receipt by MoviePass of the Helios Closing Shares, the Initial Cash Payment (which shall have been delivered as of the date of this Agreement) and the Helios Note.

 

1.3          Use of Proceeds . In accordance with the directions of MoviePass’ Board of Directors, as it shall be constituted in accordance with Subsection 5.6 hereof and the Voting Agreement, MoviePass will use the proceeds from the sale of the Shares for product development and other general corporate purposes.

 

1.4           Defined Terms Used in this Agreement . In addition to the terms defined elsewhere in this Agreement, the following terms used in this Agreement shall be construed to have the meanings set forth or referenced below.

 

(a)     “ Affiliate ” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including, without limitation, any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

 

(b)     “ Code ” means the Internal Revenue Code of 1986, as amended.

 

(c)     “ Common Stock Equivalents ” means any securities of MoviePass or its subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

(d)     “ Helios Common Stock ” means the common stock, par value $0.01 per share, of Helios.

 

(e)     “ Helios Common Stock Equivalents ” means any securities of Helios or its subsidiaries which would entitle the holder thereof to acquire at any time Helios Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Helios Common Stock.

 

(f)     “ Helios Company ” means any of Helios and its subsidiaries.

 

 
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(g)     “ Helios Covered Person ” means, with respect to Helios as an “issuer” for purposes of Rule 506 promulgated under the Securities Act, any Person listed in the first paragraph of Rule 506(d)(1).

 

(h)     “ Helios Intellectual Property ” means all patents, patent applications, trademarks, trademark applications, service marks, service mark applications, tradenames, copyrights, trade secrets, domain names, mask works, information and proprietary rights and processes, similar or other intellectual property rights, subject matter of any of the foregoing, tangible embodiments of any of the foregoing, licenses in, to and under any of the foregoing, and any and all such cases as are necessary to any Helios Company in the conduct of the Helios Companies’ businesses as now conducted.

 

(i)     “ Helios Key Employee ” means Theodore Farnsworth (Chief Executive Officer) and Stuart Benson (Chief Financial Officer).

 

(j)     “ Helios Securities ” means the Helios Note and Helios Shares.

 

(k)     “ Indemnification Agreement ” means the agreement between MoviePass and each of the directors of MoviePass following the Closing.

 

(l)     “Investors’ Rights Agreement ” means the agreement among MoviePass, Helios and certain other stockholders of MoviePass dated as of the date of the Closing, in the form of Exhibit F attached to this Agreement.

 

(m)     “ Key Employee ” means any executive-level employee (including division director and vice president-level positions) of MoviePass as well as any employee or consultant who either alone or in concert with others develops, invents, programs or designs any material MoviePass Intellectual Property.

 

(n)     “ Knowledge ” or “ knowledge ” with respect to MoviePass, including the phrase “ to MoviePass’ knowledge ,” shall mean the actual knowledge of the following officers or directors: Mitch Lowe, Sanjay Puri and Stacey Spikes. “ Knowledge ” with respect to Helios, including the phrase “ to Helios’ knowledge ,” shall mean the actual knowledge of the following officers: Theodore Farnsworth and Stuart Benson.

 

(o)     “ Material Adverse Effect ” means, with respect to the applicable party, any changes, events, circumstances or developments which have, or would reasonably be expected to have, a material adverse effect on (x) the business, assets (including intangible assets), liabilities, financial condition, property or results of operations of such party and its subsidiaries, taken as a whole, or (y) the ability of such party to consummate the transactions contemplated by this Agreement or the other Transaction Agreements to which such party is a party or to perform its obligations hereunder or thereunder; provided , however , that none of the following shall constitute a “Material Adverse Effect” for purposes of clause (x): (i) general changes in the financial or securities markets or general economic or political conditions in the United States or any other country or region in which such party does business; (ii) changes, conditions or effects that generally affect the industries in which such party principally operates; (iii) changes in law, statute, ordinance, rule, regulation, code, order, judgment, injunction, decree or other provision having the force or effect of law enacted, issued, promulgated, enforced or ordered by a governmental authority or GAAP or the interpretation thereof; (iv) conditions caused by acts of God, terrorism, war (whether or not declared) or natural disaster; (v) changes that are the result of the announcement or pendency of the transactions contemplated by this Agreement, including the impact thereof on the relationships (contractual or otherwise) of the parties with customers, suppliers, licensors or employees; (vi) any failure in and of itself by such party to meet any internal or published budgets, projections, forecasts or predictions of financial performance for any period ( provided , that the underlying cause of any such failure may be considered in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur to the extent not excluded by another exception herein); (vii) changes that result from any action taken by or on behalf of one of the parties pursuant to this Agreement or at the written request or with the written consent of the other party; and (viii) any change in the market price or trading volume of the Helios Common Stock; provided , further , that any change, event, circumstance or development referred to in clauses (i) - (iv) immediately above shall be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur to the extent that such change, event, circumstance or development has a disproportionate effect on such party as compared to other participants of similar size and scope of such party in the industries and geographic areas in which such party primarily conducts its business.

 

 
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(p)     “ MoviePass Covered Person ” means, with respect to MoviePass as an “issuer” for purposes of Rule 506 promulgated under the Securities Act, any Person listed in the first paragraph of Rule 506(d)(1).

 

(q)     “ MoviePass Intellectual Property ” means all patents, patent applications, trademarks, trademark applications, service marks, service mark applications, tradenames, copyrights, trade secrets, domain names, mask works, information and proprietary rights and processes, similar or other intellectual property rights, subject matter of any of the foregoing, tangible embodiments of any of the foregoing, licenses in, to and under any of the foregoing, and any and all such cases as are necessary to MoviePass in the conduct of MoviePass’ business as now conducted.

 

(r)     “ Person ” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

 

(s)     “ Representative ” means, as to any party, any of such party’s Affiliates and any director, officer, employee, consultant, advisor, agent or other representative of such party or its Affiliate.

 

(t)       Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

(u)     “ Shares ” means the shares of Common Stock issued by MoviePass to Helios at the Closing.

 

(v)     “ Transaction Agreements ” means this Agreement and each of the agreements attached as exhibits hereto, including without limitation, the Investors’ Rights Agreement, the Indemnification Agreement, the Voting Agreement, the Transaction Voting and Support Agreements, the Helios Transaction Voting and Support Agreements, and any other agreement or instrument entered into or executed in connection with this Agreement or any of the foregoing.

 

(w)      “Voting Agreement ” means the agreement among MoviePass, Helios and certain other stockholders of MoviePass, dated as of the date of the Closing, in the form of Exhibit G attached to this Agreement.

 

2.          Representations and Warranties of MoviePass .  MoviePass hereby represents and warrants to Helios that, except as set forth on the Disclosure Schedule attached as Exhibit D to this Agreement, which exceptions shall be deemed to be part of the representations and warranties made hereunder, the following representations are true and complete as of the date hereof, except as otherwise indicated. The Disclosure Schedule shall be arranged in sections corresponding to the numbered and lettered sections and subsections contained in this Section 2, and the disclosures in any section or subsection of the Disclosure Schedule shall qualify other sections and subsections in this Section 2 only to the extent it is readily apparent from a reading of the disclosure that such disclosure is applicable to such other sections and subsections.

 

 
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2.1          Organization, Good Standing, Corporate Power and Qualification . MoviePass is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as presently conducted. MoviePass is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect on MoviePass.

 

2.2           Capitalization .

 

(a)           As of the date hereof, the authorized and outstanding capital of MoviePass consists of the following:

 

(i)     103,000,000 shares of Common Stock of which 12,930,569 are issued and outstanding. All of the outstanding shares of Common Stock have been duly authorized, are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws. MoviePass holds no Common Stock in its treasury.

 

(ii)     41,753,367 shares of preferred stock, $0.0001 par value per share (the “ Preferred Stock ”), of which (A) 4,510,741 shares have been designated Series Seed Preferred Stock, all of which are issued and outstanding, (B) 486,666 shares have been designated as Series Seed-1 Preferred Stock, all of which are issued and outstanding, (C) 7,632,239 shares have been designated as Series A Preferred Stock, of which 4,986,736 shares are issued and outstanding, and (D) 29,123,721 shares have been designated as Series A-1 Preferred Stock, of which 11,489,356 shares are issued and outstanding. The rights, privileges and preferences of the Preferred Stock are as stated in MoviePass’ amended and restated certificate of incorporation, as amended to date (the “ Current Certificate ”), and as provided by the General Corporation Law of the State of Delaware (the “ DGCL ”). MoviePass holds no Preferred Stock in its treasury.

 

(iii)     46,200,097 shares of Common Stock reserved for issuance to officers, directors, employees and consultants of MoviePass pursuant to its 2011 Equity Incentive Plan duly adopted by the Board of Directors and approved by MoviePass stockholders (the “ Stock Plan ”). Of such reserved shares of Common Stock, 285,067 shares have been issued pursuant to restricted stock purchase agreements or option exercises, options to purchase 21,887,358 shares have been granted and are currently outstanding, and 24,027,672 shares of Common Stock remain available for issuance to officers, directors, employees and consultants pursuant to the Stock Plan. MoviePass has furnished to Helios complete and accurate copies of the Stock Plan and forms of agreements used thereunder.

 

(iv)     The warrants described on Subsection 2.2(a)(iv) of the Disclosure Schedule.

 

(v)     The convertible promissory notes described on Subsection 2(a)(v) of the Disclosure Schedule.

 

 
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(b)          Effective as of the Closing, the authorized and outstanding capital of MoviePass will consist of the following:

 

(i)     380,000,000 shares of Common Stock, of which 154,931,774 shares will be issued and outstanding (assuming that none of the outstanding options described in Subsection 2.2(b)(iii) or warrants described in Subsection 2.2(b)(iv) are exercised). All of the outstanding shares of Common Stock, when issued, will be duly authorized, fully paid and nonassessable and will be issued in compliance with all applicable federal and state securities laws. The rights, privileges and preferences of the Common Stock will be as stated in the Restated Certificate and as provided by the DGCL. MoviePass will hold no Common Stock in its treasury as of the Closing.

 

(ii)     20,000,000 shares of Preferred Stock, none of which will be designated or issued and outstanding as of the Closing. MoviePass will hold no Preferred Stock in its treasury as of the Closing.

 

(iii)     46,200,097 shares of Common Stock will be reserved for issuance to officers, directors, employees and consultants of MoviePass pursuant to the Stock Plan. Of such reserved shares of Common Stock, as of the Closing, 285,067 shares will have been issued pursuant to restricted stock purchase agreements or option exercises and options to purchase 21,887,358 shares will have been granted and will be outstanding, and all remaining shares of Common Stock reserved for issuance pursuant to the Stock Plan will remain available for issuance thereunder.

 

(iv)     The warrants described on Subsection 2.2(a)(iv) of the Disclosure Schedule.

 

(v)     3,097,413 shares of Common Stock issuable upon conversion of the Kelly Note.

 

(c)           Subsection 2.2(c) of the Disclosure Schedule sets forth, as of the date hereof, the pro forma fully diluted capitalization of MoviePass immediately following the Closing, including, without limitation, the number of shares of the following: (i) issued and outstanding Common Stock, including, with respect to restricted Common Stock issued pursuant to (or issued in exchange for Common Stock issued pursuant to) the Stock Plan, and the vesting schedule and repurchase price thereof; (ii) shares of Common Stock reserved for future award grants under the Stock Plan; and (iii) shares of Common Stock reserved for future issuance upon exercise of outstanding options, warrants and the Kelly Note. Except for (A) the rights provided in Section 5 of the MoviePass Amended and Restated Investors’ Rights Agreement, dated as of June 24, 2014, as amended to date (the “ Existing Investors’ Rights Agreement ”), and (B) the securities and rights described in Subsection 2.2(a) of this Agreement, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, to purchase or acquire from MoviePass any shares of Common Stock or Preferred Stock, or any securities convertible into or exchangeable for shares of Common Stock or Preferred Stock. MoviePass has a right of first refusal over transfers of all outstanding shares of Common Stock until the termination of the Amended and Restated Right of First Refusal and Co-Sale Agreement, dated June 24, 2014, by and among MoviePass and the parties signatory thereto.

 

(d)         None of MoviePass’ stock purchase agreements or stock option documents contains a provision for acceleration of vesting (or lapse of a repurchase right) or other changes in the vesting provisions or other terms of such agreement or understanding upon the occurrence of any event or combination of events, including without limitation in the case where the Stock Plan is not assumed in an acquisition. MoviePass has never adjusted or amended the exercise price of any stock options previously awarded, whether through amendment, cancellation, replacement grant, repricing, or any other means. MoviePass has no obligation (contingent or otherwise) to purchase or redeem any of its capital stock.

 

 
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(e)      409A . MoviePass believes in good faith that any “nonqualified deferred compensation plan” (as such term is defined under Section 409A(d)(1) of the Code and the guidance thereunder) under which MoviePass makes, is obligated to make or promises to make, payments (each, a “ 409A Plan ) complies in all material respects, in both form and operation, with the requirements of Section 409A of the Code and the guidance thereunder. To the knowledge of MoviePass, no payment to be made under any 409A Plan is, or will be, subject to the penalties of Section 409A(a)(1) of the Code.

 

(f)     MoviePass has obtained valid waivers of any rights by other parties to purchase any of the Shares covered by this Agreement.

 

2.3          Subsidiaries . MoviePass does not currently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, limited liability company, association, or other business entity. MoviePass is not a participant in any joint venture, partnership or similar arrangement.

 

2.4          Authorization . MoviePass has all requisite corporate power and corporate authority to enter into and deliver this Agreement, to perform its obligations under the Transaction Agreements and, subject to approval of the transactions contemplated by the Transaction Agreements by the requisite stockholders of MoviePass, to consummate the transactions contemplated by the Transaction Agreements. All action on the part of the officers of MoviePass necessary for the execution and delivery of the Transaction Agreements, the performance of all obligations of MoviePass under the Transaction Agreements to be performed as of or prior to the Closing, and the issuance and delivery of the MoviePass Securities has been taken or will be taken prior to Closing. The Transaction Agreements, when executed and delivered by MoviePass, shall constitute valid and legally binding obligations of MoviePass, enforceable against MoviePass in accordance with their respective terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, or (iii) to the extent the indemnification provisions contained in the Investors’ Rights Agreement and the Indemnification Agreement may be limited by applicable federal or state securities laws. On or prior to the date hereof, those securities holders of MoviePass identified on Subsection 2.4 of the Disclosure Schedule (such holders holding the majority of the Common Stock, Preferred Stock and convertible promissory notes, the “ Majority MoviePass Holders ”) have entered into voting and support agreements with Helios, each in the form attached as Exhibit H-1 (the “ Transaction Voting and Support Agreements ”), which, among other things, set forth such holders’ agreements to vote in favor of, as applicable, the Restated Certificate and the other transactions contemplated hereby. On or prior to the date hereof, the Majority MoviePass Holders shall have executed and delivered to Helios all notices and written consents required to convert all outstanding Preferred Stock and convertible notes of MoviePass into Common Stock, as applicable, effective at or prior to the Closing, consistent with MoviePass’ representations and warranties in Subsection 2.2(b).

 

2.5           Valid Issuance of Securities .

 

(a)     The Shares, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under the Transaction Agreements, applicable state and federal securities laws and liens or encumbrances created by or imposed by Helios. Assuming the accuracy of the representations of Helios in Section 3 of this Agreement and subject to the filings described in Subsection 2.6(ii) below, the Shares will be issued in compliance in all material respects with all applicable federal and state securities laws.

 

 
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(b)     No “bad actor” disqualifying event described in Rule 506(d)(1)(i)-(viii) of the Securities Act (a “ Disqualification Event ”) is applicable to MoviePass or, to MoviePass’ knowledge, any MoviePass Covered Person, except for a Disqualification Event as to which Rule 506(d)(2)(ii–iv) or (d)(3) is applicable.

 

2.6          Governmental Consents and Filings . Assuming the accuracy of the representations made by Helios in Section 3 of this Agreement, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of MoviePass in connection with the consummation of the transactions contemplated by this Agreement, except for (i) the filing of the Restated Certificate, which will have been filed as of the Closing, (ii) filings pursuant to Regulation D of the Securities Act, if required, and applicable state securities laws, which have been made or will be made in a timely manner, and (iii) for such consents, approvals, orders or authorizations of, or registrations, qualifications, designations, declarations or filings that, the failure of which to obtain or make, has not had and would not reasonably be expected to have a Material Adverse Effect on MoviePass.

 

2.7          Litigation . There is no material claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or, to MoviePass’ knowledge, currently threatened (i) against MoviePass or, to MoviePass’ knowledge, against any officer, director or Key Employee of MoviePass in connection with their service to or employment with MoviePass or (ii) that questions the validity of the Transaction Agreements or the right of MoviePass to enter into them, or to consummate the transactions contemplated by the Transaction Agreements. Neither MoviePass nor, to MoviePass’ knowledge, any of its officers, directors or Key Employees is a party or is named as subject to the provisions of any material order, writ, injunction, judgment or decree of any court or government agency or instrumentality (in the case of officers, directors or Key Employees, such as would affect MoviePass). There is no action, suit, proceeding or investigation by MoviePass pending or which MoviePass intends to initiate. The foregoing includes, without limitation, any actions, suits, proceedings or investigations pending or threatened by MoviePass in writing involving the prior employment of any of MoviePass’ employees, their services provided in connection with MoviePass’ business, any information or techniques allegedly proprietary to any of their former employers or their obligations under any agreements with prior employers.

 

2.8          Intellectual Property . MoviePass owns or possesses or can acquire on commercially reasonable terms sufficient legal rights to all material MoviePass Intellectual Property without, to the knowledge of MoviePass, any conflict with, or infringement of, the rights of others. To MoviePass’ knowledge, no product or service marketed or sold (or proposed to be marketed or sold) by MoviePass violates or will violate any license or infringes or will infringe any intellectual property rights of any other party in any material respect. Other than with respect to commercially available software products under standard end-user object code license agreements, there are no material outstanding options, licenses, agreements, claims, encumbrances or shared ownership interests of any kind relating to the material MoviePass Intellectual Property, nor is MoviePass bound by or a party to any material options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights and processes of any other Person. MoviePass has obtained and possesses valid licenses to use all of the software programs present on the computers and other software-enabled electronic devices that it owns or leases or that it has otherwise provided to its employees for their use in connection with MoviePass’ business except where failure to have such licenses has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on MoviePass. To MoviePass’ knowledge, it will not be necessary to use any inventions of any of its employees or consultants (or Persons it currently intends to hire) made prior to their employment by MoviePass. Each employee and consultant has assigned to MoviePass all intellectual property rights he or she owns that are related to MoviePass’ business as now conducted. Subsection 2.8 of the Disclosure Schedule lists all registered MoviePass Intellectual Property owned by MoviePass and all material unregistered MoviePass Intellectual Property owned by MoviePass. MoviePass has not embedded any open source, copyleft or community source code in any of its products generally available or in development, including but not limited to any libraries or code licensed under any General Public License, Lesser General Public License or similar license arrangement.

 

 
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2.9         Compliance with Other Instruments . MoviePass is not in violation or default (i) of any provisions of its Current Certificate or Bylaws, (ii) of any instrument, judgment, order, writ or decree, (iii) under any note, indenture or mortgage, or (iv) under any lease, agreement, contract or purchase order to which it is a party or by which it is bound that is required to be listed on the Disclosure Schedule, or (v) of any provision of federal or state statute, rule or regulation applicable to MoviePass, the violation of which, in the cases of each of clauses (ii) through (v), would have a Material Adverse Effect on MoviePass. The execution, delivery and performance of the Transaction Agreements and the consummation of the transactions contemplated by the Transaction Agreements will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either (a) a default under any such provision, instrument, judgment, order, writ, decree, contract or agreement; or (b) an event which results in the creation of any lien, charge or encumbrance upon any assets of MoviePass or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to MoviePass, except in clauses (a) and (b) as has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on MoviePass.

 

2.10          Agreements; Actions .

 

(a)     Except for the Transaction Agreements and the agreements, understandings, instruments and contracts set forth on Subsection 2.10(a) of the Disclosure Schedule, there are no agreements, understandings, instruments, contracts or proposed transactions to which MoviePass is a party or by which it is bound that involve (i) obligations (contingent or otherwise) of, or payments to, MoviePass in excess of $50,000, (ii) the license of any patent, copyright, trademark, trade secret or other proprietary right to or from MoviePass, (iii) the grant of rights to manufacture, produce, assemble, license, market, or sell its products to any other Person that limit MoviePass’ exclusive right to develop, manufacture, assemble, distribute, market or sell its products, or (iv) indemnification by MoviePass with respect to infringements of proprietary rights.

 

(b)     Since January 1, 2016, MoviePass has not (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock or (ii) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business

 

(c)      Subsection 2.10(c) of the Disclosure Schedule sets forth all of the indebtedness for borrowed money for which MoviePass is liable which is outstanding as of the date hereof. MoviePass is not a guarantor or indemnitor of any indebtedness for borrowed money of any other Person.

 

(d)     For the purposes of this Subsection 2.10 , all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same Person (including Persons MoviePass has reason to believe are Affiliates of each other) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsection.

 

2.11         Certain Transactions .

 

(a)     Other than on Subsection 2.11(a) of the Disclosure Schedule and (i) standard employee benefits generally made available to all employees, (ii) standard director and officer indemnification agreements approved by MoviePass’ Board of Directors, and (iii) the purchase of shares of MoviePass’ capital stock and the issuance of options to purchase shares of MoviePass’ Common Stock, in each instance, approved in the written minutes of MoviePass’ Board of Directors (previously provided to Helios or its counsel), there are no material agreements, understandings or proposed transactions between MoviePass and any of its officers, directors, consultants or Key Employees, or any Affiliate thereof.

 

 
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(b)     Other than on Subsection 2.11(b) of the Disclosure Schedule, MoviePass is not indebted, directly or indirectly, to any of its directors, officers or employees or to their respective spouses or children or to any Affiliate of any of the foregoing, other than in connection with expenses or advances of expenses incurred in the ordinary course of business or employee relocation expenses and for other customary employee benefits made generally available to all employees. None of MoviePass’ directors, officers or employees, or any members of their immediate families, or any Affiliate of the foregoing are, directly or indirectly, indebted to MoviePass or have any (i) material commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship with any of MoviePass’ customers, suppliers, service providers, joint venture partners, licensees and competitors, (ii) material direct or indirect ownership interest in any firm or corporation which is an Affiliate of MoviePass or with which MoviePass has a material business relationship, or any firm or corporation which competes with MoviePass except that directors, officers, employees or stockholders of MoviePass may own stock in (but not exceeding two percent (2%) of the outstanding capital stock of) publicly traded companies that may compete with MoviePass, or (iii) material financial interest in any contract with MoviePass.

 

2.12        Rights of Registration and Voting Rights . Except as provided in the Existing Investors’ Rights Agreement and on Subsection 2.12 of the Disclosure Schedule, MoviePass is not under any obligation to register under the Securities Act any of its currently outstanding securities or any securities issuable upon exercise or conversion of its currently outstanding securities. To MoviePass’ knowledge, except as contemplated in the Voting Agreement and the Transaction Voting and Support Agreements (as defined below), no stockholder of MoviePass has entered into any agreements with respect to the voting of capital shares of MoviePass.

 

2.13        Property . Other than Subsection 2.13 of the Disclosure Schedule, the property and assets that MoviePass owns are free and clear of all mortgages, deeds of trust, liens, loans and encumbrances, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do not materially impair MoviePass’ ownership or use of such property or assets. With respect to the property and assets it leases, MoviePass is in compliance in all material respects with such leases and, to its knowledge, holds a valid leasehold interest free of any liens, claims or encumbrances other than those of the lessors of such property or assets. MoviePass does not own any real property.

 

2.14        Financial Statements . MoviePass has delivered to Helios its unaudited financial statements as of December 31, 2016 and for the fiscal years ended December 31, 2016 and 2015 and its unaudited financial statements (including balance sheet, income statement and statement of cash flows) as of June 30, 2017 and for the three-month periods ended June 30, 2017 and 2016 (collectively, the “ Financial Statements ”). The Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“ GAAP ”) applied on a consistent basis throughout the periods indicated, except as provided on Subsection 2.14 of the Disclosure Schedule and that the Financial Statements may not contain all footnotes required by GAAP. The Financial Statements fairly present in all material respects the financial condition and operating results of MoviePass as of the dates, and for the periods, indicated therein, subject to normal year-end audit adjustments. Except as set forth in the Financial Statements, MoviePass has no material liabilities or obligations, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to June 30, 2017; (ii) obligations under contracts and commitments incurred in the ordinary course of business; and (iii) liabilities and obligations of a type or nature not required under GAAP to be reflected in the Financial Statements, which, in all such cases, individually and in the aggregate would not reasonably be expected to have a Material Adverse Effect on MoviePass. MoviePass maintains and will continue to maintain a standard system of accounting established and administered in accordance with GAAP. Any financial or other information of MoviePass provided by MoviePass to Helios for inclusion in the Proxy Documents (as hereinafter defined) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading.

 

 
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2.15          Changes . Since June 30, 2017 there has not been, except as specifically contemplated by the Transaction Agreements:

 

(a)     any change in the assets, liabilities, financial condition or operating results of MoviePass reflected in the Financial Statements, except changes in the ordinary course of business that have not caused, in the aggregate, a Material Adverse Effect on MoviePass;

 

(b)     any damage, destruction or loss, whether or not covered by insurance, that would have a Material Adverse Effect on MoviePass;

 

(c)     any waiver or compromise by MoviePass of a valuable right or of a material debt owed to it;

 

(d)     any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by MoviePass, except in the ordinary course of business and the satisfaction or discharge of which would not have a Material Adverse Effect on MoviePass;

 

(e)     any material change to a material contract or agreement by which MoviePass or any of its assets is bound or subject;

 

(f)     any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;

 

(g)     any resignation or termination of employment of any officer or Key Employee of MoviePass;

 

(h)     any mortgage, pledge, transfer of a security interest in, or lien, created by MoviePass, with respect to any of its material properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and do not materially impair MoviePass’ ownership or use of such property or assets;

 

(i)     any loans or guarantees made by MoviePass to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;

 

(j)     any declaration, setting aside or payment or other distribution in respect of any of MoviePass’ capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by MoviePass;

 

 
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(k)     any sale, assignment or transfer of any MoviePass Intellectual Property that has resulted in, or would reasonably be expected to result in, a Material Adverse Effect on MoviePass;

 

(l)     receipt of notice that there has been a loss of, or material order cancellation by, any major customer of MoviePass; or

 

(m)     any arrangement or commitment by MoviePass to do any of the things described in this Subsection 2.15 .

 

2.16         Employee Matters .

 

(a)     As of the date hereof, MoviePass employs 9 full-time employees and 5 part-time employees. Subsection 2.16(a) of the Disclosure Schedule sets forth a description of all compensation, including salary, bonus, severance obligations and deferred compensation paid or payable for each officer, employee, consultant and independent contractor of MoviePass who received compensation in excess of $50,000 for the fiscal year ended December 31, 2016 or is anticipated to receive compensation in excess of $50,000 for the fiscal year ending December 31, 2017.

 

(b)     To MoviePass’ knowledge, none of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with such employee’s ability to promote the interest of MoviePass or that would conflict with MoviePass’ business. Neither the execution or delivery of the Transaction Agreements, nor the carrying on of MoviePass’ business by the employees of MoviePass, nor the conduct of MoviePass’ business as now conducted, will, to MoviePass’ knowledge, in any material respect, conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument under which any such employee is now obligated.

 

(c)     MoviePass is not delinquent in payments to any of its employees, consultants, or independent contractors for any wages, salaries, commissions, bonuses, or other direct compensation for any service performed for it to the date hereof or amounts required to be reimbursed to such employees, consultants or independent contractors. MoviePass has complied in all material respects with all applicable state and federal equal employment opportunity laws and with other laws related to employment, including those related to wages, hours, worker classification and collective bargaining. MoviePass has withheld and paid to the appropriate governmental entity or is holding for payment not yet due to such governmental entity all amounts required to be withheld from employees of MoviePass and is not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing.

 

(d)     To MoviePass’ knowledge, no Key Employee intends to terminate employment with MoviePass or is otherwise likely to become unavailable to continue as a Key Employee, nor does MoviePass have a present intention to terminate the employment of any of the foregoing. Except as set forth in Subsection 2.16(d) of the Disclosure Schedule, the employment of each employee of MoviePass is terminable at the will of MoviePass. Except as set forth in Subsection 2.16(d) of the Disclosure Schedule or as required by law, upon termination of the employment of any such employees, no severance or other payments will become due. Except as set forth in Subsection 2.16(d) of the Disclosure Schedule, MoviePass has no policy, practice, plan or program of paying severance pay or any form of severance compensation in connection with the termination of employment services.

 

 
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(e)     MoviePass has not made any representations regarding equity incentives to any officer, employee, director or consultant that are inconsistent with the share amounts and terms set forth in the minutes of meetings of MoviePass’ Board of Directors.

 

(f)     Intentionally omitted.

 

(g)      Subsection 2.16(g) of the Disclosure Schedule sets forth each employee benefit plan maintained, established or sponsored by MoviePass, or which MoviePass participates in or contributes to, which is subject to the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”). MoviePass has made all required contributions and has no liability to any such employee benefit plan, other than liability for health plan continuation coverage described in Part 6 of Title I(B) of ERISA, and has complied in all material respects with all applicable laws for any such employee benefit plan.

 

(h)     MoviePass is not bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union, and no labor union has requested or, to the knowledge of MoviePass, has sought to represent any of the employees, representatives or agents of MoviePass. There is no strike or other labor dispute involving MoviePass pending, or to MoviePass’ knowledge, threatened, which has had or would reasonably be expected to have a Material Adverse Effect on MoviePass, nor does MoviePass have knowledge of any labor organization activity involving its employees.

 

(i)     To MoviePass’ knowledge, none of the Key Employees or directors of MoviePass has been (a) subject to voluntary or involuntary petition under the federal bankruptcy laws or any state insolvency law or the appointment of a receiver, fiscal agent or similar officer by a court for his business or property; (b) convicted in a criminal proceeding or named as a subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (c) subject to any order, judgment or decree (not subsequently reversed, suspended, or vacated) of any court of competent jurisdiction permanently or temporarily enjoining him from engaging, or otherwise imposing limits or conditions on his engagement in any securities, investment advisory, banking, insurance, or other type of business or acting as an officer or director of a public company; or (d) found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission (the “ SEC ”) or the Commodity Futures Trading Commission to have violated any federal or state securities, commodities, or unfair trade practices law, which such judgment or finding has not been subsequently reversed, suspended, or vacated.

 

2.17      Tax Returns and Payments . There are no material federal, state, county, local or foreign taxes due and payable by MoviePass which have not been timely (subject to permitted extensions) paid. There are no material accrued and unpaid federal, state, country, local or foreign taxes of MoviePass which are due, whether or not assessed or disputed. There are no outstanding examinations or audits of any tax returns or reports of MoviePass by any applicable federal, state, local or foreign governmental agency. MoviePass has duly and timely (subject to permitted extensions) filed all material federal, state, county, local and foreign tax returns required to have been filed by it and there are in effect no waivers of applicable statutes of limitations with respect to taxes for any year.

 

2.18      Insurance . MoviePass has in full force and effect the insurance policies set forth in Subsection 2.18 of the Disclosure Schedule.

 

2.19      Employee Agreements . Each current and former employee, consultant and officer of MoviePass has executed an agreement with MoviePass regarding confidentiality and proprietary information substantially in the form or forms delivered to the counsel for Helios (the “ Confidential Information Agreements ”). No current or former Key Employee has excluded material works or inventions relating to MoviePass’ business from his or her assignment of inventions pursuant to such current or Former Key Employee arrangement with MoviePass. Each current and former Key Employee has executed a non-competition and non-solicitation agreement substantially in the form or forms delivered to counsel for Helios. MoviePass does not have knowledge that any of its Key Employees is in violation of any agreement covered by this Subsection 2.19 .

 

 
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2.20      Permits . To the knowledge of MoviePass, MoviePass has all franchises, permits, licenses and any similar authority necessary for the conduct of its business, the lack of which has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on MoviePass. MoviePass is not in default in any material respect under any of such franchises, permits, licenses or other similar authority .

 

2.21      Corporate Documents . The Current Certificate and Bylaws of MoviePass are in the form provided to Helios. The copy of the minute books of MoviePass provided to Helios contains minutes of all meetings of directors and stockholders and all actions by written consent without a meeting by the directors and stockholders since the date of incorporation and accurately reflects in all material respects all actions by the directors (and any committee of directors) and stockholders with respect to all transactions referred to in such minutes.

 

2.22      83(b) Elections . To MoviePass’ knowledge, all elections and notices under Section 83(b) of the Code have been or will be timely filed by all individuals who have acquired unvested shares of MoviePass’ Common Stock.

 

2.23      Real Property Holding Corporation . MoviePass is not now and has never been a “United States real property holding corporation” as defined in the Code and any applicable regulations promulgated thereunder. MoviePass has filed with the Internal Revenue Service all statements, if any, with its United States income tax returns which are required under such regulations.

 

2.24      Environmental and Safety Laws . Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on MoviePass, (a) MoviePass is and has been in compliance with all Environmental Laws; (b) there has been no release or threatened release of any pollutant, contaminant or toxic or hazardous material, substance or waste or petroleum or any fraction thereof (each a “ Hazardous Substance ”), on, upon, into or from any site currently or heretofore owned, leased or otherwise used by MoviePass; (c) there have been no Hazardous Substances generated by MoviePass that have been disposed of or come to rest at any site that has been included in any published U.S. federal, state or local “superfund” site list or any other similar list of hazardous or toxic waste sites published by any governmental authority in the United States; and (d) there are no underground storage tanks located on, no polychlorinated biphenyls (“ PCBs ”) or PCB-containing equipment used or stored on, and no hazardous waste as defined by the Resource Conservation and Recovery Act, as amended, stored on, any site owned or operated by MoviePass, except for the storage of hazardous waste in compliance with Environmental Laws. MoviePass has made available to Helios true and complete copies of all material environmental records, reports, notifications, certificates of need, permits, pending permit applications, correspondence, engineering studies and environmental studies or assessments.

 

For purposes of this Subsection 2.24 , “ Environmental Laws ” means any law, regulation, or other applicable requirement relating to (a) releases or threatened release of Hazardous Substance; (b) pollution or protection of employee health or safety, public health or the environment; or (c) the manufacture, handling, transport, use, treatment, storage, or disposal of Hazardous Substances.

 

 
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2.25      Foreign Corrupt Practices Act . Neither MoviePass nor, to MoviePass’ knowledge, any of MoviePass’ directors, officers, employees or agents have, directly or indirectly, made, offered, promised or authorized any payment or gift of any money or anything of value to or for the benefit of any “foreign official” (as such term is defined in the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “ FCPA ”)), foreign political party or official thereof or candidate for foreign political office for the purpose of (i) influencing any official act or decision of such official, party or candidate, (ii) inducing such official, party or candidate to use his, her or its influence to affect any act or decision of a foreign governmental authority, or (iii) securing any improper advantage, in the case of (i), (ii) and (iii) above in order to assist MoviePass or any of its Affiliates in obtaining or retaining business for or with, or directing business to, any person. Neither MoviePass nor, to MoviePass’ knowledge, any of its directors, officers, employees or agents have made or authorized any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of funds or received or retained any funds in violation of any law, rule or regulation. MoviePass further represents that it has maintained, and has caused each of its subsidiaries and Affiliates to maintain, systems of internal controls (including, but not limited to, accounting systems, purchasing systems and billing systems) to ensure compliance with the FCPA or any other applicable anti-bribery or anti-corruption law. Neither MoviePass, nor, to MoviePass’ knowledge, any of its officers, directors or employees are the subject of any allegation, voluntary disclosure, investigation, prosecution or other enforcement action related to the FCPA or any other anti-corruption law (collectively, “ Enforcement Action ”).

 

2.26      Data Privacy . In connection with its collection, storage, transfer (including, without limitation, any transfer across national borders) and/or use of any personally identifiable information from any individuals, including, without limitation, any customers, prospective customers, employees and/or other third parties (collectively “ Personal Information ”), MoviePass is and has been in compliance in all respects with all applicable laws in all relevant jurisdictions, MoviePass’ privacy policies and the requirements of any contract or codes of conduct to which MoviePass is a party, except where any failure to be in compliance would not reasonably be expected to have a Material Adverse Effect on MoviePass. MoviePass has commercially reasonable physical, technical, organizational and administrative security measures and policies in place to protect all Personal Information collected by it or on its behalf from and against unauthorized access, use and/or disclosure. MoviePass is and has been in compliance in all material respects with all laws relating to data loss, theft and breach of security notification obligations.

 

2.27      Purchase Entirely for Own Account . This Agreement is made with MoviePass in reliance upon MoviePass’ representation to Helios, which by MoviePass’ execution of this Agreement, MoviePass hereby confirms, that the Helios Securities to be acquired by MoviePass will be acquired for investment for MoviePass’ own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that MoviePass has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, MoviePass further represents that MoviePass does not presently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Helios Securities. MoviePass has not been formed for the specific purpose of acquiring the Helios Securities.

 

2.28      Disclosure of Information . MoviePass has had an opportunity to discuss Helios’ business, management, financial affairs and the terms and conditions of the offering of the Helios Securities with Helios’ management and has had an opportunity to review Helios’ facilities. The foregoing, however, does not limit or modify the representations and warranties of Helios in Section 3 of this Agreement or the right of MoviePass to rely thereon.

 

 
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2.29      Restricted Securities . MoviePass understands that the Helios Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of MoviePass’ representations as expressed herein. MoviePass understands that the Helios Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, MoviePass must hold the Helios Securities indefinitely unless they are registered with the SEC and qualified by state authorities, or an exemption from such registration and qualification requirements is available. MoviePass acknowledges that, except as set forth in the Helios Registration Rights Agreement, Helios has no obligation to register or qualify the Helios securities for resale. MoviePass further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Helios Securities, and on requirements relating to Helios which are outside of MoviePass’ control, and which Helios is under no obligation and may not be able to satisfy.

 

2.30      No Public Market . MoviePass understands that no public market now exists for the Helios Note, and that Helios has made no assurances that a public market will ever exist for the Helios Note.

 

2.31      Legends . MoviePass understands that the Helios Securities and any securities issued in respect of or exchange for the Helios Securities, may be notated with one or all of the following legends:

 

“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.”

 

(a)     Any legend set forth in, or required by, the other Transaction Agreements.

 

(b)     Any legend required by the securities laws of any state to the extent such laws are applicable to the Helios Securities represented by the certificate, instrument, or book entry so legended.

 

2.32      Sophisticated Investor . MoviePass (i) is a sophisticated investor; (ii) does not require the assistance of an investment advisor or other purchaser representative to purchase the Helios Securities; (iii) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its prospective investment in the Helios Securities; (iv) has the ability to bear the economic risks of its prospective investment for an indefinite period of time; (v) can afford the complete loss of such investment; and (vi) recognizes that the investment in the Helios Securities involves substantial risk.

 

2.33      No General Solicitation . Neither MoviePass, nor any of its officers, directors, employees, agents, stockholders or partners has either directly or indirectly, including, through a broker or finder (a) engaged in any general solicitation, or (b) published any advertisement in connection with the offer and sale of the MoviePass Securities. In addition, MoviePass is not purchasing the Helios Securities as a result of any advertisement, article, notice or other communication regarding the Helios Securities published in any newspaper, magazine, or similar media or broadcast over the internet, television or radio or presented at any seminar or, to the knowledge of MoviePass, any other general solicitation or general advertisement.

 

 
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2.34      Exculpation . MoviePass acknowledges that it is not relying upon any Person, other than Helios and its officers and directors, in making its investment or decision to invest in Helios.

 

2.35      Residence . MoviePass’ principal place of business is identified in the address of MoviePass set forth on the signature page hereto.

 

3.             Representations and Warranties of Helios . Helios hereby represents and warrants to MoviePass that, except as set forth in the Public Reports filed since January 1, 2017 (including all exhibits thereto) that are available on the SEC’s website through EDGAR or on the Helios Disclosure Schedule set forth on Exhibit I to this Agreement, which exceptions shall be deemed to be part of the representations and warranties made hereunder, the following representations are true and complete as of the date hereof, except as otherwise indicated. The Helios Disclosure Schedule shall be arranged in sections corresponding to the numbered and lettered sections and subsections contained in this Section 3 , and the disclosures in any section or subsection of the Helios Disclosure Schedule shall qualify other sections and subsections in this Section 3 only to the extent it is readily apparent from a reading of the disclosure that such disclosure is applicable to such other sections and subsections.

 

3.1      Organization, Good Standing, Corporate Power and Qualification . Helios is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as presently conducted and as proposed to be conducted. Helios is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect on Helios.

 

3.2      Authorization . Helios has all requisite corporate power and corporate authority to enter into and deliver this Agreement, to perform its obligations under the Transaction Agreements and, subject to approval of the transactions contemplated by the Transaction Agreements by the requisite stockholders of Helios, to consummate the transactions contemplated by the Transaction Agreements. All action on the part of the officers of Helios necessary for the execution and delivery of the Transaction Agreements to which Helios is a party, the performance of all obligations of Helios under the Transaction Agreements to which Helios is a party to be performed as of or prior to the Closing, and the issuance and delivery of the Helios Securities has been taken or will be taken prior to Closing. The Transaction Agreements to which Helios is a party, when executed and delivered by Helios, will constitute valid and legally binding obligations of Helios, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, or (b) to the extent the indemnification provisions contained in the Investors’ Rights Agreement may be limited by applicable federal or state securities laws. On or prior to the date hereof, those securities holders of Helios identified on Subsection 3.2 of the Helios Disclosure Schedule have entered into a voting and support agreement with MoviePass, in the form attached as Exhibit H-2 (the “ Helios Transaction Voting and Support Agreements ”), which, among other things, set forth such holders’ agreements to vote in favor of the transactions contemplated hereby.

 

 
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3.3          Capitalization . The authorized capital stock of Helios consists of (i) 100,000,000 shares of Helios Common Stock, 7,071,799 of which are issued and outstanding as of the date of this Agreement, and (ii) 2,000,000 shares of preferred stock, par value $0.01 per share, of Helios, none of which are issued and outstanding as of the date of this Agreement. Subsection 3.3 of the Helios Disclosure Schedule sets forth the number of shares of Helios Common Stock owned beneficially, and of record, by Affiliates of Helios as of the date hereof. Helios has not issued any capital stock since its most recently filed periodic report under the Exchange Act (as defined below), other than pursuant to the exercise of employee stock options under Helios’ stock option plans, the issuance of shares of Helios Common Stock to employees pursuant to Helios’ employee stock purchase plans and pursuant to the conversion and/or exercise of Helios Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by this Agreement. There are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of the capital stock of any Helios Company, or contracts, commitments, understandings or arrangements by which any Helios Company is or may become bound to issue additional shares of Helios Common Stock or Helios Common Stock Equivalents or any other capital stock of any Helios Company. Helios’ issuance of Helios Common Stock in accordance with the terms of this Agreement will not obligate any Helios Company to issue any securities to any Person (other than MoviePass) and will not result in a right of any holder of securities of any Helios Company to adjust the exercise, conversion, exchange or reset price under any of such securities. There are no outstanding securities or instruments of any Helios Company that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which any Helios Company is or may become bound to redeem a security of a Helios Company. No Helios Company has any equity appreciation rights or “phantom equity” plans or any similar plan or agreement. All of the outstanding shares of capital stock of Helios are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder of Helios, the Helios Board of Directors or others is required for the issuance of Helios Common Stock under this Agreement. There are no stockholders agreements, voting agreements or other similar agreements with respect to Helios’ capital stock to which Helios is a party or, to the knowledge of the Helios, between or among any of Helios’ stockholders.

 

3.4          Subsidiaries . All of the direct and indirect subsidiaries of Helios are set forth in the Public Reports. Helios owns, directly or indirectly, all of the capital stock or other equity interests of each of its subsidiaries free and clear of any liens, and all of the issued and outstanding shares of capital stock of each subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. Each subsidiary of Helios is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has all requisite power and authority to carry on its business as presently conducted and as proposed to be conducted. Each subsidiary of Helios is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect on Helios.

 

3.5           Valid Issuance of Securities .

 

(a)     The Helios Shares, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under the Transaction Agreements, applicable state and federal securities laws and liens or encumbrances created by or imposed by MoviePass. Assuming the accuracy of the representations of MoviePass in Section 2 of this Agreement and subject to the filings described in Subsection 3.6 below, the Helios Shares will be issued in compliance in all material respects with all applicable federal and state securities laws.

 

 
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(b)     No Disqualification Event is applicable to Helios or, to Helios’ knowledge, any Helios Covered Person, except for a Disqualification Event as to which Rule 506(d)(2)(ii–iv) or (d)(3), is applicable.

 

3.6      Governmental Consents and Filings . Assuming the accuracy of the representations made by MoviePass in Section 2 of this Agreement, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of Helios in connection with the consummation of the transactions contemplated by this Agreement, except for approvals required by Nasdaq and for such consents, approvals, orders or authorizations of, or registrations, qualifications, designations, declarations or filings that, the failure of which to obtain or make, has not had and would not reasonably be expected to have a Material Adverse Effect on Helios.

 

3.7      Litigation . There is no material claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or to Helios’ knowledge, currently threatened (i) against any Helios Company or, to Helios’ knowledge, against any officer or director of a Helios Company in connection with their service to or employment with a Helios Company or (ii) that questions the validity of the Transaction Agreements or the right of Helios to enter into them, or to consummate the transactions contemplated by the Transaction Agreements. No Helios Company nor, to Helios’ knowledge, any of their respective officers or directors is a party or is named as subject to the provisions of any material order, writ, injunction, judgment or decree of any court or government agency or instrumentality (in the case of officers or directors, such as would affect a Helios Company). There is no action, suit, proceeding or investigation by a Helios Company pending or which a Helios Company intends to initiate. The foregoing includes, without limitation, any actions, suits, proceedings or investigations pending or threatened by a Helios Company in writing involving the prior employment of any employees of a Helios Company, their services provided in connection with the business of a Helios Company, any information or techniques allegedly proprietary to any of their former employers or their obligations under any agreements with prior employers.

 

3.8      Intellectual Property . A Helios Company owns or possesses or can acquire on commercially reasonable terms sufficient legal rights to all material Helios Intellectual Property without, to the knowledge of Helios, any conflict with, or infringement of, the rights of others. To Helios’ knowledge, no product or service marketed or sold (or proposed to be marketed or sold) by a Helios Company violates or will violate any license or infringes or will infringe any intellectual property rights of any other party in any material respect. Other than with respect to commercially available software products under standard end-user object code license agreements, there are no material outstanding options, licenses, agreements, claims, encumbrances or shared ownership interests of any kind relating to the material Helios Intellectual Property, nor is any Helios Company bound by or a party to any material options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights and processes of any other Person. Each Helios Company has obtained and possesses valid licenses to use all of the software programs present on the computers and other software-enabled electronic devices that it owns or leases or that it has otherwise provided to its employees for their use in connection with the business of the Helios Companies except where failure to have such licenses has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Helios. To Helios knowledge, it will not be necessary to use any inventions of any employees or consultants of a Helios Company (or Persons it currently intends to hire) made prior to their employment by a Helios Company. Each employee and consultant has assigned to a Helios Company all intellectual property rights he or she owns that are related to the Helios Companies’ business as now conducted. No Helios Company has embedded any open source, copyleft or community source code in any of its products generally available or in development, including but not limited to any libraries or code licensed under any General Public License, Lesser General Public License or similar license arrangement.

 

 
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3.9       Compliance with Other Instruments . No Helios Company is in violation or default (i) of any provisions of its certificate of incorporation, bylaws or similar organizational documents, (ii) of any instrument, judgment, order, writ or decree, (iii) under any note, indenture or mortgage, or (iv) under any lease, agreement, contract or purchase order to which it is a party or by which it is bound, or (v) of any provision of federal or state statute, rule or regulation applicable to a Helios Company, the violation of which, in the cases of each of clauses (ii) through (v), would have a Material Adverse Effect on Helios. The execution, delivery and performance of the Transaction Agreements to which Helios is a party and the consummation of the transactions contemplated by the Transaction Agreements to which Helios is a party will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either (a) a default under any such provision, instrument, judgment, order, writ, decree, contract or agreement; or (b) an event which results in the creation of any lien, charge or encumbrance upon any assets of any Helios Company or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to any Helios Company, except in clauses (a) and (b) as has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Helios.

 

3.10      Public Reports; Financial Statements . Since January 1, 2016, Helios has timely filed (giving effect to permissible extensions in accordance with Rule 12b-25 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) all reports, schedules, forms, proxy statements, statements and other documents (including all exhibits required pursuant to Regulation S-K) required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act, including, without limitation, all Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (all of the foregoing filed prior to the date hereof and all exhibits and appendices included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “ Public Reports ”). As of their respective dates, the Public Reports complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the Public Reports, and none of the Public Reports, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of Helios (including, without limitation, any notes or any letter of the independent accountants of Helios with respect thereto) included in the Public Reports (the “ Public Report Financial Statements ”) complied in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto as in effect as of the time of filing. Such Public Report Financial Statements have been prepared in accordance with GAAP, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such Public Report Financial Statements, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of Helios and its subsidiaries as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of Helios to MoviePass which is not included in the Public Reports contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein not misleading, in the light of the circumstance under which they are or were made.

 

 
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3.11         Changes . Since June 30, 2017 there has not been:

 

(a)     any change in the assets, liabilities, financial condition or operating results of any Helios Company from that reflected in the Public Report Financial Statements, except changes in the ordinary course of business that have not caused, in the aggregate, a Material Adverse Effect on Helios;

 

(b)     any damage, destruction or loss, whether or not covered by insurance, that would have a Material Adverse Effect on Helios;

 

(c)     any waiver or compromise by a Helios Company of a valuable right or of a material debt owed to it;

 

(d)     any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by a Helios Company, except in the ordinary course of business, the satisfaction or discharge of certain of Helios’ obligations under the Senior Secured Convertible Notes described in the Public Reports and the satisfaction or discharge of which would not have a Material Adverse Effect on Helios;

 

(e)     any material change to a material contract or agreement by which a Helios Company or any of its assets is bound or subject (including any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder);

 

(f)     any resignation or termination of employment of any officer of Helios Company or Helios Key Employee;

 

(g)     any mortgage, pledge, transfer of a security interest in, or lien, created by a Helios Company, with respect to any of its material properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and do not materially impair any Helios Company’s ownership or use of such property or assets;

 

(h)     any loans or guarantees made by a Helios Company to or for the benefit of any employees, officers or directors of any Helios Company, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;

 

(i)     any declaration, setting aside or payment or other distribution in respect of any of equity securities of a Helios Company, or any direct or indirect redemption, purchase, or other acquisition of any of such equity securities by a Helios Company;

 

(j)     any sale, assignment or transfer of any Helios Intellectual Property that could reasonably be expected to result in a Material Adverse Effect on Helios; or

 

(k)     any arrangement or commitment by any Helios Company to do any of the things described in this Subsection 3.11 .

 

3.12         Tax Returns and Payments . There are no material federal, state, county, local or foreign taxes due and payable by a Helios Company which have not been timely (subject to permitted extensions) paid. There are no material accrued and unpaid federal, state, country, local or foreign taxes of a Helios Company which are due, whether or not assessed or disputed. There are no outstanding examinations or audits of any tax returns or reports of a Helios Company by any applicable federal, state, local or foreign governmental agency. Each Helios Company has duly and timely (subject to permitted extensions) filed all material federal, state, county, local and foreign tax returns required to have been filed by it and there are in effect no waivers of applicable statutes of limitations with respect to taxes for any year.

 

 
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3.13      Permits . Each Helios Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business, the lack of which has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Helios. No Helios Company is in default in any material respect under any of such franchises, permits, licenses or other similar authority.

 

3.14      Sarbanes-Oxley; Internal Accounting Controls . The Helios Companies are in compliance in all material respects with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof and as of the Closing. The Helios Companies maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Helios Companies have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Helios Companies and designed such disclosure controls and procedures to ensure that information required to be disclosed by Helios in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Helios’ certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Helios Companies as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “ Evaluation Date ”). Helios presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) of any Helios Company that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of any Helios Company.

 

3.15      Investment Company . Helios is not, and is not an Affiliate of, and immediately after Closing, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. Each Helios Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

 

3.16      Foreign Corrupt Practices Act . No Helios Company nor, to Helios’ knowledge, any directors, officers, employees or agents of a Helios Company have, directly or indirectly, made, offered, promised or authorized any payment or gift of any money or anything of value to or for the benefit of any “foreign official” (as such term is defined in the FCPA), foreign political party or official thereof or candidate for foreign political office for the purpose of (i) influencing any official act or decision of such official, party or candidate, (ii) inducing such official, party or candidate to use his, her or its influence to affect any act or decision of a foreign governmental authority, or (iii) securing any improper advantage, in the case of (i), (ii) and (iii) above in order to assist any Helios Company or any of their respective Affiliates in obtaining or retaining business for or with, or directing business to, any person. No Helios Company nor, to Helios’ knowledge, any of its directors, officers, employees or agents of any Helios Company have made or authorized any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of funds or received or retained any funds in violation of any law, rule or regulation. Helios further represents that it has maintained, and has caused each of its subsidiaries and Affiliates to maintain, systems of internal controls (including, but not limited to, accounting systems, purchasing systems and billing systems) to ensure compliance with the FCPA or any other applicable anti-bribery or anti-corruption law. No Helios Company, nor, to Helios’ knowledge, any of their respective officers, directors or employees are the subject of any Enforcement Action.

 

 
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3.17      Purchase Entirely for Own Account . This Agreement is made with Helios in reliance upon Helios’ representation to MoviePass, which by Helios’ execution of this Agreement, Helios hereby confirms, that the MoviePass Securities to be acquired by Helios will be acquired for investment for Helios’ own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that Helios has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, Helios further represents that Helios does not presently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the MoviePass Securities. Helios has not been formed for the specific purpose of acquiring the MoviePass Securities.

 

3.18      Disclosure of Information . Helios has had an opportunity to discuss MoviePass’ business, management, financial affairs and the terms and conditions of the offering of the MoviePass Securities with MoviePass’ management and has had an opportunity to review MoviePass’ facilities. The foregoing, however, does not limit or modify the representations and warranties of MoviePass in Section 2 of this Agreement or the right of Helios to rely thereon.

 

3.19      Restricted Securities . Helios understands that the MoviePass Securities have not been, and will not be, upon issuance, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of Helios’ representations as expressed herein. Helios’ understands that the MoviePass Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, Helios must hold the MoviePass Securities indefinitely unless they are registered with the SEC and qualified by state authorities, or an exemption from such registration and qualification requirements is available. Helios acknowledges MoviePass has no obligation to register or qualify the MoviePass Securities for resale except for the Shares as set forth in the Investors’ Rights Agreement. Helios further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the MoviePass Securities, and on requirements relating to MoviePass which are outside of Helios’ control, and which MoviePass is under no obligation and may not be able to satisfy.

 

3.20      No Public Market . Helios understands that no public market now exists for the MoviePass Securities, and that MoviePass has made no assurances that a public market will ever exist for the MoviePass Securities except for the Shares as set forth in the Investors’ Rights Agreement.

 

3.21      Legends . Helios understands that the MoviePass Securities and any securities issued in respect of or exchange for the MoviePass Securities, as applicable, may be notated with one or all of the following legends:

 

“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.”

 

 
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(a)     Any legend set forth in, or required by, the other Transaction Agreements.

 

(b)     Any legend required by the securities laws of any state to the extent such laws are applicable to the MoviePass Securities represented by the certificate, instrument, or book entry so legended.

 

3.22      Sophisticated Investor . Helios (i) is a sophisticated investor; (ii) does not require the assistance of an investment advisor or other purchaser representative to purchase the MoviePass Securities; (iii) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its prospective investment in the MoviePass Securities; (iv) has the ability to bear the economic risks of its prospective investment for an indefinite period of time; (v) can afford the complete loss of such investment; and (vi) recognizes that the investment in the MoviePass Securities involves substantial risk.

 

3.23      No General Solicitation . No Helios Company, nor any of their respective officers, directors, employees, agents, stockholders or partners has either directly or indirectly, including, through a broker or finder (a) engaged in any general solicitation, or (b) published any advertisement in connection with the offer and sale of the Helios Securities. In addition, Helios is not purchasing the MoviePass Securities as a result of any advertisement, article, notice or other communication regarding the MoviePass Securities published in any newspaper, magazine, or similar media or broadcast over the internet, television or radio or presented at any seminar or, to the knowledge of Helios, any other general solicitation or general advertisement.

 

3.24      Exculpation . Helios acknowledges that it is not relying upon any Person, other than MoviePass and its officers and directors, in making its investment or decision to invest in MoviePass.

 

3.25      Residence . Helios’ principal place of business is identified in the address of Helios set forth on the signature page hereto.

 

4.              Covenants; Other Agreements .

 

4.1      MoviePass Employment Agreements . The Board of Directors of MoviePass shall take such action as reasonably required such that, effective as of Closing, Mitch Lowe will remain appointed as Chief Executive Officer of MoviePass under a five (5) year employment agreement, in form and substance reasonably acceptable to Mr. Lowe, MoviePass and Helios (the “ Lowe Employment Agreement ”).

 

4.2      Dilutive Issuances . From the Closing until the first anniversary of the Closing, if MoviePass issues and/or sells any shares of Common Stock, including upon exercise or conversion of any Common Stock Equivalents, MoviePass shall promptly notify Helios of such issuance in writing and simultaneously issue to Helios a certificate or certificates evidencing such number of duly authorized, fully paid and nonassessable additional shares of Common Stock as is necessary for Helios to maintain its ownership percentage of fifty one percent (51%) of the then outstanding shares of Common Stock (for the avoidance of doubt, not on a fully-diluted basis, and excluding any unexercised options, warrants or convertible debt) (the “ Anti-Dilution Percentage ”) without the payment of additional consideration by Helios; provided, that in the event that Helios sells or otherwise transfers any of the Shares during the period from the Closing until the first anniversary of the Closing (including in the case of a transfer of all or a portion of the Shares pursuant to the Helios Note in satisfaction of Helios’ obligations thereunder or pursuant to the pledge made thereunder), the above Anti-Dilution Percentage will be appropriately reduced to reflect the Shares so transferred.

 

 
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4.3      Listing of Helios Shares . Helios hereby agrees to use commercially reasonable efforts to maintain the listing or quotation of its common stock on the trading market on which it is currently listed, and concurrently with the Closing, Helios shall apply to list or quote all of the Helios Shares on such trading market and promptly secure the listing of all of the Helios Shares on such trading market.

 

4.4      Helios Offering . Helios shall use its best efforts to consummate as promptly as practicable after the date of this Agreement an offering of its equity or equity-linked securities with aggregate gross proceeds of at least $10,000,000.

 

4.5      Helios Employment Agreements . Helios shall take such action as reasonably required such that, effective as of Closing, Theodore Farnsworth will remain appointed as Chief Executive Officer of Helios under a five (5) year employment agreement and Stuart Benson will remain appointed as Chief Financial Officer of Helios under a three (3) year employment agreement, each employment agreement to be in form and substance reasonably acceptable to MoviePass.

 

4.6      Appointment of Director . Helios shall take such actions as necessary to appoint Mitch Lowe as a director of the Helios Board of Directors immediately after Closing, including increasing the number of Helios directorships from five (5) to seven (7), and shall provide Mr. Lowe with a customary director indemnification agreement in form and substance reasonably acceptable to Mr. Lowe.

 

4.7      Publicity . The parties hereto agree that no public release, filing or announcement concerning this Agreement or the transactions contemplated hereby shall be issued by either party or any of its Representatives without the prior written consent of the other party hereto (which consent shall not be unreasonably withheld, conditioned or delayed), except as such release or announcement may be required by applicable law or the rules or regulations of any securities exchange, in which case the applicable party shall use commercially reasonable efforts to allow the other party reasonable time to comment on, and arrange for any required filing with respect to, such release or announcement in advance of such issuance.

 

4.8      Confidentiality . Referenced is hereby made to the Confidentiality Agreement, dated as of May 25, 2017 (the “Confidentiality Agreement”), by and between Zone Technologies, Inc. (“ Zone ”) and MoviePass. The parties hereby agree that Helios will be bound by and have all of the rights and obligations of Zone under the Confidentiality Agreement as it were the original party thereto in lieu of Zone.

 

4.9      Commercially Reasonable Efforts . Subject to the terms and conditions of this Agreement, each party shall (and shall cause its Affiliates to) use its commercially reasonable efforts and shall reasonably cooperate with the other parties, to take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws to consummate the transactions contemplated by this Agreement (including those transactions described in the other Transaction Agreements which shall not take place until after Closing) and to comply as promptly as practicable with all requirements of governmental authorities and applicable laws applicable to the transactions contemplated by this Agreement. Prior to the Closing, each party shall use its commercially reasonable efforts to obtain any consents of third Persons as may be necessary for the consummation of the transactions contemplated hereby by such party or required as a result of the execution, performance or consummation of the transactions contemplated by this Agreement or the other Transaction Agreements hereby by such party, and the other party shall provide reasonable cooperation in connection with such efforts. Without limiting the foregoing, Helios shall promptly provide all information reasonably necessary for MoviePass to list its shares of common stock on Nasdaq or NYSE as promptly as practicable following Closing.

 

 
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4.10      Proxy Statement . As promptly as practicable after the date hereof, and in consultation with MoviePass, Helios shall prepare and file with the SEC a proxy statement (as amended or supplemented from time to time, the “ Proxy Statement ”) calling a special meeting of Helios’ stockholders (the “ Stockholder Meeting ”) in accordance with its certificate of incorporation and bylaws seeking the approval of the Helios’ stockholders for the transactions contemplated by this Agreement and the other Transaction Agreement, and MoviePass shall use its commercially reasonable efforts to obtain and furnish to Helios any financial and other information about MoviePass required by the Exchange Act to be included in the Proxy Statement all in accordance with and as required by Helios’ certificate of incorporation and bylaws, applicable law and any applicable rules and regulations of the SEC and Nasdaq. In connection with the Proxy Statement, Helios will also file with the SEC all financial and other information about Helios, MoviePass and the transactions contemplated by this Agreement in accordance with applicable proxy solicitation rules set forth in Helios’ certificate of incorporation and bylaws, applicable law and any applicable rules and regulations of the SEC and Nasdaq (such Proxy Statement, together with any additional soliciting materials, supplements, amendments and/or exhibits thereto, the “ Proxy Documents ”). Except with respect to the financial and other information provided by or on behalf of MoviePass for inclusion in the Proxy Documents, Helios shall ensure that, when filed, the Proxy Statement and other Proxy Documents will comply in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder. Helios shall cause the Proxy Documents to be disseminated as promptly as practicable after receiving clearance from the SEC to Helios’ equity holders as and to the extent such dissemination is required by U.S. federal securities laws and the rules and regulations of the SEC and Nasdaq promulgated thereunder or otherwise (the “ Federal Securities Laws ”). Subject to any information provided for inclusion therein by MoviePass, Helios shall cause the Proxy Documents to comply in all material respects with the Federal Securities Laws. Helios shall provide copies of the proposed forms of the Proxy Documents (including, in each case, any amendments or supplements thereto) to MoviePass such that MoviePass and its Representatives are afforded a reasonable amount of time prior to the dissemination or filing thereof to review such material and comment thereon prior to such dissemination or filing, and Helios shall reasonably consider in good faith any comments of MoviePass and its Representatives. Helios shall respond promptly to any comments of the SEC or its staff with respect to the Proxy Documents and promptly correct any information provided by it for use in the Proxy Documents if and to the extent that such information shall have become false or misleading in any material respect or as otherwise required by the Federal Securities Laws. Helios shall amend or supplement the Proxy Documents and cause the Proxy Documents, as so amended or supplemented, to be filed with the SEC and to be disseminated to the Helios stockholders, in each case as and to the extent required by the Federal Securities Laws and subject to the terms and conditions of this Agreement and Helios’ certificate of incorporation and bylaws. Helios shall provide MoviePass and its Representatives with copies of any written comments, and shall inform them of any material oral comments, that Helios or any of its Representatives receive from the SEC or its staff with respect to the Proxy Documents promptly after the receipt of such comments and shall give MoviePass a reasonable opportunity under the circumstances to review and comment on any proposed written or material oral responses to such comments. As promptly as reasonably practicable after the Proxy Statement has “cleared” comments from the SEC, Helios shall cause the definitive Proxy Statement to be filed with the SEC and disseminated to Helios stockholders, and shall duly call, give notice of, convene and hold the Stockholder Meeting.

 

 
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5.              Conditions to Helios’ Obligations at Closing . The obligations of Helios to purchase the Shares at the Closing are subject to the fulfillment, at or before the Closing, of each of the following conditions, unless otherwise waived:

 

5.1      Representations and Warranties . The representations and warranties of MoviePass contained in this Agreement and in any certificate delivered by MoviePass pursuant hereto shall be true and correct in all respects as of the Closing Date as if made on the Closing Date, except for (i) those representations and warranties that address matters only as of a particular date (which representations and warranties shall have been accurate as of such date), and (ii) any failures to be true and correct that (without giving effect to any qualifications or limitations as to materiality or Material Adverse Effect), individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on MoviePass.

 

5.2      Performance . MoviePass shall have performed and complied in all material respects with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by MoviePass at or before the Closing.

 

5.3      Compliance Certificate . The Chief Executive Officer of MoviePass shall deliver to Helios at the Closing a certificate certifying that the conditions specified in Subsections 5.1 and 5.2 have been fulfilled.

 

5.4      Qualifications . All authorizations, approvals or permits as set forth on Subsection 5.4 of the Disclosure Schedule of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be obtained and effective as of the Closing.

 

5.5      Opinion of MoviePass Counsel . Helios shall have received from counsel for MoviePass an opinion, dated as of the Closing, in such form to be agreed upon by the parties .

 

5.6      Board of Directors . As of the Closing, the authorized size of the Board of Directors of MoviePass shall be five, and the Board of Directors shall be comprised of the following persons: Mitch Lowe, Theodore Farnsworth, two (2) directors designated prior to the Closing by MoviePass’ Board of Directors who qualify as independent directors under Nasdaq requirements and one (1) director designated by Helios who qualifies as an independent director under Nasdaq requirements.

 

5.7      Indemnification Agreement . MoviePass shall have executed and delivered the Indemnification Agreements.

 

5.8      Investors’ Rights Agreement . MoviePass, Helios and such other stockholders of MoviePass named as parties to the Investors’ Rights Agreement shall have executed and delivered the Investors’ Rights Agreement.

 

5.9      Voting Agreement . MoviePass, Helios and such other stockholders of MoviePass named as parties to the Voting Agreement shall have executed and delivered the Voting Agreement.

 

5.10      Restated Certificate . MoviePass shall have filed the Restated Certificate with the Secretary of State of Delaware on or prior to the Closing, which shall continue to be in full force and effect as of the Closing.

 

 
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5.11      Secretary’s Certificate . The Secretary of MoviePass shall have delivered to Helios at the Closing a certificate certifying (i) the Bylaws of MoviePass as of the Closing, (ii) resolutions of the Board of Directors of MoviePass approving the Transaction Agreements and the transactions contemplated under the Transaction Agreements, and (iii) resolutions of the stockholders of MoviePass approving the Restated Certificate.

 

5.12      Preemptive Rights . MoviePass shall have fully satisfied (including with respect to rights of timely notification) or obtained enforceable waivers in respect of any preemptive or similar rights directly or indirectly affecting any of its securities in connection with the transactions contemplated by this Agreement.

 

5.13      Exchange of Preferred Stock and Convertible Notes . Prior to the Closing, MoviePass shall have caused all Preferred Stock and convertible notes (other than the convertible notes in the aggregate principal amount of $1,000,000 held by Chris Kelly (collectively, the “ Kelly Note ”)) to have been cancelled, extinguished or otherwise exchanged for shares of Common Stock, as applicable, and consistent with MoviePass’ representations and warranties in Subsection 2.2(b) .

 

5.14      Debt Repayment . Prior to the Closing, MoviePass shall have repaid or converted to Common Stock of MoviePass, consistent with MoviePass’ representations and warranties in Subsection 2.2(b) , all of its outstanding indebtedness for borrowed money, except with respect to such indebtedness represented by the Kelly Note.

 

5.15      MoviePass Audited Financial Statements . MoviePass shall have delivered to Helios financial statements audited by a PCAOB independent registered accounting firm for the fiscal years ended December 31, 2015 and 2016 and interim unaudited (reviewed) financial statements for the six months ended June 30, 2017 (or, if the date of the Closing is on or after November 1, 2017, interim unaudited (reviewed) financial statements for the nine months ended September 30, 2017).

 

5.16      Approval of the Stockholders of Helios . Helios shall have held the Stockholders Meeting and the stockholders of Helios shall have approved the transactions contemplated by this Agreement and the other Transaction Agreements to the extent required by Helios’ certificate of incorporation and bylaws, applicable law and any applicable rules and regulations of the SEC and Nasdaq.

 

5.17      Approval of Hudson Bay Master Fund Ltd . Helios shall have obtained the written consent of Hudson Bay Master Fund Ltd to issue the Helios Shares.

 

5.18      Listing of Additional Shares (Helios Shares) . The Helios Shares shall have been approved for listing on Nasdaq, subject only to official notice of issuance.

 

5.19      No Material Adverse Effect . Prior to and on the Closing, there shall have been no Material Adverse Effect on MoviePass from the date hereof which is continuing and uncured.

 

5.20      Completion of $10 Million Offering . Helios shall have consummated an offering of its equity or equity-linked securities with aggregate gross proceeds of at least $10,000,000.

 

5.21      Lock-Up Agreements . MoviePass shall have delivered to Helios an executed copy of the lock-up agreement, with respect to the Helios Shares, by and between MoviePass and Helios, in substantially the form attached hereto as Exhibit J-1 (the “ Lock-Up Agreement ”).

 

 
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5.22      Voting Proxy . MoviePass shall have delivered to Helios an executed voting proxy agreement in favor of the current Chief Executive Officer of Helios, individually, with respect to the Helios Shares, in substantially the form attached hereto as Exhibit K-1 .

 

5.23      MoviePass Stockholder Approval . The requisite vote of the stockholders of MoviePass to approve the transactions contemplated by the Transaction Agreements pursuant to written consents of the Majority MoviePass Stockholders in accordance with the DGCL, the Current Certificate and the bylaws of MoviePass (the “MoviePass Stockholder Approval”) shall have been received no later than 5:00 pm Eastern Time on the business day following the date of this Agreement.

 

6.             Conditions of MoviePass’ Obligations at Closing . The obligations of MoviePass to sell Shares to Helios at the Closing are subject to the fulfillment, at or before the Closing, of each of the following conditions, unless otherwise waived: 6.1     Representations and Warranties. The representations and warranties of Helios contained in this Agreement and in any certificate delivered by Helios pursuant hereto shall be true and correct in all respects as of the Closing Date as if made on the Closing Date, except for (i) those representations and warranties that address matters only as of a particular date (which representations and warranties shall have been accurate as of such date), and (ii) any failures to be true and correct that (without giving effect to any qualifications or limitations as to materiality or Material Adverse Effect), individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on Helios.

 

6.2      Performance . Helios shall have performed and complied in all material respects with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by Helios at or before the Closing.

 

6.3      Compliance Certificate . The Chief Executive Officer of Helios shall deliver to MoviePass at the Closing a certificate certifying that the conditions specified in Subsections 6.1 and 6.2 have been fulfilled.

 

6.4      Qualifications . All authorizations, approvals or permits as set forth on Subsection 6.4 of the Helios Disclosure Schedule of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Helios Shares pursuant to this Agreement shall be obtained and effective as of the Closing.

 

6.5      Investors’ Rights Agreement . Helios and such other stockholders of MoviePass named as parties to the Investors’ Rights Agreement shall have executed and delivered the Investors’ Rights Agreement.

 

6.6      Voting Agreement . Helios and such other stockholders of MoviePass named as parties to the Voting Agreement shall have executed and delivered the Voting Agreement.

 

6.7      Restated Certificate . The Restated Certificate shall be in full force and effect as of the Closing.

 

6.8      Secretary’s Certificate . The Secretary of Helios shall have delivered to MoviePass at the Closing a certificate certifying (i) the certificate of incorporation, as amended, and bylaws, as amended, of Helios as of the Closing, (ii) resolutions of the Board of Directors of Helios approving the Transaction Agreements and the transactions contemplated under the Transaction Agreements, and (iii) evidence that the stockholders of Helios have approved the transactions contemplated by this Agreement and the other Transaction Agreements to the extent required by Helios’ certificate of incorporation and bylaws, applicable law and any applicable rules and regulations of the SEC and Nasdaq.

 

 
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6.9      No Material Adverse Effect . Prior to and on the Closing, there shall have been no Material Adverse Effect on Helios from the date hereof which is continuing and uncured.

 

6.10      Lock-Up Agreements . Helios shall have delivered to MoviePass an executed copy of the lock-up agreement, with respect to the Shares, by and between MoviePass and Helios, in substantially the form attached hereto as Exhibit J-2 (the “ Helios Lock-Up Agreement ”).]

 

6.11      Purchase of Kelly Note and Conversion of Kelly Note Following Closing . Helios shall have purchased the Kelly Note from Chris Kelly for $1,000,000 and agreed to convert all outstanding principal and accrued unpaid interest under the Kelly Note into Common Stock in accordance with the terms of the Kelly Note immediately following the Closing.

 

6.12      Approval of the Stockholders of MoviePass . The requisite stockholders of MoviePass shall have approved the transactions contemplated hereby.

 

6.13      Appointment of Mitch Lowe as Director . Helios shall have appointed Mitch Lowe as a director of the Helios Board of Directors and shall have entered into a director indemnification agreement with Mr. Lowe consistent with the requirements of Subsection 4.6 .

 

6.14      Registration Rights . Helios shall have entered into a registration rights agreement with MoviePass with respect to the Helios Shares in form and substance reasonably acceptable to MoviePass and Helios and subject to the approval of the requisite holders of Helios’ outstanding senior secured convertible notes, if required (the “ Helios Registration Rights Agreement ”).

 

6.15      Approval of the Stockholders of Helios . Helios shall have held the Stockholders Meeting and the stockholders of Helios shall have approved the transactions contemplated by this Agreement and the other Transaction Agreements in accordance with Helios’ certificate of incorporation and bylaws, applicable law and any applicable rules and regulations of the SEC and Nasdaq.

 

6.16      Listing of Additional Shares (Helios Shares) . The Helios Shares shall have been approved for listing on the Nasdaq Stock Market, subject only to official notice of issuance.

 

6.17      Completion of $10 Million Offering . Helios shall have consummated an offering of its equity or equity-linked securities with aggregate gross proceeds of at least $10,000,000.

 

6.18      Voting Proxy . Helios shall have delivered to MoviePass an executed voting proxy agreement in favor of the current Chief Executive Officer of MoviePass, individually, with respect to the Shares, in substantially the form attached hereto as Exhibit K-2 .

 

6.19      Opinion of Helios Counsel MoviePass shall have received from counsel for Helios an opinion, dated as of the Closing, in such form to be agreed upon by the parties .

 

 
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7.              Other Agreements; Miscellaneous .

 

7.1      Survival of Warranties; Damages Under this Agreement . Unless otherwise set forth in this Agreement, the representations and warranties of MoviePass and Helios contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall survive until the one (1) year anniversary of Closing and shall in no way be affected by any investigation or knowledge of the subject matter thereof made by or on behalf of Helios or MoviePass. Neither party shall be liable after the Closing for any claims made for any breaches of representations or warranties by such party in this Agreement in excess of, in the aggregate, $2,500,000, and the maximum liability for each party under this Agreement from and after the Closing shall not exceed, in the aggregate, $4,000,000, in addition to the consideration required to be delivered under this Agreement (including the Helios Milestone Shares), except in each case for common law fraud by such party in connection with the transactions contemplated by this Agreement. In the event that Helios makes any claim against MoviePass after the Closing in connection with this Agreement or the other Transaction Agreements or the transactions contemplated hereby or thereby, MoviePass shall have the right to offset any damages awarded to Helios against the then outstanding amount due to MoviePass under the Helios Note. In the event that MoviePass makes any claim against Helios after the termination of this Agreement in connection with this Agreement or any Transaction Agreements in effect at the time of such termination or the transactions contemplated hereby or thereby, Helios shall have the right to offset any damages awarded to MoviePass against the then outstanding amount due to Helios under the MoviePass Note. Notwithstanding anything to the contrary contained in this Agreement, neither Helios nor MoviePass (directly or indirectly) shall be liable to the other for any punitive, exemplary, consequential, indirect, incidental or special damages (including any loss of future revenue, income or profits, or loss of business reputation or opportunity).

 

7.2      Successors and Assigns; Third Party Beneficiaries . 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. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. Nothing contained in this Agreement or in any instrument or document executed by any party in connection with the transactions contemplated hereby shall create any rights in, or be deemed to have been executed for the benefit of, any Person that is not a party hereto or thereto or a successor or permitted assign of such a party.

 

7.3      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.

 

7.4      Counterparts . This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g. , www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

7.5      Titles and Subtitles; Interpretation . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. In this Agreement, unless the context otherwise requires: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and words in the singular form, including any defined terms, include the plural and vice versa; (b) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity; (c) any accounting term used and not otherwise defined in this Agreement or any other Transaction Agreement has the meaning assigned to such term in accordance with GAAP; (d) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding or succeeding such term and shall be deemed in each case to be followed by the words “without limitation”; and (e) the words “herein,” “hereto,” and “hereby” and other words of similar import in this Agreement shall be deemed in each case to refer to this Agreement as a whole and not to any particular Section or other subdivision of this Agreement.

 

 
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7.6      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 Subsection 7.6 . 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.

 

7.7      No Finder’s Fees . Except as described on Subsection 7.7 of the Disclosure Schedule (with respect to MoviePass) or the Helios Disclosure Schedule (with respect to Helios), each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with the transactions contemplated by this Agreement. Helios agrees to indemnify and to hold harmless MoviePass from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of the transactions contemplated by this Agreement (and the reasonable out-of-pocket costs and expenses of defending against such liability or asserted liability) for which Helios or any of its officers, employees or representatives is responsible. MoviePass agrees to indemnify and hold harmless Helios from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of the transactions contemplated by this Agreement (and the reasonable out-of-pocket costs and expenses of defending against such liability or asserted liability) for which MoviePass or any of its officers, employees or representatives is responsible.

 

7.8      Specific Performance . The parties hereto agree that irreparable damage might occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, without the requirement to post a bond or other security.

 

7.9      Fees and Expenses . Except as expressly set forth in this Agreement (including Subsection 7.18 hereof) or the other Transaction Agreements to the contrary, each party shall pay the fees and expenses of such party’s advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. MoviePass shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of the Shares to Helios. Helios shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of the Helios Shares to MoviePass. MoviePass shall engage a transfer agent reasonably acceptable to Helios prior to the Closing, provided that Computershare shall be deemed acceptable to Helios.

 

7.10      Attorneys’ Fees . If any action at law or in equity (including, arbitration) is necessary to enforce or interpret the terms of any of the Transaction Agreements, the prevailing party shall be entitled to reasonable out-of-pocket attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

 

 
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7.11         Amendments and Waivers . Any term of this Agreement may be amended, terminated or waived only with the written consent of MoviePass and Helios.

 

7.12         Severability . The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties will substitute for any invalid, illegal or unenforceable provision a suitable and equitable provision that carries out, so far as may be valid, legal and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.

 

7.13         Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

7.14         Entire Agreement . This Agreement (including the Exhibits hereto), the Restated Certificate and the other Transaction Agreements, together with the Confidentiality Agreement, constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly canceled. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or the documents or instruments referred to herein (including the Confidentiality Agreement), which collectively supersede all prior agreements and the understandings among the parties with respect to the subject matter contained herein.

 

7.15         Governing Law; Dispute Resolution .

 

(a)     Subject to Subsection 7.15(b) , 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.

 

 
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(b)     In the event of a dispute relating to the number of MoviePass subscribers to the MoviePass product (a “ Dispute ”), such Dispute shall be governed by this Subsection 7.15(b) . Helios must, in the first instance, provide written notice of the Dispute to MoviePass, which notice must provide a reasonably detailed description of the reason for the Dispute. Helios and MoviePass shall then seek to resolve the Dispute on an amicable basis within ten (10) business days of the notice of such Dispute being received by MoviePass (the “ Resolution Period ”). Any Dispute that is not resolved during the Resolution Period may immediately be referred to and finally resolved by arbitration pursuant to the then-existing Expedited Procedures of the Commercial Arbitration Rules (the “ AAA Procedures ”) of the American Arbitration Association (the “ AAA ”). Any party involved in such Dispute may submit the Dispute to the AAA to commence the proceedings after the Resolution Period. To the extent that the AAA Procedures and this Agreement are in conflict, the terms of this Agreement shall control. The arbitration shall be conducted by one arbitrator nominated by the AAA promptly (but in any event within three (3) business days) after the submission of the Dispute to the AAA and reasonably acceptable to each party subject to the Dispute, which arbitrator shall be a commercial lawyer with substantial experience arbitrating disputes under acquisition agreements. The arbitrator shall accept his or her appointment and begin the arbitration process promptly (but in any event within three (3) business days) after his or her nomination and acceptance by the parties subject to the Dispute. The proceedings shall be streamlined and efficient. The arbitrator shall decide the Dispute in accordance with the substantive law of the State of New York. Time is of the essence. Each party shall submit a proposal for resolution of the Dispute to the arbitrator within ten (10) business days after confirmation of the appointment of the arbitrator. The arbitrator shall have the power to order any party to do, or to refrain from doing, anything consistent with this Agreement and applicable law, including to perform its contractual obligation(s); provided, that the arbitrator shall be limited to ordering pursuant to the foregoing power (and, for the avoidance of doubt, shall order) the relevant party (or parties, as applicable) to comply with only one or the other of the proposals. The arbitrator’s award shall be in writing and shall include a reasonable explanation of the arbitrator’s reason(s) for selecting one or the other proposal. The seat of arbitration shall be in the borough of Manhattan, State of New York. Judgment on the arbitration award may be entered in any court having jurisdiction over the subject matter of controversy.

 

7.16      WAIVER OF JURY TRIAL . 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 OTHER TRANSACTION DOCUMENTS, 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.

 

7.17      No Commitment for Additional Financing . MoviePass acknowledges and agrees that Helios has not made any representation, undertaking, commitment or agreement to provide or assist MoviePass in obtaining any financing, investment or other assistance, other than the purchase of the MoviePass Securities as set forth herein and subject to the conditions set forth herein. In addition, MoviePass acknowledges and agrees that (i) no statements, whether written or oral, made by Helios or its representatives on or after the date of this Agreement shall create an obligation, commitment or agreement to provide or assist MoviePass in obtaining any financing or investment, (ii) MoviePass shall not rely on any such statement by Helios or its representatives, and (iii) an obligation, commitment or agreement to provide or assist MoviePass in obtaining any financing or investment may only be created by a written agreement, signed by Helios and MoviePass, setting forth the terms and conditions of such financing or investment and stating that the parties intend for such writing to be a binding obligation or agreement. Helios shall have the right, in its sole and absolute discretion, to refuse or decline to participate in any other financing of or investment in MoviePass, and shall have no obligation to assist or cooperate with MoviePass in obtaining any financing, investment or other assistance.

 

 
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7.18          Termination .

 

(a)           This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing as follows:

 

(i)     by mutual written consent of the parties;

 

(ii)     by written notice by either party if a governmental authority of competent jurisdiction shall have issued a law, judgment, writ or order or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such law, judgment, writ or order or other action has become final and non-appealable;

 

(iii)     by written notice by either party if the conditions to the Closing of the other party set forth in Section 5 or 6 , as applicable, have not been satisfied within twelve (12) months after the date hereof (the “ Outside Date ”); provided , however , the right to terminate under this Subsection 7.18(a)(iii) shall not be available if an intentional and willful failure by the offending party to fulfill a condition was the primary cause of the failure of the Closing to occur on or before the Outside Date;

 

(iv)     by written notice by Helios if (A) there has been a breach by MoviePass of any of its representations, warranties, covenants or agreements contained in this Agreement, or if any representation or warranty of MoviePass shall have become untrue or inaccurate, in any case, which would result in a failure of a condition set forth in Subsection 5.1 or 5.2 to be satisfied (treating the Closing Date for such purposes as the date of this Agreement or, if later, the date of such breach), and (B) the breach or inaccuracy is incapable of being cured or is not cured within the earlier of (x) twenty (20) days after written notice of such breach or inaccuracy is provided by Helios or (y) the Outside Date; provided , that Helios shall not have the right to terminate this Agreement pursuant to this Subsection 7.18(a)(iv) if at such time Helios is in material uncured breach of this Agreement;

 

(v)     by written notice by MoviePass if (A) there has been a breach by Helios of any of its representations, warranties, covenants or agreements contained in this Agreement, or if any representation or warranty of Helios shall have become untrue or inaccurate, in any case, which would result in a failure of a condition set forth in Subsections 6.1 or 6.2 to be satisfied (treating the Closing Date for such purposes as the date of this Agreement or, if later, the date of such breach), and (B) the breach or inaccuracy is incapable of being cured or is not cured within the earlier of (x) twenty (20) days after written notice of such breach or inaccuracy is provided by MoviePass or (y) the Outside Date; provided , that MoviePass shall not have the right to terminate this Agreement pursuant to this Subsection 7.18(a)(v) if at such time MoviePass is in material uncured breach of this Agreement;

 

(vi)     by written notice by Helios if the MoviePass Stockholder Approval is not received within the time period set forth in Subsection 5.23 of this Agreement; or

 

(vii)     by written notice by MoviePass if MoviePass does not receive the unpaid balance of the Initial Cash Payment within one business day following its delivery to Helios of the MoviePass Stockholder Approval.

 

 
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(b)     This Agreement may only be terminated in the circumstances described in Subsection 7.18(a) and pursuant to a written notice delivered by the terminating party to the other party, which sets forth the basis for such termination. In the event of the valid termination of this Agreement pursuant to Subsection 7.18(a) , this Agreement shall forthwith become void, and there shall be no liability on the part of either party or any of their respective Representatives, and all rights and obligations of each party shall cease, except: (i) Subsections 4.7 , 4.8 and 7 shall survive the termination of this Agreement, and (ii) nothing herein shall relieve either party from liability for any willful breach of any representation, warranty, covenant or obligation under this Agreement or any claim for common law fraud in connection with the transactions contemplated by this Agreement against such party, in either case, prior to termination of this Agreement. Without limiting the foregoing, and except as provided in this Section 7 , the parties’ sole right prior to the Closing with respect to any breach of any representation, warranty, covenant or other agreement contained in this Agreement by the other party or with respect to the transactions contemplated by this Agreement shall be the right, if applicable, to terminate this Agreement pursuant to Subsection 7.18(a) .

 

(c)     Notwithstanding the foregoing, if Helios terminates this Agreement pursuant to Subsection 7.18(a)(iv) or MoviePass terminates this Agreement pursuant to Subsection 7.18(a)(v) , in addition to any other remedies available to the terminating party under this Agreement, the breaching party shall pay the terminating party’s actual reasonable out-of-pocket costs and expenses incurred in connection with the transactions contemplated hereby in an aggregate amount of up to $250,000. Such amount shall be paid to the terminating party after the termination of this Agreement by wire transfer within five (5) business days of the breaching party‘s receipt of reasonable evidence from the terminating party of its incurrence of such costs and expenses.

 

[Signature page to follow]

 

 
37

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

MOVIEPASS INC.:

 

 

 

 

 

 

 

 

 

 

By:

/s/  Mitch Lowe

 

 

 

Name: Mitch Lowe

 

 

 

Title: Chief Executive Officer

 

       
       
 

Address: 175 Varick Street

                 Suite 604

                 New York, NY 10012

 

 

 

 

[Helios Signature Page to Securities Purchase Agreement]

 

 

 

 

 

 

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 10118

 

 

 

 

[MoviePass Signature Page to Securities Purchase Agreement]

 

 
 

 

 

EXHIBITS

 

 

Exhibit A

Form of RESTATED CERTIFICATE

   

EXHIBIT B-1

form of amended NOTE purchase agreement

   

Exhibit B-2

Form of moviepass Note

   

Exhibit C

Form of Helios Note

   

Exhibit D

Disclosure Schedule

   

EXHIBIT E

Form of indemnification agreement

   

Exhibit f

Form of Investors Rights Agreement

   

Exhibit g

Form of Voting Agreement

   

Exhibit h-1

FORM OF TRANSACTION VOTING AND SUPPORT AGREEMENT

   

Exhibit h-2

FORM OF helios TRANSACTION VOTING AND SUPPORT AGREEMENT

   

Exhibit I

HELIOS Disclosure Schedule

   

EXHIBIT J-1

foRM OF lOCK-UP AGREEMENT

   

EXHIBIT J-2

foRM OF HELIOS lOCK-UP AGREEMENT

   

EXHIBIT K-1

FORM OF VOTING PROXY IN FAVOR OF HELIOS CEO

   

EXHIBIT K-2

FORM OF VOTING PROXY IN FAVOR OF MOVIEPASS CEO

 

 
 

 

 

EXHIBIT A

 

FORM OF RESTATED CERTIFICATE

 

 

 
 

 

 

 

EXHIBIT B-1

 

FORM OF AMENDED NOTE PURCHASE AGREEMENT

 

 

 

 

 

EXHIBIT B-2

 

FORM OF MOVIEPASS NOTE

 

 

 
 

 

 

EXHIBIT C

 

FORM OF HELIOS NOTE

 

 

 
 

 

 

EXHIBIT D

 

DISCLOSURE SCHEDULE

 

 

 
 

 

 

EXHIBIT E

 

FORM OF INDEMNIFICATION AGREEMENT

 

 

 
 

 

 

EXHIBIT F

 

FORM OF INVESTORS’ RIGHTS AGREEMENT

 

 

 
 

 

 

EXHIBIT G

 

FORM OF VOTING AGREEMENT

 

 

 

 

 

EXHIBIT H-1

 

FORM OF TRANSACTION VOTING AND SUPPORT AGREEMENT

 

 

 

 

 

EXHIBIT H-2

 

FORM OF HELIOS TRANSACTION VOTING AND SUPPORT AGREEMENT

 

 

 

 

 

EXHIBIT I

 

FORM OF HELIOS DISCLOSURE SCHEDULE

 

 

 

 

 

EXHIBIT J-1

 

FORM OF LOCK-UP AGREEMENT

 

 

 

 

 

EXHIBIT J-2

 

FORM OF HELIOS LOCK-UP AGREEMENT

 

 

 

 

 

EXHIBIT K-1

 

FORM OF VOTING PROXY IN FAVOR OF HELIOS CEO

 

 

 

 

 

EXHIBIT K-2

 

FORM OF VOTING PROXY IN FAVOR OF MOVIEPASS CEO

 

 

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.

 

SUBORDINATED CONVERTIBLE PROMISSORY NOTE

 

$5,000,000

  [           ] , 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 Five Million Dollars ($5,000,000), 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. Interest shall accrue from the date of this Subordinated Convertible Promissory Note (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. This Note is being issued to the Holder pursuant to that certain [Second] Amended and Restated Subordinated Convertible Note Purchase Agreement, dated 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 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 date of this Note (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).

 

 

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 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). 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.

 

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.

 

 

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.

 

 

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]

 

 
 

 

 

IN WITNESS WHEREOF , the parties have executed this Subordinated Convertible Promissory Note as of the date first set forth above.

 

 

THE COMPANY:

 

MOVIEPASS INC.

 

 

 

 

 

 

 

 

 

 

By:

 

 

    (Signature)  
       

 

Name:

 

 

       

 

Title:

 

 

       
  Address:    

 

 

AGREED TO AND ACCEPTED:

 

THE HOLDER:

 

HELIOS AND MATHESON ANALYTICS INC.

 

By:

 

 

  (Signature)  
     

Name:

 

 

     

Title:

 

 

     
Address:    

 

 

[Signature Page to the Subordinated Convertible Promissory Note of MoviePass Inc.]

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

 

$10,000,000

New York, New York

 

_________. 2017

 

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 dates set forth below, (i) the principal amount of Ten Million Dollars ($10,000,000) 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, 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 as follows:

 

(a)     $5,000,000, plus all accrued interest thereon, due in full on the 90th calendar day following the Closing Date (the “ Initial Maturity ”); and

 

(b)     $5,000,000, plus all accrued interest thereon, due in full 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 “ Listing Maturity Date ” and together with the Initial Maturity Date, collectively, the “ Maturity Dates ” and each, a “ 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 each 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 (not to exceed $5,000,000) 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 $25,000,000 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 his principal place of residence is as Helios has provided to MoviePass and Helios covenants to promptly notify MoviePass in writing in the event Helios changes his principal place of residence.

 

(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 [proxy agreement by and between MoviePass and Helios].

 

 
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(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.

 

(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 [     ], 2017 by:

 

MOVIEPASS INC.

 

 

 

 

 

 

 

 

 

 

By: 

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

[Signature Page to Helios Note]

Exhibit 4.3

 

[FORM OF [INITIAL SERIES A][ADDITIONAL SERIES A][SERIES B] SENIOR SECURED CONVERTIBLE NOTE]

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

 

Helios and Matheson Analytics Inc.

 

[InitialSeries A][Additional Series A][Series B] Senior Secured Convertible Note

 

Issuance Date: ___________, ______

Original Principal Amount: U.S. $[●]            

 

FOR VALUE RECEIVED, Helios and Matheson Analytics Inc., a Delaware corporation (the “ Company ”), hereby promises to pay to the order of [BUYER] or its registered assigns (“ Holder ”) the amount set forth above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “ Principal ”) when due, whether upon the Maturity Date, or upon acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“ Interest ”) on any outstanding Principal at the applicable Interest Rate (as defined below) from the date set forth above as the Issuance Date (the “ Issuance Date ”) until the same becomes due and payable, whether upon the Maturity Date or upon acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This [Initial Series A][Additional Series A][Series B] Senior Secured Convertible Note (including all Senior Secured Convertible Notes issued in exchange, transfer or replacement hereof, this “ Note ”) is one of an issue of Senior Secured Convertible Notes issued pursuant to the Securities Purchase Agreement, dated as of August __, 2017 (the “ Subscription Date ”), by and among the Company and the investors (the “ Buyers ”) referred to therein, as amended from time to time (collectively, the “ Notes ”, and such other Senior Secured Convertible Notes, the “ Other Notes ”). Certain capitalized terms used herein are defined in Section 31.

 

 
 

 

 

1.          PAYMENTS OF PRINCIPAL . On the Maturity Date, the Company shall pay to the Holder an amount in cash representing 115% of all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges (as defined in Section 24(c)) on such Principal and Interest. Other than as specifically permitted by this Note, the Company may not prepay any portion of the outstanding Principal, accrued and unpaid Interest or accrued and unpaid Late Charges on Principal and Interest, if any. [INSERT IN INITIAL SERIES A NOTE AND SERIES B NOTE ONLY: Notwithstanding anything herein to the contrary, with respect to any conversion or redemption hereunder, as applicable, the Company shall convert or redeem, as applicable, First , all accrued and unpaid Interest hereunder and under any other Notes, the December Notes or the February Notes held by such Holder, Second , all accrued and unpaid Late Charges on any Principal and Interest hereunder and under any other Notes, the December Notes or the February Notes held by such Holder, and Third , all Principal outstanding hereunder and under any other Notes, the December Notes or the February Notes held by such Holder.]

 

[INSERT IN ADDITIONAL SERIES A NOTE ONLY:

 

(a)      Investor Prepayments; No Share Issuance until Paid in Full . Upon the consummation of any Investor Prepayment, the aggregate outstanding Restricted Principal under this Note shall automatically become unrestricted Principal hereunder, on a dollar-for-dollar basis, in an amount equal to the aggregate amount of cash paid in such Investor Prepayment. Notwithstanding anything herein to the contrary, the shares of Common Stock issuable upon conversion of Restricted Principal hereunder shall not be issued by the Company until such portion of the Investor Note equivalent to the Restricted Principal subject to such conversion has been fully paid pursuant to an Investor Prepayment or otherwise upon maturity of the Investor Note (to the Company or to such other Persons as directed by the Company in writing) and such Restricted Principal becomes unrestricted Principal in accordance with the preceding sentence.

 

(b)      Prohibited Transfer or Severability Reduction . Upon any Prohibited Transfer (as defined in the Investor Note) of, or Severability Event (as defined in the Investor Note) under, the Investor Note, (x) the Investor Note shall be deemed paid in full and shall be null and void, and (y) 75% of the remaining Restricted Principal of this Note shall be automatically cancelled (with the remaining 25% of the Restricted Principal of this Note automatically becoming unrestricted Principal hereunder).

 

(c)      Investor Offset Right Reduction . Upon any exercise by the Holder of Investor Offset Rights (as defined in the Investor Note), the Restricted Principal hereunder shall automatically and simultaneously be reduced, on a dollar-for-dollar basis, by such portion of the aggregate principal of the Investor Note cancelled pursuant to such Investor Offset Rights.

 

 
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(d)      Single Integrated Transaction . The Company hereby acknowledges and agrees that (i) the Holder shall be entitled to exercise the Investor Offset Rights through any means permissible under applicable law, including without limitation, set-off and recoupment and (ii) the obligations of the Holder under the Investor Note and the obligations of the Company under this Note arise in a single integrated transaction and constitute related and interdependent obligations within such transaction.

 

(e)      Order of Conversion and/or Redemption . Notwithstanding anything herein to the contrary, with respect to any conversion or redemption hereunder, as applicable, the Company shall convert or redeem, as applicable, First , all accrued and unpaid Interest hereunder and under any other Additional Series A Notes held by such Holder, Second , all accrued and unpaid Late Charges on any Principal and Interest hereunder and under any other Additional Series A Notes held by such Holder, Third , all Principal (other than Restricted Principal) outstanding hereunder and under any other Additional Series A Notes held by such Holder and, Fourth , all other amounts outstanding (other than Restricted Principal) under any other Additional Series A Notes held by such Holder, in each case, prior to any conversion or redemption, as applicable, of any Restricted Principal hereunder.]

 

2.             INTEREST; INTEREST RATE .

 

(a)     [INSERT IN INITIAL SERIES A NOTE: No Interest shall accrue hereunder unless and until an Event of Default has occurred. From and after the occurrence and during the continuance of any Event of Default, Interest shall accrue hereunder at the Default Rate and shall be computed on the basis of a 360-day year and twelve 30-day months and shall be payable in arrears on the first Trading Day of each such calendar quarter in which Interest accrues hereunder (each, an “ Interest Date ”). Accrued and unpaid Interest, if any, shall also be payable by way of inclusion of such Interest in the Conversion Amount on each Conversion Date in accordance with Section 3(b)(i) or upon any redemption in accordance with Section 11 or any required payment upon any Bankruptcy Event of Default. In the event that such Event of Default is subsequently cured (and no other Event of Default then exists (including, without limitation, for the Company’s failure to pay such Interest at the Default Rate on the applicable Interest Date), Interest shall cease to accrue hereunder as of the calendar day immediately following the date of such cure; provided that the Interest as calculated and unpaid during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of such cure of such Event of Default.][INSERT IN ADDITIONAL SERIES A NOTE AND SERIES B NOTE: Interest on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of a 360-day year and twelve 30-day months and shall be payable in arrears on October 1, 2017 and, thereafter, with respect to any given calendar quarter, the first Trading Day of such calendar quarter (each, an “ Interest Date ”).] Interest shall be payable on each Interest Date, to the record holder of this Note on the applicable Interest Date, in shares of Common Stock (“ Interest Shares ”) so long as there has been no Equity Conditions Failure (unless waived in writing by the Holder); provided however, that the Company may, at its option following notice to the Holder, pay Interest on any Interest Date in cash (“ Cash Interest ”) or in a combination of Cash Interest and Interest Shares. The Company shall deliver a written notice (each, an “ Interest Election Notice ”) to each holder of the Notes on or prior to the Interest Notice Due Date (the date such notice is delivered to all of the holder, the “ Interest Notice Date ”) which notice (i) either (A) confirms that Interest to be paid on such Interest Date shall be paid entirely in Interest Shares or (B) elects to pay Interest as Cash Interest or a combination of Cash Interest and Interest Shares and specifies the amount of Interest that shall be paid as Cash Interest and the amount of Interest, if any, that shall be paid in Interest Shares and (ii) certifies that there has been no Equity Conditions Failure (or if an Equity Conditions Failure has occurred as of the Interest Notice Date, unless the Company has elected to pay such Interest as Cash Interest, the Interest Notice shall indicate that unless the Holder, in its sole discretion, waives the Equity Conditions Failure, in whole or in part, the Interest shall be paid as Cash Interest). Notwithstanding anything herein to the contrary, if no Equity Conditions Failure has occurred as of the Interest Notice Date but an Equity Conditions Failure occurs at any time prior to the Interest Date, (A) the Company shall provide the Holder a subsequent notice to that effect and (B) unless the Holder, in its sole discretion, waives the Equity Conditions Failure, the Interest shall be paid in cash. Interest to be paid on an Interest Date in Interest Shares shall be paid in a number of fully paid and nonassessable shares (rounded to the nearest whole share in accordance with Section 3(a)) of Common Stock equal to the quotient of (1) the amount of Interest payable on such Interest Date less any Cash Interest paid and (2) the Alternate Conversion Price in effect on the applicable Interest Date.

 

 
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(b)     When any Interest Shares are to be paid on an Interest Date, the Company shall (i) (A) provided that the Company's transfer agent (the “ Transfer Agent ”) is participating in the Depository Trust Company (“ DTC ”) Fast Automated Securities Transfer Program, credit such aggregate number of Interest Shares to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit/Withdrawal at Custodian system, or (B) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver on the applicable Interest Date, to the address set forth in the register maintained by the Company for such purpose pursuant to the Securities Purchase Agreement or to such address as specified by the Holder in writing to the Company at least two (2) Business Days prior to the applicable Interest Date, a certificate, registered in the name of the Holder or its designee, for the number of Interest Shares to which the Holder shall be entitled and (ii) with respect to each Interest Date, pay to the Holder, in cash by wire transfer of immediately available funds, the amount of any Cash Interest.

 

(c)     [INSERT IN INITIAL SERIES A NOTE: [Intentionally Ommitted] [INSERT IN ADDITIONAL SERIES A NOTE AND SERIES B NOTE: Prior to the payment of Interest on an Interest Date, Interest on this Note shall accrue at the Interest Rate and shall also be payable by way of inclusion of the Interest in the Conversion Amount on each Conversion Date in accordance with Section 3(b)(i) or upon any redemption in accordance with Section 11 or any required payment upon any Bankruptcy Event of Default. From and after the occurrence and during the continuance of any Event of Default, the Interest Rate shall automatically be increased to the Default Rate. In the event that such Event of Default is subsequently cured (and no other Event of Default then exists (including, without limitation, for the Company’s failure to pay such Interest at the Default Rate on the applicable Interest Date), the adjustment referred to in the preceding sentence shall cease to be effective as of the calendar day immediately following the date of such cure; provided that the Interest as calculated and unpaid at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of such cure of such Event of Default.]

 

 
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3.             CONVERSION OF NOTES . At any time after [INSERT IN ADDITIONAL SERIES A NOTES: the Initial Eligibility Date] [INSERT IN SERIES B NOTES AND INITIAL SERIES A NOTES: the Issuance Date], this Note shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock (as defined below), on the terms and conditions set forth in this Section 3.

 

(a)           Conversion Right . Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into validly issued, fully paid and non-assessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer, stamp, issuance and similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent (as defined below)) that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount.

 

(b)           Conversion Rate . The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “ Conversion Rate ”).

 

(i)     “ Conversion Amount ” means the sum of (x) portion of the Principal to be converted, redeemed or otherwise with respect to which this determination is being made and (y) all accrued and unpaid Interest with respect to such portion of the Principal amount and accrued and unpaid Late Charges with respect to such portion of such Principal and such Interest, if any .

 

(ii)     “ Conversion Price ” means, as of any Conversion Date or other date of determination, $[ ] 1 , subject to adjustment as provided herein.

 

 


1 [INSERT IN INITIAL SERIES A NOTE AND ADDITIONAL SERIES A NOTE: $4.00][INSERT IN SERIES B NOTE: $3.00]

 

 
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(c)           Mechanics of Conversion .

 

(i)      Optional Conversion . To convert any Conversion Amount into shares of Common Stock on any date (a “ Conversion Date ”), the Holder shall deliver (whether via facsimile, electronic mail or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “ Conversion Notice ”) to the Company. If required by Section 3(c)(iii), within three (3) Trading Days following a conversion of this Note as aforesaid, the Holder shall surrender this Note to a nationally recognized overnight delivery service for delivery to the Company (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction as contemplated by Section 18(b)). On or before the first (1st) Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile or electronic mail an acknowledgment of confirmation and representation as to whether such shares of Common Stock may then be resold pursuant to Rule 144 or an effective and available registration statement, in the form attached hereto as Exhibit II , of receipt of such Conversion Notice to the Holder and the Transfer Agent which confirmation shall constitute an instruction to the Transfer Agent to process such Conversion Notice in accordance with the terms herein. On or before the third (3rd) Trading Day following the date on which the Company has received a Conversion Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade initiated on the applicable Conversion Date of such shares of Common Stock issuable pursuant to such Conversion Notice) (the “ Share Delivery Deadline ”), the Company shall (1) provided that the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled pursuant to such conversion to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system or (2) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant to such conversion. If this Note is physically surrendered for conversion pursuant to Section 3(c)(iii) and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver to the Holder (or its designee) a new Note (in accordance with Section 18(d)) representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. Notwithstanding anything to the contrary contained in this Note or the Registration Rights Agreement, after the effective date of the Registration Statement (as defined in the Registration Rights Agreement) and prior to the Holder’s receipt of the notice of a Grace Period (as defined in the Registration Rights Agreement), the Company shall cause the Transfer Agent to deliver unlegended shares of Common Stock to the Holder (or its designee) in connection with any sale of Registrable Securities (as defined in the Registration Rights Agreement) with respect to which the Holder has entered into a contract for sale, and delivered a copy of the prospectus included as part of the particular Registration Statement to the extent applicable, and for which the Holder has not yet settled.

 

 
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(ii)      Company’s Failure to Timely Convert . If the Company shall fail, for any reason or for no reason, on or prior to the applicable Share Delivery Deadline, either (I) either (x) prior to the Resale Eligibility Date or if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s share register or, (y) after the Resale Eligibility Date and if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion of this Note (as the case may be) or (II) after the Resale Eligibility Date, if the Registration Statement covering the resale of the shares of Common Stock that are the subject of the Conversion Notice (the “ Unavailable Conversion Shares ”) is not available for the resale of such Unavailable Conversion Shares and the Company fails to promptly, but in no event later than as required pursuant to the Registration Rights Agreement (x) so notify the Holder and (y) deliver such shares of Common Stock electronically without any restrictive legend by crediting such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such conversion to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause (II) is hereinafter referred as a “ Notice Failure ” and together with the event described in clause (I) above, a “ Conversion Failure ”), then, in addition to all other remedies available to the Holder, (1) the Company shall pay in cash to the Holder on each day after such Share Delivery Deadline that the issuance of such shares of Common Stock is not timely effected an amount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Deadline and to which the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the period beginning on the applicable Conversion Date and ending on the applicable Share Delivery Deadline and (2) the Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned (as the case may be) any portion of this Note that has not been converted pursuant to such Conversion Notice, provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 3(c)(ii) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Deadline and after the Resale Eligibility Date either (A) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate and register such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder or pursuant to the Company’s obligation pursuant to clause (II) below or (B) a Notice Failure occurs, and if on or after such Share Delivery Deadline the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to all or any portion of the number of shares of Common Stock issuable upon such conversion that the Holder is entitled to receive from the Company and has not received from the Company in connection with such Conversion Failure or Notice Failure, as applicable (a “ Buy-In ”), then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Business Days after receipt of the Holder’s request and in the Holder’s discretion, either: (I) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “ Buy-In Price ”), at which point the Company’s obligation to so issue and deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (II) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (x) such number of shares of Common Stock multiplied by (y) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date of the applicable Conversion Notice and ending on the date of such issuance and payment under this clause (II) (the “ Buy-In Payment Amount ”). Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares of Common Stock) upon the conversion of this Note as required pursuant to the terms hereof. Notwithstanding anything herein to the contrary, with respect to any given Notice Failure and/or Conversion Failure, this Section 3(c)(ii) shall not apply to the Holder to the extent the Company has already paid such amounts in full to such Holder with respect to such Notice Failure and/or Conversion Failure, as applicable, pursuant to the analogous sections of the Securities Purchase Agreement.

 

 
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(iii)      Registration; Book-Entry . The Company shall maintain a register (the “ Register ”) for the recordation of the names and addresses of the holders of each Note and the principal amount of the Notes [INSERT IN ADDITIONAL SERIES A NOTE ONLY: and Restricted Principal] held by such holders (the “ Registered Notes ”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes (including, without limitation, the right to receive payments of Principal and Interest hereunder) notwithstanding notice to the contrary. A Registered Note may be assigned, transferred or sold in whole or in part only by registration of such assignment or sale on the Register. Upon its receipt of a written request to assign, transfer or sell all or part of any Registered Note by the holder thereof, the Company shall record the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered Registered Note to the designated assignee or transferee pursuant to Section 18, provided that if the Company does not so record an assignment, transfer or sale (as the case may be) of all or part of any Registered Note within two (2) Business Days of such a request, then the Register shall be automatically deemed updated to reflect such assignment, transfer or sale (as the case may be). Notwithstanding anything to the contrary set forth in this Section 3, following conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted (in which event this Note shall be delivered to the Company following conversion thereof as contemplated by Section 3(c)(i)) or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder and the Company shall maintain records showing the Principal, Interest and Late Charges converted and/or paid (as the case may be) [INSERT IN ADDITIONAL SERIES A NOTE ONLY: or Restricted Principal becoming unrestricted] and the dates of such conversions [INSERT IN ADDITIONAL SERIES A NOTE ONLY:, Investor Prepayments] and/or payments (as the case may be) or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion. If the Company does not update the Register to record such Principal, Interest and Late Charges converted and/or paid (as the case may be) [INSERT IN ADDITIONAL SERIES A NOTE ONLY: or Restricted Principal becoming unrestricted] and the dates of such conversions, [INSERT IN ADDITIONAL SERIES A NOTE ONLY: Investor Prepayment] and/or payments (as the case may be) within two (2) Business Days of such occurrence, then the Register shall be automatically deemed updated to reflect such occurrence.

 

 
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(iv)      Pro Rata Conversion; Disputes . In the event that the Company receives a Conversion Notice from more than one holder of Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of Notes electing to have Notes converted on such date a pro rata amount of such holder’s portion of its Notes submitted for conversion based on the principal amount of Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23.

 

 
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(d)          Limitations on Conversions .

 

(i)      Beneficial Ownership . T he Company shall not effect the conversion of any portion of this Note, and the Holder shall not have the right to convert any portion of this Note pursuant to the terms and conditions of this Note and any such conversion shall be null and void and treated as if never made, to the extent that after giving effect to such conversion, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 9.99% (the “ Maximum Percentage ”) of the shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held by the Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including, without limitation, the Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 3(d)(i). For purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. For purposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the conversion of this Note without exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the SEC, as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (the “ Reported Outstanding Share Number ”). If the Company receives a Conversion Notice from the Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall notify the Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Conversion Notice would otherwise cause the Holder’s beneficial ownership, as determined pursuant to this Section 3(d)(i), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of shares of Common Stock to be purchased pursuant to such Conversion Notice. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of Common Stock to the Holder upon conversion of this Note results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Maximum Percentage (the “ Excess Shares ”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares. Upon delivery of a written notice to the Company, the Holder may from time to time increase (with such increase not effective until the sixty-first (61 st ) day after delivery of such notice) or decrease the Maximum Percentage to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until the sixty-first (61 st ) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other Attribution Parties and not to any other holder of Notes that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of this Note in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to convert this Note pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 3(d)(i) to the extent necessary to correct this paragraph (or any portion of this paragraph) which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 3(d)(i) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of this Note.

 

 
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(ii)      Exchange Cap . The Company shall not issue any shares of Common Stock upon conversion of this Note or otherwise pursuant to the terms of this Note if the issuance of such shares of Common Stock (taken together with any shares of Common Stock issuable upon exercise of the Warrants) would exceed the aggregate number of shares of Common Stock which the Company may issue upon exercise or conversion of the Notes or otherwise pursuant to the terms of the Notes or the Warrants without breaching the Company’s obligations, if any, under the rules or regulations of the Principal Market (the number of shares which may be issued without violating such rules and regulations, including rules related to the aggregate of offerings under NASDAQ Listing Rule 5635(d), as applicable, the “ Exchange Cap ”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its stockholders as required by the applicable rules of the Principal Market for issuances of shares of Common Stock upon conversion of the Notes or otherwise pursuant to the terms of this Note in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the Holder. Until such approval or such written opinion is obtained, no Buyer shall be issued in the aggregate, upon conversion or exercise (as the case may be) of any Notes or any of the Warrants or otherwise pursuant to the terms of the Notes or the Warrants, shares of Common Stock in an amount greater than the product of (i) the Exchange Cap as of the Issuance Date multiplied by (ii) the quotient of (A) the aggregate original principal amount of Notes issued to such Buyer pursuant to the Securities Purchase Agreement on the Closing Date (as defined in the Securities Purchase Agreement) divided by (B) the aggregate original principal amount of all Notes issued to the Buyers pursuant to the Securities Purchase Agreement on the Closing Date (with respect to each Buyer, the “ Exchange Cap Allocation ”). In the event that any Buyer shall sell or otherwise transfer any of such Buyer’s Notes, the transferee shall be allocated a pro rata portion of such Buyer’s Exchange Cap Allocation with respect to such portion of such Notes so transferred, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation so allocated to such transferee. Upon conversion and exercise in full of a holder’s Notes and Warrants, the difference (if any) between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder upon such holder’s conversion in full of such holder’s Notes and such holder’s exercise in full of such Warrants shall be allocated, to the respective Exchange Cap Allocations of the remaining holders of Notes and related Warrants on a pro rata basis in proportion to the shares of Common Stock underlying the Notes and related Warrants then held by each such holder of Notes and related Warrants. In the event that the Company is prohibited from issuing shares of Common Stock pursuant to this Section 3(d)(ii) (the “ Exchange Cap Shares ”) after September 15, 2017, the Company shall pay cash in exchange for the cancellation of such portion of the Conversion Amount of the Note convertible into such Exchange Cap Shares at a price equal to the sum of (i) the product of (x) such number of Exchange Cap Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date the Holder delivers the applicable Conversion Notice with respect to such Exchange Cap Shares to the Company and ending on the date of such issuance and payment under this Section 3(d)(ii) and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Exchange Cap Shares, any Buy-In Payment Amount, any brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith (collectively, the “ Exchange Cap Share Cancellation Amount ”); provided, that no Exchange Cap Share Cancellation Amount shall be due and payable to the Holder to the extent that (x) on or prior to the applicable Share Delivery Deadline, the Exchange Cap Allocation of a Holder is increased (whether by assignment by a holder of Notes or all, or any portion, of such holder's Exchange Cap Allocation or otherwise) (an “ Exchange Cap Allocation Increase ”) and (y) after giving effect to such Exchange Cap Allocation Increase, the Company delivers the applicable Exchange Cap Shares to the Holder (or its designee) on or prior to the applicable Share Delivery Deadline.

 

 
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(e)           Right of Alternate Conversion .

 

(i)             General .

 

(1)      Alternate Optional Conversion . At any time from and after [INSERT IN ADDITIONAL SERIES A NOTES: the Initial Eligibility Date] [INSERT IN SERIES B NOTES AND INITIAL SERIES A NOTES: the Issuance Date], at the option of the Holder, the Holder may convert (each, an “ Alternate Optional Conversion ”, and the date of such Alternate Optional Conversion, an “ Alternate Optional Conversion Date ”) all, or any part, of the Principal amount of this Note (together with any accrued and unpaid Interest thereon and accrued and unpaid Late Charges on such Principal and Interest through such Alternate Optional Conversion Date) into shares of Common Stock (such portion of the Conversion Amount subject to such Alternate Optional Conversion, the “ Alternate Optional Conversion Amount ”) at the Alternate Conversion Price.

 

(2)      Alternate Conversion Upon an Event of Default . At any time during an Event of Default Redemption Right Period (as defined below) (regardless of whether such Event of Default has been cured or if the Holder has delivered an Event of Default Redemption Notice to the Company), the Holder may, at the Holder’s option, convert (each, an “ Alternate Event of Default Conversion ” and together with each Alternate Optional Conversion, each, an “ Alternate Conversion ”, and the date of such Alternate Event of Default Conversion, each, an “ Alternate Event of Default Conversion Date ”, and together with each Alternate Optional Conversion Date, each, an “ Alternate Conversion Date ”) all, or any part of, the Conversion Amount (such portion of the Conversion Amount subject to such Alternate Conversion, the “ Alternate Event of Default Conversion Amount ” and together with each Alternate Optional Conversion Amount, each, an “ Alternate Conversion Amount ”) into shares of Common Stock at the Alternate Conversion Event of Default Price.

 

(ii)           Mechanics of Alternate Conversion . On any Alternate Conversion Date, the Holder may voluntarily convert any Alternate Conversion Amount pursuant to Section 3(c) (with “Alternate Conversion Price” replacing “Conversion Price” for all purposes hereunder with respect to such Alternate Optional Conversion, with “Alternate Conversion Event of Default Price” replacing “Conversion Price” for all purposes hereunder with respect to such Alternate Event of Default Conversion and, solely with respect to the calculation of the number of shares of Common Stock issuable upon conversion of any Conversion Amount in an Alternate Event of Default Conversion, with “Redemption Premium of the Conversion Amount” replacing “Conversion Amount” in clause (x) of the definition of Conversion Rate above with respect to such Alternate Conversion) by designating in the Conversion Notice delivered pursuant to this Section 3(e) of this Note that the Holder is electing to use the Alternate Conversion Price for such conversion. Notwithstanding anything to the contrary in this Section 3(e), but subject to Section 3(d), until the Company delivers shares of Common Stock representing the applicable Alternate Conversion Amount to the Holder, such Alternate Conversion Amount may be converted by the Holder into shares of Common Stock pursuant to Section 3(c) without regard to this Section 3(e).

 

 
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(f)            Mandatory Conversion .

 

(i)      General . If at any time after [INSERT IN SERIES B NOTE: the date no December Notes or February Notes remain oustanding] [INSERT IN INITIAL SERIES A NOTE: the date no December Notes, February Notes or Series B Notes (as defined in the Securities Purchase Agreement) remain outstanding] [INSERT IN ADDITIONAL SERIES A NOTE: the date no December Notes, February Notes, Series B Notes (as defined in the Securities Purchase Agreement) or Initial Series A Notes (as defined in the Securities Purchase Agreement) remain outstanding], no Equity Conditions Failure then exists (unless waived, in whole or in part, in writing by the Holder (but only with respect to such specified Equity Conditions waived and, if applicable, portion of the Mandatory Conversion Amount (as defined below) in which such waiver is applicable), the Company shall have the right to require the Holder to convert all, or any part, of the Conversion Amount of this Note, not in excess of the Maximum Mandatory Share Amount or the Maximum Mandatory Conversion Amount, as designated in the Mandatory Conversion Notice (as defined below) into fully paid, validly issued and nonassessable shares of Common Stock in accordance with Section 3(c) hereof (with “Mandatory Conversion Price” replacing “Conversion Price” for all purposes hereunder with respect to such Mandatory Conversion) as of the Mandatory Conversion Date (as defined below) (each, a “ Mandatory Conversion ”). The Company may exercise its right to require conversion under this Section 3(f) by delivering a written notice thereof by facsimile or electronic mail to all, but not less than all, of the holders of Notes and the Transfer Agent (each, a “Mandatory Conversion Notice” and each date all of the holders received a notice is referred to as a “ Mandatory Conversion Notice Date ”) at a conversion price equal to the Mandatory Conversion Price. The Mandatory Conversion Notice shall be irrevocable. The Mandatory Conversion Notice shall state (i) the Trading Day selected for the Mandatory Conversion in accordance with this Section 3(f), which Trading Day shall be the third (3rd) Trading Day following the Mandatory Conversion Notice Date (each, a “ Mandatory Conversion Date ”), (ii) the aggregate Conversion Amount (not in excess of the Maximum Mandatory Conversion Amount or resulting in the issuance of such aggregate number of shares of Common Stock in excess of the Maximum Mandatory Share Amount), of the Notes subject to mandatory conversion from the Holder and all of the holders of the Notes pursuant to this Section 3(f) (and analogous provisions under the Other Notes) (each, a “ Mandatory Conversion Amount ”), and (iii) that there has been no Equity Conditions Failure (or specifying any such Equity Conditions Failure that then exists and has not been waived (or, if appcliable, with respect to such portion of the Mandatory Convesion Amount in which such waiver is not applicable), with an acknowledgement that unless such Equity Conditions are waived, in whole or in part, such Mandatory Conversion Notice will be invalid (or, if applicable, such portion of the Mandatory Conversion Notice will be invalid with respect to such portion of the Mandatory Conversion Amount in which such waiver is not applicable). Notwithstanding the foregoing, (x) the Company may affect only one (1) Mandatory Conversion during any three (3) Trading Day period and (y) the Holder may, at its option, by written notice to the Company at any time on or prior to the applicable Mandatory Conversion Date, increase the Mandatory Conversion Amount to any amount up to, and including, all of the Conversion Amount then outstanding hereunder, whether or not in excess of the Maximum Mandatory Conversion Amount. Notwithstanding anything herein to the contrary, (i) if an Equity Conditions Failure occurs at any time prior to the Mandatory Conversion Date, (A) the Company shall provide the Holder a subsequent notice to that effect and (B) unless the Holder waives the applicable Equity Conditions Failure, the Mandatory Conversion shall be cancelled and the applicable Mandatory Conversion Notice shall be null and void and (ii) at any time prior to the date all of the shares of Common Stock to be delivered to the Holder (or its designee) in such Mandatory Conversion have been delivered in full in compliance with Section 3(c) above, the Mandatory Conversion Amount may be converted, in whole or in part, by the Holders into shares of Common Stock pursuant to Section 3. Notwithstanding the foregoing, any Conversion Amount subject to a Mandatory Conversion may be converted by the Holder hereunder prior to the applicable Mandatory Conversion Date and such aggregate Conversion Amount converted hereunder on or after the Mandatory Conversion Notice Date and prior to such Mandatory Conversion Date shall reduce the Mandatory Conversion Amount to be converted on such Mandatory Conversion Date. For the avoidance of doubt, if any Event of Default has occurred and continuing, unless such Event of Default has been waived, in whole or in part, in writing by the Holder, Company shall have no right to effect a Mandatory Conversion; provided, that such Event of Default shall have no effect upon the Holder’s right to convert this Note in its discretion.

 

 
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(ii)      Pro Rata Conversion Requirement . If the Company elects to cause a Mandatory Conversion of this Note pursuant to Section 3(f) , then it must simultaneously take the same action in the same proportion with respect to all of the Other Notes.

 

(iii)      True-Up of Mandatory Conversion . On the fifth (5 th ) Trading Day immediately following a Mandatory Conversion Date and on each fifth (5 th ) Trading Day thereafter through and including the fifteenth (15 th ) Trading Day immediately following such Mandatory Conversion Date (each, a “ True-Up Date ”), if the True-Up Price is less than the applicable Mandatory Conversion Price, then on each such True-Up Date the Company shall deliver to the Holder such additional number of shares of Common Stock equal to the difference of (A) the quotient of (x) the applicable Mandatory Conversion Amount, divided by (y) the True-Up Price, less (B) such aggregate number of shares of Common Stock previously delivered to the Holder on such Mandatory Conversion Date and/or any prior True-Up Date with respect to such Mandatory Conversion (each, a “ True-Up ”); provided, however, that to the extent that such True-Up would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to such True-Up to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such True-Up (and beneficial ownership) to the extent of any such excess) and such portion of such True-Up shall be held in abeyance for the benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such portion of the True-Up held in the abeyance to the same extent as if there had been no such limitation.

 

 
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(iv)      Mechanics . All shares of Common Stock required to be delivered to the Holder pursuant to this Section 3(f) shall be delivered to the Holder in accordance with Section 3(c) as if a Conversion Notice with respect to such Conversion Amount to be converted shall have been delivered to the Company on the third (3 rd ) Trading Day immediately prior such Mandatory Conversion Date or True-Up Date, as applicable.

 

4.             RIGHTS UPON EVENT OF DEFAULT .

 

(a)           Event of Default . Each of the following events shall constitute an “ Event of Default ” and each of the events in clauses (ix), (x) and (xi) shall constitute a “ Bankruptcy Event of Default ”:

 

(i)       the failure of the applicable Registration Statement (as defined in the Registration Rights Agreement) to be filed with the SEC on or prior to the date that is five (5) days after the applicable Filing Deadline (as defined in the Registration Rights Agreement) or the failure of the applicable Registration Statement to be declared effective by the SEC on or prior to the date that is five (5) days after the applicable Effectiveness Deadline (as defined in the Registration Rights Agreement);

 

(ii)      while the applicable Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of the applicable Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or such Registration Statement (or the prospectus contained therein) is unavailable to any holder of Registrable Securities (as defined in the Registration Rights Agreement) for sale of all of such holder’s Registrable Securities in accordance with the terms of the Registration Rights Agreement (or such lesser number of Registrable Securities as required to be registered in accordance with Section 2(f) of the Registration Rights Agreement), and such lapse or unavailability continues for a period of five (5) consecutive days or for more than an aggregate of ten (10) days in any 365-day period (excluding days during an Allowable Grace Period (as defined in the Registration Rights Agreement));

 

(iii)     the suspension from trading or the failure of the Common Stock to be trading or listed (as applicable) on an Eligible Market for a period of five (5) consecutive Trading Days;

 

 
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(iv)     the Company’s (A) failure to cure a Conversion Failure or a Delivery Failure (as defined in the Warrants) by delivery of the required number of shares of Common Stock within five (5) Trading Days after the applicable Conversion Date or exercise date (as the case may be) or (B) notice, written or oral, to any holder of the Notes or Warrants, including, without limitation, by way of public announcement or through any of its agents, at any time, of its intention not to comply, as required, with a request for conversion of any Notes into shares of Common Stock that is requested in accordance with the provisions of the Notes, other than pursuant to Section 3(d), or a request for exercise of any Warrants for shares of Common Stock in accordance with the provisions of the Warrants;

 

(v)      except to the extent the Company is in compliance with Section 10(b) below, at any time following the tenth (10 th ) consecutive Trading Day that the Holder’s Authorized Share Allocation (as defined in Section 10(a) below) is less than (A) the number of shares of Common Stock that the Holder would be entitled to receive upon a conversion by the Holder of the full Conversion Amount of this Note (without regard to any limitations on conversion set forth in Section 3(d) or otherwise) and (B) the number of shares of Common Stock that the Holder would be entitled to receive upon exercise in full of the Holder’s Warrants (without regard to any limitations on exercise set forth in the Warrants);

 

(vi)     the Company’s or any Subsidiary’s failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Note (including, without limitation, the Company’s or any Subsidiary’s failure to pay any redemption payments or amounts hereunder) or any other Transaction Document (as defined in the Securities Purchase Agreement) or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby, except, in the case of a failure to pay Interest and Late Charges when and as due, in which case only if such failure remains uncured for a period of at least five (5) Trading Days;

 

(vii)    the Company fails to remove any restrictive legend on any certificate or any shares of Common Stock issued to the Holder upon conversion or exercise (as the case may be) of any Securities (as defined in the Securities Purchase Agreement) acquired by the Holder under the Securities Purchase Agreement (including this Note) as and when required by such Securities or the Securities Purchase Agreement, unless otherwise then prohibited by applicable federal securities laws, and any such failure remains uncured for at least five (5) Trading Days;

 

(viii)   the occurrence of any default under, redemption of or acceleration prior to maturity of at least an aggregate of $150,000 of Indebtedness (as defined in the Securities Purchase Agreement) of the Company or any of its Subsidiaries, other than with respect to any Other Notes;

 

(ix)     bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary by a third party, shall not be dismissed within thirty (30) days of their initiation;

 

 
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(x)      the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company or any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts generally as they become due, the taking of corporate action by the Company or any Subsidiary in furtherance of any such action or the taking of any action by any Person to commence a Uniform Commercial Code foreclosure sale or any other similar action under federal, state or foreign law;

 

(xi)     the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company or any Subsidiary of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or (ii) a decree, order, judgment or other similar document adjudging the Company or any Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company or any Subsidiary under any applicable federal, state or foreign law or (iii) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period of thirty (30) consecutive days;

 

(xii)    a final judgment or judgments for the payment of money aggregating in excess of $150,000 are rendered against the Company and/or any of its Subsidiaries and which judgments are not, within thirty (30) days after the entry thereof, bonded, discharged, settled or stayed pending appeal, or are not discharged within thirty (30) days after the expiration of such stay; provided, however, any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $150,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company or such Subsidiary (as the case may be) will receive the proceeds of such insurance or indemnity within thirty (30) days of the issuance of such judgment;

 

 
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(xiii)   the Company and/or any Subsidiary, individually or in the aggregate, either (i) fails to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness in excess of $150,000 due to any third party (other than, with respect to unsecured Indebtedness only, payments contested by the Company and/or such Subsidiary (as the case may be) in good faith by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP) or is otherwise in breach or violation of any agreement for monies owed or owing in an amount in excess of $150,000, which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist any other circumstance or event that would, with or without the passage of time or the giving of notice, result in a default or event of default under any agreement binding the Company or any Subsidiary, which default or event of default would or is likely to have a material adverse effect on the business, assets, operations (including results thereof), liabilities, properties, condition (including financial condition) of the Company or any of its Subsidiaries, individually or in the aggregate;

 

(xiv)   other than as specifically set forth in another clause of this Section 4(a), the Company or any Subsidiary breaches any representation or warranty in any material respect (other than representations or warranties subject to material adverse effect or materiality limitations, which may not be breached in any respect) or any covenant or other term or condition of any Transaction Document, except, in the case of a breach of a covenant or other term or condition that is curable, only if such breach remains uncured for a period of ten (10) consecutive Trading Days;

 

(xv)    a materially false or inaccurate certification (including a false or inaccurate deemed certification) by the Company that either (A) the Equity Conditions are satisfied, (B) there has been no Equity Conditions Failure, or (C) as to whether any Event of Default has occurred;

 

(xvi)    any breach or failure in any respect by the Company or any Subsidiary to comply with any provision of Section 13 of this Note;

 

(xvii)   any Material Adverse Effect (as defined in the Securities Purchase Agreement) occurs;

 

(xviii)  any material provision of any Transaction Document (including, without limitation, the Security Documents) shall at any time for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against the parties thereto in any material respect, or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by the Company or any Subsidiary or any governmental authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or the Company or any Subsidiary shall deny in writing that it has any liability or obligation purported to be created under any Transaction Document (including, without limitation, the Security Documents); and

 

 
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(xix)     any Security Document shall for any reason fail or cease to create a separate valid and perfected and, except to the extent permitted by the terms hereof or thereof, first priority Lien (as defined in the Securities Purchase Agreement) on the Collateral (as defined in the Security Documents) in favor of the Collateral Agent (as defined in the Securities Purchase Agreement) or any material provision of any Security Document shall at any time for any reason cease to be valid and binding on or enforceable against the Company or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by the Company or any governmental authority having jurisdiction over the Company, seeking to establish the invalidity or unenforceability thereof;

 

(xx)     any material damage to, or loss, theft or destruction of, any Collateral, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty which causes, for more than fifteen (15) consecutive days, the cessation or substantial curtailment of revenue producing activities at any facility of the Company or any Subsidiary, if any such event or circumstance could have a Material Adverse Effect; or

 

(xxi)     any Event of Default (as defined in the Other Notes) occurs with respect to any Other Notes.

 

(b)      Notice of an Event of Default; Redemption Right . Upon the occurrence of an Event of Default with respect to this Note or any Other Note, the Company shall within one (1) Business Day deliver written notice thereof via facsimile or electronic mail and overnight courier (with next day delivery specified) (an “ Event of Default Notice ”) to the Holder. At any time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, (such earlier date, the “ Event of Default Right Commencement Date ”) and ending (such ending date, the “ Event of Default Right Expiration Date ”, and each such period, an “ Event of Default Redemption Right Period ”) on the twentieth (20 th ) Trading Day after the later of (x) the date such Event of Default is cured and (y) the Holder’s receipt of an Event of Default Notice that includes (I) a reasonable description of the applicable Event of Default, (II) a certification as to whether, in the opinion of the Company, such Event of Default is capable of being cured and, if applicable, a reasonable description of any existing plans of the Company to cure such Event of Default and (III) a certification as to the date the Event of Default occurred and, if cured on or prior to the date of such Event of Default Notice, the applicable Event of Default Right Expiration Date, the Holder may require the Company to redeem the Holder may require the Company to redeem (regardless of whether such Event of Default has been cured) all or any portion of this Note by delivering written notice thereof (the “ Event of Default Redemption Notice ”) to the Company, which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i) the product of (A) the Conversion Amount to be redeemed multiplied by (B) the Redemption Premium and (ii) the product of (X) the Conversion Rate with respect to the Conversion Amount in effect at such time as the Holder delivers an Event of Default Redemption Notice multiplied by (Y) the product of (1) the Redemption Premium multiplied by (2) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date immediately preceding such Event of Default and ending on the date the Company makes the entire payment required to be made under this Section 4(b) (the “ Event of Default Redemption Price ”). Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 11. To the extent redemptions required by this Section 4(b) are deemed or determined by a court of competent jurisdiction to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section 4(b), but subject to Section 3(d), until the Event of Default Redemption Price (together with any Late Charges thereon) is paid in full, the Conversion Amount submitted for redemption under this Section 4(b) (together with any Late Charges thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant to the terms of this Note. In the event of the Company’s redemption of any portion of this Note under this Section 4(b), the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium due under this Section 4(b) is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a penalty. Any redemption upon an Event of Default shall not constitute an election of remedies by the Holder, and all other rights and remedies of the Holder shall be preserved.

 

 
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(c)      Mandatory Redemption upon Bankruptcy Event of Default . Notwithstanding anything to the contrary herein, and notwithstanding any conversion that is then required or in process, upon any Bankruptcy Event of Default, whether occurring prior to or following the Maturity Date, the Company shall immediately pay to the Holder an amount in cash representing (i) all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges on such Principal and Interest, multiplied by (ii) the Redemption Premium, in addition to any and all other amounts due hereunder, without the requirement for any notice or demand or other action by the Holder or any other person or entity, provided that the Holder may, in its sole discretion, waive such right to receive payment upon a Bankruptcy Event of Default, in whole or in part, and any such waiver shall not affect any other rights of the Holder hereunder, including any other rights in respect of such Bankruptcy Event of Default, any right to conversion, and any right to payment of the Event of Default Redemption Price or any other Redemption Price, as applicable.

 

5.      RIGHTS UPON FUNDAMENTAL TRANSACTION .

 

(a)      Assumption . The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of this Section 5(a) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior to such Fundamental Transaction, including agreements to deliver to each holder of Notes in exchange for such Notes a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to the principal amounts then outstanding and the interest rates of the Notes held by such holder, having similar conversion rights as the Notes and having similar ranking and security to the Notes, and satisfactory to the Holder and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion or redemption of this Note at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 6 and 15, which shall continue to be receivable thereafter) issuable upon the conversion or redemption of the Notes prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Note been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of this Note) , as adjusted in accordance with the provisions of this Note. Notwithstanding the foregoing, the Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 5(a) to permit the Fundamental Transaction without the assumption of this Note. The provisions of this Section 4(c) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note.

 

 
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(b)      Notice of a Change of Control; Redemption Right . No sooner than twenty (20) Trading Days nor later than ten (10) Trading Days prior to the consummation of a Change of Control (the “ Change of Control Date ”), but not prior to the public announcement of such Change of Control, the Company shall deliver written notice thereof via facsimile or electronic mail and overnight courier to the Holder (a “ Change of Control Notice ”). At any time during the period beginning after the Holder’s receipt of a Change of Control Notice or the Holder becoming aware of a Change of Control if a Change of Control Notice is not delivered to the Holder in accordance with the immediately preceding sentence (as applicable) and ending on the later of twenty (20) Trading Days after (A) consummation of such Change of Control or (B) the date of receipt of such Change of Control Notice, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (“ Change of Control Redemption Notice ”) to the Company, which Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 5 shall be redeemed by the Company in cash at a price equal to the greatest of (i) the product of (w) the Change of Control Redemption Premium multiplied by (y) the Conversion Amount being redeemed, (ii) the product of (A) the Conversion Amount being redeemed multiplied by (B) the quotient determined by dividing (I) the greatest Closing Sale Price of the shares of Common Stock during the period beginning on the date immediately preceding the earlier to occur of (1) the consummation of the applicable Change of Control and (2) the public announcement of such Change of Control and ending on the date the Holder delivers the Change of Control Redemption Notice by (II) the Conversion Price then in effect and (iii) the product of (A) the Conversion Amount being redeemed multiplied by (B) the quotient of (I) the aggregate cash consideration and the aggregate cash value of any non-cash consideration per share of Common Stock to be paid to the holders of the shares of Common Stock upon consummation of such Change of Control (any such non-cash consideration constituting publicly-traded securities shall be valued at the highest of the Closing Sale Price of such securities as of the Trading Day immediately prior to the consummation of such Change of Control, the Closing Sale Price of such securities on the Trading Day immediately following the public announcement of such proposed Change of Control and the Closing Sale Price of such securities on the Trading Day immediately prior to the public announcement of such proposed Change of Control) divided by (II) the Conversion Price then in effect (the “ Change of Control Redemption Price ”). Redemptions required by this Section 5 shall be made in accordance with the provisions of Section 11 and shall have priority to payments to stockholders in connection with such Change of Control. To the extent redemptions required by this Section 5(b) are deemed or determined by a court of competent jurisdiction to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section 5, but subject to Section 3(d), until the Change of Control Redemption Price (together with any Late Charges thereon) is paid in full, the Conversion Amount submitted for redemption under this Section 5(b) (together with any Late Charges thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3. In the event of the Company’s redemption of any portion of this Note under this Section 5(b), the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium due under this Section 5(b) is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a penalty.

 

 
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6.             RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS .

 

(a)      Purchase Rights . In addition to any adjustments pursuant to Section 7 below, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of any class of Common Stock (the “ Purchase Rights ”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note and assuming for such purpose that the Note was converted at the Alternate Conversion Price as of the applicable record date) immediately prior to the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights ( provided , however , that to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (and beneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance (and, if such Purchase Right has an expiration date, maturity date or other similar provision, such term shall be extended by such number of days held in abeyance, if applicable) for the benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right held similarly in abeyance (and, if such Purchase Right has an expiration date, maturity date or other similar provision, such term shall be extended by such number of days held in abeyance, if applicable)) to the same extent as if there had been no such limitation).

 

(b)      Other Corporate Events . In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “ Corporate Event ”), the Company shall make appropriate provision to ensure that the Holder will thereafter have the right to receive upon a conversion of this Note, at the Holder’s option (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section 6 shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Note.

 

 
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7.      RIGHTS UPON ISSUANCE OF OTHER SECURITIES .

 

(a)      Adjustment of Conversion Price upon Subdivision or Combination of Common Stock . Without limiting any provision of Sections 5, 6 or 15, if the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, stock combination, recapitalization or other similar transaction) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision of Sections 5, 6 or 15, if the Company at any time on or after the Subscription Date combines (by any stock split, stock dividend, stock combination, recapitalization or other similar transaction) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 7(a) shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 7(a) occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event.

 

(b)      Holder’s Right of Adjusted Conversion Price . In addition to and not in limitation of the other provisions of this Section 7, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (any such securities, “ Variable Price Securities ”), after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable or exercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting customary anti-dilution provisions (such as share splits, share combinations, share dividends and similar transactions) (each of the formulations for such variable price being herein referred to as, the “ Variable Price ”), the Company shall provide written notice thereof via facsimile or electronic mail and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From and after the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its sole discretion to substitute the Variable Price for the Conversion Price upon conversion of this Note by designating in the Conversion Notice delivered upon any conversion of this Note that solely for purposes of such conversion the Holder is relying on the Variable Price rather than the Conversion Price then in effect. The Holder’s election to rely on a Variable Price for a particular conversion of this Note shall not obligate the Holder to rely on a Variable Price for any future conversion of this Note.

 

(c)      Other Events . In the event that the Company (or any Subsidiary) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder, provided that no such adjustment pursuant to this Section 7(c) will increase the Conversion Price as otherwise determined pursuant to this Section 7, provided further that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board of directors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.

 

 
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(d)         Calculations . All calculations under this Section 7 shall be made by rounding to the nearest cent or the nearest 1/100 th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

 

(e)         Voluntary Adjustment by Company . The Company may at any time during the term of this Note, with the prior written consent of the Required Holders, reduce the then current Conversion Price of each of the Notes to any amount equal to or greater than the Floor Price and for any period of time deemed appropriate by the board of directors of the Company.

 

8.             REDEMPTIONS AT THE COMPANY’S ELECTION .

 

(a)      Company Optional Redemption . At any time no Equity Conditions Failure exists (unless waived in writing by the Holder) and no [INSERT IN SERIES B NOTES: December Notes or February Notes][INSERT IN INITIAL SERIES A NOTES: December Notes, February Notes or Series B Notes][INSERT IN ADDITIONAL SERIES A NOTES: December Notes, February Notes, Series B Notes or Initial Series A Notes] remains outstanding, subject to the Company’s compliance with Section 1(e) above, the Company shall have the right to redeem all, but not less than all, of the Conversion Amount then remaining under this Note (the “ Company Optional Redemption Amount ”) on the Company Optional Redemption Date (each as defined below) (a “ Company Optional Redemption ”). The portion of this Note subject to redemption pursuant to this Section 8(a) shall be redeemed by the Company in cash at a price (the “ Company Optional Redemption Price ”) equal to 115% of the Conversion Amount being redeemed as of the Company Optional Redemption Date [INSERT IN ADDITIONAL SERIES A NOTE ONLY: (which, with respect to any Restricted Principal hereunder, may be offset and reduced on a dollar for dollar basis by the surrender for cancellation of such portion of the Investor Note equal to the amount of Restricted Principal included in such Company Optional Redemption hereunder)]. The Company may exercise its right to require redemption under this Section 8(a) by delivering a written notice thereof by facsimile or electronic mail and overnight courier to all, but not less than all, of the holders of Notes (the “ Company Optional Redemption Notice ” and the date all of the holders of Notes received such notice is referred to as the “ Company Optional Redemption Notice Date ”). The Company may deliver only one Company Optional Redemption Notice hereunder and such Company Optional Redemption Notice shall be irrevocable. The Company Optional Redemption Notice shall (x) state the date on which the Company Optional Redemption shall occur (the “ Company Optional Redemption Date ”) which date shall not be less than ten (10) Trading Days nor more than thirty (30) Trading Days following the Company Optional Redemption Notice Date, (y) certify that there has been no Equity Conditions Failure (or specifying any such Equity Conditions Failure that then exists, with an acknowledgement that unless such Equity Conditions are waived by the Holder, in its sole discretion, such Company Optional Redemption Notice will be invalid) and (z) state the aggregate Conversion Amount of the Notes which is being redeemed in such Company Optional Redemption from the Holder and all of the other holders of the Notes pursuant to this Section 8(a) (and analogous provisions under the Other Notes) on the Company Optional Redemption Date. Notwithstanding anything herein to the contrary, (i) if no Equity Conditions Failure has occurred as of the Company Optional Redemption Notice Date but an Equity Conditions Failure occurs at any time prior to the Company Optional Redemption Date, (A) the Company shall provide the Holder a subsequent notice to that effect and (B) unless the Holder, in its sole discretion., waives the Equity Conditions Failure, the Company Optional Redemption shall be cancelled and the applicable Company Optional Redemption Notice shall be null and void and (ii) at any time prior to the date the Company Optional Redemption Price is paid, in full, the Company Optional Redemption Amount may be converted, in whole or in part, by the Holder into shares of Common Stock pursuant to Section 3. All Conversion Amounts converted by the Holder after the Company Optional Redemption Notice Date shall reduce the Company Optional Redemption Amount of this Note required to be redeemed on the Company Optional Redemption Date. Redemptions made pursuant to this Section 8(a) shall be made in accordance with Section 11. In the event of the Company’s redemption of any portion of this Note under this Section 8(a), the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium due under this Section 8(a) is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a penalty. For the avoidance of doubt, the Company shall have no right to effect a Company Optional Redemption if any Event of Default has occurred and continuing, but any Event of Default shall have no effect upon the Holder’s right to convert this Note in its discretion.

 

 
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(b)      Pro Rata Redemption Requirement . If the Company elects to cause a Company Optional Redemption of this Note pursuant to Section 8(a), then it must simultaneously take the same action with respect to all of the Other Notes.

 

9.            NONCIRCUMVENTION . The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note. Without limiting the generality of the foregoing or any other provision of this Note or the other Transaction Documents, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon conversion of this Note above the Conversion Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the conversion of this Note. Notwithstanding anything herein to the contrary, if after the sixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to convert this Note in full for any reason (other than pursuant to restrictions set forth in Section 3(d) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining such consents or approvals as necessary to permit such conversion into shares of Common Stock.

 

 
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10.           RESERVATION OF AUTHORIZED SHARES .

 

(a)      Reservation . So long as any Notes remain outstanding, the Company shall at all times reserve at least the greater of (x) 6 million and (y) 200% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion, including without limitation, Alternate Conversions, of all of the Notes then outstanding (without regard to any limitations on conversions and assuming such Notes remain outstanding until the Maturity Date ) (the “ Required Reserve Amount ”). The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among the holders of the Notes based on the original principal amount of the Notes held by each holder on the Closing Date or increase in the number of reserved shares, as the case may be (the “ Authorized Share Allocation ”). In the event that a holder shall sell or otherwise transfer any of such holder’s Notes, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by such holders.

 

(b)      Insufficient Authorized Shares . If, notwithstanding Section 10(a), and not in limitation thereof, at any time while any of the Notes remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an “ Authorized Share Failure ”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting or obtain written consent of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement or information statement, as applicable, and shall use its best efforts to solicit or obtain its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the event that the Company is prohibited from issuing shares of Common Stock pursuant to the terms of this Note due to the failure by the Company to have sufficient shares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the “ Authorized Failure Shares ”), in lieu of delivering such Authorized Failure Shares to the Holder, the Company shall pay cash in exchange for the redemption of such portion of the Conversion Amount convertible into such Authorized Failure Shares at a price equal to the sum of (i) the product of (x) such number of Authorized Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date the Holder delivers the applicable Conversion Notice with respect to such Authorized Failure Shares to the Company and ending on the date of such issuance and payment under this Section 10(a); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Authorized Failure Shares, any brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in Section 10(a) or this Section 10(b) shall limit any obligations of the Company under any provision of the Securities Purchase Agreement.

 

 
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11.           REDEMPTIONS .

 

(a)      Mechanics . The Company shall deliver the applicable Event of Default Redemption Price to the Holder in cash within five (5) Business Days after the Company’s receipt of the Holder’s Event of Default Redemption Notice. If the Holder has submitted a Change of Control Redemption Notice in accordance with Section 5(b), the Company shall deliver the applicable Change of Control Redemption Price to the Holder in cash concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control and within five (5) Business Days after the Company’s receipt of such notice otherwise. The Company shall deliver the applicable Company Optional Redemption Price to the Holder in cash on the applicable Company Optional Redemption Date. Notwithstanding anything herein to the contrary, in connection with any redemption hereunder at a time the Holder is entitled to receive a cash payment under any of the other Transaction Documents, at the option of the Holder delivered in writing to the Company, the applicable Redemption Price hereunder shall be increased by the amount of such cash payment owed to the Holder under such other Transaction Document and, upon payment in full or conversion in accordance herewith, shall satisfy the Company’s payment obligation under such other Transaction Document. In the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal which has not been redeemed. In the event that the Company does not pay the applicable Redemption Price to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price (together with any Late Charges thereon) has not been paid. Upon the Company’s receipt of such notice, (x) the applicable Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 18(d)), to the Holder, and in each case the principal amount of this Note or such new Note (as the case may be) shall be increased by an amount equal to the difference between (1) the applicable Redemption Price (as the case may be, and as adjusted pursuant to this Section 11, if applicable) minus (2) the Principal portion of the Conversion Amount submitted for redemption and (z) the Conversion Price of this Note or such new Notes (as the case may be) shall be automatically adjusted with respect to each conversion effected thereafter by the Holder to the lowest of (A) the Conversion Price as in effect on the date on which the applicable Redemption Notice is voided, (B) 75% of the lowest Closing Bid Price of the Common Stock during the period beginning on and including the date on which the applicable Redemption Notice is delivered to the Company and ending on and including the date on which the applicable Redemption Notice is voided and (C) 75% of the quotient of (I) the sum of the five (5) lowest VWAPs of the Common Stock during the twenty (20) consecutive Trading Day period ending and including the Trading Day immediately preceding the applicable Conversion Date divided by (II) five (5) (it being understood and agreed that all such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period). The Holder’s delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company’s obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Conversion Amount subject to such notice.

 

 
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(b)      Redemption by Other Holders . Upon the Company’s receipt of notice from any of the holders of the Other Notes for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b) or Section 5(b) (each, an “ Other Redemption Notice ”), the Company shall immediately, but no later than one (1) Business Day of its receipt thereof, forward to the Holder by facsimile or electronic mail a copy of such notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices, during the seven (7) Business Day period beginning on and including the date which is three (3) Business Days prior to the Company’s receipt of the Holder’s applicable Redemption Notice and ending on and including the date which is three (3) Business Days after the Company’s receipt of the Holder’s applicable Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other Redemption Notices received during such seven (7) Business Day period, then the Company shall redeem a pro rata amount from each holder of the Notes (including the Holder) based on the principal amount of the Notes submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received by the Company during such seven (7) Business Day period.

 

12.      VOTING RIGHTS . The Holder shall have no voting rights as the holder of this Note, except as required by law (including, without limitation, the Delaware General Corporation Law) and as expressly provided in this Note.

 

 
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13.      COVENANTS . Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with their terms:

 

(a)      Rank . All payments due under this Note (a) shall rank pari passu with all Other Notes, the December Notes and the February Notes and (b) shall be senior to all other Indebtedness of the Company and its Subsidiaries in right of payment other than Permitted Indebtedness secured by Permitted Liens..

 

(b)      Incurrence of Indebtedness . The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness (other than (i) the Indebtedness evidenced by this Note and the Other Notes and (ii) other Permitted Indebtedness) until the ninety-first (91 st ) calendar day after no Notes remain outstanding.

 

(c)      Existence of Liens . The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “ Liens ”) other than Permitted Liens.

 

(d)      Restricted Payments . The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness (other than the Notes) whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness if at the time such payment is due or is otherwise made or, after giving effect to such payment, (i) an event constituting an Event of Default has occurred and is continuing or (ii) an event that with the passage of time and without being cured would constitute an Event of Default has occurred and is continuing.

 

(e)      Restriction on Redemption and Cash Dividends . Until the ninety-first (91 st ) calendar day after no Notes remain outstanding, the Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on any of its capital stock.

 

(f)      Restriction on Transfer of Assets . The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, sell, lease, license, assign, transfer, spin-off, split-off, close, convey or otherwise dispose of any of the Collateral (as defined in the Security Documents) whether in a single transaction or a series of related transactions, other than (i) sales, leases, licenses, assignments, transfers, conveyances and other dispositions of such assets or rights by the Company and its Subsidiaries in the ordinary course of business consistent with its past practice, or, in the case of licenses by Zone (as defined in the Securities Purchase Agreement), in the ordinary course of business consistent with Zone’s plan of operation as of the Subscription Date, and (ii) and (ii) sales of inventory and product in the ordinary course of business.

 

(g)      Maturity of Indebtedness . The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, permit any Indebtedness of the Company or any of its Subsidiaries other than Permitted Indebtedness to mature or accelerate prior to the Maturity Date.

 

 
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(h)      Change in Nature of Business . The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, engage in any material line of business substantially different from those lines of business conducted by or publicly contemplated to be conducted by the Company and each of its Subsidiaries on the Subscription Date or any business substantially related or incidental thereto. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, modify its or their corporate structure or purpose.

 

(i)      Preservation of Existence, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.

 

(j)      Maintenance of Properties, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply, and cause each of its Subsidiaries to comply, at all times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.

 

(k)      Maintenance of Intellectual Property . The Company will, and will cause each of its Subsidiaries to, take all action necessary or advisable to maintain all of the Intellectual Property Rights (as defined in the Securities Purchase Agreement) of the Company and/or any of its Subsidiaries that are necessary or material to the conduct of its business in full force and effect.

 

(l)      Maintenance of Insurance . The Company shall maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated.

 

(m)      Transactions with Affiliates . The Company shall not, nor shall it permit any of its Permitted Subsidiaries to, enter into, renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any affiliate, except (i) transactions approved by a majority of the Company’s independent directors and a Majority In Interest and (ii) transactions in the ordinary course of business in a manner and to an extent consistent with past practice and necessary or desirable for the prudent operation of its business, for fair consideration and on terms no less favorable to it or its Subsidiaries than would be obtainable in a comparable arm’s length transaction with a Person that is not an affiliate thereof, provided that the foregoing shall in no way limit or prevent the Company from consummating the Reserve Amount Forgiveness (as defined in the Agreement and Plan of Merger, dated as of July 12, 2016, among the Company, Zone Acquisition, Inc. and Zone Technologies, Inc.) or entering into a consulting agreement with a non-independent director of the Company provided that cash compensation paid to such non-independent director for consulting services thereunder does not exceed $225,000 per year.

 

 
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(n)      Restricted Issuances . The Company shall not, directly or indirectly, without the prior written consent of the holders of a majority in aggregate principal amount of the Notes then outstanding, (i) issue any Notes (other than as contemplated by the Securities Purchase Agreement and the Notes), (ii) issue any other securities that would cause a breach or default under the Notes or (iii) [INSERT IN ADDITIONAL SERIES A NOTE ONLY: until such initial time as the only Principal outstanding hereunder consists of Restricted Principal (and any principal outstanding under any other Notes held by the Holder consists of Restricted Principal (as defined in such Other Notes)),] issue any shares of Common Stock, Options or Convertible Securities, directly or indirectly, at a purchase price, per share of Common Stock (on an as converted and as exercised basis) less than $3.00 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events).

 

(o)      New Subsidiaries . Simultaneously with the acquisition or formation of each New Subsidiary, the Company shall cause such New Subsidiary to execute, and deliver to each holder of Notes, all Security Documents as requested by the Collateral Agent or the Required Holders, as applicable; provided, however, that MoviePass shall not be a Grantor (as defined in the Security Agreement) under the Security Agreement. The Company shall also deliver to the Collateral Agent an opinion of counsel to such New Subsidiary that is reasonably satisfactory to the Collateral Agent and the Required Holders covering such legal matters with respect to such New Subsidiary becoming a guarantor of the Company’s obligations, executing and delivering the Security Document and any other matters that the Collateral Agent or the Required Holders may reasonably request. The Company shall deliver, or cause the applicable Subsidiary to deliver to the Collateral Agent, each of the physical stock certificates of such New Subsidiary, along with undated stock powers for each such certificates, executed in blank (or, if any such shares of capital stock are uncertificated, confirmation and evidence reasonably satisfactory to the Collateral Agent and the Required Holders that the security interest in such uncertificated securities has been transferred to and perfected by the Collateral Agent, in accordance with Sections 8-313, 8-321 and 9-115 of the Uniform Commercial Code or any other similar or local or foreign law that may be applicable).

 

(p)      Change in Collateral; Collateral Records . The Company shall (i) give the Collateral Agent not less than thirty (30) days’ prior written notice of any change in the location of any Collateral (as defined in the Security Documents), other than to locations set forth in the Perfection Certificate (as defined in the Securities Purchase Agreement) hereto and with respect to which the Collateral Agent has filed financing statements and otherwise fully perfected its Liens thereon, (ii) advise the Collateral Agent promptly, in sufficient detail, of any material adverse change relating to the type, quantity or quality of the Collateral or the Lien granted thereon and (iii) execute and deliver, and cause each of its Subsidiaries to execute and deliver, to the Collateral Agent for the benefit of the Holder and holders of the Other Notes from time to time, solely for the Collateral Agent’s convenience in maintaining a record of Collateral, such written statements and schedules as the Collateral Agent or any Holder may reasonably require, designating, identifying or describing the Collateral.

 

 
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(q)      Independent Investigation . At the request of the Holder either (x) at any time when an Event of Default has occurred and is continuing, (y) upon the occurrence of an event that with the passage of time or giving of notice would constitute an Event of Default or (z) at any time the Holder reasonably believes an Event of Default may have occurred or be continuing, the Company shall hire an independent, reputable investment bank selected by the Company and approved by the Holder (such approval not to be unreasonably withheld or delayed) to investigate as to whether any breach of this Note has occurred (the “ Independent Investigator ”). If the Independent Investigator determines that such breach of this Note has occurred, the Independent Investigator shall notify the Company of such breach and the Company shall deliver written notice to each holder of a Note of such breach. In connection with such investigation, the Independent Investigator may, during normal business hours, inspect all contracts, books, records, personnel, offices and other facilities and properties of the Company and its Subsidiaries and, to the extent available to the Company after the Company uses reasonable efforts to obtain them, the records of its legal advisors and accountants (including the accountants’ work papers) and any books of account, records, reports and other papers not contractually required of the Company to be confidential or secret, or subject to attorney-client or other evidentiary privilege, and the Independent Investigator may make such copies and inspections thereof as the Independent Investigator may reasonably request. The Company shall furnish the Independent Investigator with such financial and operating data and other information with respect to the business and properties of the Company as the Independent Investigator may reasonably request. The Company shall permit the Independent Investigator to discuss the affairs, finances and accounts of the Company with, and to make proposals and furnish advice with respect thereto to, the Company’s officers, directors, key employees and independent public accountants or any of them (and by this provision the Company authorizes said accountants to discuss with such Independent Investigator the finances and affairs of the Company and any Subsidiaries), all at such reasonable times, upon reasonable notice, and as often as may be reasonably requested.

 

14.      SECURITY . This Note and the Other Notes are secured to the extent and in the manner set forth in the Transaction Documents (including, without limitation, the Security Documents).

 

 
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15.          DISTRIBUTION OF ASSETS . In addition to any adjustments pursuant to Section 7, if the Company shall declare or make any dividend or other distributions of its assets (or rights to acquire its assets) to any or all holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (the “ Distributions ”), then the Holder will be entitled to such Distributions as if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note and assuming for such purpose that the Note was converted at the Alternate Conversion Price as of the applicable record date) immediately prior to the date on which a record is taken for such Distribution or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for such Distributions (provided, however, that to the extent that the Holder’s right to participate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on any subsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).

 

16.          AMENDING THE TERMS OF THIS NOTE . The prior written consent of the Required Holders (as defined in the Securities Purchase Agreement) shall be required for any change, waiver or amendment to this Note. Any change, waiver or amendment so approved shall be binding upon all existing and future holders of this Note and any Other Notes; provided, however, that no such change, waiver or, as applied to any of the Notes held by any particular holder of Notes, shall, without the written consent of that particular holder, (i) reduce the amount of Principal, reduce the amount of accrued and unpaid Interest, or extend the Maturity Date, of the Notes, (ii) disproportionally and adversely affect any rights under the Notes of any holder of Notes; or (iii) modify any of the provisions of, or impair the right of any holder of Notes under, this Section 16.

 

17.          TRANSFER . This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(g) of the Securities Purchase Agreement.

 

18.          REISSUANCE OF THIS NOTE .

 

(a)      Transfer . If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 18(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred, a new Note (in accordance with Section 18(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.

 

 
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(b)      Lost, Stolen or Mutilated Note . Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal.

 

(c)      Note Exchangeable for Different Denominations . This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 18(d) and in principal amounts of at least $1,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

 

(d)      Issuance of New Notes . Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 18(a) or Section 18(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest and Late Charges on the Principal and Interest of this Note, from the Issuance Date.

 

19.          REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF . The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note (including, without limitation, compliance with Section 7).

 

 
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20.      PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS . If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements. The Company expressly acknowledges and agrees that no amounts due under this Note shall be affected, or limited, by the fact that the purchase price paid for this Note was less than the original Principal amount hereof.

 

21.      CONSTRUCTION; HEADINGS . This Note shall be deemed to be jointly drafted by the Company and the initial Holder and shall not be construed against any such Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Note instead of just the provision in which they are found. Unless expressly indicated otherwise, all section references are to sections of this Note. Terms used in this Note and not otherwise defined herein, but defined in the other Transaction Documents, shall have the meanings ascribed to such terms on the Closing Date in such other Transaction Documents unless otherwise consented to in writing by the Holder.

 

22.      FAILURE OR INDULGENCE NOT WAIVER . No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. Notwithstanding the foregoing, nothing contained in this Section 22 shall permit any waiver of any provision of Section 3(d).

 

 
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23.      DISPUTE RESOLUTION .

 

(a)           Submission to Dispute Resolution .

 

(i)     In the case of a dispute relating to a Closing Bid Price, a Closing Sale Price, a Conversion Price, an Alternate Conversion Price, a VWAP or a fair market value or the arithmetic calculation of a Conversion Rate, or the applicable Redemption Price (as the case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile or electronic mail (A) if by the Company, within two (2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Closing Bid Price, such Closing Sale Price, such Conversion Price, such Alternate Conversion Price, such VWAP or such fair market value, or the arithmetic calculation of such Conversion Rate or such applicable Redemption Price (as the case may be), at any time after the second (2 nd ) Business Day following such initial notice by the Company or the Holder (as the case may be) of such dispute to the Company or the Holder (as the case may be), then the Company shall select an independent, reputable investment bank approved by the Required Holders (as defined in the Securities Purchase Agreement), such approval not to be unreasonably withheld, to resolve such dispute.

 

(ii)     The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 23 and (B) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth (5 th ) Business Day immediately following the date on which the Holder selected such investment bank (the “ Dispute Submission Deadline ”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the “ Required Dispute Documentation ”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested by such investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation).

 

(iii)     The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and the Holder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of such investment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all parties absent manifest error.

 

 
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(b)      Miscellaneous . The Company expressly acknowledges and agrees that (i) this Section 23 constitutes an agreement to arbitrate between the Company and the Holder (and constitutes an arbitration agreement) under § 7501, et seq. of the New York Civil Practice Law and Rules (“ CPLR ”) and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 23, (ii) a dispute relating to a Conversion Price, (iii) the terms of this Note and each other applicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall be entitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by such investment bank in connection with its resolution of such dispute and in resolving such dispute such investment bank shall apply such findings, determinations and the like to the terms of this Note and any other applicable Transaction Documents, (iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 23 to any state or federal court sitting in The City of New York, Borough of Manhattan, in lieu of utilizing the procedures set forth in this Section 23 and (v) nothing in this Section 23 shall limit the Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 23).

 

24.           NOTICES; CURRENCY; PAYMENTS .

 

(a)      Notices . Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which the Company 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 Options, Convertible 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 Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.

 

(b)      Currency . All dollar amounts referred to in this Note are in United States Dollars (“ U.S. Dollars ”), and all amounts owing under this Note shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “ Exchange Rate means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Note, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation (it being understood and agreed that where an amount is calculated with reference to, or over, a period of time, the date of calculation shall be the final date of such period of time).

 

 
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(c)      Payments . Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise expressly set forth herein, such payment shall be made in lawful money of the United States of America by a certified check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Buyers, shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement), provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day. Any amount of Principal or other amounts due under the Transaction Documents which is not paid when due (solely to the extent such amount is not then accruing interest at the Default Rate) shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of eighteen percent (18%) per annum from the date such amount was due until the same is paid in full (“ Late Charge ”).

 

25.          CANCELLATION . After all Principal, accrued Interest, Late Charges and other amounts at any time owed on this Note have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.

 

26.          WAIVER OF NOTICE . To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.

 

27.          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 Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. Except as otherwise required by Section 23 above, the Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Chicago, Illinois, 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. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein (i) shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder or (ii) shall limit, or shall be deemed or construed to limit, any provision of Section 23. THE COMPANY 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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28.           JUDGMENT CURRENCY .

 

(a)          If for the purpose of obtaining or enforcing judgment against the Company in any court in any jurisdiction it becomes necessary to convert into any other currency (such other currency being hereinafter in this Section 28 referred to as the “ Judgment Currency ”) an amount due in U.S. dollars under this Note, the conversion shall be made at the Exchange Rate prevailing on the Trading Day immediately preceding:

 

(i)       the date actual payment of the amount due, in the case of any proceeding in the courts of New York or in the courts of any other jurisdiction that will give effect to such conversion being made on such date: or

 

(ii)      the date on which the foreign court determines, in the case of any proceeding in the courts of any other jurisdiction (the date as of which such conversion is made pursuant to this Section 28(a)(ii) being hereinafter referred to as the “ Judgment Conversion Date ”).

 

(b)          If in the case of any proceeding in the court of any jurisdiction referred to in Section 28(a)(ii) above, there is a change in the Exchange Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the applicable party shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the Exchange Rate prevailing on the date of payment, will produce the amount of US dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing on the Judgment Conversion Date.

 

(c)          Any amount due from the Company under this provision shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of this Note.

 

29.           SEVERABILITY . If any provision of this Note is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Note so long as this Note as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

 
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30.          MAXIMUM PAYMENTS . Without limiting Section 9(d) of the Securities Purchase Agreement, nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company.

 

31.           CERTAIN DEFINITIONS . For purposes of this Note, the following terms shall have the following meanings:

 

(a)     “ 1933 Act ” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

 

(b)     “ 1934 Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

 

(c)      “ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

 

(d)     [INSERT IN SERIES A NOTES: “ Alternate Conversion Price ” means, with respect to any Alternate Conversion, that price which shall be the lower of (i) the applicable Conversion Price as in effect on the applicable Conversion Date of the applicable Alternate Conversion and (ii) [INSERT IN INITIAL SERIES A NOTE: the Floor Price then in effect] [ INSERT IN ADDITIONAL SERIES A NOTE: the greater of (I) the Floor Price then in effect and (II) 85% of the quotient of (x) the sum of the VWAP of the Common Stock for each of the five (5) consecutive Trading Days ending and including the Trading Day immediately preceding the delivery or deemed delivery of the applicable Conversion Notice, divided by (y) five (5) (such period, the “ Alternate Conversion Measuring Period ”). All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such Alternate Conversion Measuring Period.]

 

 
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[INSERT IN SERIES B NOTE: “ Alternate Conversion Price ” means, with respect to any Alternate Conversion, that price which shall be the lowest of (i) the Conversion Price then in effect, (ii) during the period commencing on the Closing Date through and including [______, 2017] 2 (the “ Adjustment Date ”), the greater of (A) the Floor Price then in effect and (B) 85% of the lowest VWAP of any Trading Day during the twenty (20) consecutive Trading Day period ending and including the applicable Alternate Conversion Date, and (iii) after the Adjustment Date, the greater of (I) the Floor Price then in effect and (II) 85% of the quotient of (x) the sum of the VWAP of the Company’s common stock for each of the five consecutive Trading Days ending and including the applicable Alternate Conversion Date, divided by (y) 5.]

 

(e)     “ Alternate Conversion Event of Default Price ” means, with respect to any Alternate Conversion that price which shall be the lowest of (i) the applicable Conversion Price as in effect on the applicable Conversion Date of the applicable Alternate Conversion, and (ii) 75% of the lowest VWAP of the Common Stock for each of the thirty (30) consecutive Trading Days ending and including the Trading Day of delivery or deemed delivery of the applicable Conversion Notice (such period, the “ Alternate Conversion Event of Default Measuring Period ”). All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such Alternate Conversion Event of Default Measuring Period.

 

(f)     “ Approved Stock Plan ” means any employee benefit plan which has been approved by the board of directors of the Company prior to or subsequent to the Subscription Date pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee, consultant, officer or director for services provided to the Company in their capacity as such.

 

(g)     “ Attribution Parties ” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could be aggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.

 

(h)     “ Black Scholes Consideration Value ” means the value of the applicable Option, Convertible Security or Adjustment Right (as the case may be) as of the date of issuance thereof calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the public announcement of the execution of definitive documents with respect to the issuance of such Option, Convertible Security or Adjustment Right (as the case may be), (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of such Option, Convertible Security or Adjustment Right (as the case may be) as of the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may be), (iii) a zero cost of borrow and (iv) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may be).

 

 


2 Insert (x) if the Company obtains the approval of the Principal Market (the “ Nasdaq Approval ”), the fourtieth (40 th ) calendar day anniversary of the Closing Date or (y) otherwise, the fifty (50) calendar day anniversary of the Closing Date.

 

 
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(i)     “ Bloomberg ” means Bloomberg, L.P.

 

(j)     “ Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

 

(k)     “ Change of Control ” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, wholly-owned Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders of the Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (or entities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities) after such reorganization, recapitalization or reclassification, (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company or any of its Subsidiaries, or (iv) the Merger (as defined in the Securities Purchase Agreement).

 

(l)     “ Change of Control Redemption Premium ” means [INSERT IN INITIAL SERIES A NOTE AND SERIES B NOTE: 125%][INSERT IN ADDITIONAL SERIES A NOTE: 110%].

 

(m)     “ Closing Bid Price ” and “ Closing Sale Price ” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 23. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during such period.

 

 
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(n)     “ Closing Date ” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially issued Notes pursuant to the terms of the Securities Purchase Agreement.

 

(o)     “ Common Stock ” means (i) the Company’s shares of common stock, $0.01 par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

 

(p)      “ Convertible Securities ” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.

 

(q)     “ Current Subsidiary ” means any Person in which the Company on the Subscription Date, directly or indirectly, (i) owns any of the outstanding capital stock or holds any equity or similar interest of such Person or (ii) controls or operates all or any part of the business, operations or administration of such Person, and all of the foregoing, collectively, “ Current Subsidiaries ”.

 

(r)     “ December Notes ” means those certain Senior Secured Convertible Notes issued pursuant to the December Securities Purchase Agreement.

 

(s)     “ December Securities Purchase Agreement ” means that certain securities purchase agreement, dated as of December 1, 2016, by and among the Company and the initial holders of the December Notes pursuant to which the Company issued the December Notes, as may be amended from time to time.

 

(t)      “ Default Rate ” means (x) during the first thirty (30) calendar days after the occurrence and continuance of an Event of Default, twelve percent (12%) per annum, and (y) thereafter, eighteen percent (18.0%) per annum.

 

(u)     “ Eligible Market ” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market or the Principal Market.

 

 
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(v)     “ Equity Conditions ” means, with respect to an given date of determination: (i) on each day during the period beginning thirty (30) calendar days prior to such applicable date of determination (or, with respect to the initial thirty (30) calendar days after the Resale Eligibility Date, as of the Resale Eligibility Date) and ending on and including such applicable date of determination either (x) one or more Registration Statements filed pursuant to the Registration Rights Agreement shall be effective and the prospectus contained therein shall be available on such applicable date of determination (with, for the avoidance of doubt, any shares of Common Stock previously sold pursuant to such prospectus deemed unavailable) for the resale of all shares of Common Stock to be issued in connection with the event requiring this determination (or issuable upon conversion of the Conversion Amount being redeemed in the event requiring this determination at the Alternate Conversion Price then in effect (without regard to any limitations on conversion set forth herein)) (each, a “ Required Minimum Securities Amount ”), in each case, in accordance with the terms of the Registration Rights Agreement and there shall not have been during such period any Grace Periods (as defined in the Registration Rights Agreement) or (y) all Registrable Securities shall be eligible for sale pursuant to Rule 144 (as defined in the Securities Purchase Agreement) without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Notes, other issuance of securities with respect to the Notes and exercise of the Warrants) and no Current Information Failure (as defined in the Registration Rights Agreement) exists or is continuing ; (ii) on each day during the period beginning thirty (30) calendar days prior to the applicable date of determination and ending on and including the applicable date of determination (the “ Equity Conditions Measuring Period ”), the Common Stock (including all Registrable Securities ) is listed or designated for quotation (as applicable) on an Eligible Market and shall not have been suspended from trading on an Eligible Market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by an Eligible Market have been threatened (with a reasonable prospect of delisting occurring after giving effect to all applicable notice, appeal, compliance and hearing periods) or reasonably likely to occur or pending as evidenced by (A) a writing by such Eligible Market or (B) the Company falling below the minimum listing maintenance requirements of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable) other than as disclosed in the SEC Documents (as defined in the Securities Purchase Agreement) prior to the Issuance Date; (iii) during the Equity Conditions Measuring Period, the Company shall have delivered all shares of Common Stock issuable upon conversion of this Note on a timely basis as set forth in Section 3 hereof and all other shares of capital stock required to be delivered by the Company on a timely basis as set forth in the other Transaction Documents; (iv) any shares of Common Stock to be issued in connection with the event requiring determination (or issuable upon conversion of the Conversion Amount being redeemed in the event requiring this determination) may be issued in full without violating Section 3(d) hereof; (v) any shares of Common Stock to be issued in connection with the event requiring determination (or issuable upon conversion of the Conversion Amount being redeemed in the event requiring this determination (without regards to any limitations on conversion set forth herein)) may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (vi) on each day during the Equity Conditions Measuring Period, no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (vii) the Company shall have no knowledge of any fact that would reasonably be expected to cause (1) any Registration Statement required to be filed pursuant to the Registration Rights Agreement to not be effective or the prospectus contained therein to not be available for the resale of the applicable Required Minimum Securities Amount of Registrable Securities in accordance with the terms of the Registration Rights Agreement or (2) any Registrable Securities to not be eligible for sale pursuant to Rule 144 without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Notes, other issuance of securities with respect to the Notes and exercise of the Warrants) and no Current Information Failure exists or is continuing ; (viii) the Holder shall not be in (and no other holder of Notes shall be in) possession of any material, non-public information provided to any of them by the Company, any of its Subsidiaries or any of their respective affiliates, employees, officers, representatives, agents or the like; (ix) on each day during the Equity Conditions Measuring Period, the Company otherwise shall have been in compliance with each, and shall not have breached any representation or warranty in any material respect (other than representations or warranties subject to material adverse effect or materiality, which may not be breached in any respect) or any covenant or other term or condition of any Transaction Document, including, without limitation, the Company shall not have failed to timely make any payment pursuant to any Transaction Document; (x) there shall not have occurred any Volume Failure or Price Failure as of such applicable date of determination; (xi) on the applicable date of determination (A) no Authorized Share Failure shall exist or be continuing and the applicable Required Minimum Securities Amount of shares of Common Stock are available under the certificate of incorporation of the Company and reserved by the Company to be issued pursuant to the Notes and (B) all shares of Common Stock to be issued in connection with the event requiring this determination (or issuable upon conversion of the Conversion Amount being redeemed in the event requiring this determination (without regards to any limitations on conversion set forth herein)) may be issued in full without resulting in an Authorized Share Failure; (xii) on each day during the Equity Conditions Measuring Period, there shall not have occurred and there shall not exist an Event of Default or an event that with the passage of time or giving of notice would constitute an Event of Default; (xiii) the shares of Common Stock issuable pursuant the event requiring the satisfaction of the Equity Conditions are duly authorized and listed and eligible for trading without restriction on an Eligible Market; and (xiv) the Stockholder Approval (as defined in the Securities Purchase Agreement) shall have been obtained.

 

 
44

 

 

(w)     “ Equity Conditions Failure ” means that (i) on any day during the period commencing twenty (20) Trading Days prior to the applicable Company Optional Redemption Notice Date through the applicable Company Optional Redemption Date or (ii) on any day during the period commencing twenty (20) Trading Days prior to the applicable Interest Notice Date through the applicable Interest Date, or (iii) on any day during the period commencing twenty (20) Trading Days prior to the applicable Mandatory Conversion Notice Date through the applicable Mandatory Conversion Date, the Equity Conditions have not been satisfied (or waived in writing by the Holder).

 

(x)     “ February Notes ” means those certain Senior Secured Convertible Notes issued pursuant to the February Securities Purchase Agreement.

 

(y)     “ February Securities Purchase Agreement ” means that certain securities purchase agreement, dated as of February [ ], 2016, by and among the Company and the initial holders of the February Notes pursuant to which the Company issued the February Notes, as may be amended from time to time.

 

(z)      “ Floor Price ” means [INSERT IN SERIES A NOTES: $4.00 (or, solely with respect to the calculation of the aggregate number of Interest Shares to be delivered to the Holder hereunder on any given Interest Date at any time either a Price Failure or Volume Failure exists, $0.50][INSERT IN SERIES B NOTES: (i) during the period commencing on the Closing Date through and including the Adjustment Date , $3.00 or (ii) from and after the Adjustment Date , $0.50] (in each case, or such lower price as mutually determined by the Company and the Holder in writing).

 

 
45

 

 

(aa)     “ Fundamental Transaction ” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock , (B) that the Company shall , directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entities as of the date of this Note calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stock without approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction. Notwithstanding anything herein to the contrary, the transactions contemplated by the MoviePass SPA (as in effect as of the Subscription Date) shall not be deemed to be, either individually or in the aggregate, a Fundamental Transaction.

 

 
46

 

 

(bb)      “ GAAP ” means United States generally accepted accounting principles, consistently applied.

 

(cc)     “ Group ” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.

 

(dd)     “ Holder Pro Rata Amount ” means a fraction (i) the numerator of which is the original Principal amount of this Note on the Closing Date and (ii) the denominator of which is the aggregate original principal amount of all Notes issued to the initial purchasers pursuant to the Securities Purchase Agreement on the Closing Date.

 

(ee)      “ Indebtedness ” shall have the meaning ascribed to such term in the Securities Purchase Agreement.

 

(ff)      “ Initial Eligibility Date ” means the date no December Notes, February Notes, Series B Notes (as defined in the Securities Purchase Agreement) or Initial Series A Notes remain outstanding.

 

(gg)      “ Interest Rate ” means six percent (6%) per annum, as may be adjusted from time to time in accordance with Section 1(a).

 

 
47

 

 

(hh)     [INSERT IN INITIAL SERIES A NOTE AND SERIES B NOTE: [INTENTIONALLY OMITTED]] [INSERT IN ADDITIONAL SERIES A NOTE ONLY: “ Investor Note ” means that certain promissory note of the Holder issued to the Company at the Closing Date, pursuant to the Securities Purchase Agreement, with an aggregate principal amount outstanding equal to the Restricted Principal outstanding hereunder and secured by a cash amount set forth in a bank account of the Holder (or its affiliates) at least equal to the Restricted Principal outstanding hereunder.]

 

(ii)     [INSERT IN INITIAL SERIES A NOTE AND SERIES B NOTE: [INTENTIONALLY OMITTED]] [INSERT IN ADDITIONAL SERIES A NOTE ONLY: “ Investor Prepayment ” means any Prepayment (as defined in the Investor Note) of the Investor Note.]

 

(jj)     “ Mandatory Conversion Price ” means, with respect to any Mandatory Conversion that price which shall be the lower of (i) the applicable Conversion Price as in effect on the applicable Mandatory Conversion Date, and (ii) 80% the sum of (A) the VWAP of the Common Stock for each of the three (3) Trading Days with the lowest VWAP of the Common Stock during the twenty (20) consecutive Trading Day period ending on and including the Trading Day immediately prior to the applicable Mandatory Conversion Date divided by (B) three (3) (such period, the “ Mandatory Conversion Measuring Period ”). All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such Mandatory Conversion Measuring Period.

 

(kk)      “ Maturity Date ” shall mean April __, 2018; provided, however, the Maturity Date may be extended at the option of the Holder (i) in the event that, and for so long as, an Event of Default shall have occurred and be continuing or any event shall have occurred and be continuing that with the passage of time and the failure to cure would result in an Event of Default or (ii) through the date that is twenty (20) Business Days after the consummation of a Fundamental Transaction in the event that a Fundamental Transaction is publicly announced or a Change of Control Notice is delivered prior to the Maturity Date, provided further that if a Holder elects to convert some or all of this Note pursuant to Section 3 hereof, and the Conversion Amount would be limited pursuant to Section 3(d) hereunder, the Maturity Date shall automatically be extended until such time as such provision shall not limit the conversion of this Note.

 

(ll)     “ Maximum Mandatory Conversion Amount ” with respect to any Mandatory Conversion Date means the difference of (x) $500,000 less (y) the sum of each Conversion Amount converted hereunder (or required to be converted pursuant to a Mandatory Conversion Date scheduled to occur during the Maximum Mandatory Conversion Measuring Period (as defined below)) and pursuant to any other Notes of the Holder (whether pursuant to a Mandatory Conversion or otherwise) during the five (5) Trading Day period ending and including such applicable Mandatory Conversion Date (the “ Maximum Mandatory Conversion Measuring Period ”).

 

 
48

 

 

(mm)     “ Maximum Mandatory Share Amount ” with respect to any Mandatory Conversion Date means 100% of the quotient of (x) the sum of the composite aggregate daily share trading volume as reported on Bloomberg of the Common Stock for each Trading Day during the five (5) Trading Day period ending and including the Trading Day immediately prior to the applicable Mandatory Conversion Notice Date, divided by (y) five (5). All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such measuring period.

 

(nn)     “ MoviePass SPA ” means that certain Securities Purchase Agreement, dated August [___], 2017, between the Company and MoviePass Inc., a Delaware corporation (as in effect as of the Subscription Date).

 

(oo)     “ New Subsidiary ” means, as of any date of determination, any Person in which the Company after the Subscription Date, directly or indirectly, (i) owns or acquires any of the outstanding capital stock or holds any equity or similar interest of such Person or (ii) controls or operates all or any part of the business, operations or administration of such Person, and all of the foregoing, collectively, “ New Subsidiaries ”.

 

(pp)     “ Options ” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

 

(qq)     “ Parent Entity ” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

(rr)     “ Permitted Indebtedness ” means (i) Indebtedness evidenced by this Note, the Other Notes, the December Notes and the February Notes, (ii) Indebtedness set forth on Schedule 3(s) to the Securities Purchase Agreement, as in effect as of the Subscription Date, (iii) intercompany Indebtedness between the Company and any wholly-owned subsidiary of the Company (including, without limitation, the Zone Loan (as defined in the February Securities Purchase Agreement)) and (iv) Indebtedness secured by Permitted Liens or unsecured but as described in clauses (iv) and (v) of the definition of Permitted Liens.

 

 
49

 

 

(ss)     “ Permitted Liens ” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv) Liens (A) upon or in any equipment acquired or held by the Company or any of its Subsidiaries to secure the purchase price of such equipment or Indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment, or (B) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment, in either case, with respect to Indebtedness in an aggregate amount not to exceed $150,000, (v) Liens incurred in connection with the extension, renewal or refinancing of the Indebtedness secured by Liens of the type described in clause (iv) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase, (vi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of custom duties in connection with the importation of goods, (vii) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 4(a)(xii), (viii) Liens with respect to the Notes, the December Notes or the February Notes, and (ix) Liens imposed by MoviePass on certain of the Shares (as defined in the MoviePass SPA) pursuant to the Helios Note (as defined in the MoviePass SPA) (as in effect as of the Subscription Date).

 

(tt)     “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

 

(uu)       “Price Failure ” means, with respect to a particular date of determination, the VWAP of the Common Stock on any Trading Day during any Trading Day during the twenty (20) Trading Day period ending on the Trading Day immediately preceding such date of determination fails to exceed $2.00 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions occurring after the Subscription Date). All such determinations to be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during any such measuring period.

 

(vv)     “ Principal Market ” means the Nasdaq Capital Market.

 

(ww)      “ Redemption Notices ” means, collectively, the Event of Default Redemption Notices, the Company Optional Redemption Notices and the Change of Control Redemption Notices, and each of the foregoing, individually, a “ Redemption Notice .”

 

(xx)     “ Redemption Premium ” means 125%.

 

(yy)     “ Redemption Prices ” means, collectively, Event of Default Redemption Prices, the Change of Control Redemption Prices, and the Company Optional Redemption Prices, and each of the foregoing, individually, a “ Redemption Price .”

 

(zz)      “ Registration Rights Agreement ” means that certain registration rights agreement, dated as of the Closing Date, by and among the Company and the initial holders of the Notes relating to, among other things, the registration of the resale of the Common Stock issuable upon conversion of the Notes or otherwise pursuant to the terms of the Notes, as may be amended from time to time.

 

 
50

 

 

(aaa)      “ Resale Eligibility Date ” means the earlier to occur of (i) the Effective Date (as defined in the Registration Rights Agreement) of a Registration Statement registering any of the Registrable Securities (as defined in the Registration Rights Agreement) and (ii) the initial date any of the Registrable Securities are eligible to be resold pursuant to Rule 144.

 

(bbb)     [INSERT IN INITIAL SERIES A NOTE AND SERIES B NOTE ONLY: [INTENTIONALLY OMITTED]][INSERT IN ADDITIONAL SERIES A NOTE ONLY: “ Restricted Principal ” means, initially $8,800,000, subject to reduction as provided herein, including, without limitation, pursuant to Investor Prepayments or Investor Offset Rights.]

 

(ccc)      “ SEC ” means the United States Securities and Exchange Commission or the successor thereto.

 

(ddd)     “ Securities Purchase Agreement ” means that certain securities purchase agreement, dated as of the Subscription Date, by and among the Company and the initial holders of the Notes pursuant to which the Company issued the Notes, as may be amended from time to time.

 

(eee)      “ Security Agreement ” shall have the meaning as set forth in the Securities Purchase Agreement.

 

(fff)     “ Series A Notes ” shall have the meaning as set forth in the Securities Purchase Agreement.

 

(ggg)     “ Series B Notes ” shall have the meaning set forth as set forth in the Securities Purchase Agreement.

 

(hhh)     “ Subscription Date ” means August __, 2017.

 

(iii)     “ Subsidiaries ” means, as of any date of determination, collectively, all Current Subsidiaries and all New Subsidiaries, and each of the foregoing, individually, a “ Subsidiary .”

 

(jjj)      “Subject Entity ” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.

 

(kkk)      “ Successor Entity ” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

 

 
51

 

 

(lll)     “ Trading Day ” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.

 

(mmm)     “ True-Up Price ” means, with respect to any Mandatory Conversion, 85% of the VWAP of the Common Stock on the Trading Day with the lowest VWAP of the Common Stock during the fifteen (15) consecutive Trading Day period commencing on, and including, the Trading Day immediately following the applicable Mandatory Conversion Date (such period, the “ True-Up Measuring Period ”). All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during the True-Up Measuring Periods.

 

(nnn)      “ Volume Failure ” means, with respect to a particular date of determination, the aggregate daily dollar trading volume (as reported on Bloomberg) of the Common Stock on the Principal Market on any Trading Days during the five (5) Trading Day period ending on the Trading Day immediately preceding such date of determination (such period, the “ Volume Failure Measuring Period ”), is less than $250,000 (as adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions occurring after the Subscription Date). All such determinations to be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during such Volume Failure Measuring Period.

 

(ooo)      “ VWAP ” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set to weighted average) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 23. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.

 

 
52

 

 

(ppp)     “ Warrants ” has the meaning ascribed to such term in the Securities Purchase Agreement, and shall include all warrants issued in exchange therefor or replacement thereof.

 

32.      DISCLOSURE . Upon receipt or delivery by the Company of any notice in accordance with the terms of this Note, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Company or any of its Subsidiaries, the Company shall within one (1) Business Day or such receipt or prior to (or simultaneous with) such delivery, as applicable, publicly disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company so shall indicate to the Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, non-public information relating to the Company or any of its Subsidiaries. If the Company or any of its Subsidiaries provides material non-public information to the Holder that is not simultaneously filed in a Current Report on Form 8-K and the Holder has not agreed to receive such material non-public information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of its Subsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basis of, such material non-public information. Nothing contained in this Section 32 shall limit any obligations of the Company, or any rights of the Holder, under Section 4(i) of the Securities Purchase Agreement.

 

[ signature page follows ]

 

 
53

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance Date set out above.

 

 

 

HELIOS AND MATHESON ANALYTICS

INC.

   
   
   
  By:

 

 
   

Name:

 
   

Title:

 

 

 

Senior Convertible Note - Signature Page

 

 
 

 

 

EXHIBIT I

 

HELIOS AND MATHESON ANALYTICS INC.
CONVERSION NOTICE

 

Reference is made to the [Initial Series A][Additional Series A][Series B] Senior Secured Convertible Note (the “ Note ”) issued to the undersigned by Helios and Matheson Analytics Inc., a Delaware corporation (the “ Company ”). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock, $0.001 par value per share (the “ Common Stock ”), of the Company, as of the date specified below. Capitalized terms not defined herein shall have the meaning as set forth in the Note.

 

 

Date of Conversion:

 
   

Aggregate Principal to be converted:

 
   

Aggregate accrued and unpaid Interest and accrued and unpaid Late Charges with respect to such portion of the Aggregate Principal and such Aggregate Interest to be converted:

 
   

AGGREGATE CONVERSION AMOUNT
TO BE CONVERTED:

 
   

Please confirm the following information:

 

Conversion Price:

 
   

Number of shares of Common Stock to be issued:

 
   

☐           If this Conversion Notice is being delivered with respect to an Alternate Conversion, check here if Holder is electing to use the following Alternate Conversion Price:____________

 

Please issue the Common Stock into which the Note is being converted to Holder, or for its benefit, as follows:

 

☐          Check here if requesting delivery as a certificate to the following name and to the following address:

 

Issue to:

 
   
   

 

 
 

 

 

☐         Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:

 

DTC Participant:

 
   

DTC Number:

 
   

Account Number:

 

 

Notwithstanding anything to the contrary contained herein, this Conversion Notice shall constitute a representation by the Holder of the Note submitting this Conversion Notice that after giving effect to the conversion provided for in this Conversion Notice, such Holder (together with its affiliates) will not have beneficial ownership (together with the beneficial ownership of such Person’s affiliates) of a number of shares of Common Stock which exceeds the Maximum Percentage (as defined in the Note) of the total outstanding shares of Common Stock of the Company as determined pursuant to the provisions of Section 3(d)(i) of the Note.

 

Date: _____________ __,          

 

                                                       

Name of Registered Holder

 
   
   

By:                                                  

       Name:
       Title:


 

       Tax ID:_____________________

 

       Facsimile:___________________

 

E-mail Address:     

 

 

 
 

 

 

Exhibit II

 

ACKNOWLEDGMENT

 

The Company hereby (a) acknowledges this Conversion Notice, (b) certifies that the above indicated number of shares of Common Stock [are][are not] eligible to be resold by the Holder either (i) pursuant to Rule 144 (subject to the Holder’s execution and delivery to the Company of a customary 144 representation letter) or (ii) an effective and available registration statement and (c) hereby directs _________________ to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated _____________, 20__ from the Company and acknowledged and agreed to by ________________________.

 

 

 

HELIOS AND MATHESON ANALYTICS

INC.

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

Exhibit 4.4

 

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

 

 

 

 New York, New York

$8,800,000

 August __. 2017

 

 

FOR VALUE RECEIVED, Hudson Bay Master Fund Ltd. (the “ Investor ”) hereby promises to pay to Helios and Matheson Analytics Inc., a Delaware corporation (the “ Company ”), on the date set forth below, (i) the principal amount of Eight Million and Eight Hundred Thousand Dollars ($8,800,000) and (ii) interest on the unpaid principal balance hereof at the rate set forth herein (collectively, the “ Obligations ”). This Promissory Note (this “ Note ”) is issued as payment, in part, of the purchase price of that certain Senior Secured Convertible Note of the Company, with an initial aggregate principal amount of $8,800,000 (as such note may be amended, modified, supplemented, extended, renewed, restated or replaced from time to time in accordance with the terms thereof, the “ Convertible Note ”), issued pursuant to that certain Securities Purchase Agreement, dated as of August __, 2017, by and among the Company and the investors party thereto (as amended, modified, supplemented, extended, renewed, restated or replaced from time to time, the “ Securities Purchase Agreement ”). Capitalized terms not defined herein shall have the meaning as set forth in the Convertible Note. NEITHER THIS NOTE NOR ANY INTEREST HEREIN MAY BE PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED, WHETHER BY THE COMPANY, OPERATION OF LAW, COURT ORDER OR OTHERWISE, WITHOUT THE EXPRESS PRIOR WRITTEN CONSENT OF THE INVESTOR. 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 accrued thereon and any other Obligations payable hereunder, shall be due and payable in full upon April __. 2018 (the “ Maturity Date ”); provided, that the Maturity Date shall be automatically extended by one (1) calendar day for each calendar day after April __, 2018 (the “ Scheduled Convertible Note Maturity Date ”), if any, that all, or any part, of the Convertible Note remains outstanding.

 

2.      Payment of Interest . The unpaid Principal balance due hereunder shall bear interest (the “ Interest ”) at an annual rate equal to 0.61% (the “ Interest Rate ”). Subject to Sections 3 and 7 below, Interest shall be payable and due upon 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.             Prepayment Prior to the Maturity Date .

 

(a)            Optional Prepayment . The Investor may, at its option at any time after August 31, 2017 (or such earlier date as the Company shall permit any holder of Notes to effect an Optional Prepayment) and from time to time thereafter, prepay, in whole or in part, without premium or penalty, the Obligations under this Note (each, an “ Optional Prepayment ”).

 

(b)            Mandatory Prepayment . Upon any Mandatory Prepayment Event (as defined below), the Investor shall promptly prepay such aggregate outstanding Principal of this Note equal to the applicable Mandatory Prepayment Amount (as defined below) with respect to such Mandatory Prepayment Event. (each, a “ Mandatory Prepayment ”, and together with each Optional Prepayment, each a “ Prepayment ”).

 

(c)           Mechanics of Prepayments . All Prepayments hereunder shall be made in cash, by wire transfer, in U.S. dollars and immediately available funds, in accordance with the wire instructions delivered to the Investor by the Company on or prior to such date of such Prepayment. At the option of the Company, prepayments may be made directly to the Company or to such other Persons as the Company may direct in its wire instructions.

 

(d)            Cancellation of Interest upon Prepayment . Notwithstanding anything herein to the contrary, upon any Prepayment prior to the Maturity Date (including, without limitation, any Mandatory Prepayment), the aggregate cash amount in such Prepayment shall be applied entirely to and against any outstanding Principal under this Note, and any accrued and unpaid Interest with respect to the Principal prepaid shall be automatically cancelled as of the date of such prepayment.

 

(d)            Definitions . For the purpose of this Note, the following definitions shall apply:

 

(i)     “ Mandatory Prepayment Amount ” means, with respect to any given Mandatory Prepayment Event, such amount of cash as specified in the applicable clause of the definition of “Mandatory Prepayment Event” below (or, as applicable, in such valid written notice delivered pursuant to such clause).

 

(ii)     “ Mandatory Prepayment Event ” means, as applicable, (i) with respect to any Restricted Principal of the Convertible Note designated to be converted in a Conversion Notice, both (A) the Company’s receipt of such Conversion Notice thereunder executed by the Investor in which all, or any part, of the principal of the Convertible Note to be converted includes any Restricted Principal and (B) the Investor’s receipt from the Company of written confirmation that the Company’s transfer agent (the “ Transfer Agent ”) has been irrevocably instructed by the Company to deliver to the Investor (or its designee) the shares of Common Stock to be issued pursuant to such Conversion Notice in accordance with Section 3(c) of the Convertible Note (in each case, as adjusted, if applicable, to reflect the withdrawal of any Conversion Notice, in whole or in part, by the Investor, whether pursuant to Section 3(c)(ii) of the Convertible Note or otherwise), or (ii), (A) the Investor’s receipt of a valid (unless waived in writing by the Investor) written notice by the Company electing to effect a Mandatory Conversion (as defined in the Convertible Note) of Restricted Principal (as defined in the Convertible Note) (solely with respect to such aggregate amount of Restricted Principal included in such Mandatory Conversion) and (B) the Investor’s receipt from the Company of written confirmation that the Transfer Agent has been irrevocably instructed by the Company to deliver the shares of Common Stock to be issued pursuant to such Mandatory Conversion Notice in accordance with Section 3(f) of the Convertible Note (each, a “ Mandatory Prepayment Notice ”, and the date thereof, a “ Mandatory Prepayment Notice Date ”); provided, that, with respect to this clause (ii), no Equity Conditions Failure may exist as of the date of the applicable Mandatory Prepayment (unless waived in writing by the Investor). Notwithstanding the foregoing, the Investor (or its designee) shall not commence a Deposit/Withdrawal at Custodian with respect to such shares of Common Stock to be issued upon conversion of Restricted Principal unless and until the Investor shall have either (x) delivered such Mandatory Prepayment Amount to the Company or (y) delivered evidence to the Company of the delivery of irrevocable instructions to the Investor’s bank, broker or other financial institution to wire such Mandatory Prepayment Amount to the Company from an account with at least an amount of cash or other Eligible Assets (as defined below) equal to such Mandatory Prepayment Amount).

 

 
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4.             Defaults .

 

(a)           the Investor shall be deemed in default hereunder upon the occurrence of any of the following (a “ Default ”):

 

(i)        Failure to Pay Principal or Interest . The failure of the Investor to pay, when due, all or any part of any Principal or Interest required to be made hereunder; or

 

(ii)       Bankruptcy, etc . The Investor shall have entered against it by a court having jurisdiction thereof a decree or order for relief in respect to the Investor in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or a receiver, liquidator, assignee, custodian, trustee, sequestrator or other similar official shall be appointed for the Investor or for any substantial part of the Investor’s property, or the winding up or liquidation of the Investor’s affairs shall have been ordered; or the Investor shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect; or the Investor shall consent to the entry of an order for such relief in an involuntary case under any such law, or any such involuntary case shall commence, and not be dismissed within sixty (60) days; or the Investor shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or other similar official for the Investor or for any substantial part of the Investor’s property, or make any general assignment for the benefit of creditors.

 

 
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(b)       Consequence of Default . Upon the occurrence of a Default, the outstanding Obligations hereunder shall, at the option of the Company, become immediately due and payable. Notwithstanding the foregoing, if there shall occur a Default under Section 4(a)(ii) above, the entire outstanding Obligations hereunder, shall automatically become immediately due and payable without any action on the part of the Company. Upon the occurrence of a Default, the Company shall also have all the rights and remedies of a secured party on default under Article 9 of the Uniform Commercial Code of the State of New York with respect to the Collateral (as hereinafter defined).

 

5.             Representations and Warranties of the Investor . The Investor represents and warrants to the Company as follows as of the date hereof: (a) the Investor has the power and authority to execute, deliver and perform all obligations in accordance herewith; (b) the execution, delivery and performance by the Investor of this Note are within the Investor's legal powers, and do not contravene any law or any contractual restriction binding on or affecting the Investor; (c) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Investor of this Note; (d) this Note constitutes the legal, valid and binding obligation of the Investor, enforceable against the Investor in accordance with its terms, except to the extent enforceability is limited by bankruptcy, insolvency, fraudulent conveyance, moratorium and other laws for the protection of creditors generally and by general equitable principles; and (e) there is no pending or, to the Investor's knowledge, threatened action or proceeding affecting the Investor before any governmental agency or arbitrator with respect to the transactions contemplated by this Note or which may materially adversely affect the property, assets or condition (financial or otherwise) of the Investor.

 

6.             Security .

 

(a)        Grant of Security Interest . As security for the due and prompt payment and performance of all payment obligations under this Note and any modifications, replacements and extensions hereof (collectively, “ Secured Obligations ”), the Investor hereby pledges and grants a security interest to the Company in all of the Investor’s right, title, and interest in and to, initially at least $8,800,000, in the aggregate, in cash, cash equivalents, any Group of Ten (“ G10 ”) currency and any notes or other securities issued by any G10 country (the “ Eligible Assets”) held by the Investor in the bank or brokerage account described on Schedule I attached hereto (the “ Collateral ”, and such account, the “ Collateral Account ”), subject to reduction upon any reduction, offset or cancellation of this Note. So long as any Restricted Principal (as defined in the Convertible Note) remains outstanding under the Convertible Note, the Investor shall keep Collateral in the Collateral Accout with a fair market value of at least the amount of Restricted Principal then outstanding.

 

(b)        Change in Collateral Account . The Investor may, with at least five (5) Trading Days’ notice to the Company, move the Collateral to an account or accounts of the Investor (the “ New Collateral Account ”) to a new account or accounts at a financial institution selected by the Investor, (but if such financial institution is not listed as a permitted financial institution on Schedule II attached hereto, subject to the consent of the Company, not to be unreasonably withheld), and upon such move, such New Collateral Account shall be the Collateral Account for all purposes hereunder.

 

 
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7.             Offset Rights .

 

(a)       Investor Optional Offset . Notwithstanding anything herein to the contrary, Investor may, on or after September 30, 2017, at any time an Equity Conditions Failure then exists, at its option, at its sole discretion, satisfy all, or any part, of any Principal (and related accrued and unpaid Interest hereunder) in full by the surrender and concurrent cancellation of such portion of the outstanding obligations under the Convertible Note equal to such portion of Principal being satisfied hereunder (each, an “ Investor Optional Offset ”). Upon any Investor Optional Offset, any accrued and unpaid Interest with respect to such portion of Principal being satisfied in such Investor Optional Offset shall be automatically cancelled as of the date of such Investor Optional Offset. Each Investor Optional Offset shall be effective upon the date the Investor delivers notice to the Company of the Investor’s election to effect such Investor Optional Offset.

 

(b)       Redemption Offset . Notwithstanding anything herein to the contrary, at the option of the Company, the Company may reduce the Principal by any cash amount then due and payable by the Company to the Investor under the Convertible Note (after which such cash amount shall be deemed to have been paid in full under the Convertible Note) (a “ Redemption Offset ”). Upon any Redemption Offset, any accrued and unpaid Interest with respect to such portion of Principal being satisfied in such Redemption Offset shall be automatically cancelled as of the date of such Redemption Offset. Each Redemption Offset shall be effective upon the date the Company delivers notice to the Investor of the Company’s election to effect such Redemption Offset.

 

(c)       Event of Default Offset . Notwithstanding anything herein to the contrary, Investor may, at any time on or after the occurrence of any Event of Default under the Convertible Note, but prior to the date of cure thereof, at its sole discretion, satisfy all, or any part, of any Principal (and related accrued and unpaid Interest hereunder) in full by the surrender and concurrent cancellation of such portion of the outstanding obligations under the Convertible Note equal to such portion of Principal being satisfied hereunder (each, an “ Event of Default Offset ”). Upon any Event of Default Offset, any accrued and unpaid Interest with respect to such portion of Principal being satisfied in such Event of Default Offset shall be automatically cancelled as of the date of such Event of Default Offset. Each Event of Default Offset shall be effective upon the date the Investor delivers notice to the Company of the Investor’s election to effect such Event of Default Offset.

 

 
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(d)        Automatic Set-off Upon any Bankruptcy Event of Default . Notwithstanding anything herein to the contrary, upon any Bankruptcy Event of Default under the Convertible Note, all Principal (and related accrued and unpaid Interest hereunder) shall be automatically satisfied in full by the deemed automatic surrender and concurrent cancellation of the outstanding obligations under the Convertible Note equal to such portion of Principal being satisfied hereunder (each, a “ Bankruptcy Event of Default Offset ”, and together with the Investor Optional Offset, and Event of Default Offset, the “ Investor Offset Rights ”). Upon any Bankruptcy Event of Default Offset, any accrued and unpaid Interest with respect to such portion of Principal being satisfied in such Bankruptcy Event of Default Offset shall be automatically cancelled as of the date of such Bankruptcy Event of Default Offset. Each Bankruptcy Event of Default Offset shall be effective upon the date of the earliest occurrence of a Bankruptcy Event (as defined in the Convertible Note) under the Convertible Note.

 

(e)         Automatic Offset Upon Prohibited Transfers of this Note . If for any reason, this Note or any interest herein is pledged, assigned or transferred to any Person other than the Company without the prior written consent of the Investor, whether by contract, operation of law, court order or otherwise (each, a “ Prohibited Transfer ”), (i) all of the outstanding Principal shall be automatically deemed satisfied in full, (ii) 75% of the remaining Restricted Principal of the Convertible Note shall be automatically cancelled (with the remaining 25% of the Restricted Principal of the Convertible Note automatically becoming unrestricted principal thereunder), (iii) all accrued and unpaid Interest payable hereunder shall be automatically cancelled and (iv) this Note shall be deemed to be paid in full and shall be null and void.

 

(f)         Investor Offset Rights; Single Integrated Transaction . The Company hereby acknowledges and agrees that (i) the Investor shall be entitled to exercise the Investor Offset Rights through any means permissible under applicable law, including without limitation, set-off and recoupment and (ii) the Obligations of the Investor hereunder and the obligations of the Company under the Convertible Note issued pursuant to the Securities Purchase Agreement arise in a single integrated transaction and constitute related and interdependent obligations within such transaction.

 

8.             Miscellaneous.

 

(a)        Full Recourse . The parties hereby acknowledge and agree that this Note is a full recourse obligation of the Investor.

 

(b)        No Oral Waivers or Modifications . No provision of this Note may be waived or modified orally, but only in a writing signed by the Company and the Investor.

 

(c)        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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(d)        No Severability . If any provision of this Note is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction or other similar authority (a “ Severability Event ”), this entire Note shall be automatically terminated and shall thereafter be null and void and all remaining payment obligations hereunder of the Investor to the Company shall be automatically cancelled, ab initio .

 

(e)        Currency . Principal and interest due hereunder shall be payable in lawful money of the United States of America and shall be payable to the Company at the address of the Company, or at such other address as may be specified in a written notice to the Investor given by the Company. The Company has provided the Investor with wire transfer instructions pursuant to which payments may be made under this Note and such wire transfer instruction shall be valid for the entire period of this Note.

 

(f)         Weekend; Holidays .     If any payment on this Note shall become due on a Saturday, Sunday or a bank or legal holiday in the State of New York, such payment shall be made on the next succeeding business day in the State of New York.

 

(g)        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.

 

(h)        Remedies . No delay or omission on the part of the Company 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.

 

(i)         Waiver of Presentment . The Investor hereby waives presentment, diligence, protest and demand, notice of protest, demand and dishonor and nonpayment of this Note.

 

[ Signature Page Follows ]

 

 
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IN WITNESS WHEREOF, this Note has been executed as of the date first written above.

 

 

HUDSON BAY MASTER FUND LTD

 

 

 

 

 

       

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

Agreed and accepted as of
this ___ day of August, 2017 by:

 

HELIOS AND MATHESON ANALYTICS INC.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

 

 

 

 

   

Schedule I

 

Collateral Account

 

Bank: First Republic Bank
160 Federal St. 8 th floor Boston, MA 02110
First Republic Foreign Exchange
(877) 888-0177

Account Number: 1752 (CHF)
Account Name: Hudson Bay Master Fund LTD

 

 
 

 

 

Schedule II

 

Permitted Financial Institutions

 

UBS AG or any of their affiliates

Citibank NA or any of their affiliates

Bank of America Merrill Lynch or any of their affiliates

Deutsche Bank, AG or any of their affiliates

Fidelity Investments, FMR LLC or any of their affiliates

Morgan Stanley or any of their affiliates

First Republic Bank or any of their affiliates

Exhibit 4.5

 

 

[FORM OF WARRANT]

 

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 1(a) OF THIS WARRANT.

 

Helios and Matheson Analytics Inc.

 

Warrant To Purchase Common Stock

 

Warrant No.:

 

Date of Issuance: [                  ], 20__ (“ Issuance Date ”)

 

Helios and Matheson Analytics Inc., a Delaware corporation (the “ Company ”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, [BUYER] , the registered holder hereof or its permitted assigns (the “ Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the “ Warrant ”), at any time or times on or after the Issuance Date, but not after 11:59 p.m., New York time, on the Expiration Date (as defined below), _________________ 1 (subject to adjustment as provided herein) fully paid and non-assessable shares of Common Stock (as defined below) (the “ Warrant Shares ”, and such number of Warrant Shares, the “ Warrant Number ”). Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “ SPA Warrants ”) issued pursuant to Section 1 of that certain Securities Purchase Agreement, dated as of August __. 2017 (the “ Subscription Date ”), by and among the Company and the investors (the “ Buyers ”) referred to therein, as amended from time to time (the “ Securities Purchase Agreement ”).

 

 


60% (or, if the Nasdaq Approval (as defined in the Notes) is not obtained, 80%) Warrant coverage (based upon conversion, in full, of the February Notes (as defined in the Securities Purchase Agreement) immediately following the Closing Date (as defined in the Securities Purchase Agreement) without regard to any floor price or limitations on conversion thereof

 

 
 

 

 

1.             EXERCISE OF WARRANT.

 

(a)        Mechanics of Exercise . Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by the Holder on any day on or after the Issuance Date (an “ Exercise Date ”), in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit A (the “ Exercise Notice ”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Day following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date of such exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “ Aggregate Exercise Price ”) in cash or via wire transfer of immediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of an Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On or before the second (2nd) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronic mail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B , to the Holder and the Company’s transfer agent (the “ Transfer Agent ”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the terms herein. On or before the third (3 rd ) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), the Company shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“ DTC ”) Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the Exercise Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant to such exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise and upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event later than three (3) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuance and similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly made pursuant to a Cashless Exercise), the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of ((i) three (3) Trading Days after receipt of the applicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of a Cashless Exercise (such later date, the “ Share Delivery Date ”) shall not be deemed to be a breach of this Warrant. Notwithstanding anything to the contrary contained in this Warrant or the Registration Rights Agreement, after the effective date of the Registration Statement (as defined in the Registration Rights Agreement) and prior to the Holder’s receipt of the notice of a Grace Period (as defined in the Registration Rights Agreement), the Company shall cause the Transfer Agent to deliver unlegended shares of Common Stock to the Holder (or its designee) in connection with any sale of Registrable Securities (as defined in the Registration Rights Agreement) with respect to which the Holder has entered into a contract for sale, and delivered a copy of the prospectus included as part of the particular Registration Statement to the extent applicable, and for which the Holder has not yet settled. From the Issuance Date through and including the Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.

 

(b)        Exercise Price . For purposes of this Warrant, “ Exercise Price ” means $3.25, subject to adjustment as provided herein.

 

 
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(c)        Company’s Failure to Timely Deliver Securities . If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either (I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificate for the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for such number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if a Registration Statement covering the resale of the Warrant Shares that are the subject of the Exercise Notice (the “ Unavailable Warrant Shares ”) is not available for the resale of such Unavailable Warrant Shares and the Company fails to promptly, but in no event later than as required pursuant to the Registration Rights Agreement (x) so notify the Holder and (y) deliver the Warrant Shares electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause (II) is hereinafter referred as a “ Notice Failure ” and together with the event described in clause (I) above, a “ Delivery Failure ”), then, in addition to all other remedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure an amount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and to which the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the period beginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void its Exercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate and register such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failure occurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to all or any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not received from the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “ Buy-In ”), then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “ Buy-In Price ”), at which point the Company’s obligation to so issue and deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares) shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date of the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “ Buy-In Payment Amount ”). Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares of Common Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transfer agent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicable number of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind such exercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c). or otherwise, and (ii) if a registration statement covering the issuance or resale of the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Exercise Notice Warrant Shares and the Holder has submitted an Exercise Notice prior to receiving notice of the non-availability of such registration statement and the Company has not already delivered the Warrant Shares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holder shall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect the Company’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c). or otherwise, and/or (y) switch some or all of such Exercise Notice from a cash exercise to a Cashless Exercise.

 

 
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(d)          Cashless Exercise . Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), at any time after the six month anniversary of the Closing Date (as defined in the Securities Purchase Agreement), if at the time of exercise hereof a Registration Statement (as defined in the Registration Rights Agreement (as defined in the Securities Purchase Agreement)) is not effective (or the prospectus contained therein is not available for use) for the resale by the Holder of all of the Warrant Shares, then the Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according to the following formula (a “ Cashless Exercise ”):

 

Net Number = (A x B) - (A x C)

                                     D

 

For purposes of the foregoing formula:

 

A= the total number of shares with respect to which this Warrant is then being exercised.

 

B = the quotient of (x) the sum of the VWAP of the Common Stock of each of the five (5) Trading Days ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice, divided by (y) five (5) (the “ Cashless Measuring Period ”).

 

C = the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.

 

D = as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicable Exercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicable Exercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant to Section 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a Trading Day and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.

 

For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued in a Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued pursuant to the Securities Purchase Agreement.

 

(e)           Disputes . In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issued pursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 13.

 

 
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(f)            Limitations on Exercises .

 

(i)        Beneficial Ownership . The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise any portion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extent that after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 9.99% (the “ Maximum Percentage ”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held by the Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercised portion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including other SPA Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 1(f)(i). For purposes of this Section 1(f)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. For purposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the SEC, as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (the “ Reported Outstanding Share Number ”). If the Company receives an Exercise Notice from the Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determined pursuant to this Section 1(f)(i), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquired pursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “ Reduction Shares ”) and (ii) as soon as reasonably practicable, the Company shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Maximum Percentage (the “ Excess Shares ”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, the Company shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder may from time to time increase (with such increase not effective until the sixty-first (61 st ) day after delivery of such notice) or decrease the Maximum Percentage to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until the sixty-first (61 st ) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other Attribution Parties and not to any other holder of SPA Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f)(i) to the extent necessary to correct this paragraph or any portion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f)(i) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of this Warrant.

 

 
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(ii)      Principal Market Regulation . The Company shall not issue any shares of Common Stock upon the exercise of this Warrant if the issuance of such shares of Common Stock (taken together with the issuance of such shares upon the exercise of the SPA Warrants and the conversion of the Notes or otherwise pursuant to the terms of the Notes or the SPA Warrants) would exceed the aggregate number of shares of Common Stock which the Company may issue upon exercise or conversion or otherwise pursuant to the terms of the Notes or the SPA Warrants (as the case may be) of the Warrants and the Notes without breaching the Company’s obligations under the rules or regulations of the Principal Market (the number of shares which may be issued without violating such rules and regulations, the “ Exchange Cap ”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its stockholders as required by the applicable rules of the Principal Market for issuances of shares of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the Holder. Until such approval or such written opinion is obtained, no Buyer shall be issued in the aggregate, upon conversion or exercise (as the case may be) of any Notes or any of the SPA Warrants or otherwise pursuant to the terms of the Notes or the SPA Warrants, shares of Common Stock in an amount greater than the product of (i) the Exchange Cap as of the Issuance Date multiplied by (ii) the quotient of (1) the original principal amount of Notes issued to such Buyer pursuant to the Securities Purchase Agreement on the Closing Date (as defined in the Securities Purchase Agreement) divided by (2) the aggregate original principal amount of all Notes issued to the Buyers pursuant to the Securities Purchase Agreement on the Closing Date (with respect to each Buyer, the “ Exchange Cap Allocation ”). In the event that any Buyer shall sell or otherwise transfer any of such Buyer’s SPA Warrants, the transferee shall be allocated a pro rata portion of such Buyer’s Exchange Cap Allocation with respect to such portion of such SPA Warrants so transferred, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation so allocated to such transferee. Upon conversion and exercise in full of a holder’s Notes and SPA Warrants, the difference (if any) between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder upon such holder’s conversion in full of such Notes and such holder’s exercise in full of such SPA Warrants shall be allocated, to the respective Exchange Cap Allocations of the remaining holders of Notes and related SPA Warrants on a pro rata basis in proportion to the shares of Common Stock underlying the Notes and related SPA Warrants then held by each such holder of Notes and related SPA Warrants. In the event that the Company is then prohibited from issuing any shares of Common Stock pursuant to this Section 1(f)(ii) (the “ Exchange Cap Shares ”) after September 15, 2017, in lieu of issuing and delivering such Exchange Cap Shares to the Holder, the Company shall pay cash to the Holder in exchange for the cancellation of such portion of this Warrant exercisable into such Exchange Cap Shares (the “ Exchange Cap Payment Amount ”) at a price equal to the sum of (x) the product of (A) such number of Exchange Cap Shares and (B) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date the Holder delivers the applicable Exercise Notice with respect to such Exchange Cap Shares to the Company and ending on the date of such payment under this Section 1(f)(ii) and (y) to the extent the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Exchange Cap Shares, any brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith.

 

 
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(g)            Reservation of Shares .

 

(i)         Required Reserve Amount . So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under this Warrant a number of shares of Common Stock at least equal to 125% of the maximum number of shares of Common Stock as shall be necessary to satisfy the Company’s obligation to issue shares of Common Stock under the SPA Warrants then outstanding (without regard to any limitations on exercise) (the “ Required Reserve Amount ”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) be reduced other than proportionally in connection with any exercise or redemption of SPA Warrants or such other event covered by Section 2(a) below. The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among the holders of the SPA Warrants based on number of shares of Common Stock issuable upon exercise of SPA Warrants held by each holder on the Closing Date (without regard to any limitations on exercise) or increase in the number of reserved shares, as the case may be (the “ Authorized Share Allocation ”). In the event that a holder shall sell or otherwise transfer any of such holder’s SPA Warrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any SPA Warrants shall be allocated to the remaining holders of SPA Warrants, pro rata based on the number of shares of Common Stock issuable upon exercise of the SPA Warrants then held by such holders (without regard to any limitations on exercise).

 

 
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(ii)       Insufficient Authorized Shares . If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the SPA Warrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve the Required Reserve Amount (an “ Authorized Share Failure ”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for all the SPA Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the event that the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficient shares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the “ Authorization Failure Shares ”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for the cancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) such number of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date of such issuance and payment under this Section 1(f); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any Buy-In Payment Amount, brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g) shall limit any obligations of the Company under any provision of the Securities Purchase Agreement.

 

 
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2.             ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES . The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 2.

 

(a)          Stock Dividends and Splits . Without limiting any provision of Section 2(b) or Section 4, if the Company, at any time on or after the Subscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflect such event.

 

(b)          Adjustment Upon Issuance of Shares of Common Stock . If and whenever on or after the Subscription Date [                 ] 2 , the Company issues or sells, or in accordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration per share (the “ New Issuance Price ”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (such Exercise Price then in effect is referred to herein as the “ Applicable Price ”) (the foregoing a “ Dilutive Issuance ”), then immediately after such Dilutive Issuance, the Exercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation, determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:

 

(i)       Issuance of Options . If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.

 

 


2 IF THE NASDAQ APPROVAL IS OBTAINED INSERT: and on or prior to the forty-second month anniversary of the Closing Date

 

 
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(ii)      Issuance of Convertible Securities . If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security or otherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale of such Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Convertible Security (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any such issuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be made pursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of such issuance or sale.

 

 
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(iii)      Change in Option Price or Rate of Conversion . If the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion or exercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decrease shall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.

 

(iv)      Calculation of Consideration Received . If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “ Primary Security ”, and such Option and/or Convertible Security and/or Adjustment Right, the “ Secondary Securities ”), together comprising one integrated transaction, (or one or more transactions if such issuances or sales or deemed issuances or sales of securities of the Company either (A) have at least one investor or purchaser in common, (B) are consummated in reasonable proximity to each other and/or (C) are consummated under the same plan of financing) the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to be equal to the difference of (x) the lowest price per share for which one share of Common Stock was issued (or was deemed to be issued pursuant to Section 2(b)(i) or 2(b)(ii) above, as applicable) in such integrated transaction solely with respect to such Primary Security, minus (y) with respect to such Secondary Securities, the sum of (I) the Black Scholes Consideration Value of each such Option, if any, (II) the fair market value (as determined by the Holder in good faith) or the Black Scholes Consideration Value, as applicable, of such Adjustment Right, if any, and (III) the fair market value (as determined by the Holder) of such Convertible Security, if any, in each case, as determined on a per share basis in accordance with this Section 2(b)(iv). If any shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be deemed to be the net amount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be the fair value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “ Valuation Event ”), the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10 th ) day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.

 

 
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(v)      Record Date . If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).

 

(c)      Number of Warrant Shares . Simultaneously with any adjustment to the Exercise Price pursuant to this Section 2 , the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regard to any limitations on exercise contained herein).

 

(d)      Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities . In addition to and not in limitation of the other provisions of this Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities other than the Notes and other than the February Notes and December Notes (each as defined in the Securities Purchase Agreement) as may be modified by virtue of the issuance of the Notes (any such securities, “ Variable Price Securities ”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable or exercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting customary anti-dilution provisions (such as share splits, share combinations, share dividends and similar transactions) (each of the formulations for such variable price being herein referred to as, the “ Variable Price ”), the Company shall provide written notice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From and after the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its sole discretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise of this Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election to rely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.

 

(e)      Other Events . In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriate adjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustment pursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2 , provided further that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board of directors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.

 

(f)      Calculations . All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100 th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issuance or sale of Common Stock.

 

(g)      Voluntary Adjustment By Company . The Company may at any time during the term of this Warrant, with the prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors of the Company.

 

 
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3.            RIGHTS UPON DISTRIBUTION OF ASSETS . In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “ Distribution ”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right to participate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on any subsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).

 

4.             PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

 

(a)        Purchase Rights . In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “ Purchase Rights ”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issuance or sale of such Purchase Rights ( provided , however , that to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (and beneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).

 

 
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(b)        Fundamental Transactions . The Company shall not enter into or be party to a Fundamental Transaction unless (i)  the Successor Entity assumes in writing all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) in accordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number of shares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter)) issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), as adjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. In addition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “ Corporate Event ”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter)) issuable upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.

 

 
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(c)            Black Scholes Value .

 

(i)        Fundamental Transaction Redemption . Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any time commencing on the earliest to occur of (x) the public disclosure of any Fundamental Transaction, (y) the consummation of any Fundamental Transaction and (z) the Holder first becoming aware of any Fundamental Transaction through the date that is ninety (90) days after the public disclosure of the consummation of such Fundamental Transaction by the Company pursuant to a Current Report on Form 8-K filed with the SEC, the Company or the Successor Entity (as the case may be) shall purchase this Warrant from the Holder on the date of such request by paying to the Holder cash in an amount equal to the Black Scholes Value. Payment of such amounts shall be made by the Company (or at the Company’s direction) to the Holder on or prior to the later of (x) the second (2 nd ) Trading Day after the date of such request and (y) the date of consummation of such Fundamental Transaction.

 

(ii)       Event of Default Redemption . Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any time after the occurrence of an Event of Default (as defined in the Notes)(assuming for such purpose that the Notes remain outstanding), the Company or the Successor Entity (as the case may be) shall purchase this Warrant from the Holder on the date of such request by paying to the Holder cash in an amount equal to the Event of Default Black Scholes Value.

 

(d)            Application . The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shall be applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant (provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registered under the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)) .

 

 
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5.            NONCIRCUMVENTION . The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after the sixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant to restrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining such consents or approvals as necessary to permit such exercise into shares of Common Stock.

 

6.            WARRANT HOLDER NOT DEEMED A STOCKHOLDER . Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in its capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.

 

7.             REISSUANCE OF WARRANTS.

 

(a)       Transfer of Warrant . If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.

 

(b)       Lost, Stolen or Mutilated Warrant . Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.

 

 
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(c)      Exchangeable for Multiple Warrants . This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for fractional shares of Common Stock shall be given.

 

(d)      Issuance of New Warrants . Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.

 

8.            NOTICES . Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than the issuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, (iii) at least ten (10) Trading Days prior to the consummation of any Fundamental Transaction and (iv) within one (1) Business Day of the occurrence of an Event of Default (as defined in the Notes), setting forth in reasonable detail any material events with respect to such Event of Default and any efforts by the Company to cure such Event of Default. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of its Subsidiaries, the Company shall simultaneously file such notice with the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8-K. If the Company or any of its Subsidiaries provides material non-public information to the Holder that is not simultaneously filed in a Current Report on Form 8-K and the Holder has not agreed to receive such material non-public information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of its Subsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basis of, such material non-public information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company.

 

 
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9.             AMENDMENT AND WAIVER . Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder or Holders of at least 51% of the Warrant Shares underlying any then outstanding SPA Warrants, provided that if Hudson Bay Master Fund Ltd. (“ Hudson ”) is then a holder of SPA Warrants, such consent shall include the consent of Hudson. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.

 

10.            SEVERABILITY . If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

11.           GOVERNING LAW . This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant 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. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, 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. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY 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 WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

 
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12.            CONSTRUCTION; HEADINGS . This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant but defined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement) in such other Transaction Documents unless otherwise consented to in writing by the Holder.

 

13.            DISPUTE RESOLUTION .

 

(a)            Submission to Dispute Resolution .

 

(i)        In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Consideration Value, Event of Default Black Scholes Value, Black Scholes Value or fair market value or the arithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two (2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, such Closing Sale Price, such Bid Price, such Black Scholes Consideration Value, Event of Default Black Scholes Value, Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as the case may be), at any time after the second (2 nd ) Business Day following such initial notice by the Company or the Holder (as the case may be) of such dispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank to resolve such dispute.

 

(ii)       The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth (5 th ) Business Day immediately following the date on which the Holder selected such investment bank (the “ Dispute Submission Deadline ”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the “ Required Dispute Documentation ”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested by such investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation).

 

 
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(iii)      The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and the Holder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of such investment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all parties absent manifest error.

 

(b)            Miscellaneous . The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Company and the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“ CPLR ”) and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) a dispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each other applicable Transaction Document shall serve as the basis for the selected independent investment bank’s resolution of the applicable dispute, such independent investment bank shall be entitled (and is hereby expressly authorized) to make all findings, determinations and the like that such independent investment bank determines are required to be made by such investment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance or sale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving such dispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents, (iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sitting in The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).

 

 
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14.            REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF . The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercises and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). The issuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.

 

15.            PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS . If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions of this Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involving a claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.

 

16.            TRANSFER . This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company, except as may otherwise be required by Section [2(g)] of the Securities Purchase Agreement.

 

 
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17.            CERTAIN DEFINITIONS . For purposes of this Warrant, the following terms shall have the following meanings:

 

(a)     “ 1933 Act ” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

 

(b)     “ 1934 Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

 

(c)     “ Adjustment Right ” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (or deemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that could result in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cash settlement rights, cash adjustment or other similar rights).

 

(d)     “ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

 

(e)      “ Approved Stock Plan ” means any employee benefit plan, contract or arrangement or employment or consulting agreement which has been approved by the board of directors of the Company prior to or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee, officer or director for services provided to the Company in their capacity as such

 

(f)     “ Attribution Parties ” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could be aggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.

 

(g)     “ Bid Price ” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported by Bloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time of determination, or if the foregoing does not apply, the bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the average of the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time of determination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of such security as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

 
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(h)     “ Black Scholes Consideration Value ” means the value of the applicable Option, Convertible Security or Adjustment Right (as the case may be) as of the date of issuance thereof calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the public announcement of the execution of definitive documents with respect to the issuance of such Option or Convertible Security (as the case may be), (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of such Option, Convertible Security or Adjustment Right (as the case may be) as of the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may be), (iii) a zero cost of borrow and (iv) an expected volatility equal to the greater of 100% and the 30 day volatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may be).

 

(i)     “ Black Scholes Value ” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section 4(c)(i), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding the announcement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the Trading Day of the Holder’s request pursuant to Section 4(c)(i) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any) plus the value of the non-cash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effect on the date of the Holder’s request pursuant to Section 4(c)(i), (iii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of (1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c)(i) and (2) the remaining term of this Warrant as of the date of consummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c)(i) if such request is prior to the date of the consummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 day volatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the earliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C) the date on which the Holder first became aware of the applicable Fundamental Transaction.

 

 
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(j)     “ Bloomberg ” means Bloomberg, L.P.

 

(k)     “ Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

 

(l)     “ Closing Sale Price ” means, for any security as of any date, the last closing trade price for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last trade price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing does not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no last trade price is reported for such security by Bloomberg, the average of the ask prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

(m)     “ Common Stock ” means (i) the Company’s shares of common stock, $0.0001 par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

 

(n)     “ Convertible Securities ” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.

 

(o)     “ Eligible Market ” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQB or the Principal Market.

 

 
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(p)     “ Equity Conditions ” means: means, with respect to an given date of determination: (i) on each day during the period beginning thirty calendar days prior to such applicable date of determination and ending on and including such applicable date of determination one or more Registration Statements filed pursuant to the Registration Rights Agreement shall be effective and the prospectus contained therein shall be available on such applicable date of determination (with, for the avoidance of doubt, any shares of Common Stock previously sold pursuant to such prospectus deemed unavailable) for the resale of all shares of Common Stock to be issued in connection with the event requiring this determination (each, a “ Required Minimum Securities Amount ”), in each case, in accordance with the terms of the Registration Rights Agreement and there shall not have been during such period any Grace Periods (as defined in the Registration Rights Agreement) and no Current Information Failure (as defined in the Registration Rights Agreement) exists or is continuing ; (ii) on each day during the period beginning thirty calendar days prior to the applicable date of determination and ending on and including the applicable date of determination (the “ Equity Conditions Measuring Period ”), the Common Stock (including all Registrable Securities ) is listed or designated for quotation (as applicable) on an Eligible Market and shall not have been suspended from trading on an Eligible Market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by an Eligible Market have been threatened (with a reasonable prospect of delisting occurring after giving effect to all applicable notice, appeal, compliance and hearing periods) or reasonably likely to occur or pending as evidenced by (A) a writing by such Eligible Market or (B) the Company falling below the minimum listing maintenance requirements of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable) other than as disclosed in the SEC Documents (as defined in the Securities Purchase Agreement) prior to the Issuance Date; (iii) during the Equity Conditions Measuring Period, the Company shall have delivered all shares of Common Stock issuable upon exercise of this Warrant and conversion of the Notes on a timely basis as required by the terms thereof and all other shares of capital stock required to be delivered by the Company on a timely basis as set forth in the other Transaction Documents; (iv) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section 1(f) hereof; (v) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (vi) on each day during the Equity Conditions Measuring Period, no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (vii) the Company shall have no knowledge of any fact that would reasonably be expected to cause any Registration Statement required to be filed pursuant to the Registration Rights Agreement to not be effective or the prospectus contained therein to not be available for the resale of the applicable Required Minimum Securities Amount of Registrable Securities in accordance with the terms of the Registration Rights Agreement; (viii) the Holder shall not be in (and no other holder of SPA Warrants shall be in) possession of any material, non-public information provided to any of them by the Company, any of its Subsidiaries or any of their respective affiliates, employees, officers, representatives, agents or the like; (ix) on each day during the Equity Conditions Measuring Period, the Company otherwise shall have been in compliance with each, and shall not have breached any representation or warranty in any material respect (other than representations or warranties subject to material adverse effect or materiality, which may not be breached in any respect) or any covenant or other term or condition of any Transaction Document, including, without limitation, the Company shall not have failed to timely make any payment pursuant to any Transaction Document; (x) on the applicable date of determination (A) no Authorized Share Failure shall exist or be continuing and the applicable Required Minimum Securities Amount of shares of Common Stock are available under the certificate of incorporation of the Company and reserved by the Company to be issued pursuant to the Notes and (B) all shares of Common Stock to be issued in connection with the event requiring this determination may be issued in full without resulting in an Authorized Share Failure; (xii) on each day during the Equity Conditions Measuring Period, there shall not have occurred and there shall not exist an Event of Default (as defined in the Notes) or an event that with the passage of time or giving of notice would constitute an Event of Default; (xiii) the shares of Common Stock issuable pursuant the event requiring the satisfaction of the Equity Conditions are duly authorized and listed and eligible for trading without restriction on an Eligible Market; and (xiv) the Stockholder Approval (as defined in the Securities Purchase Agreement) shall have been obtained

 

 
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(q)      “ Equity Conditions Failure ” means, with respect to a particular date of determination, that on any day during the period commencing twenty (20) Trading Days immediately prior to such date of determination, the Equity Conditions have not been satisfied (or waived in writing by the Holder).

 

(r)     “ Event of Default Black Scholes Value ” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section 4(c)(ii), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the highest Closing Sale Price of the Common Stock during the period beginning on the date of the occurrence of the Event of Default through the date all Events of Default have been cured (assuming for such purpose that the Notes remain outstanding) or, if earlier, the Trading Day of the Holder’s request pursuant to Section 4(c)(ii), (ii) a strike price equal to the Exercise Price in effect on the date of the Holder’s request pursuant to Section 4(c)(ii), (iii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of (1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c)(ii) and (2) the remaining term of this Warrant as of the date of the occurrence of such Event of Default, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 day volatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following later of (x) the date of the occurrence of such Event of Default and (y) the date of the public announcement of such Event of Default.

 

 
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(s)      “ Excluded Securities ” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, consultants or employees of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that (A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause (i) do not, in the aggregate, exceed more than [            ] shares of the Common Stock (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events) and (B) the exercise price of any such options is not lowered, none of such options are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adversely affects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversion price of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are otherwise materially changed in any manner that adversely affects any of the Buyers; (iii) the shares of Common Stock issuable upon conversion of the Notes or otherwise pursuant to the terms of the Notes; provided, that the terms of the Notes are not amended, modified or changed on or after the Subscription Date (other than antidilution adjustments pursuant to the terms thereof in effect as of the Subscription Date), (iv) the shares of Common Stock issuable upon exercise of the SPA Warrants; provided, that the terms of the SPA Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilution adjustments pursuant to the terms thereof in effect as of the Subscription Date) (v) the Helios Shares (as defined in the MoviePass SPA (as defined in the Securities Purchase Agreement) as of the Subscription Date), (vi) the Granted Unissued Shares (as defined in the Securities Purchase Agreement), and (vi) shares of Common Stock, Options and Convertible Securities issued pursuant to strategic mergers or acquisitions of other assets or businesses; provided that (x) the primary purpose of such issuance is not to raise capital, (y) the purchaser or acquirer of such shares of 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 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). For the avoidance of doubt, the December Notes and February Notes, as may be modified by virtue of the issuance of the Series B Notes, shall be Excluded Securities.

 

(t)     “ Expiration Date ” means the date that is the fifth (5 th ) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or on which trading does not take place on the Principal Market (a “ Holiday ”), the next date that is not a Holiday.

 

 
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(u)      “ Fundamental Transaction ” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock , (B) that the Company shall , directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entities as of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stock without approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction. Notwithstanding anything herein to the contrary, the transactions contemplated by the MoviePass SPA (as in effect as of the Subscription Date) shall not be deemed to be, either individually or in the aggregate, a Fundamental Transaction.

 

(v)     “ Group ” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.

 

(w)     “ Maximum Forced Exercise Amount ” means, as of any given date, the lesser of (x) subject to Section 1(f)(i), the number of Warrant Shares issuable upon exercise of this Warrant as of such given date and (y) 100% of the average trading volume (as reported on Bloomberg) of the Common Stock on the Principal Market on each of the ten (10) consecutive Trading Days ending and including the Trading Day immediately prior to such given date.

 

 
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(x)      “ Notes ” has the meaning ascribed to such term in the Securities Purchase Agreement, and shall include all notes issued in exchange therefor or replacement thereof.

 

(y)      “ Options ” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

 

(z)       “ Parent Entity ” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

(aa)     “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

 

(bb)     “ Principal Market ” means the Nasdaq Capital Market.

 

(cc)     “ Registration Rights Agreement ” means that certain registration rights agreement, dated as of the Closing Date, by and among the Company and the initial holders of the Notes relating to, among other things, the registration of the resale of the Common Stock issuable upon conversion of the Notes or otherwise pursuant to the terms of the Notes and exercise of the SPA Warrants, as may be amended from time to time.

 

(dd)    “ SEC ” means the United States Securities and Exchange Commission or the successor thereto.

 

(ee)      “Subject Entity ” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.

 

(ff)      “ Successor Entity ” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

 

(gg)    “ Trading Day ” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.

 

 
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(hh)    “ VWAP ” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set to weighted average) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.

 

18.      FORCED EXERCISE.

 

(a)      General . If at any time after the date hereof (i) the VWAP of the Common Stock is equal to or greater than $5.6875 (as adjusted for stock splits, stock combinations or other similar transaction) for a period of ten (10) consecutive Trading Days ending on the Trading Day immediately prior to the applicable Forced Exercise Notice Date (as defined below)(each ten (10) consecutive Trading Days on which the condition in this clause (i) is satisfied being referred to herein as a “ Measuring Period ”), (ii) no Equity Conditions Failure shall have occurred or be continuing, and (iii) the aggregate trading volume (as reported on Bloomberg) of the Common Stock on the applicable Eligible Market for each Trading Day during such Measuring Period exceeds 250,000 shares (as adjusted for stock splits, stock combinations or other similar transaction) per Trading Day in such Measuring Period (collectively, the “ Forced Exercise Conditions ”, and each date in which all the Forced Exercise Conditions are met, a “ Forced Exercise Eligibility Date ”), then the Company shall have the right, exercisable on a Forced Exercise Eligibility Date, to require the Holder to exercise for cash all, or any part, of this Warrant (up to the Maximum Forced Exercise Amount of Warrant Shares as of the applicable Forced Exercise Notice Date (as defined below)) in accordance with Section 1 hereof (excluding Section 1(d) hereof) (the “ Forced Exercise ”) at the Exercise Price in effect as of the applicable Forced Exercise Date (as defined below).

 

 
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(b)      Mechanics . On any Forced Exercise Eligibility Date, the Company may exercise its right to require a Forced Exercise by delivering a written notice thereof by facsimile and e-mail to the Holder (each, a “ Forced Exercise Notice ” and the date the Holder receives any such notice by facsimile is referred to as a “ Forced Exercise Notice Date ”). Except as set forth below, each Forced Exercise Notice shall be irrevocable. Each Forced Exercise Notice shall (i) state that the Company is electing to effect a Forced Exercise, (ii) state the proposed date of such Forced Exercise (the “ Forced Exercise Date ”), which shall be no less than five (5) Trading Days after such Forced Exercise Notice Date, no more than ten (10) Trading Days after such Forced Exercise Notice Date and no less than ten (10) Trading Days after any prior Forced Exercise Date, (ii) state the number of Warrant Shares to be exercised by the Holder on such Forced Exercise Date (subject to any adjustments thereto pursuant to Section 2 that may occur prior to such Forced Exercise Date); provided, that such number of Warrant Shares shall not exceed the Maximum Forced Exercise Amount as of such Forced Exercise Notice Date, and (iv) contain a certification from an officer or director of the Company that the Forced Exercise Conditions shall have been satisfied as of the Forced Exercise Notice Date. On the Forced Exercise Date, the mechanics of exercise set forth in Section 1 shall apply (excluding Section 1(d) above), to the extent applicable, as if the Company had received from the Holder on the Forced Exercise Date an Exercise Notice with respect to the number of Warrant Shares subject to the Forced Exercise as set forth in such Forced Exercise Notice. If on any Trading Day during the period commencing on, and including, the applicable Forced Exercise Notice Date through, and including, the applicable Forced Exercise Date either (i) the VWAP of the Common Stock fails to be equal to or greater than $5.6875 (as adjusted for stock splits, stock combinations or other similar transaction) , (ii) an Equity Conditions Failure occurs or is continuing, or (iii) the aggregate trading volume (as reported on Bloomberg) of the Common Stock on the applicable Eligible Market fails to exceed 250,000 shares (as adjusted for stock splits, stock combinations or other similar transaction) , the Company shall deliver a written notice to the Holder of such failure and, unless such failure is waived by the Holder, such Forced Exercise Notice shall be null and void and the Company shall not be permitted to effect such Forced Exercise hereunder.

 

(c)     If the Company elects to cause a Forced Exercise of this Warrant pursuant to this Section 18, then it must simultaneously take the same action in the same proportion with respect to all of the SPA Warrants.

 

[ signature page follows ]

 

 
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IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.

 

 

HELIOS AND MATHESON ANALYTICS INC.

 

     

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 
 

 

 

EXHIBIT A

 

EXERCISE NOTICE

 

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK

 

HELIOS AND MATHESON ANALYTICS INC.

 

The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “ Warrant ”) of Helios and Matheson Analytics Inc., a Delaware corporation (the “ Company ”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

 

1.          Form of Exercise Price . The Holder intends that payment of the Aggregate Exercise Price shall be made as:

 

 

a “ Cash Exercise ” with respect to _________________ Warrant Shares; and/or

 

 

a “ Cashless Exercise ” with respect to _______________ Warrant Shares.

 

In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder hereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable, the Bid Price as of such time of execution of this Exercise Notice was $________.

 

2.          Payment of Exercise Price . In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.

 

3.          Delivery of Warrant Shares . The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock in accordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:

 

☐        Check here if requesting delivery as a certificate to the following name and to the following address:

 

 

Issue to:

 
   
   

 

 
 

 

 

☐        Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:

 

DTC Participant:

 
   

DTC Number:

 
   

Account Number:

 

 

 

Date: _____________ __,            

 

                                                   
Name of Registered Holder

 

   
By:

                                               
Name:

Title:

 

Tax ID:____________________________

 

Facsimile:__________________________

 

E-mail Address:_____________________

 

 
 

 

 

EXHIBIT B

 

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.

 

 

 

Helios and Matheson Analytics Inc.

 

 

 

 

 

       

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

Exhibit 10.1

 

MOVIEPASS INC.

 

INVESTORS’ RIGHTS AGREEMENT

 

Closing: [ ], 2017

 

 

 

 

 

TABLE OF CONTENTS

 

 

Page

     
SECTION 1 Definitions 1
1.1 Certain Definitions 1
     
SECTION 2 Registration Rights 4
2.1 Registration 4
2.2 Request for Registration 5
2.3 Company Registration 7
2.4 Registration on Form S-3 9
2.5 Expenses of Registration 10
2.6 Registration Procedures 10
2.7 Indemnification 11
2.8 Information by Holder 13
2.9 Restrictions on Transfer 13
2.10 Rule 144 Reporting 14
2.11 Market Stand-Off Agreement 15
2.12 Delay of Registration 16
2.13 Transfer or Assignment of Registration Rights 16
2.14 Limitations on Subsequent Registration Rights 16
2.15 Termination of Registration Rights 16
     
SECTION 3 Covenants of the Company 16
3.1 Basic Financial Information; Inspection Rights; Annual Budget 16
3.2 Confidentiality 17
3.3 “Bad Actor” Notice 18
3.4 National Securities Exchange Listing 18
3.5 Termination of Covenants 18
     
SECTION 4 Protective Provisions 18
4.1 Protective Provisions 18
4.2 Termination of Protective Provisions 19
     
SECTION 5 Miscellaneous 19
5.1 Amendment 19
5.2 Notices 19
5.3 Governing Law 20
5.4 Successors and Assigns 20
5.5 Entire Agreement 20
5.6 Delays or Omissions 21
5.7 Severability 21
5.8 Titles and Subtitles 21
5.9 Counterparts 21
5.10 Telecopy Execution and Delivery 21
5.11 Jurisdiction; Venue 21
5.12 Further Assurances 22
5.13 Termination Upon Change of Control 22

 

 

 

 

 

TABLE OF CONTENTS

(continued)

 

    Page
     
5.14 Conflict 22
5.15 Attorneys’ Fees 22
5.16 Aggregation of Stock 22
5.17 Jury Trial 22

 

 

 

 
ii 

 

 

MOVIEPASS INC.
INVESTORS’ RIGHTS AGREEMENT

 

This Investors’ Rights Agreement (this “ Agreement ”) is dated as of [●], 2017, and is between MoviePass Inc., a Delaware corporation (the “ Company ”), the holders of the Company’s Common Stock listed on Exhibit A (the “ Prior Investors ”) and Helios and Matheson Analytics Inc. (the “ New Investor ” and collectively with the Prior Investors, the “ Investors ”).

 

RECITALS

 

A.     The New Investor is a party to the Securities Purchase Agreement, dated as of [●], 2017, between the Company and the New Investor (the “ Purchase Agreement ”), and it is a condition to the closing of the sale of the Shares (as defined in the Purchase Agreement) to the New Investor that the Investors and the Company execute and deliver this Agreement.

 

B.     At the Closing (as defined below), the Amended and Restated Investors’ Rights Agreement, dated June 24, 2014, among the Company and the Prior Investors shall automatically terminate pursuant to Subsection 7.13 thereof.

 

NOW, THEREFORE, the parties therefore agree as follows:

 

SECTION 1

Definitions

 

1.1     Certain Definitions . As used in this Agreement, the following terms shall have the meanings set forth below:

 

(a)     “ Bad Actor Disqualification ” means any “bad actor” disqualification described in Rule 506(d)(1)(i) through (viii) under the Securities Act.

 

(b)      “ Closing ” shall have the meaning set forth in the Purchase Agreement.

 

(c)     “ Commission ” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

 

(d)     “ Common Stock ” shall mean shares of the Company’s common stock.

 

(e)     “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.

 

(f)     “ Family Member ” means (a) with respect to any individual, such individual’s spouse, any descendants (whether natural or adopted), any trust all of the beneficial interests of which are owned by any of such individuals or by any of such individuals together with any organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, the estate of any such individual, and any corporation, association, partnership or limited liability company all of the equity interests of which are owned by those above described individuals, trusts or organizations and (b) with respect to any trust, the owners of the beneficial interests of such trust.

 

 
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(g)     “ Holder ” shall mean any Investor who holds Registrable Securities and any holder of Registrable Securities to whom the registration rights conferred by this Agreement have been duly and validly transferred in accordance with Subsection 2.13 of this Agreement.

 

(h)     “ Indemnified Party ” shall have the meaning set forth in Subsection 2.7(c) .

 

(i)     “ Indemnifying Party ” shall have the meaning set forth in Subsection 2.7(c) .

 

(j)     “ Initial Public Offering ” shall mean the closing of the Company’s first firm commitment underwritten public offering of the Company’s Common Stock registered under the Securities Act.

 

(k)     “ Initiating Holder ” means any Holder or Holders holding, in the aggregate, not less than 25% of the outstanding Registrable Securities and who properly initiate a registration request under this Agreement.

 

(l)     “ Other Selling Stockholders ” shall mean persons other than Holders who, by virtue of agreements with the Company, are entitled to include their Other Shares in certain registrations hereunder.

 

(m)     “ Other Shares ” shall mean shares of Common Stock, other than Registrable Securities (as defined below), (including shares of Common Stock issuable upon conversion of shares of any currently unissued series of Preferred Stock of the Company) with respect to which registration rights have been granted.

 

(n)     “ Preferred Stock ” shall mean the shares of the Company’s preferred stock, par value $0.0001 per share.

 

(o)     “ Purchase Agreement ” shall have the meaning set forth in the Recitals.

 

(p)     “ Registrable Securities ” shall mean (i) shares of Common Stock issued or issuable to the New Investor pursuant to the Purchase Agreement, (ii) shares of Common Stock held by the Prior Investors and (iii) any Common Stock issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referenced in (i) or (ii) above; provided , however , that Registrable Securities shall not include any shares of Common Stock described in clause (i), (ii) or (iii) above which have previously been registered or which have been sold to the public either pursuant to a registration statement or Rule 144, or which have been sold in a private transaction in which the transferor’s rights under this Agreement are not validly assigned in accordance with this Agreement.

 

(q)     The terms “ register ,” “ registered ” and “ registration ” shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness of such registration statement.

 

 
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(r)     “ Registration Expenses ” shall mean all expenses incurred in effecting any registration pursuant to this Agreement, including, without limitation, all registration, qualification, and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, and expenses of any regular or special audits incident to or required by any such registration, but shall not include Selling Expenses, fees and disbursements of counsel for the Holders and the compensation of regular employees of the Company, which shall be paid in any event by the Company.

 

(s)     “ Registration Effectiveness Date ” means the date that is one hundred and twenty (120) calendar days after the date hereof (or, in the event of a “full review” by the Commission, the date that is one hundred and fifty (150) calendar days following the date hereof).

 

(t)     “ Registration Filing Date ” means the date that is sixty (60) calendar days after the date hereof.

 

(u)     “ Restricted Securities ” shall mean any Registrable Securities required to bear the first legend set forth in Subsection 2.9 .

 

(v)     “ Rule 144 ” shall mean Rule 144 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

 

(w)     “ Rule 145 ” shall mean Rule 145 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

 

(x)     “ Rule 415 ” shall mean Rule 415 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

 

(y)     “ Securities Act ” shall mean the Securities Act of 1933, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.

 

(z)     “ Selling Expenses ” shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder.

 

(aa)     “ Withdrawn Registration ” shall mean a forfeited demand registration under Subsection 2.2 in accordance with the terms and conditions of Subsection 2.5 .

 

 
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SECTION 2

Registration Rights

 

2.1     Registration .

 

(a)     Registration on Form S-1 . Following one or more discussions by counsel for the Company and the New Investor with the Staff (as defined below) in which the Staff indicates, after a reasonable disclosure of the state of facts, that the filing of a resale registration statement for the Registrable Securities held by the New Investor will receive proper consideration from the Commission and not be rejected pursuant to Rule 415(a)(1)(i), which discussions shall occur promptly following Closing, or if the Commission takes no position on the matter following such discussions, the Company shall file with the Commission a Registration Statement on Form S-1, or any other form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the resale by the New Investor of its Registrable Securities, and the Company shall (i) make the initial filing of the Registration Statement no later than the Registration Filing Date, (ii) use its reasonable best efforts to cause such Registration Statement to be declared effective no later than the Registration Effectiveness Date and (iii) use its reasonable best efforts to keep such Registration Statement effective for a period of thirty-six (36) months or for such shorter period ending on the earlier to occur of (x) the sale of all Registrable Securities held by the New Investor and (y) the availability of Rule 144 for the Holder to sell all of the Registrable Securities without volume limitations within a 90 day period;  provided however , that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Subsection 2.1(a) , or keep such registration effective pursuant to the terms hereunder, in any particular jurisdiction in which the Company would be required to qualify to do business as a foreign corporation or as a dealer in securities under the securities laws of such jurisdiction or to execute a general consent to service of process in effecting such registration, qualification or compliance, in each case where it has not already done so. Notwithstanding the foregoing, in the event that the staff of the Commission (the “ Staff ”) should limit the number of Registrable Securities of the New Investor that may be sold pursuant to the Registration Statement, the Company may remove from the Registration Statement such number of Registrable Securities as specified by the Commission on behalf of the New Investor. If the number or amount of Registrable Securities included in the Registration Statement is reduced pursuant to this Subsection 2.1(a) , then (1) the Company, to the extent not prohibited by the Staff, shall file a subsequent Registration Statement with respect to the remaining Registrable Securities on or before the sixtieth (60th) calendar day after the New Investor has resold substantially all of the Registrable Securities included in such Registration Statement; and (2) the Company shall use its reasonable best efforts to cause such subsequent Registration Statement to become effective under the Securities Act as promptly as practicable and use its reasonable best efforts to keep such Registration Statement Effective for a period of thirty-six (36) months.

 

(b)     Primary Offering by the New Investor (c)     . If, after contacting the Commission or filing a Registration Statement pursuant to Subsection 2.1(a) , the Staff advises the Company that it may not rely on Rule 415(a)(1)(i) to register the resale of any Registrable Securities of the New Investor, then the New Investor may, in its sole discretion, require the Company to file a Registration Statement on Form S-1 or any other form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available, for a primary offering of the Registrable Securities by the New Investor of its Registrable Securities through an underwriter or in a self-directed offering, in the New Investor’s sole discretion. The New Investor’s right under this Subsection 2.1(b) shall terminate upon earlier of (i) an Exchange Listing (as defined below) and (ii) the date on which Rule 415(a)(1)(i) is no longer applicable to the Company with respect to the Registrable Shares held by the New Investor.

 

 
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2.2     Request for Registration . No earlier than six (6) months after the Registration Effectiveness Date and subject to the conditions set forth in this Subsection 2.2 , if the Company shall receive from Initiating Holders a written request signed by such Initiating Holders that the Company effect any registration with respect to all or a part of the Registrable Securities (such request shall state the number of shares of Registrable Securities to be disposed of by such Initiating Holders), the Company will:

 

(i)     promptly give written notice of the proposed registration to all other Holders; and

 

(ii)     as soon as practicable, file and use its commercially reasonable efforts to effect such registration (including, without limitation, filing post-effective amendments, appropriate qualifications under applicable blue sky or other state securities laws, and appropriate compliance with the Securities Act) and to permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within twenty (20) days after such written notice from the Company is mailed or delivered.

 

(b)     Limitations on Requested Registration . The Company shall not be obligated to effect, or to take any action to effect, any such registration pursuant to this Subsection 2.2 :

 

(i)     Prior to the earlier of (A) the one (1) year anniversary of the date of this Agreement or (B) the effective date of the first registration statement filed by the Company covering an underwritten offering of any of its securities to the general public (or the subsequent date on which all market stand-off agreements applicable to the offering have terminated);

 

(ii)     In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification, or compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

 

(iii)     After the Company has initiated two (2) such registrations pursuant to this Subsection 2.2 (counting for these purposes only (x) registrations which have been declared or ordered effective and pursuant to which securities have been sold, and (y) Withdrawn Registrations);

 

 
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(iv)     During the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of filing of, and ending on a date one hundred eighty (180) days after the effective date of, a Company-initiated registration (or ending on the subsequent date on which all market stand-off agreements applicable to the offering have terminated); provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective;

 

(v)     If the Initiating Holders propose to dispose of shares of Registrable Securities that may be registered on Form S-3 pursuant to a request made under Subsection 2.4 ;

 

(vi)     If the Initiating Holders do not request that such offering be firmly underwritten by underwriters selected by the Initiating Holders (subject to the consent of the Company);

 

(vii)     If the Company and the Initiating Holders are unable to obtain the commitment of the underwriter described in clause (b)(vi) above to firmly underwrite the offer; and

 

(viii)     If the Initiating Holders, together with the holder of any other securities of the Company entitled to inclusion in such registration statement, propose to sell Registrable Securities for aggregate proceeds (after deducting underwriter’s discounts and expenses related to the issuance) are less than $5,000,000.

 

(c)     Deferral . If (i) in the good faith judgment of the board of directors of the Company, the filing of a registration statement covering the Registrable Securities would be detrimental to the Company and the board of directors of the Company concludes, as a result, that it is in the best interests of the Company to defer the filing of such registration statement at such time, and (ii) the Company shall furnish to such Holders a certificate signed by the President of the Company stating that in the good faith judgment of the board of directors of the Company, it would be detrimental to the Company for such registration statement to be filed in the near future and that it is, therefore, in the best interests of the Company to defer the filing of such registration statement, then (in addition to the limitations set forth in Subsection 2.2(b)(iv) above) the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holders, and, provided further, that the Company shall not defer its obligation in this manner more than two (2) times in any twelve-month period.

 

(d)     Other Shares . The registration statement filed pursuant to the request of the Initiating Holders may, subject to the provisions of Subsections 2.2(e) and (f) , include Other Shares, and may include securities of the Company being sold for the account of the Company.

 

(e)     Underwriting . The right of any Holder to include all or any portion of its Registrable Securities in a registration pursuant to this Subsection 2.2 shall be conditioned upon such Holder’s participation in an underwriting and the inclusion of such Holder’s Registrable Securities to the extent provided herein. If the Company shall request inclusion in any registration pursuant to Subsection 2.2 of securities being sold for its own account, or if other persons shall request inclusion in any registration pursuant to Subsection 2.2 , the Initiating Holders shall, on behalf of all Holders, offer to include such securities in the underwriting and such offer shall be conditioned upon the participation of the Company or such other persons in such underwriting and the inclusion of the Company’s and such person’s other securities of the Company and their acceptance of the further applicable provisions of this Section 2 (including Subsection 2.11 ). The Company shall (together with all Holders and other persons proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for such underwriting by the Company, which underwriters are reasonably acceptable to a majority-in-interest of the Initiating Holders.

 

 
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Notwithstanding any other provision of this Subsection 2.2 , if the underwriters advise the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, the number of Registrable Securities and Other Shares that may be so included shall be allocated as follows: (i) first, among all Holders requesting to include Registrable Securities in such registration statement based on the pro rata percentage of Registrable Securities held by such Holders, assuming conversion; (ii) second, to the Other Selling Stockholders; and (iii) third, to the Company, which the Company may allocate, at its discretion, for its own account, or for the account of other holders or employees of the Company.

 

If a person who has requested inclusion in such registration as provided above does not agree to the terms of any such underwriting, such person shall be excluded therefrom by written notice from the Company, the underwriter or the Initiating Holders. The securities so excluded shall also be withdrawn from registration. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall also be withdrawn from such registration. If shares are so withdrawn from the registration and if the number of shares to be included in such registration was previously reduced as a result of marketing factors pursuant to this Subsection 2.2(e) , then the Company shall then offer to all Holders who have retained rights to include securities in the registration the right to include additional Registrable Securities in the registration in an aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated among such Holders requesting additional inclusion, as set forth above.

 

(f)     Commission . Notwithstanding any other provision of this Subsection 2.2 , if the Commission informs the Company that all of the Registrable Securities and Other Shares cannot, as a result of the application of Rule 415 or otherwise, be registered for resale as a secondary offering on a single registration statement, the Company agrees to file an amendment to the registration statement as required by the Commission covering the maximum number of Registrable Securities and Other Shares permitted to be registered by the Commission and such shares shall be allocated as follows: (i) first, among all Holders requesting to include Registrable Securities in such registration statement based on the pro rata percentage of Registrable Securities held by such Holders, assuming conversion; (ii) second, to the Other Selling Stockholders; and (iii) third, to the Company, which the Company may allocate, at its discretion, for its own account, or for the account of other holders or employees of the Company.

 

2.3     Company Registration .

 

(a)     Company Registration . If the Company shall determine to register any of its securities either for its own account or the account of a security holder or holders, other than a registration pursuant to Subsections 2.1 and 2.2 , a registration relating solely to employee benefit plans, a registration relating to the offer and sale of debt securities, a registration relating to a corporate reorganization or other Rule 145 transaction, or a registration on any registration form that does not permit secondary sales, the Company will:

 

(i)     promptly give written notice of the proposed registration to all Holders; and

 

 
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(ii)     use its commercially reasonable efforts to include in such registration (and any related qualification under blue sky laws or other compliance), except as set forth in Subsection 2.3(b) below, and in any underwriting involved therein, all of such Registrable Securities as are specified in a written request or requests made by any Holder or Holders received by the Company within ten (10) days after such written notice from the Company is mailed or delivered. Such written request may specify all or a part of a Holder’s Registrable Securities.

 

(b)     Underwriting . If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Subsection 2.3(a)(i) . In such event, the right of any Holder to registration pursuant to this Section 2.3 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company, the Other Selling Stockholders and other holders of securities of the Company with registration rights to participate therein distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected by the Company.

 

Notwithstanding any other provision of this Section 2.3 , if the underwriters advise the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, the underwriters may (subject to the limitations set forth below) exclude all Registrable Securities from, or limit the number of Registrable Securities to be included in, the registration and underwriting. The Company shall so advise all holders of securities requesting registration, and the number of shares of securities that are entitled to be included in the registration and underwriting shall be allocated, as follows: (i) first, to the Company for securities being sold for its own account, (ii) second, to the Holders requesting to include Registrable Securities in such registration statement based on the pro rata percentage of Registrable Securities held by such Holders, assuming conversion and (iii) third, to the Other Selling Stockholders requesting to include Other Shares in such registration statement based on the pro rata percentage of Other Shares held by such Other Selling Stockholders, assuming conversion.

 

If a person who has requested inclusion in such registration as provided above does not agree to the terms of any such underwriting, such person shall also be excluded therefrom by written notice from the Company or the underwriter. The Registrable Securities or other securities so excluded shall also be withdrawn from such registration. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration.

 

 
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(c)     Right to Terminate Registration . The Company shall have the right to terminate or withdraw any registration initiated by it under this Subsection 2.3 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration.

 

2.4     Registration on Form S-3 .

 

(a)     Request for Form S-3 Registration . After its initial public offering, the Company shall use its commercially reasonable efforts to qualify for registration on Form S-3 or any comparable or successor form or forms. After the Company has qualified for the use of Form S-3, in addition to the rights contained in the foregoing provisions of this Section 2 and subject to the conditions set forth in this Subsection 2.4 , if the Company shall receive from a Holder or Holders of Registrable Securities a written request that the Company effect any registration on Form S-3 or any similar short form registration statement with respect to all or part of the Registrable Securities (such request shall state the number of shares of Registrable Securities to be disposed of and the intended methods of disposition of such shares by such Holder or Holders), the Company will take all such action with respect to such Registrable Securities as required by Subsections 2.1 and 2.2 .

 

(b)     Limitations on Form S-3 Registration . The Company shall not be obligated to effect, or take any action to effect, any such registration pursuant to this Subsection 2.4 :

 

(i)     In the circumstances described in either Subsection 2.2(b)(i) , 2.2(b)(ii), 2.2(b)(iii) or 2.2(b)(iv) ;

 

(ii)     If the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) on Form S-3 at an aggregate price to the public of less than $1,000,000; or

 

(iii)     If, in a given twelve-month period, the Company has effected one (1) such registration in such period.

 

(c)     Deferral . The provisions of Subsection 2.2(c) shall apply to any registration pursuant to this Subsection 2.4.

 

(d)     Underwriting . If the Holders of Registrable Securities requesting registration under this Section 2.4 intend to distribute the Registrable Securities covered by their request by means of an underwriting, the provisions of Subsection 2.2(e) shall apply to such registration. Notwithstanding anything contained herein to the contrary, registrations effected pursuant to this Subsection 2.4 shall not be counted as requests for registration or registrations effected pursuant to Subsection 2.2 .

 

 
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     . Notwithstanding any other provision of this Subsection 2.4 , if the Commission informs the Company that all of the Registrable Securities (and Other Shares, if applicable) cannot, as a result of the application of Rule 415 or otherwise, be registered for resale as a secondary offering on a single registration statement, the Company agrees to file an amendment to the registration statement as required by the Commission covering the maximum number of Registrable Securities (and Other Shares, if applicable) permitted to be registered by the Commission and such shares shall be allocated as follows: (i) first, among all Holders requesting to include Registrable Securities in such registration statement based on the pro rata percentage of Registrable Securities held by such Holders, assuming conversion; (ii) second, to the Other Selling Stockholders; and (iii) third, to the Company, which the Company may allocate, at its discretion, for its own account, or for the account of other holders or employees of the Company.

 

2.5     Expenses of Registration . All Registration Expenses incurred in connection with registrations pursuant to this Section 2 shall be borne by the Company; provided , however , that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Subsections 2.2 or 2.4 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered or because a sufficient number of Holders shall have withdrawn so that the minimum offering conditions set forth in Subsection 2.4 are no longer satisfied (in which case all participating Holders shall bear such expenses pro rata among each other based on the number of Registrable Securities requested to be so registered), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to a demand registration pursuant to Subsections 2.2 or 2.4 ; provided , however , in the event that a withdrawal by the Holders is based upon material adverse information relating to the Company that is different from the information known or available (upon request from the Company or otherwise) to the Holders requesting registration at the time of their request for registration under Subsections 2.2 or 2.4 , such registration shall not be treated as a counted registration for purposes of Subsections 2.2 or 2.4 , even though the Holders do not bear the Registration Expenses for such registration. All Selling Expenses relating to securities registered on behalf of the Holders shall be borne by the holders of securities included in such registration pro rata among each other on the basis of the number of Registrable Securities so registered.

 

2.6     Registration Procedures . In the case of each registration effected by the Company pursuant to Section 2, the Company will keep each Holder advised in writing as to the initiation of each registration and as to the completion thereof. At its expense, the Company will use its reasonable best efforts to:

 

(a)     Keep such registration pursuant to Subsections 2.2 , 2.3 and 2.4 effective for a period ending on the earlier of the date which is twelve (12) months from the effective date of the registration statement or such time as the Holder or Holders have completed the distribution described in the registration statement relating thereto;

 

(b)     Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in subsection (a) above;

 

(c)     Furnish such number of prospectuses, including any preliminary prospectuses, and other documents incident thereto, including any amendment of or supplement to the prospectus, as a Holder from time to time may reasonably request;

 

 
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(d)     Use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdiction as shall be reasonably requested by the Holders; provided , that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;

 

(e)     Notify each seller of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in light of the circumstances then existing, and following such notification promptly prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in light of the circumstances then existing;

 

(f)     Provide a transfer agent and registrar for all Registrable Securities registered pursuant to such registration statement and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

 

(g)     Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed; and

 

(h)     In connection with any underwritten offering pursuant to a registration statement filed pursuant to Subsections 2.2 or 2.4 , enter into an underwriting agreement in form reasonably necessary to effect the offer and sale of Common Stock, provided such underwriting agreement contains reasonable and customary provisions, and provided further , that each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

 

 
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2.7     Indemnification .

 

(a)     To the extent permitted by law, the Company will indemnify and hold harmless each Holder, each of its officers, directors and partners, legal counsel and accountants and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification or compliance has been effected pursuant to this Section 2 , and each underwriter, if any, and each person who controls within the meaning of Section 15 of the Securities Act any underwriter, against all expenses, claims, losses, damages and liabilities (or actions, proceedings or settlements in respect thereof) arising out of or based on: (i) any untrue statement (or alleged untrue statement) of a material fact contained or incorporated by reference in any prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance, (ii) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation (or alleged violation) by the Company of the Securities Act, any state securities laws or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any offering covered by such registration, qualification or compliance, and the Company will reimburse each such Holder, each of its officers, directors, partners, legal counsel and accountants and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending or settling any such claim, loss, damage, liability or action; provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability, or action arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by such Holder, any of such Holder’s officers, directors, partners, legal counsel or accountants, any person controlling such Holder, such underwriter or any person who controls any such underwriter, and stated to be specifically for use therein; and provided , further that, the indemnity agreement contained in this Subsection 2.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld).

 

(b)     To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify and hold harmless the Company, each of its directors, officers, partners, legal counsel and accountants and each underwriter, if any, of the Company’s securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, each other such Holder, and each of their officers, directors and partners, and each person controlling each other such Holder, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on: (i) any untrue statement (or alleged untrue statement) of a material fact contained or incorporated by reference in any prospectus, offering circular or other document (including any related registration statement, notification, or the like) incident to any such registration, qualification or compliance, or (ii) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such Holders, directors, officers, partners, legal counsel and accountants, persons, underwriters, or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein; provided , however , that the obligations of such Holder hereunder shall not apply to amounts paid in settlement of any such claims, losses, damages or liabilities (or actions in respect thereof) if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld); and provided that in no event shall any indemnity under this Subsection 2.7 exceed the net proceeds from the offering received by such Holder, except in the case of fraud or willful misconduct by such Holder.

 

 
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(c)     Each party entitled to indemnification under this Subsection 2.7 (the “ Indemnified Party ”) shall give notice to the party required to provide indemnification (the “ Indemnifying Party ”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of such claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such party’s expense; and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 3.6, to the extent such failure is not prejudicial. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom.

 

(d)     If the indemnification provided for in this Subsection 2.7 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage, or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations; provided , however , that no contribution by any Holder, when combined with any amounts paid by such Holder pursuant to Subsection 2.7(b) , shall exceed the net proceeds from the offering received by such Holder (except in the case of fraud or willful misconduct by such Holder); and provided further that in no event shall a Holder’s liability pursuant to this Subsection 2.7(d) , when combined with the amounts paid or payable by such Holder pursuant to Subsection 2.7(b) , exceed the proceeds from the offering received by such Holder (net of any expenses paid by such Holder) (except in the case of fraud or willful misconduct by such Holder). The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. No person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.

 

(e)     Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

 

 
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2.8     Information by Holder . Each Holder of Registrable Securities shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification, or compliance referred to in this Section 2 .

 

2.9     Restrictions on Transfer .

 

(a)     The holder of each certificate representing Registrable Securities by acceptance thereof agrees to comply in all respects with the provisions of this Subsection 2.9 . Each Holder agrees not to make any sale, assignment, transfer, pledge or other disposition of all or any portion of the Restricted Securities, or any beneficial interest therein, unless and until the transferee thereof has agreed in writing for the benefit of the Company to take and hold such Restricted Securities subject to, and to be bound by, the terms and conditions set forth in this Agreement, including, without limitation, this Subsection 2.9 and Subsection 2.11 , and:

 

(i)     There is then in effect a registration statement under the Securities Act covering such proposed disposition and the disposition is made in accordance with the registration statement; or

 

(ii)     The Holder shall have given prior written notice to the Company of the Holder’s intention to make such disposition and shall have furnished the Company with a detailed description of the manner and circumstances of the proposed disposition, and the Holder shall have furnished the Company, at the Holder’s expense, with (i) an opinion of counsel, reasonably satisfactory to the Company, to the effect that such disposition will not require registration of such Restricted Securities under the Securities Act or (ii) a “no action” letter from the Commission to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto, whereupon the holder of such Restricted Securities shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by the Holder to the Company.

 

(b)     Each certificate representing Registrable Securities shall (unless otherwise permitted by the provisions of this Agreement) be stamped or otherwise imprinted with a legend restricting transferability of such Registrable Securities pursuant to the Securities Act and a legend stating that such Registrable Securities are subject to this Agreement, and, as applicable, a legend stating that such Registrable Securities are subject to any other agreements between the Holders and the Company, including any voting agreements or lock-up agreements (in addition to any legend required under applicable state securities laws). The Holders consent to the Company making a notation on its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer established in this Subsection 2.9 .

 

(c)     The first legend referring to federal and state securities laws identified in Subsection 2.9(b) stamped on a certificate evidencing the Restricted Securities and the stock transfer instructions and record notations with respect to the Restricted Securities shall be removed and the Company shall issue a certificate without such legend to the holder of Restricted Securities if (i) those securities are registered under the Securities Act, or (ii) the holder provides the Company with an opinion of counsel reasonably acceptable to the Company to the effect that a sale or transfer of those securities may be made without registration or qualification.

 

 
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2.10     Rule 144 Reporting . With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of the Restricted Securities to the public without registration, the Company agrees to use its commercially reasonable efforts to:

 

(a)     Make and keep adequate current public information with respect to the Company available in accordance with Rule 144 under the Securities Act, at all times from and after the effective date of the first registration under the Securities Act filed by the Company for an offering of its securities to the general public;

 

(b)     File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act at any time after it has become subject to such reporting requirements; and

 

(c)     So long as a Holder owns any Restricted Securities, furnish to the Holder forthwith upon written request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time from and after ninety (90) days following the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration.

 

2.11     Market Stand-Off Agreement . Each Holder other than the New Investor (which is a party to that certain Lock-Up Agreement dated the date hereof) shall not sell or otherwise transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, of any Common Stock (or other securities) of the Company held by such Holder (held immediately prior to the Company’s Initial Public Offering and other than those included in the registration) during the period from the filing of the registration statement for the Company’s Initial Public Offering filed under the Securities Act that includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act through the end of the one hundred and eighty (180) day period following the effective date of the registration statement (or such other period as may be requested by the Company or an underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2241(f) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto), provided that all officers and directors of the Company are bound by and have entered into similar agreements. The foregoing provisions of this Subsection 2.11 shall apply only to the Company’s Initial Public Offering, shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, and shall only be applicable to the Holders if all officers, directors and greater than one percent (1%) stockholders of the Company enter into similar agreements. The obligations described in this Subsection 2.11 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions and may stamp each such certificate with the second legend set forth in Subsection 2.9(b) with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of such one hundred and eighty (180) day (or other) period. Each Holder agrees to execute a market standoff agreement with said underwriters in customary form consistent with the provisions of this Subsection 2.11 .

 

 
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2.12     Delay of Registration . No Holder shall have any right to take any action to restrain, enjoin, or otherwise delay any registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2 .

 

2.13     Transfer or Assignment of Registration Rights . The rights to cause the Company to register securities granted to a Holder by the Company under this Section 2 may be transferred or assigned by a Holder only to a transferee or assignee of not less than [●] shares of Registrable Securities (as presently constituted and subject to subsequent adjustments for stock splits, stock dividends, reverse stock splits, and the like); provided that such transfer or assignment of Registrable Securities is effected in accordance with the terms of Subsection 2.9 , and applicable securities laws, (ii) the Company is given written notice prior to said transfer or assignment, stating the name and address of the transferee or assignee and identifying the securities with respect to which such registration rights are intended to be transferred or assigned and (iii) the transferee or assignee of such rights assumes in writing the obligations of such Holder under this Agreement, including without limitation the obligations set forth in Subsection 2.11 .

 

2.14     Limitations on Subsequent Registration Rights . From and after the date of this Agreement, the Company shall not, without the prior written consent of Holders holding a majority of the Registrable Securities (excluding any of such shares held by any Holders whose rights to request registration or inclusion in any registration pursuant to this Section 2 have terminated in accordance with Subsection 2.15 ), enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights the terms of which are senior to the registration rights granted to the Holders hereunder.

 

2.15     Termination of Registration Rights . The right of any Holder to request registration or inclusion in any registration pursuant to Subsections 2.2 , 2.3 or 2.4 shall terminate on the earlier of (i) such date, on or after the closing of the Company’s first registered public offering of Common Stock, on which all shares of Registrable Securities held or entitled to be held upon conversion by such Holder may immediately be sold under Rule 144 during any ninety (90) day period and (ii) three (3) years after the date the Company’s Common Stock began trading on the Nasdaq Stock Market or the New York Stock Exchange.

 

SECTION 3     

Covenants of the Company

 

The Company hereby covenants and agrees, as follows:

 

3.1     Basic Financial Information; Inspection Rights; Annual Budget .

 

(a)     Basic Financial Information . The Company will furnish the following reports to the New Investor:

 

 
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(i)     As soon as practicable after the end of each fiscal year of the Company, and in any event within twenty (20) business days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its subsidiaries, if any, as at the end of such fiscal year, and consolidated statements of income and cash flows of the Company and its subsidiaries, if any, for such year, prepared in accordance with U.S. generally accepted accounting principles consistently applied, certified by the Chief Financial Officer of the Company; and

 

(ii)     As soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company, and in any event within fifteen (15) business days after the end of the first, second, and third quarterly accounting periods in each fiscal year of the Company, an unaudited consolidated balance sheet of the Company and its subsidiaries, if any, as of the end of each such quarterly period, and unaudited consolidated statements of income and cash flows of the Company and its subsidiaries, if any, for such period, prepared in accordance with U.S. generally accepted accounting principles consistently applied, subject to changes resulting from normal year-end audit adjustments.

 

(b)     Inspection Rights . The Company will afford to the New Investor and to such New Investors’ accountants and counsel, reasonable access during normal business hours to all of the Company’s respective properties, books and records. The New Investor shall have such other access to management and information as is necessary for it to comply with applicable laws and regulations and reporting obligations. The Company shall not be required to disclose details of contracts with or work performed for specific customers and other business partners where to do so would violate confidentiality obligations to those parties. The New Investor may exercise their rights under this Subsection 3.1(b) only for purposes reasonably related to their interests under this Agreement and related agreements. The rights granted pursuant to this Subsection 3.1(b) may not be assigned or otherwise conveyed by the New Investor or by any subsequent transferee of any such rights without the prior written consent of the Company except as authorized in this Subsection 3.1(b) .

 

(c)     Annual Budget . The Company will prepare an annual budget, broken down on a monthly basis, to be reviewed, revised and approved by the board of directors of the New Investor quarterly within fifteen (15) business days of the end of each quarter. The Company shall provide an initial budget for the remainder of the fiscal year ending December 31, 2017 within fifteen (15) business days of closing of the transaction contemplated by the Purchase Agreement. Thereafter, the annual budget shall be provided by the Company within 15 business days following the end of each fiscal year.

 

3.2     Confidentiality . Anything in this Agreement to the contrary notwithstanding, no Holder by reason of this Agreement shall have access to any trade secrets or classified information of the Company. The Company shall not be required to comply with any information rights of Section 3 in respect of any Holder whom the Company reasonably determines to be a competitor or an officer, employee, director or holder of more than ten percent (10%) of a competitor. Each Holder acknowledges that the information received by them pursuant to this Agreement may be confidential and for its use only, and it will not use such confidential information in violation of the Exchange Act or reproduce, disclose or disseminate such information to any other person (other than its employees or agents having a need to know the contents of such information, and its attorneys), except in connection with the exercise of rights under this Agreement, unless the Company has made such information available to the public generally or such Holder is required to disclose such information by a governmental authority.

 

 
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3.3     “Bad Actor” Notice . Each party to this Agreement will promptly notify each other party to this Agreement in writing if it or, to its knowledge, any person specified in Rule 506(d)(1) under the Securities Act becomes subject to any Bad Actor Disqualification.

 

3.4     National Securities Exchange Listing . The Company will use its best efforts to list the Common Stock on The Nasdaq Stock Market or the New York Stock Exchange by March 31, 2018 (the “ Exchange Listing ”).

 

3.5     Termination of Covenants . The covenants set forth in this Section 3 shall terminate and be of no further force and effect after the date on which the Company’s Common Stock began trading on The Nasdaq Stock Market or the New York Stock Exchange.

 

SECTION 4

Protective Provisions

 

4.1     Protective Provisions . The Company shall not, without first obtaining the approval (by vote or written consent as provided by law) of the New Investor:

 

(i)     amend, alter or repeal any provisions of the Certificate of Incorporation or bylaws of the Company;

 

(ii)     increase or decrease the authorized number of shares of Common Stock or Preferred Stock;

 

(iii)     authorize or create (by reclassification or otherwise) any new class or series of equity security having rights, preferences or privileges with respect to dividends, redemption or payments upon liquidation senior to the Common Stock;

 

(iv)     hire, terminate, or change the compensation of the executive officers, including approving any option grants or stock awards to executive officers;

 

(v)     change the principal business of the Company, enter new lines of business, or exit the current line of business;

 

(vi)     sell, assign, license, pledge, or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business;

 

(vii)     enter into any corporate strategic relationship involving the payment, contribution, or assignment by the Company or to the Company of money or assets greater than $500,000;

 

(viii)     engage in a borrowing or expenditure in excess of $500,000;

 

 
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(ix)     approve an equity incentive option with vesting acceleration provisions not already provided for in the Company’s equity incentive plan(s) and standard form of agreements thereunder;

 

(x)     approve an increase in the Company’s stock option pool; or

 

(xi)     authorize a transaction between the Company and its affiliates or their Family Members.

 

Notwithstanding the foregoing, the New Investor shall not have a separate right of consent related to the listing for trading of the Company’s Common Stock on The Nasdaq Stock Market or the New York Stock Exchange.

 

4.2     Termination of Protective Provisions . The protective provisions set forth in this Section 4 shall terminate and be of no further force and effect from and after the date on which the Company’s Common Stock began trading on The Nasdaq Stock Market or the New York Stock Exchange.

 

SECTION 5     

Miscellaneous

 

5.1     Amendment . Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument referencing this Agreement and signed by the Company, the New Investor and the Holders holding a majority of the Registrable Securities (excluding any of such shares that have been sold to the public or pursuant to Rule 144, and excluding, with respect to Section 2 (other than Subsections 2.9 , 2.10 and 2.11 ), any of such shares held by any Holders whose rights to request registration or inclusion in any registration pursuant to Section 2 have terminated in accordance with Subsection 2.15 ). Any such amendment, waiver, discharge or termination effected in accordance with this paragraph shall be binding upon each Holder and each future holder of all such securities of Holder. Each Holder acknowledges that by the operation of this paragraph, the New Investor and the holders of a majority of the Registrable Securities (excluding any of such shares that have been sold to the public or pursuant to Rule 144, and excluding, with respect to Section 2 (other than Subsection 2.9 , 2.10 and 2.11 ), any of such shares held by any Holders whose rights to request registration or inclusion in any registration pursuant to Section 2 have terminated in accordance with Subsection 2.15 ) will have the right and power to diminish or eliminate all rights of such Holder under this Agreement.

 

5.2     Notices . All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail (if to an Investor or Holder) or otherwise delivered by hand, messenger or courier service addressed:

 

(a)     if to any Holder, to such address, facsimile number or electronic mail address as shown in the Company’s records, or, until any such Holder so furnishes an address, facsimile number or electronic mail address to the Company, then to the address, facsimile number or electronic mail address of the last holder of such shares for which the Company has contact information in its records; or

 

 
19

 

 

(b)     if to the Company, to the attention of the Chief Executive Officer or Chief Financial Officer of the Company at MoviePass Inc., 175 Varick Street, Suite 604, New York, NY 10012, or at such other current address as the Company shall have furnished to the Investors or other such holders, with a copy (which shall not constitute notice) 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.

 

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one business day after deposit with the courier), or (ii) if sent via mail, at the earlier of its receipt or five days after the same has been deposited in a regularly-maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile, upon confirmation of facsimile transfer or, if sent via electronic mail, upon confirmation of delivery when directed to the relevant electronic mail address, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day. In the event of any conflict between the Company’s books and records and this Agreement or any notice delivered hereunder, the Company’s books and records will control absent fraud or error.

 

Subject to the limitations set forth in Delaware General Corporation Law §232(e), each Investor and Holder consents to the delivery of any notice to stockholders given by the Company under the Delaware General Corporation Law or the Company’s certificate of incorporation or bylaws by (i) facsimile telecommunication to the facsimile number set forth on Exhibit A (or to any other facsimile number for the Investor or Holder in the Company’s records), (ii) electronic mail to the electronic mail address set forth on Exhibit A (or to any other electronic mail address for the Investor or Holder in the Company’s records), (iii) posting on an electronic network together with separate notice to the Investor or Holder of such specific posting or (iv) any other form of electronic transmission (as defined in the Delaware General Corporation Law) directed to the Investor or Holder. This consent may be revoked by an Investor or Holder by written notice to the Company and may be deemed revoked in the circumstances specified in Delaware General Corporation Law §232.

 

5.3     Governing Law . This Agreement shall be governed in all respects by the internal laws of the State of Delaware as applied to agreements entered into among Delaware residents to be performed entirely within Delaware, without regard to principles of conflicts of law.

 

5.4     Successors and Assigns . This Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred, delegated or sublicensed by any Investor without the prior written consent of the Company. Any attempt by an Investor without such permission to assign, transfer, delegate or sublicense any rights, duties or obligations that arise under this Agreement shall be void. Subject to the foregoing and except as otherwise provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

 

5.5     Entire Agreement . This Agreement and the exhibits hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof. No party hereto shall be liable or bound to any other party in any manner with regard to the subjects hereof or thereof by any warranties, representations or covenants except as specifically set forth herein.

 

 
20

 

 

5.6     Delays or Omissions . Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party to this Agreement upon any breach or default of any other party under this Agreement shall impair any such right, power or remedy of such non-defaulting party, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party to this Agreement, shall be cumulative and not alternative.

 

5.7     Severability . If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Agreement, and such court will replace such illegal, void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision. The balance of this Agreement shall be enforceable in accordance with its terms.

 

5.8     Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs and exhibits shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits attached hereto.

 

5.9     Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties that execute such counterparts, and all of which together shall constitute one instrument.

 

5.10     Telecopy Execution and Delivery . A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more parties hereto and delivered by such party by facsimile or any similar electronic transmission device pursuant to which the signature of or on behalf of such party can be seen. Such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any party hereto, all parties hereto agree to execute and deliver an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.

 

5.11     Jurisdiction; Venue . Each of the parties hereto hereby submits and consents irrevocably to the exclusive jurisdiction of the courts of the State of Delaware and the United States District Court for the District of Delaware for the interpretation and enforcement of the provisions of this Agreement. Each of the parties hereto also agrees that the jurisdiction over the person of such parties and the subject matter of such dispute shall be effected by the mailing of process or other papers in connection with any such action in the manner provided for in Subsection 5.2 or in such other manner as may be lawful, and that service in such manner shall constitute valid and sufficient service of process.

 

 
21

 

 

5.12     Further Assurances . Each party hereto agrees to execute and deliver, by the proper exercise of its corporate, limited liability company, partnership or other powers, all such other and additional instruments and documents and do all such other acts and things as may be necessary to more fully effectuate this Agreement.

 

5.13     Termination Upon Change of Control . Notwithstanding anything to the contrary herein, this Agreement (excluding any then-existing obligations and excluding the New Investor’s rights under Subsections 2.1 and 2.4 , which shall survive) shall terminate upon (a) the acquisition of the Company by another entity by means of any transaction or series of related transactions to which the Company is party (including, without limitation, any stock acquisition, reorganization, merger or consolidation but excluding any sale of stock for capital raising purposes) other than a transaction or series of transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction continue to retain (either by such voting securities remaining outstanding or by such voting securities being converted into voting securities of the surviving entity), as a result of shares in the Company held by such holders prior to such transaction, at least fifty percent (50%) of the total voting power represented by the voting securities of the Corporation or such surviving entity outstanding immediately after such transaction or series of transactions; or (b) a sale, lease or other conveyance of all substantially all of the assets of the Company.

 

5.14     Conflict . In the event of any conflict between the terms of this Agreement and the Company’s certificate of incorporation or its bylaws, the terms of the Company’s certificate of incorporation or its bylaws, as the case may be, will control.

 

5.15     Attorneys’ Fees . In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

 

5.16     Aggregation of Stock . All securities held or acquired by affiliated entities (including affiliated venture capital funds) or persons shall be aggregated together for purposes of determining the availability of any rights under this Agreement.

 

5.17     Jury Trial . EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING (WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATED TO THIS AGREEMENT . If the waiver of jury trial set forth in this section is not enforceable, then any claim or cause of action arising out of or relating to this Agreement shall be settled by judicial reference pursuant to Delaware Rules of Civil Procedure before a referee sitting without a jury, such referee to be mutually acceptable to the parties or, if no agreement is reached, by a referee appointed by the Presiding Judge of the Delaware Court of Chancery for New Castle County. This paragraph shall not restrict a party from exercising remedies under the Uniform Commercial Code or from exercising pre-judgment remedies under applicable law.

 

( signature page follows )

 

 
22

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

MOVIEPASS INC.

 

 

a Delaware corporation

 

 

 

 

 

  By:    
       
       
  Name:    
       
       
  Title:    
       

 

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

HELIOS AND MATHESON ANALYTICS INC.

 

 

   
   
  ( Signature )
   
   
   
  ( Print name of signatory, if signing for an entity )

 

 

   
   
   
  ( Print title of signatory, if signing for an entity )
   
   
   
  Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

 

 

CHRISTOPHER KELLY

 

 

   
   

 

( Signature )

   
   
   
  Address:
  66 Acacia Drive
  Atherton, CA 94027

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

AIDAN KELLY HERITAGE TRUST

 

 

 

 

   
  ( Signature )
   
   
   
  ( Print name of signatory, if signing for an entity )
   
   
   
   
  ( Print title of signatory, if signing for an entity )
   
   
   
  Address:

 

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

AUGUST KELLY HERITAGE TRUST

   
  ( Signature )
   
   
   
  ( Print name of signatory, if signing for an entity )
   
   
   
   
  ( Print title of signatory, if signing for an entity )
   
   
   
  Address:

 

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

STRUCTURE CAPITAL LP

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

Mike Walsh

 

( Print name of signatory, if signing for an entity )

 

 

   
   
  General Partner
  ( Print title of signatory, if signing for an entity )
   
   
  Address:
  418 Connecticut Street
  San Francisco, CA 94107

 

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

TRUE VENTURES II, LP

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

 

 

( Print name of signatory, if signing for an entity )

 

 

 

 

 

 

 

 

 

 

  ( Print title of signatory, if signing for an entity )
   
   
   
  Address:
  530 Lytton Avenue
  Suite 303
  Palo Alto, CA 94301

 

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

2005 MICHAEL MCGINLEY AND SARA PRATTER LIVING TRUST

 

 

 

 

 

 

 

( Print investor name )

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

 

 

( Print name of signatory, if signing for an entity )

 

 

 

 

   

 

 

 

( Print title of signatory, if signing for an entity )

 

 

   
   
  Address:

 

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

BRADLEY ZIONS

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

RICHARD GOLDBERG

 

 

   

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

 

 

Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

LAURA GOLDBERG AND SASCHA BIGLER

 

 

 

 

 

 

 

Laura Goldberg

 

 

 

 

 

 

 

Sascha Bigler

 

 

   
   
  Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

HENRY GOLDBERG

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

MATTHEW HANOVER

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

CHRISTOPHER HAYES

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

BILL DELANEY

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

DAVID MACKAY

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

STU POLLARD

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

RN DEPENDANTS TRUST

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

 

 

( Print name of signatory )

 

 

 

 

 

 

 

 

 

( Print title of signatory )

 

 

 

 

 

 

 

Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

SEAN RILEY

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

 

 

Address:

  6829 Andover Lane
  Los Angeles, CA 90045

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

DEMAREST FILMS, LLC

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

 

 

( Print name of signatory )

 

 

 

 

 

 

 

 

 

( Print title of signatory )

 

 

 

 

 

 

 

Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

MATTHEW ZINN

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

 

 

 

 

 

 

Address:

 

1335 Ranchita Drive

 

Los Altos, CA 94024

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

LARRY N. CHAPMAN

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

 

 

 

 

 

 

Address:

 

3301 Via Palomino

 

Palos Verdes Estates, CA 90274

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

HUGH PANERO

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

 

 

 

 

 

 

Address:

 

4609 DeRussey Parkway

 

Chevy Chase, MD 20815

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

THE JAMES B. RAMO 1979 REVOCABLE TRUST

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

James Ramo

 

( Print name of signatory, if signing for an entity )

 

 

 

 

 

Trustee

 

( Print title of signatory, if signing for an entity )

 

 

   
  Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

KEVIN BYERS AND SARAH L. COOK

 

 

 

 

 

 

 

 

 

Kevin Byers

 

 

 

 

 

 

 

 

 

Sarah L. Cook

 

 

 

 

 

 

 

Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

GARY P. LINDE

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

 

 

Address:

 

4435 15th Street N.

 

Arlington, VA 22207

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

JAMES LEFKOWITZ

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

 

 

Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

MARK RABINOWITZ

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

 

 

Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

MARK KOLOKOTRONES

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

 

 

Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

WS INVESTMENT COMPANY, LLC (2013A)

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

( Print name of signatory )

 

 

 

 

 

 

 

( Print title of signatory )

 

 

   
   

 

Address:

  650 Page Mill Road
  Palo Alto, CA 94304

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

CHIP SEELIG

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

Address:

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

AOL VENTURES I, LLC

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

( Print name of signatory )

 

 

 

 

 

 

 

( Print title of signatory )

 

 

   
  Address:
  22000 AOL Way
  Dulles, VA 20166

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated in the introductory clause.

 

 

INVESTOR

 

 

 

 

 

 

 

( Print investor name )

 

 

 

 

 

 

 

 

 

( Signature )

 

 

 

 

 

 

 

 

 

( Print name of signatory, if signing for an entity )

 

 

 

 

 

 

 

 

 

( Print title of signatory, if signing for an entity )

 

 

(Signature page to the Investors’ Rights Agreement)

 

 
 

 

 

EXHIBIT A

PRIOR INVESTORS

 

AOL Ventures I, LLC

22000 AOL Way

Dulles, VA 20166

Attn: Joanne M. Kelly

Email: joanne.kelly@teamaol.com

 

Address for copy of notice for AOL Ventures:

Arnold & Porter, LLP

555 Twelfth Street, N.W.

Washington, DC 20005

Attention: Paul Freshour

Facsimile: (202) 942-5999

Email: Paul.Freshour@aporter.com

 

Newport Coast Investments, LLC

32 Blue Heron

Irvine, CA 92603

Attn: Ryan Steelberg

Email: ryan@steelberg.com

 

Brian Lee

2501 Colorado Avenue Suite 325

Santa Monica, CA 90404

Email: blee@legalzoom.com

 

Diego Berdakin

465 South Sherbourne Drive

Los Angeles, CA 90048

Email: diego.berdakin@gmail.com

 

Robert Fernandez

835 Dolington Road

Newtown, PA 18950

Email: fernandez@moxiepictures.com

 

Sally Coonan

216 East 7th St, Apt. 6

New York, NY 10009

Email: sally@moxiepictures.com

 

 

Exhibit A

 

 
 

 

 

MJ Eng

3414 South Bentley Avenue

Los Angeles, CA 90034

Email: mj@shoedazzle.com

 

Lambert Media Group

100 North Crescent Drive

Suite 250

Beverly Hills, CA 90210

Attention: Sam Engelbert

Email: sam@lambertmediagroup.com

 

WS Investment Company LLC (2011A)

650 Page Mill Road

Palo Alto, CA 94304

 

Adam Liling

4514 Jasmine Ave

Culver City, CA 90232

Email: Adam@Lilling.com

 

True Ventures

Attn: Jim Stewart

530 Lytton Ave, Suite 303

Palo Alto, CA 94301

Email: jim@trueventures.com

 

WME Investments, LLC

℅ WME

9601 Wilshire Blvd.

Beverly Hills, CA 90212

 

With a copy to :

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, NY 10019-6064

Attn: Justin Hamill

 

NALA Investments, LLC

Attn: Emilio Diez Barroso

2016 Broadway St.

Santa Monica, CA 90404

 

True Ventures II, L.P.

530 Lytton Avenue

Suite 303

Palo Alto, CA 94301

Attn: Jim Stewart

Fax: (415) 449-3486

Email: jim@trueventures.com

 

 

Exhibit A

 

 
 

 

 

Bradley Zions

8818 Pinto Place

Los Angeles, CA 90069

BradZions@aol.com

 

Richard Goldberg

2029 6th Street

Santa Monica, CA 90405

 

Laura Goldberg and Sascha Bigler

6406 Ivarene Avenue

Los Angeles, CA 90068

ointment@earthlink.net

 

Henry Goldberg

1229 19th Street, NW

Washington, DC 20036

 

Matthew Hanover

1250 Amherst Avenue #206

Los Angeles, CA 90025

310-773-0767 phone

310-997-3612 fax

matthanover@gmail.com

 

Christopher Hayes

630 Oakley Place

Alexandria, VA 22302

 

Bill Delaney

5130 N. 15th Street

Arlington, VA 22205

 

David Mackay

1948 N. Van Ness Avenue

Los Angeles, CA 90068

 

Stu Pollard

1158 26th Street #429

Santa Monica, CA 90403

 

Pentera Trustees Limited as Trustee of

The RN Dependants Trust

Pentera Chambers

P.O. Box 79

Century Buildings, Patriotic Place

St. Helier, Jersey JE4 8PS

 

Exhibit A

 

 
 

 

 

Sean Riley

6829 Andover Lane

Los Angeles, CA 90045

Riley.sean@yahoo.com

 

Demarest Films, LLC

11401 Chalon Road

Los Angeles, CA 90049

 

Matthew Zinn

1335 Ranchita Drive

Los Altos, CA 94024

mattz@tivo.com

 

Larry N. Chapman

3301 Via Palomino

Palos Verdes Estates, CA 90274

 

The James B. Ramo 1979 Revocable Trusto

27044 Malibu Cove Colony Drive

Malibu, CA 90265

 

Kevin Byers and Sarah L. Cook

567 Oakdale Road

Atlanta, GA 30307

 

WS Investment Company, LLC (2013A)

650 Page Mill Road

Palo Alto, CA 94304

 

Gary P. Linde

4435 15th Street N.

Arlington, VA 22207

 

Hugh Panero

4609 DeRussey Parkway

Chevy Chase, MD 20815

 

Hugh Panero

4609 DeRussey Parkway

Chevy Chase, MD 20815

 

2005 Michael McGinley and Sara Pratter Living Trust

 

James Lefkowitz

 

Mark Rabinowitz

 

Mark Kolokotrones

 

Exhibit A

 

 
 

 

 

Chip Seelig

 

 

 

Exhibit A

 

 

 

Exhibit 10.2

 

 

 

 

 

 

MOVIEPASS INC.

 

VOTING AGREEMENT

 

 

Closing: [●], 2017

 

 

 

 

 

 

 
 

 

 

TABLE OF CONTENTS

 

Page

 

1.

Voting Provisions Regarding Board of Directors  

1
     
 

1.1

Size of the Board

1

 

1.2

Board Composition

2

 

1.3

Failure to Designate a Board Member

2

 

1.4

Change in Designees

3

 

1.5

No Liability for Election of Recommended Directors

3

 

1.6

No “Bad Actor” Designees

3

     

2.

Remedies  

3

   

 

2.1

Covenants of the Company

3

 

2.2

Irrevocable Proxy and Power of Attorney

4

 

2.3

Specific Enforcement

4

 

2.4

Remedies Cumulative

4

     

3.

Intentionally omitted.  

4

   

4.

Term  

4

   

5.

Miscellaneous  

5

   

 

5.1

Additional Parties

5

 

5.2

Transfers

5

 

5.3

Successors and Assigns

5

 

5.4

Applicable Law; Dispute Resolution

6

 

5.5

WAIVER OF JURY TRIAL

6

 

5.6

Counterparts

6

 

5.7

Titles and Subtitles

6

 

5.8

Notices

7

 

5.9

Consent Required to Amend, Terminate or Waive

7

 

5.10

Delays or Omissions

8

 

5.11

Severability

8

 

5.12

Entire Agreement

8

 

5.13

Share Certificate Legend

9

 

5.14

Stock Splits, Stock Dividends, etc.

9

 

5.15

Manner of Voting

9

 

5.16

Further Assurances

9

 

5.17

Attorney’s Fees

9

 

5.18

Not a Voting Trust

9

 

Schedule A

-

Key Holders

 

Exhibit A - Adoption Agreement

 

 

 

 

VOTING AGREEMENT

 

THIS VOTING AGREEMENT (this “ Agreement ”), is made and entered into as of this [__] day of _____, 2017, by and among MoviePass Inc., a Delaware corporation (the “ Company ”), Helios and Matheson Analytics Inc., a Delaware corporation (“ Helios ”), and those stockholders of the Company listed on Schedule A attached hereto (together with any subsequent stockholders, or any transferees, who become parties hereto as “Key Holders” pursuant to Subsection 5.1 below, the “ Key Holders ,” and together collectively with Helios, the “ Stockholders ”).

 

RECITALS

 

A.      Concurrently with the execution of this Agreement, the Company and Helios are closing (the “ Closing ”) the transactions contemplated by that certain Securities Purchase Agreement, dated as of [__], 2017 (the “ Purchase Agreement ”), by and between the Company and Helios, providing for the sale of shares of the Company’s common stock (the “ Common Stock ”), and in connection with that Purchase Agreement the parties desire to provide Helios and certain other Stockholders with the right, among other rights, to designate the election of certain members of the board of directors of the Company (the “ Board ”) in accordance with the terms of this Agreement.

 

B.       Prior to the date hereof, the Company and certain stockholders were a party to that certain Amended and Restated Voting Agreement, dated June 24, 2014, which has been terminated pursuant to Subsection 5.1 therein as a result of the conversion of all outstanding shares of the Company’s preferred stock into Common Stock at the Closing.

 

NOW, THEREFORE, the parties agree as follows:

 

1.         Voting Provisions Regarding Board of Directors .

 

1.1      Size of the Board . Each Stockholder agrees to vote, or cause to be voted, all Shares (as defined below) owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that the size of the Board shall be set and remain at five (5) directors and may be increased only with the written consent of Helios. For purposes of this Agreement, the term “ Shares ” shall mean and include any securities of the Company that entitle the holders of which to vote for members of the Board, including without limitation, all shares of Common Stock, by whatever name called, now owned or subsequently acquired by a Stockholder, however acquired, whether through stock splits, stock dividends, reclassifications, recapitalizations, similar events or otherwise.

 

 

 
 

 

 

1.2      Board Composition . Each Stockholder agrees to vote, or cause to be voted, all Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that at each annual or special meeting of stockholders at which an election of directors is held or pursuant to any written consent of the stockholders, the following persons shall be elected to the Board:

 

(a)     Three (3) persons shall be designated by the Chief Executive Officer of the Company (the “ Company Designees ”), which individuals shall initially be Mitch Lowe, [_____________] and [_____________]. The parties agree that two (2) of the Company Designees shall each qualify as an “ Independent Director ,” within the meaning of the director independence rules of the NASDAQ Stock Market LLC (“ NASDAQ ”) or the New York Stock Exchange (“ NYSE ”), as applicable, by the then current Board, acting in good faith. If, at any time during the term of this Agreement, the Board determines that one or more of the Company Designees is not an Independent Director, then the Chief Executive Officer of the Company shall promptly cause any Company Designee who is not an Independent Director to be removed and replaced in accordance with Subsection 1.4 to comply with this Subsection 1.2(a) .

 

(b)     Two (2) persons shall be designated by the Chief Executive Officer of Helios (the “ Helios Designee ” and together with the Company Designees, the “ Designees ”), which individuals shall initially be [_____________] and [_____________]. The parties agree that at least one (1) of the Helios Designees shall qualify as an Independent Director,” as determined by the then current Board, acting in good faith. If, at any time during the term of this Agreement, the Board determines that one or more of the Helios Designees is not an Independent Director, then the Chief Executive Officer of Helios shall promptly cause a Helios Designee to be removed and replaced in accordance with Subsection 1.4 to comply with this Subsection 1.2(b) .

 

To the extent that any of clauses (a) and (b) above shall not be applicable, any member of the Board who would otherwise have been designated in accordance with the terms thereof shall instead be voted upon by all the stockholders of the Company entitled to vote thereon in accordance with, and pursuant to, the Company’s Amended and Restated Certificate of Incorporation in effect as of the date hereof (the “ Restated Certificate ”) and the Delaware General Corporation Law, as applicable. In addition, to the extent the staff of NASDAQ or NYSE, as applicable, inform the Company in writing that the designation rights set forth in this Subsection 1.2 must be eliminated or limited, then Subsection 5.11. “Severability” shall govern.

 

For purposes of this Agreement, an individual, firm, corporation, partnership, association, limited liability company, trust or any other entity (collectively, a “ Person ”) shall be deemed an “Affiliate” of another Person who, directly or indirectly, controls, is controlled by or is under common control with such Person, including, without limitation, any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

 

1.3      Failure to Designate a Board Member . In the absence of any designation from the Persons or groups with the right to designate a director as specified above, the director previously designated by them and then serving shall be reelected if still eligible to serve as provided herein.

 

 

 
2

 

 

1.4      Change in Designees . From time to time during the term of this Agreement, the Person entitled to select a Designee pursuant to this Agreement may, in its sole discretion:

 

(a)     notify the Company in writing of an intention to remove from the Board any incumbent Designee who occupies a Board seat for which such Person is entitled to designate a Designee; or

 

(b)     notify the Company in writing of an intention to select a new Designee for election to a Board seat for which such Person is entitled to designate a Designee (whether to replace a prior Designee or to fill a vacancy in such Board seat).

 

In the event of such an initiation of a removal or selection of a Designee under this Subsection 1.4 , the Company shall take such reasonable actions as are necessary to facilitate such removals or elections, including, without limitation, soliciting the votes of the appropriate stockholders, and the Stockholders shall vote their Shares to cause: (a) the removal from the Company’s Board of the Designee or Designees so designated for removal and (b) the election to the Company’s Board of any new Designee or Designees so designated.

 

1.5      No Liability for Election of Recommended Directors . No Stockholder, nor any Affiliate of any Stockholder, shall have any liability as a result of designating a Designee for election as a director for any act or omission by such Designee in his or her capacity as a director of the Company, nor shall any Stockholder have any liability as a result of voting for any such Designee in accordance with the provisions of this Agreement.

 

1.6      No “Bad Actor” Designees . Each Person with the right to designate or participate in the designation of a director as specified above hereby represents and warrants to the Company that, to such Person’s knowledge, none of the “bad actor” disqualifying events described in Rule 506(d)(1)(i)-(viii) promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”) (each, a “ Disqualification Event ”), is applicable to such Person’s initial designee named above except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. Any director designee to whom any Disqualification Event is applicable, except for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable, is hereinafter referred to as a “ Disqualified Designee ”. Each Person with the right to designate or participate in the designation of a director as specified above hereby covenants and agrees (A) not to designate or participate in the designation of any director designee who, to such Person’s knowledge, is a Disqualified Designee and (B) that in the event such Person becomes aware that any individual previously designated by any such Person is or has become a Disqualified Designee, such Person shall as promptly as practicable take such actions as are necessary to remove such Disqualified Designee from the Board and designate a replacement designee who is not a Disqualified Designee. Each Designee, prior to appointment, shall complete such documentation as the Company requires to determine whether such Designee is a “bad actor.”

 

2.         Remedies .

 

2.1      Covenants of the Company . Each party to this Agreement agrees to use its best efforts, within the requirements of applicable law, to ensure that the rights granted under this Agreement are effective and that the parties enjoy the benefits of this Agreement. Such actions include, without limitation, the use of such party’s best efforts to cause the nomination and election of the directors as provided in this Agreement.

 

 

 
3

 

 

2.2      Irrevocable Proxy and Power of Attorney . Each party to this Agreement hereby constitutes and appoints as the proxies of the party and hereby grants a power of attorney to the Chief Executive Officer of the Company, and the Chief Executive Officer of Helios, and each of them, with full power of substitution, with respect to the matters set forth herein, including, without limitation, election of persons as members of the Board in accordance with Section 1 hereto and hereby authorizes each of them to represent and vote, if and only if the party (i) fails to vote, or (ii) attempts to vote (whether by proxy, in person or by written consent), in a manner which is inconsistent with the terms of this Agreement, all of such party’s Shares in favor of the election of persons as members of the Board determined pursuant to and in accordance with the terms and provisions of this Agreement. Each of the proxy and power of attorney granted pursuant to the immediately preceding sentence is given in consideration of the agreements and covenants of the Company and the parties in connection with the transactions contemplated by this Agreement and, as such, each is coupled with an interest and shall be irrevocable unless and until this Agreement terminates or expires pursuant to Section 4 hereof. Each party hereto hereby revokes any and all previous proxies or powers of attorney with respect to the Shares and shall not hereafter, unless and until this Agreement terminates or expires pursuant to Section 4 hereof, purport to grant any other proxy or power of attorney with respect to any of the Shares, deposit any of the Shares into a voting trust or enter into any agreement (other than this Agreement), arrangement or understanding with any person, directly or indirectly, to vote, grant any proxy or give instructions with respect to the voting of any of the Shares, in each case, with respect to any of the matters set forth herein.

 

2.3      Specific Enforcement . Each party acknowledges and agrees that each party hereto will be irreparably damaged in the event any of the provisions of this Agreement are not performed by the parties in accordance with their specific terms or are otherwise breached. Accordingly, it is agreed that each of the Company and the Stockholders shall be entitled to an injunction to prevent breaches of this Agreement, and to specific enforcement of this Agreement and its terms and provisions in any action instituted in any court of the United States or any state having subject matter jurisdiction.

 

2.4      Remedies Cumulative . All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

3.        Intentionally omitted.

 

4.         Term . This Agreement shall be effective as of the date hereof and shall continue in effect until and shall terminate upon the earliest to occur of (a) eighteen (18) months after the date on which shares of Common Stock began trading on NASDAQ or NYSE; (b) such date when Helios no longer beneficially owns at least 25% of the number of shares of Common Stock purchased pursuant to the Purchase Agreement; (c) termination of this Agreement in accordance with Subsection 5.9 below; and (d) a Liquidation Event (as hereinafter defined. For purposes of this Agreement, a “ Liquidation Event ” means (i) the acquisition of the Company by another entity by means of any transaction or series of related transactions to which the Company is a party (including, without limitation, any stock acquisition, reorganization, merger or consolidation but excluding any sale of stock for capital raising purposes) other than a transaction or series of transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction retain, immediately after such transaction, at least a majority of the total voting power represented by the outstanding voting securities of the Company or such other surviving or resulting entity (or if the Company or such other surviving or resulting entity is a wholly-owned subsidiary immediately following such acquisition, its parent); (ii) a sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company and its subsidiaries taken as a whole by means of any transaction or series of related transactions, except where such sale, lease or other disposition is to a wholly-owned subsidiary of the Company; or (iii) any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary.

 

 

 
4

 

 

5.         Miscellaneous .

 

5.1      Additional Parties . In the event that after the date of this Agreement, the Company enters into an agreement with any Person to issue such Person shares of Common Stock constituting five percent (5%) or more of the Company’s then outstanding capital stock, then, the Company shall cause such Person, as a condition precedent to entering into such agreement, to become a party to this Agreement by executing an Adoption Agreement in the form attached hereto as Exhibit A , agreeing to be bound by and subject to the terms of this Agreement as a Stockholder and thereafter such person shall be deemed a Stockholder for all purposes under this Agreement.

 

5.2      Transfers . Each transferee or assignee of any Shares subject to this Agreement shall continue to be subject to the terms hereof, and, as a condition precedent to the Company’s recognizing such transfer, each transferee or assignee shall agree in writing to be subject to each of the terms of this Agreement by executing and delivering an Adoption Agreement substantially in the form attached hereto as Exhibit A . Upon the execution and delivery of an Adoption Agreement by any transferee, such transferee shall be deemed to be a party hereto as if such transferee were the transferor and such transferee’s signature appeared on the signature pages of this Agreement and shall be deemed to be a Stockholder. The Company shall not permit the transfer of the Shares subject to this Agreement on its books or issue a new certificate representing any such Shares unless and until such transferee shall have complied with the terms of this Subsection 5.2 . Each certificate instrument, or book entry representing the Shares subject to this Agreement if issued on or after the date of this Agreement shall be notated by the Company with the legend set forth in Subsection 5.13 .

 

5.3      Successors and Assigns . This Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred, delegated or sublicensed by any Stockholder without the prior written consent of the Company and Helios. Any attempt by a Stockholder without such permission to assign, transfer, delegate or sublicense any rights, duties or obligations that arise under this Agreement shall be void. Subject to the foregoing and except as otherwise provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

 

 

 
5

 

 

5.4      Applicable Law; Dispute Resolution . This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware without regard to principles of conflict of laws. The parties agree that irreparable damage would occur in the event any of the provisions of this Agreement were not performed in accordance with the terms hereof and that such damage would not be adequately compensable in monetary damages. Accordingly, the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement, to enforce specifically the terms and provisions of this Agreement exclusively in the Court of Chancery or other federal or state courts of the State of Delaware, in addition to any other remedies at law or in equity, and each party agrees it will not take any action, directly or indirectly, in opposition to another party seeking relief. Each of the parties hereto agrees to waive any bonding requirement under any applicable law, in the case any other party seeks to enforce the terms by way of equitable relief. Furthermore, each of the parties hereto (a) consents to submit itself to the exclusive personal jurisdiction of the Court of Chancery or, to the extent that the Delaware Court of Chancery declines to exercise jurisdiction over the matter, other federal or state courts of the State of Delaware in the event any dispute arises out of this Agreement or the transactions contemplated by this Agreement, (b) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (c) agrees that it shall not bring any action relating to this Agreement or the transactions contemplated by this Agreement in any court other than the Court of Chancery or, to the extent that the Delaware Court of Chancery declines to exercise jurisdiction over the matter, other federal or state courts of the State of Delaware, and (d) each of the parties irrevocably consents to service of process by a reputable overnight mail delivery service, signature requested, to the address set forth below the signature of such party or to such address as subsequently modified by written notice given in accordance with Subsection 5.8 .

 

5.5      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.

 

5.6      Counterparts . This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g. , www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

5.7      Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs, exhibits and schedules shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto.

 

 

 
6

 

 

5.8      Notices . All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail (if to a Stockholder) or otherwise delivered by hand, messenger or courier service addressed:

 

(a)     if to a Stockholder, to the Stockholder’s address, facsimile number or electronic mail address as shown on the signature page hereto or in the Company’s records, as may be updated in accordance with the provisions hereof;

 

(b)     if to the Company, to the attention of the Chief Executive Officer or Chief Financial Officer of the Company at MoviePass Inc., 175 Varick Street, Suite 604, New York, NY 10012, or at such other current address as the Company shall have furnished to the Stockholders, with a copy (which shall not constitute notice) 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.

 

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one business day after deposit with the courier), or (ii) if sent via mail, at the earlier of its receipt or five days after the same has been deposited in a regularly-maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile, upon confirmation of facsimile transfer or, if sent via electronic mail, upon confirmation of delivery when directed to the relevant electronic mail address, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day. In the event of any conflict between the Company’s books and records and this Agreement or any notice delivered hereunder, the Company’s books and records will control absent fraud or error.

 

Subject to the limitations set forth in Delaware General Corporation Law §232(e), each Stockholder consents to the delivery of any notice to stockholders given by the Company under the Delaware General Corporation Law or the Restated Certificate or the Company’s bylaws by (i) facsimile telecommunication to the facsimile number for the Stockholder in the Company’s records, (ii) electronic mail to the electronic mail address for the Stockholder in the Company’s records), (iii) posting on an electronic network together with separate notice to the Stockholder of such specific posting or (iv) any other form of electronic transmission (as defined in the Delaware General Corporation Law) directed to the Stockholder. This consent may be revoked by a Stockholder by written notice to the Company and may be deemed revoked in the circumstances specified in Delaware General Corporation Law §232.

 

5.9      Consent Required to Amend, Terminate or Waive . This Agreement may be amended or terminated and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument executed by (a) the Company; (b) the Key Holders holding a majority of the Common Stock held by all Key Holders; and (c) Helios. Notwithstanding the foregoing:

 

(a)     the consent of the Key Holders shall not be required for any amendment or waiver if such amendment or waiver either (A) is not directly applicable to the rights of the Key Holders hereunder; or (B) does not adversely affect the rights of the Key Holders in a manner that is different than the effect on the rights of the other parties hereto; and

 

 

 
7

 

 

(b)     any provision hereof may be waived by the waiving party on such party’s own behalf, without the consent of any other party.

 

The Company shall give prompt written notice of any amendment, termination, or waiver hereunder to any party that did not consent in writing thereto. Any amendment, termination, or waiver effected in accordance with this Subsection 5.9 shall be binding on each party and all of such party’s successors and permitted assigns, whether or not any such party, successor or assignee entered into or approved such amendment, termination or waiver. For purposes of this Subsection 5.9 , the requirement of a written instrument may be satisfied in the form of an action by written consent of the Stockholders circulated by the Company and executed by the Stockholder parties specified, whether or not such action by written consent makes explicit reference to the terms of this Agreement.

 

5.10      Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default previously or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

5.11      Severability . The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, including, without limitation, as a result of any rules and regulations of the U.S. Securities and Exchange Commission, NASDAQ or NYSE then applicable to the Company, the parties will substitute for any invalid, illegal or unenforceable provision a suitable and equitable provision that carries out, so far as may be valid, legal and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.

 

5.12      Entire Agreement . This Agreement contains the entire understanding among the parties hereto and supersedes all prior written or oral agreements among them respecting the within subject matter, unless otherwise provided herein. There are no representations, agreements, arrangements or understandings, oral or written, among the parties hereto relating to the subject matter of this Agreement that are not fully expressed herein.

 

 

 
8

 

 

5.13      Share Certificate Legend . Each certificate, instrument, or book entry representing any Shares issued after the date hereof shall be notated by the Company with a legend reading substantially as follows:

 

“The Shares REPRESENTED hereby are subject to a Voting Agreement, AS MAY BE AMENDED FROM TIME TO TIME, (a copy of which may be obtained upon written request from the Company), and by accepting any interest in such Shares the person accepting such interest shall be deemed to agree to and shall become bound by all the provisions of that Voting Agreement, including certain restrictions on transfer and ownership set forth therein.”

 

The Company, by its execution of this Agreement, agrees that it will cause the certificates instruments, or book entry evidencing the Shares issued after the date hereof to be notated with the legend required by this Subsection 5.13 of this Agreement, and it shall supply, free of charge, a copy of this Agreement to any holder of such Shares upon written request from such holder to the Company at its principal office. The parties to this Agreement do hereby agree that the failure to cause the certificates, instruments, or book entry evidencing the Shares to be notated with the legend required by this Subsection 5.13 herein and/or the failure of the Company to supply, free of charge, a copy of this Agreement as provided hereunder shall not affect the validity or enforcement of this Agreement.

 

5.14      Stock Splits, Stock Dividends, etc. In the event of any issuance of Shares of the Company’s voting securities hereafter to any of the Stockholders (including, without limitation, in connection with any stock split, stock dividend, recapitalization, reorganization, or the like), such Shares shall become subject to this Agreement and shall be notated with the legend set forth in Subsection 5.13 .

 

5.15      Manner of Voting . The voting of Shares pursuant to this Agreement may be effected in person, by proxy, by written consent or in any other manner permitted by applicable law. For the avoidance of doubt, voting of the Shares pursuant to the Agreement need not make explicit reference to the terms of this Agreement.

 

5.16      Further Assurances . At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder.

 

5.17      Attorney’s Fees . In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

 

5.18      Not a Voting Trust . This Agreement is not a voting trust governed by Section 218 of the Delaware General Corporation Law and should not be interpreted as such.

 

[Signature Page Follows]

 

 
9

 

 

IN WITNESS WHEREOF, the parties have executed this Voting Agreement as of the date first written above.

 

 

MOVIEPASS INC.  

 

 

 

     

 

By: 

 

     
  Name:  
     
  Title:  
     
   
 

HELIOS AND MATHESON ANALYTICS

INC.:

   
     
  By:  
     
  Name:  
     
  Title:  
     
  Address:  

 

  Facsimile Number:  
     
  E-mail address:  
     

 

  KEY HOLDERS 1 :
   
   
  Signature:  
     
  Name:  

 

 

 


1 NTD: Signature pages to be added for additional Key Holders.

 

 
Signature Page to Voting Agreement

 

 

SCHEDULE A

 

KEY HOLDERS

 

Name and Address

Number of Shares Held

   
   
   

 

 

 

 

 

EXHIBIT A

 

ADOPTION AGREEMENT

 

This Adoption Agreement (“ Adoption Agreement ”) is executed on ___________________, 20__, by the undersigned (the “ Holder ”) pursuant to the terms of that certain Voting Agreement dated as of [_____ __, 20___] (the “ Agreement ”), by and among the Company and certain of its Stockholders, as such Agreement may be amended or amended and restated hereafter. Capitalized terms used but not defined in this Adoption Agreement shall have the respective meanings ascribed to such terms in the Agreement. By the execution of this Adoption Agreement, the Holder agrees as follows.

 

1.1       Acknowledgement . Holder acknowledges that Holder is acquiring certain shares of the capital stock of the Company (the “ Stock ”), for one of the following reasons (Check the correct box):

 

 

As a transferee of Shares from a party in such party’s capacity as a “Key Holder” bound by the Agreement, and after such transfer, Holder shall be considered a “Key Holder” and a “Stockholder” for all purposes of the Agreement.     

 

 

As a new Stockholder in accordance with S ubs ection 5.1 of the Agreement, in which case Holder will be a “Stockholder” for all purposes of the Agreement.

 

1.2       Agreement . Holder hereby (a) agrees that the Stock, and any other shares of capital stock or securities required by the Agreement to be bound thereby, shall be bound by and subject to the terms of the Agreement and (b) adopts the Agreement with the same force and effect as if Holder were originally a party thereto.

 

1.3       Notice . Any notice required or permitted by the Agreement shall be given to Holder at the address, facsimile number or e-mail address listed below Holder’s signature hereto.

 

HOLDER:

   

ACCEPTED AND AGREED:

         

By:

   

MOVIEPASS INC.

Name and Title of Signatory

     
         

Address:

   

By:

 
         
      Title:  

 

Facsimile Number:

   
     

E-mail address:

   

Exhibit 10.3

 

TRANSACTION VOTING AND SUPPORT AGREEMENT

 

TRANSACTION VOTING AND SUPPORT AGREEMENT (this “ Agreement ”), dated as of August 15, 2017, by and between Helios and Matheson Analytics Inc., a Delaware corporation (“ HMNY ”), and the undersigned stockholder of the Company (as defined below) (“ Stockholder ”).

 

WHEREAS, concurrently with the execution of this Agreement, MoviePass Inc., a Delaware corporation (the “ Company ”), and HMNY are entering into a Securities Purchase Agreement of even date herewith (the “ SPA ”);

 

WHEREAS, capitalized terms used but not defined in this Agreement have the respective meanings ascribed thereto in the SPA;

 

WHEREAS, as of the date hereof, Stockholder is the beneficial owner of the voting equity securities of the Company listed on Exhibit A hereto (such securities, together with any other voting equity securities of the Company acquired by Stockholder after the date hereof, including upon conversion or exchange of such securities, being collectively referred to herein as the “ Stockholder Shares ”); and

 

WHEREAS, as a condition to its willingness to enter into the SPA, HMNY has required that Stockholder enter into this Agreement and, in order to induce HMNY to enter into the SPA, Stockholder is willing to enter into this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the parties hereto, intending to be legally bound hereby, agree as follows:

 

1. Agreements of Stockholder.

 

(a) Voting . From the date hereof until any termination of this Agreement in accordance with its terms, at any meeting of the stockholders of the Company however called (or any action by written consent in lieu of a meeting) or any adjournment thereof, Stockholder, to the extent submitted to the holders of capital stock of the Company for their approval as required by applicable law and/or the organizational documents of the Company, shall vote all Stockholder Shares (or cause them to be voted) or (as appropriate) execute written consents in respect thereof, (i) for the adoption of the SPA, (ii) in favor of the Restated Certificate, (iii) against any proposal that Stockholder reasonably knows would be expected to prevent, impede, significantly interfere with, or significantly delay, the consummation of the transactions contemplated by the SPA. Any such vote shall be cast (or consent shall be given) by Stockholder in accordance with such procedures relating thereto so as to ensure that it is duly counted, including for purposes of determining that a quorum is present and for purposes of recording the results of such vote (or consent).

 

(b) Irrevocable Proxy . Stockholder hereby appoints HMNY and any designee of HMNY, and each of them individually, its proxies and attorneys-in-fact, with full power of substitution and resubstitution, to vote or act by written consent during the term of this Agreement with respect to the Stockholder Shares in accordance with Section 1(a). This proxy and power of attorney is given to secure the performance of the duties of Stockholder under this Agreement. Stockholder shall take such further reasonable action or execute such other reasonable instruments as may be necessary to effectuate the intent of this irrevocable proxy contained in this Section 1(b). This irrevocable proxy and power of attorney granted by Stockholder shall be irrevocable during the term of this Agreement, shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy and shall revoke any and all prior proxies granted by Stockholder with respect to the Stockholder Shares. The power of attorney granted by Stockholder herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of Stockholder. The proxy and power of attorney granted hereunder shall terminate upon the termination of this Agreement.

 

 
 

 

 

(c) Voting . Stockholder shall retain at all times the right to vote all Stockholder Shares in its sole discretion (other than as contemplated by Section 1(b) and subject to the Amended and Restated Voting Agreement, as applicable) and without any other limitation on those matters other than those set forth in Section 1(a) that are at any time or from time to time presented for consideration to the Company’s stockholders generally.

 

(d) Appraisal Rights . Stockholder hereby waives, and agrees not to exercise or assert, any appraisal or similar rights under Section 262 of the DGCL or other applicable law in connection with the transactions contemplated under the SPA.

 

(e) Restriction on Transfer; Proxies; Non-Interference; etc . From the date hereof until the termination of this Agreement in accordance with its terms, Stockholder shall not directly or indirectly (i) sell, transfer (including by operation of law), give, pledge, encumber, assign or otherwise dispose of (including, without limitation, any Constructive Disposition (as hereinafter defined)), or enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, gift, pledge, encumbrance, assignment, constructive disposition or other disposition of, any Stockholder Shares (or any right, title or interest thereto or therein), (ii) deposit any Stockholder Shares into a voting trust or grant any proxies or enter into a voting agreement, power of attorney or voting trust with respect to any Stockholder Shares, (iii) take any action that would make any representation or warranty of Stockholder set forth in this Agreement untrue or incorrect in any material respect or have the effect of preventing, disabling or significantly delaying Stockholder from performing any of its obligations under this Agreement or (iv) agree (whether or not in writing) to take any of the actions referred to in the foregoing clauses (i), (ii) or (iii) of this Section 1(e). Notwithstanding the foregoing, Stockholder may transfer all or any portion of the Stockholder Shares prior to termination of this Agreement as long as the transferee agrees, in writing with HMNY, to be bound by the terms of this Agreement. As used herein, the term “ Constructive Disposition ” means, with respect to any Stockholder Shares, a short sale with respect to such security, entering into or acquiring an offsetting derivative contract with respect to such security, entering into or acquiring a futures or forward contract to deliver such security or entering into any other hedging or other derivative transaction that has the effect of materially changing the economic benefits and risks of ownership; provided, however, that nothing in this Agreement shall restrict the ability of the Stockholder to engage in any hedging, derivative or other transactions relating to, or to otherwise transfer, any securities of any Person other than the Company.

 

(f) Publication . Stockholder consents to HMNY publishing and disclosing Stockholder’s identity and ownership of Company capital shares and the nature of Stockholder’s commitments, arrangements and understandings under this Agreement, but in each case only as may be required by applicable law. HMNY agrees to provide Stockholder with a reasonable advance opportunity to review and comment on such disclosure. Stockholder shall not issue any press release or make any other public statement with respect to this Agreement, the SPA or any of the transactions contemplated herein and therein without the prior written consent of HMNY, except for filings required under the Exchange Act with respect to Stockholder’s beneficial ownership of Stockholder Shares and except as may be required by applicable law.

 

2. Representations and Warranties of HMNY . HMNY represents and warrants to Stockholder as follows:

 

(a) Organization; Authority . HMNY is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated. HMNY has all necessary corporate power and authority to execute and deliver this Agreement, and to perform its obligations under this Agreement. The execution, delivery and performance by HMNY of this Agreement has been duly authorized and approved by its boards of directors, and no other corporate action on the part of HMNY is necessary to authorize the execution, delivery and performance by HMNY of this Agreement. This Agreement has been duly executed and delivered by HMNY and, assuming due authorization, execution and delivery hereof by the Stockholder, constitutes a legal, valid and binding obligation of HMNY, enforceable against HMNY in accordance with its terms, subject to the qualification that such enforceability may be limited by bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting rights of creditors and that equitable remedies, including specific performance, are discretionary and may not be ordered.

 

 
 

 

 

3. Representations and Warranties of Stockholder . Stockholder hereby represents and warrants to HMNY as follows:

 

(a) Organization; Authority . Stockholder, if an entity, is duly organized, validly existing under the laws of its jurisdiction of organization. Stockholder has all necessary power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement. The execution, delivery and performance by Stockholder of this Agreement and the transactions contemplated hereby have been duly authorized and approved by all necessary action on the part of Stockholder, and no further action on the part of Stockholder is necessary to authorize the execution, delivery and performance by Stockholder of this Agreement. This Agreement has been duly executed and delivered by Stockholder and, assuming the due and valid authorization, execution and delivery hereof by HMNY, constitutes a valid and binding obligation of Stockholder, enforceable against Stockholder in accordance with its terms, subject to the qualification that such enforceability may be limited by bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting rights of creditors and that equitable remedies, including specific performance, are discretionary and may not be ordered.

  

(b) Consents and Approvals; No Violations . No consents or approvals of, or filings, declarations or registrations with, any federal, state or local governmental authority or third party are necessary for the performance by Stockholder of its obligations under this Agreement, other than such other consents, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the performance by Stockholder of any of its material obligations under this Agreement and except for filings required under the Exchange Act with respect to Stockholder’s beneficial ownership of Stockholder Shares or applicable law. Neither the execution and delivery of this Agreement by Stockholder, nor the performance by Stockholder with its obligations under this Agreement, will (A) conflict with or violate any provision of the organizational documents of Stockholder, if any, or (B) (x) violate any law, judgment, writ or injunction of any federal, state or local governmental authority applicable to Stockholder or any of its subsidiaries, if any, or any of their respective properties or assets, or (y) violate, conflict with, result in the loss of any material benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any lien or encumbrance upon any of the respective properties or assets of, Stockholder or any of its Affiliates under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, permit, lease, agreement or other instrument or obligation to which Stockholder or any of its Affiliates is a party, or by which they or any of their respective properties or assets may be bound or affected, except, in the case of clause (B), for such violations, conflicts, losses, defaults, terminations, cancellations, accelerations, liens or encumbrances as would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the performance by Stockholder of any of its obligations under this Agreement.

 

(c) Ownership of Shares . Stockholder owns, beneficially or of record, all of the Stockholder Shares. Stockholder owns all of the Stockholder Shares free and clear of any proxy, voting restriction, adverse claim or other lien or encumbrance (other than proxies and restrictions in favor of HMNY pursuant to this Agreement or as set forth in the Company’s amended and restated certificate of incorporation, bylaws, the Amended and Restated Voting Agreement the Amended and Restated Investors’ Rights Agreement and the Amended and Restated Rights of First Refusal and Co-Sale Agreement, in each case, as applicable, and except for such transfer restrictions of general applicability as may be provided under the Securities Act and the “blue sky” laws of the various states of the United States). Without limiting the foregoing, except for proxies and restrictions in favor of HMNY pursuant to this Agreement, and except for such transfer restrictions of general applicability as may be provided under the Securities Act and the “blue sky” laws of the various States of the United States or as set forth in the Amended and Restated Voting Agreement, Stockholder has sole voting power and sole power of disposition with respect to all Stockholder Shares, with no restrictions on Stockholder’s rights of voting or disposition pertaining thereto, and no Person other than Stockholder has any right to direct or approve the voting or disposition of any Stockholder Shares. As of the date hereof, Stockholder does not own, beneficially or of record, any securities of the Company other than the Stockholder Shares.

 

 
 

 

 

(d) Brokers . No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission that is payable by the Company, HMNY or any of their respective subsidiaries in connection with the transactions contemplated herein based upon arrangements made by or on behalf of Stockholder.

  

4. Termination . This Agreement shall terminate automatically without any further action of the parties on the first to occur of (a) the termination of the SPA in accordance with its terms and (b) the Closing or, if earlier, on the mutual written consent of the parties hereto. In addition to the foregoing, Stockholder shall have the right to terminate this Agreement if the terms and conditions described in the SPA or in any of the exhibits attached thereto are modified in any manner the result of which requires the Company to seek stockholder approval for such modification. Notwithstanding the foregoing, (i) nothing herein shall relieve any party from liability for breach of this Agreement before termination in accordance with Section 4 and (ii) the provisions of this Section 4 and Section 5 of this Agreement shall survive any termination of this Agreement.

 

5. Miscellaneous .

 

(a) Action in Stockholder Capacity Only . The parties acknowledge that this Agreement is entered into by Stockholder solely in its capacity as owner of the Stockholder Shares and that nothing in this Agreement is intended to or shall in any way restrict or limit any director of the Company from taking any action in his or her capacity as a director of the Company that is necessary for him or her to comply with his or her fiduciary duties as a director of the Company, and no action taken by any individual in his or her capacity as a director of the Company shall give rise to or be deemed a breach of this Agreement.

 

(b) Expenses . All costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses.

 

(c) Additional Shares . Until any termination of this Agreement in accordance with its terms, Stockholder shall promptly notify HMNY of the number of Company voting equity securities, if any, as to which Stockholder acquires record or beneficial ownership after the date hereof. Any such Company voting equity securities as to which Stockholder acquires record or beneficial ownership after the date hereof and prior to termination of this Agreement shall be Stockholder Shares for purposes of this Agreement. Without limiting the foregoing, in the event of any stock split, stock dividend or other change in the capital structure of the Company affecting the Company capital shares, the number of shares constituting Stockholder Shares shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional Company voting capital shares or other voting equity securities of the Company issued to Stockholder in connection therewith.

 

 
 

 

 

(d) Definition of “Beneficial Ownership ”. For purposes of this Agreement, “beneficial ownership” with respect to (or to “own beneficially”) any securities shall mean having “beneficial ownership” of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing.

 

(e) Further Assurances . From time to time, at the reasonable request of HMNY and without further consideration, prior to the termination of this Agreement, Stockholder shall execute and deliver such reasonable additional documents and take all such further reasonable action as may be reasonably required to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement.

 

(f) Entire Agreement; No Third Party Beneficiaries . This Agreement constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. This Agreement is not intended to and shall not confer upon any Person other than the parties hereto any rights hereunder.

 

(g) Assignment; Binding Effect . Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Any purported assignment not permitted under this Section 5(g) shall be null and void.

 

(h) Amendments; Waiver . This Agreement may not be amended or supplemented, except by a written agreement executed by the parties hereto. Any party to this Agreement may (A) waive any inaccuracies in the representations and warranties of any other party hereto or extend the time for the performance of any of the obligations or acts of any other party hereto or (B) waive compliance by the other party with any of the agreements contained herein. Notwithstanding the foregoing, no failure or delay by a party in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.

 

(i) Severability . If any term or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, provisions and conditions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law and public policy in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

(j) Counterparts; Electronic Signatures . This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by the other parties hereto. Facsimile or other electronically scanned and transmitted signatures, including by email attachment, shall be deemed originals for all purposes of this Agreement.

 

 
 

 

 

(k) Descriptive Headings . Headings of Sections and subsections of this Agreement are for convenience of the parties only and shall be given no substantive or interpretive effect whatsoever.

 

(l) Notices . All notices, requests, demands and other communications in connection with this Agreement shall be in writing and shall be deemed given if (A) delivered personally, on the date of such delivery, (B) upon non-automated confirmation of receipt when transmitted via facsimile or electronic mail (but only if followed by transmittal by nationally recognized overnight courier or by hand for delivery on the next Business Day), or (C) on receipt (or refusal to accept delivery) after dispatch by registered or certified mail (return receipt requested), postage prepaid, or by a nationally recognized overnight courier (with confirmation), addressed, in each case, as follows:

 

 

If to HMNY:

Helios and Matheson Analytics Inc.

 

 

350 5th Ave.

 

 

New York, NY 10016

 

 

Attention:

Theodore Farnsworth, CEO

 

 

Tel:

Facsimile:

212.979.8228

[         ]

 

 

Email:

[INSERT HMNY EMAIL ADDRESS ]
     

 

with a copy to (which shall not

Mitchell Silberberg & Knupp LLP

 

constitute notice):

11377 W. Olympic Blvd.

 

 

Los Angeles, CA 90064

 

 

Attn: Kevin Friedmann, Esq.

 

 

Tel.: 310.312.3106

 

 

Facsimile: 310.312.3100

Email: kxf@msk.com

 

 

 

 

if to Stockholder:

[●]

 

 

 

 

 

 

 

 

 

 

with a copy to (which shall not

Ellenoff Grossman & Schole LLP

 

constitute notice):

1345 Avenue of the Americas

 

 

New York, New York 10105

 

 

Attn: Barry I. Grossman, Esq.

 

 

Tel.: (212) 370-1300

 

 

Email:bigrossman@egsllp.com

 

(m) Governing Law; Jurisdiction; WAIVER OF JURY TRIAL; Severability .

 

(i) This Agreement shall be governed by, and construed in accordance with, the internal procedural and substantive laws of the State of New York, without regard to the choice of law rules thereof.

 

(ii) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive 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 (and any appellate courts of such courts), in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (A) agrees not to commence any such action except in such courts, (B) agrees that any claim in respect of any such action or proceeding may be heard and determined in such courts, (C) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to venue of any such action or proceeding in any such courts, and (D) waives, to the fullest extent permitted by law, the defense of any inconvenient forum to the maintenance of such action or proceeding in any such courts. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each of the parties irrevocably consents to service of process in any such action or proceeding in the manner provided for notices in Section 5(l) of this Agreement; provided , that nothing in this Agreement shall affect the right of any Party to this Agreement to serve process in any other manner permitted by applicable law.

 

 
 

 

 

(iii) EACH OF THE PARTIES HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY, IN ANY MATTERS (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

(iv) The parties agree that irreparable damage would occur for which monetary damages would not be an adequate remedy in the event that the parties do not perform their obligations under the provisions of this Agreement in accordance with their specific terms or otherwise breach such obligations. Accordingly, the parties agree that, if for any reason any of the Stockholder or HMNY shall have failed to perform its obligations under this Agreement or otherwise breached this Agreement, then the party seeking to enforce this Agreement against such nonperforming party shall be entitled to seek specific performance and the issuance of immediate injunctive and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of proving the inadequacy of money damages as a remedy, and the Parties further agree to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief, this being in addition to and not in limitation of any other remedy to which they are entitled at law or in equity.

 

[ signature page follows ]

 

 
 

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written.

 

 

 

 

HELIOS AND MATHESON ANALYTICS INC.

 

 

 

 

By:

 

 

Name:

Theodore Farnsworth

 

Title:

Chief Executive Officer

   

 
 

 

 

Signature Page to Transaction Voting and Support Agreement

 

  

  [STOCKHOLDER]
     
     
 

By:

 
 

Name:

 

 

Title:

 

 

 

 

 

 

   

Signature Page to Transaction Voting and Support Agreement

 

 
 

 

 

EXHIBIT A

List of Securities Beneficially Owned by Stockholder

 

Exhibit 10.4

 

 

TRANSACTION VOTING AND SUPPORT AGREEMENT

 

TRANSACTION VOTING AND SUPPORT AGREEMENT (this “ Agreement ”), dated as of August 15, 2017, by and between MoviePass Inc., a Delaware Corporation (“ MoviePass ”), and the undersigned stockholder of the Company (as defined below)(“ Stockholder ”).

 

WHEREAS, concurrently with the execution of this Agreement, Helios and Matheson Analytics Inc., a Delaware corporation (the “ Company ”) and MoviePass are entering into a Securities Purchase Agreement of even date herewith (the “ SPA ”);

 

WHEREAS, capitalized terms used but not defined in this Agreement have the respective meanings ascribed thereto in the SPA;

 

WHEREAS, as of the date hereof, Stockholder is the beneficial owner of the amount of shares of Helios Common Stock set forth on the signature page attached hereto (such shares, together with any other shares of Helios Common Stock acquired by Stockholder after the date hereof, being collectively referred to herein as the “ Stockholder Shares ”); and

 

WHEREAS, as a condition to its willingness to enter into the SPA, MoviePass has required that Stockholder enter into this Agreement and, in order to induce MoviePass to enter into the SPA, Stockholder is willing to enter into this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the parties hereto, intending to be legally bound hereby, agree as follows:

 

1. Agreements of Stockholder.

 

(a)  Voting . From the date hereof until any termination of this Agreement in accordance with its terms, at any meeting of the stockholders of the Company however called (or any action by written consent in lieu of a meeting) or any adjournment thereof, Stockholder, to the extent submitted to the holders of Helios Common Stock for their approval as required by applicable law and/or the organizational documents of the Company, shall vote all Stockholder Shares (or cause them to be voted) or (as appropriate) execute written consents in respect thereof, (i) for the adoption of the SPA and, in particular, for the issuance of the Helios Common Stock required to be issued in accordance with its terms (ii) against any action or agreement (including, without limitation, any amendment of any agreement) that Stockholder knows would result in a breach of any representation, warranty, covenant, agreement or other obligation of the Company in the SPA, if such action or agreement would result in the failure of any of the conditions to MoviePass’ obligations under the as set forth in Section 6 of the SPA and (iii) against any proposal that Stockholder reasonably knows would be expected to prevent, impede, significantly interfere with, or significantly delay, the consummation of the transactions contemplated by the SPA. Any such vote shall be cast (or consent shall be given) by Stockholder in accordance with such procedures relating thereto so as to ensure that it is duly counted, including for purposes of determining that a quorum is present and for purposes of recording the results of such vote (or consent).

 

(b)  Irrevocable Proxy . Stockholder hereby appoints MoviePass and any designee of MoviePass, and each of them individually, its proxies and attorneys-in-fact, with full power of substitution and resubstitution, to vote or act by written consent during the term of this Agreement with respect to the Stockholder Shares in accordance with Section 1(a). This irrevocable proxy and power of attorney is given to secure the performance of the duties of Stockholder under this Agreement. Stockholder shall take such further reasonable action or execute such other reasonable instruments as may be necessary to effectuate the intent of this irrevocable proxy contained in this Section 1(b). This irrevocable proxy and power of attorney granted by Stockholder shall be irrevocable during the term of this Agreement, shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy and shall revoke any and all prior proxies granted by Stockholder with respect to the Stockholder Shares. The power of attorney granted by Stockholder herein is an enduring power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of Stockholder. The proxy and power of attorney granted hereunder shall terminate upon the termination of this Agreement.

 

 
 

 

 

(c)  Voting . Stockholder shall retain at all times the right to vote all Stockholder Shares in its sole discretion (other than as contemplated by Section 1(b)) and without any other limitation on those matters other than those set forth in Section 1(a) that are at any time or from time to time presented for consideration to the Company’s stockholders generally.

 

(d)  Dissent or Appraisal Rights . Stockholder hereby waives, and agrees not to exercise or assert, any appraisal or similar rights under Section 262 of the DGCL or other applicable law in connection with the transactions contemplated under the SPA.

 

(e)  Restriction on Transfer; Proxies; Non-Interference; etc . From the date hereof until the termination of this Agreement in accordance with its terms, Stockholder shall not directly or indirectly (i) sell, transfer (including by operation of law), give, pledge, encumber, assign or otherwise dispose of (including, without limitation, any Constructive Disposition (as hereinafter defined)), or enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, gift, pledge, encumbrance, assignment, constructive disposition or other disposition of, any Stockholder Shares (or any right, title or interest thereto or therein), (ii) deposit any Stockholder Shares into a voting trust or grant any proxies or enter into a voting agreement, power of attorney or voting trust with respect to any Stockholder Shares, (iii) take any action that would make any representation or warranty of Stockholder set forth in this Agreement untrue or incorrect in any material respect or have the effect of preventing, disabling or significantly delaying Stockholder from performing any of its obligations under this Agreement or (iv) agree (whether or not in writing) to take any of the actions referred to in the foregoing clauses (i), (ii) or (iii) of this Section 1(e). Notwithstanding the foregoing, Stockholder may transfer all or any portion of the Stockholder Shares prior to termination of this Agreement as long as the transferee agrees, in writing with MoviePass, to be bound by the terms of this Agreement. As used herein, the term “ Constructive Disposition ” means, with respect to any Stockholder Shares, a short sale with respect to such security, entering into or acquiring an offsetting derivative contract with respect to such security, entering into or acquiring a futures or forward contract to deliver such security or entering into any other hedging or other derivative transaction that has the effect of materially changing the economic benefits and risks of ownership;  provided, however,  that nothing in this Agreement shall restrict the ability of the Stockholder to engage in any hedging, derivative or other transactions relating to, or to otherwise transfer, any securities of any Person other than the Company.

 

(f)  Publication . Stockholder consents to MoviePass publishing and disclosing Stockholder’s identity and ownership of Helios Common Stock and the nature of Stockholder’s commitments, arrangements and understandings under this Agreement, but in each case only as may be required by applicable law. MoviePass agrees to provide Stockholder with a reasonable advance opportunity to review and comment on such disclosure. Stockholder shall not issue any press release or make any other public statement with respect to this Agreement, the SPA or any of the transactions contemplated herein and therein without the prior written consent of MoviePass, except for filings required under the Exchange Act with respect to Stockholder’s beneficial ownership of Stockholder Shares and except as may be required by applicable law.

 

 
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2. Representations and Warranties of MoviePass . MoviePass hereby represents and warrants to Stockholder as follows:

 

(a)  Organization; Authority . MoviePass is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. MoviePass has all necessary corporate power and authority to execute and deliver this Agreement, and to perform its obligations under this Agreement. The execution, delivery and performance by MoviePass of this Agreement has been duly authorized and approved by its board of directors, and no other corporate action on the part of MoviePass is necessary to authorize the execution, delivery and performance by MoviePass of this Agreement. This Agreement has been duly executed and delivered by MoviePass and, assuming due authorization, execution and delivery hereof by the Stockholder, constitutes a legal, valid and binding obligation of MoviePass, enforceable against it in accordance with its terms, subject to the qualification that such enforceability may be limited by bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting rights of creditors and that equitable remedies, including specific performance, are discretionary and may not be ordered.

 

3. Representations and Warranties of Stockholder . Stockholder hereby represents and warrants to MoviePass as follows:

 

(a)  Organization; Authority . Stockholder is either (i) a natural person or (ii) a corporation, limited liability company or other entity, duly organized and validly existing under the laws of its jurisdiction of incorporation or formation. Stockholder has all necessary power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement. The execution, delivery and performance by Stockholder of this Agreement and the transactions contemplated hereby have been duly authorized and approved by all necessary action on the part of Stockholder, and no further action on the part of Stockholder is necessary to authorize the execution, delivery and performance by Stockholder of this Agreement. This Agreement has been duly executed and delivered by Stockholder and, assuming the due and valid authorization, execution and delivery hereof by MoviePass, constitutes a valid and binding obligation of Stockholder, enforceable against Stockholder in accordance with its terms, subject to the qualification that such enforceability may be limited by bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting rights of creditors and that equitable remedies, including specific performance, are discretionary and may not be ordered.

 

(b)  Consents and Approvals; No Violations . No consents or approvals of, or filings, declarations or registrations with, any federal, state or local governmental authority or third party are necessary for the performance by Stockholder of its obligations under this Agreement, other than such other consents, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the performance by Stockholder of any of its material obligations under this Agreement and except for filings required under the Exchange Act or applicable Canadian Law with respect to Stockholder’s beneficial ownership of Stockholder Shares or applicable law. Neither the execution and delivery of this Agreement by Stockholder, nor the performance by Stockholder with its obligations under this Agreement, will (A) conflict with or violate any provision of the organizational documents of Stockholder, if any, or (B) (x) violate any law, judgment, writ or injunction of any federal, state or local governmental authority applicable to Stockholder or any of its subsidiaries, if any, or any of their respective properties or assets, or (y) violate, conflict with, result in the loss of any material benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any lien or encumbrance upon any of the respective properties or assets of, Stockholder or any of its Affiliates under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, permit, lease, agreement or other instrument or obligation to which Stockholder or any of its Affiliates is a party, or by which they or any of their respective properties or assets may be bound or affected, except, in the case of clause (B), for such violations, conflicts, losses, defaults, terminations, cancellations, accelerations, liens or encumbrances as would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the performance by Stockholder of any of its obligations under this Agreement.

 

 
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(c)  Ownership of Shares . Stockholder owns, beneficially or of record, all of the Stockholder Shares. Stockholder owns all of the Stockholder Shares free and clear of any proxy, voting restriction, voting trust, adverse claim or other lien or encumbrance (other than proxies and restrictions in favor of MoviePass pursuant to this Agreement, as set forth in the Company’s certificate of incorporation, as amended, bylaws, except for such transfer restrictions of general applicability as may be provided under the Securities Act and the “blue sky” laws of the various States of the United States, and except pursuant to certain lockup agreements between Stockholder and the holders of the Company’s senior secured convertible notes (the “ Stockholder Lockup Agreements ”). Without limiting the foregoing, except for proxies and restrictions in favor of MoviePass pursuant to this Agreement and except for such transfer restrictions of general applicability as may be provided under the Securities Act and the “blue sky” laws of the various States of the United States, Stockholder has sole voting power and sole power of disposition (except with respect to the restrictions on transfer pursuant to the Stockholder Lockup Agreements), with respect to all Stockholder Shares, with no restrictions on Stockholder’s rights of voting or disposition pertaining thereto (except with respect to the restrictions on transfer pursuant to the Stockholder Lockup Agreements), and no Person other than Stockholder has any right to direct or approve the voting or disposition of any Stockholder Shares (except with respect to the restrictions on transfer pursuant to the Stockholder Lockup Agreements). As of the date hereof, Stockholder does not own, beneficially or of record, any securities of the Company other than the Stockholder Shares.

 

(d)  Brokers . No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission that is payable by the Company, MoviePass or any of their respective subsidiaries in connection with the transactions contemplated herein based upon arrangements made by or on behalf of Stockholder.

 

4. Termination . This Agreement shall terminate automatically without any further action of the parties on the first to occur of (a) the termination of the SPA in accordance with its terms and (b) the Closing or, if earlier, on the mutual written consent of the parties hereto. In addition to the foregoing, Stockholder shall have the right to terminate this Agreement if the terms and conditions described in the SPA or in any of the exhibits attached thereto are modified in any manner the result of which requires the Company to seek stockholder approval for such modification. Notwithstanding the foregoing, (i) nothing herein shall relieve any party from liability for breach of this Agreement before termination in accordance with Section 4 and (ii) the provisions of this Section 4 and Section 5 of this Agreement, shall survive any termination of this Agreement.

 

5. Miscellaneous .

 

(a)  Action in Stockholder Capacity Only . The parties acknowledge that this Agreement is entered into by Stockholder solely in its capacity as owner of the Stockholder Shares and that nothing in this Agreement is intended to or shall in any way restrict or limit any director of the Company from taking any action in his or her capacity as a director of the Company that is necessary for him or her to comply with his or her fiduciary duties as a director of the Company, and no action taken by any individual in his or her capacity as a director of the Company shall give rise to or be deemed a breach of this Agreement.

 

(b)  Expenses . All costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses.

 

(c)  Additional Shares . Until any termination of this Agreement in accordance with its terms, Stockholder shall promptly notify MoviePass of the number of shares of Helios Common Stock, if any, as to which Stockholder acquires record or beneficial ownership after the date hereof. Any such Helios Common Stock as to which Stockholder acquires record or beneficial ownership after the date hereof and prior to termination of this Agreement shall be Stockholder Shares for purposes of this Agreement. Without limiting the foregoing, in the event of any stock split, stock dividend or other change in the capital structure of the Company affecting the Helios Common Stock, the number of shares constituting Stockholder Shares shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional Helios Common Stock or other voting securities of the Company issued to Stockholder in connection therewith.

 

 
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(d)  Definition of “Beneficial Ownership ”. For purposes of this Agreement, “beneficial ownership” with respect to (or to “own beneficially”) any securities shall mean having “beneficial ownership” of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing.

 

(e)  Further Assurances . From time to time, at the reasonable request of MoviePass and without further consideration, prior to the termination of this Agreement, Stockholder shall execute and deliver such reasonable additional documents and take all such further reasonable action as may be reasonably required to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement.

 

(f)  Entire Agreement; No Third Party Beneficiaries . This Agreement constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. This Agreement is not intended to and shall not confer upon any Person other than the parties hereto any rights hereunder.

 

(g)  Assignment; Binding Effect . Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by either party hereto (whether by operation of law or otherwise) without the prior written consent of the other party. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Any purported assignment not permitted under this Section 5(g) shall be null and void.

 

(h)  Amendments; Waiver . This Agreement may not be amended or supplemented, except by a written agreement executed by the parties hereto. Any party to this Agreement may (A) waive any inaccuracies in the representations and warranties of any other party hereto or extend the time for the performance of any of the obligations or acts of any other party hereto or (B) waive compliance by the other party with any of the agreements contained herein. Notwithstanding the foregoing, no failure or delay by a party in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.

 

(i)  Severability . If any term or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, provisions and conditions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law and public policy in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

 
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(j)  Counterparts; Electronic Signatures . This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by the other parties hereto. Facsimile or other electronically scanned and transmitted signatures, including by email attachment, shall be deemed originals for all purposes of this Agreement.

 

(k)  Descriptive Headings . Headings of Sections and subsections of this Agreement are for convenience of the parties only and shall be given no substantive or interpretive effect whatsoever.

 

(l)  Notices . All notices, requests, demands and other communications in connection with this Agreement shall be in writing and shall be deemed given if (A) delivered personally, on the date of such delivery, (B) upon non-automated confirmation of receipt when transmitted via facsimile or electronic mail (but only if followed by transmittal by nationally recognized overnight courier or by hand for delivery on the next Business Day), or (C) on receipt (or refusal to accept delivery) after dispatch by registered or certified mail (return receipt requested), postage prepaid, or by a nationally recognized overnight courier (with confirmation), addressed, in each case, as follows:

 

 

If to MoviePass :

175 Varick Street, Suite 604

New York, NY 10012

Attention: Mitch Lowe, CEO

Email:mitch@moviepass.com

 

 

 

 

with a copy to (which shall not constitute

notice):

Ellenoff Grossman & Schole LLP

 

 

1345 Avenue of the Americas

 

 

New York, New York 10105

   

Attn: Barry I. Grossman, Esq.

   

Tel.: (212) 370-1300

   

Email: bigrossman@egsllp.com

     
     
 

if to Stockholder:

See Stockholder’s signature page attached hereto.

     
     
     
 

with a copy to (which shall not

Mitchell Silberberg & Knupp LLP

 

constitute notice):

11377 W. Olympic Blvd.

 

 

Los Angeles, CA 90064

 

 

Attn: Kevin Friedmann, Esq.

 

 

Tel.: 310.312.3106

 

 

Facsimile: 310.312.3100

Email: kxf@msk.com

  

(m) Governing Law; Enforcement; Jurisdiction; WAIVER OF JURY TRIAL .

 

(i) This Agreement shall be governed by, and construed in accordance with, the internal procedural and substantive laws of the State of New York, without regard to the choice of law rules thereof.

 

 
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(ii) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the state courts New York and to the jurisdiction of the United States District Court for the Southern District of New York (and any appellate courts of such courts), in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (A) agrees not to commence any such action except in such courts, (B) agrees that any claim in respect of any such action or proceeding may be heard and determined in such courts, (C) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to venue of any such action or proceeding in any such courts, and (D) waives, to the fullest extent permitted by law, the defense of any inconvenient forum to the maintenance of such action or proceeding in any such courts. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each of the parties irrevocably consents to service of process in any such action or proceeding in the manner provided for notices in Section 5(l) of this Agreement;  provided , that nothing in this Agreement shall affect the right of any Party to this Agreement to serve process in any other manner permitted by applicable law.

 

(iii) EACH OF THE PARTIES HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY, IN ANY MATTERS (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

(iv) The parties agree that irreparable damage would occur for which monetary damages would not be an adequate remedy in the event that the parties do not perform their obligations under the provisions of this Agreement in accordance with their specific terms or otherwise breach such obligations. Accordingly, the parties agree that, if for any reason either of the Stockholder or MoviePass shall have failed to perform its obligations under this Agreement or otherwise breached this Agreement, then the party seeking to enforce this Agreement against such nonperforming party shall be entitled to seek specific performance and the issuance of immediate injunctive and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of proving the inadequacy of money damages as a remedy, and the Parties further agree to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief, this being in addition to and not in limitation of any other remedy to which they are entitled at law or in equity.

 

 

 

 

 

[ signature page follows ]

 

 
7

 

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written.

 

 

MOVIEPASS INC.

 

 

 

 

By:

 

 

Name:

Mitch Lowe

 

Title:

Chief Executive Officer

 

 

 

 

 

   

Signature Page to Transaction Voting and Support Agreement

 

 

 

 

 

STOCKHOLDER

 

 

 

 

Name:

 

 

 

 

 

   

 

   
     
 

Address:

 
     
     
     

 

Number of shares of Helios Common Stock Beneficially Owned:

 

Exhibit 10.5

 

LOCK-UP AGREEMENT

 

 

This Lock-Up Agreement (this “ Lock-Up Agreement ”) is being entered into as of [      ], 2017, by and between Helios and Matheson Analytics Inc., a Delaware corporation (“ Helios ”), on the one hand, and MoviePass Inc., a Delaware corporation ( “ MoviePass ”), on the other hand. Capitalized terms used but not defined herein have the respective meanings ascribed to them in the Agreement (as defined below). Helios and MoviePass are sometimes individually referred to herein as a “ Party ” and together as the “ Parties .”

 

WHEREAS , Helios and MoviePass have entered into that certain Securities Purchase Agreement, dated as of August 15, 2017 (the “ Agreement ”), pursuant to which Helios is agreeing to purchase and MoviePass is agreeing to sell and issue to Helios the Shares in exchange for consideration consisting, in part, of the Helios Shares, on the terms and subject to the conditions set forth in the Agreement; and

 

WHEREAS , as a condition to the Closing, Helios and MoviePass are entering into this Lock-Up Agreement with respect to the Helios Shares.

 

NOW, THEREFORE , in consideration of the foregoing premises and the covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, agree as follows:

 

1.      By signing this Lock-Up Agreement and subject to the exceptions discussed below, MoviePass covenants and agrees that, during the period commencing on the date of this Lock-Up Agreement and ending on the later of (x) one (1) year from the date hereof or (y) six (6) months after the date on which shares of MoviePass common stock began trading on The Nasdaq Stock Market or New York Stock Exchange (the “ Lock-Up Period ”), MoviePass shall not (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase, make any short sale or otherwise transfer or dispose of (or agree to transfer or dispose of), directly or indirectly, any of the Helios Shares or any securities received by MoviePass pursuant to a dividend, distribution, share split, recapitalization, division, combination or similar transaction in respect of the Helios Shares (collectively, the “ Securities ”), or establish or increase a put equivalent position or liquidate or decrease a call equivalent position with respect to the Securities within the meaning of Section 16 of the Securities and Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Securities, whether any such transaction is to be settled by delivery of the Securities, in cash or otherwise, (iii) permit to exist any security interest, lien, claim, pledge, option, right of first refusal, agreement, limitation on MoviePass’ voting rights, charge or other encumbrance of any nature whatsoever with respect to any of the Securities, (iv) engage in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of the Securities even if such Securities would be disposed of by someone other than MoviePass (including, without limitation, any short sale or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to any of the Securities or with respect to any security that includes, relates to, or derives any significant part of its value from such Securities) or (v) directly or indirectly initiate, solicit or encourage any Person to take actions which could reasonably be expected to lead to the occurrence of any of the foregoing.

 

 
 

 

 

2.        Notwithstanding the foregoing, MoviePass may transfer the Securities (i) to Helios; (ii) as a bona fide gift or gifts; (iii) (1) if MoviePass is transferring any of the Securities to another Person that is a direct or indirect affiliate or (2) if MoviePass distributes any of the Securities to its stockholders; or (iv) to Madison Global Partners, LLC as payment for fees associated with the transactions contemplated by the Agreement; provided , (x) in each of cases (i), (ii) and (iii), that such transfer shall not involve a disposition for value, (y) in each case, that each transferee agrees in writing to be bound by the terms of this Lock-Up Agreement and (z) in the case of (iv), that Madison Global Partners, LLC shall enter into a voting proxy agreement in substantially the same terms as MoviePass. For purposes of this Lock-Up Agreement, “ affiliate ” of MoviePass shall mean any business entity that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, MoviePass.  The term “ control ” in this paragraph means beneficial ownership of more than fifty percent (50%) of the issued and outstanding equity interest or share capital of an entity.

 

3.        MoviePass further agrees that, prior to engaging in any transaction or taking any other action in respect of the Securities that is permitted under the terms of this Lock-Up Agreement during the period from the date of this Lock-Up Agreement to the expiration of the Lock-Up Period, MoviePass will give written notice thereof to MoviePass at least three (3) business days prior to taking such action.

 

4.        Helios is hereby authorized to decline to make any transfer (or instruct its transfer agent to decline to make any transfer) of Securities if such transfer would constitute a violation or breach of this Lock-Up Agreement. Any certificate or instrument evidencing the Securities shall be notatd with the following legend:

 

“THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO A LOCK-UP AGREEMENT, AS MAY BE AMENDED FROM TIME TO TIME, (A COPY OF WHICH MANY BE OBTAINED UPON WRITTEN REQUEST FROM THE COMPANY), AND MAY ONLY BE TRANSFERRED PURSUANT TO SUCH LOCK-UP AGREEMENT.”

 

5.        MoviePass hereby represents and warrants that MoviePass has full power and authority to enter into this Lock-Up Agreement. All authority herein conferred or agreed to be conferred and any obligations of MoviePass shall be binding upon the successors, assigns or personal representatives of MoviePass.

 

6.        This Agreement will be governed by and construed under the laws of the State of New York without regard to conflicts-of-laws principles that would require the application of any other law. Any proceeding arising out of or relating to this Lock-Up Agreement may be brought in the state or federal courts located in the Borough of Manhattan, City of New York, New York and each of the parties irrevocably submits to the exclusive jurisdiction of each such court in any such proceeding, waives any objection it may now or hereafter have to venue or to convenience of forum, agrees that all claims in respect of the proceeding shall be heard and determined only in any such court and agrees not to bring any proceeding arising out of or relating to this Lock-Up Agreement in any other court.

 

 

[SIGNATURE PAGE FOLLOWS]

 

 
 

 

   

IN WITNESS WHEREOF , the Parties have executed this Lock-Up Agreement as of the date first above written.

 

 

 

 

HELIOS AND MATHESON ANALYTICS INC.

 

 

 

 

 

 

  By:  
  Name:  
  Title:  
     
     
     
  MOVIEPASS INC.
     
     
  By:  
  Name:  
  Title:  

 

 

[Signature page to MOVIEPASS - HELIOS – Lock-Up Agreement]

Exhibit 10.6

 

LOCK-UP AGREEMENT

 

This Lock-Up Agreement (this “ Lock-Up Agreement ”) is being entered into as of [ ], 2017, by and between Helios and Matheson Analytics Inc., a Delaware corporation (“ Helios ”), on the one hand, and MoviePass Inc., a Delaware corporation ( “ MoviePass ”), on the other hand. Capitalized terms used but not defined herein have the respective meanings ascribed to them in the Agreement (as defined below). Helios and MoviePass are sometimes individually referred to herein as a “ Party ” and together as the “ Parties .”

 

WHEREAS , Helios and MoviePass have entered into that certain Securities Purchase Agreement, dated as of August 15, 2017 (the “ Agreement ”), pursuant to which Helios is agreeing to purchase and MoviePass is agreeing to sell and issue to Helios the Shares on the terms and subject to the conditions set forth in the Agreement; and

 

WHEREAS , as a condition to the Closing, Helios and MoviePass are entering into this Lock-Up Agreement with respect to the Shares.

 

NOW, THEREFORE , in consideration of the foregoing premises and the covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, agree as follows:

 

 

1.      By signing this Lock-Up Agreement and subject to the exceptions discussed below, Helios covenants and agrees that, during the period commencing on the date of this Lock-Up Agreement and ending on the later of (x) one (1) year from the date hereof or (y) six (6) months after the date on which shares of MoviePass common stock began trading on The Nasdaq Stock Market or New York Stock Exchange (the “ Lock-Up Period ”), Helios shall not (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase, make any short sale or otherwise transfer or dispose of (or agree to transfer or dispose of), directly or indirectly, any of the Shares or any securities received by Helios pursuant to a dividend, distribution, share split, recapitalization, division, combination or similar transaction in respect of the Shares (collectively, the “ Securities ”), or establish or increase a put equivalent position or liquidate or decrease a call equivalent position with respect to the Securities within the meaning of Section 16 of the Securities and Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Securities, whether any such transaction is to be settled by delivery of the Securities, in cash or otherwise, (iii) permit to exist any security interest, lien, claim, pledge, option, right of first refusal, agreement, limitation on Helios’ voting rights (except as provided by the Voting Agreement), charge or other encumbrance of any nature whatsoever with respect to any of the Securities, (iv) engage in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of the Securities even if such Securities would be disposed of by someone other than Helios (including, without limitation, any short sale or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to any of the Securities or with respect to any security that includes, relates to, or derives any significant part of its value from such Securities) or (v) directly or indirectly initiate, solicit or encourage any Person to take actions which could reasonably be expected to lead to the occurrence of any of the foregoing

 

 
 

 

 

2.      Notwithstanding the foregoing, Helios may (i) transfer or pledge the Securities pursuant to the exercise of rights by the holder(s) of Helios’ senior secured convertible notes holding a security interest in Helios’ assets, (ii) transfer the Securities as a bona fide gift or gifts; or (iii) (1) if Helios is transferring any of the Securities to another Person that is a direct or indirect affiliate or (2) if Helios distributes any of the Securities to its stockholders; provided , (x) in each of cases (ii) and (iii), that such transfer shall not involve a disposition for value, (y) in each case, that each transferee agrees in writing to be bound by the terms of this Lock-Up Agreement and (z) in the case of (i), that such holder(s) shall enter into a voting proxy agreement in substantially the same terms as Helios. For purposes of this Lock-Up Agreement, “ affiliate ” of Helios shall mean any business entity that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, Helios.  The term “ control ” in this paragraph means beneficial ownership of more than fifty percent (50%) of the issued and outstanding equity interest or share capital of an entity.

 

3.      Helios further agrees that, prior to engaging in any transaction or taking any other action in respect of the Securities that is permitted under the terms of this Lock-Up Agreement during the period from the date of this Lock-Up Agreement to the expiration of the Lock-Up Period, Helios will give written notice thereof to MoviePass at least three (3) business days prior to taking such action.

 

4.      MoviePass is hereby authorized to decline to make any transfer (or instruct its transfer agent to decline to make any transfer) of Securities if such transfer would constitute a violation or breach of this Lock-Up Agreement. Any certificate or instrument evidencing the Shares shall be notated with the following legend:

 

“THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO A LOCK-UP AGREEMENT, AS MAY BE AMENDED FROM TIME TO TIME, (A COPY OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST FROM THE COMPANY), AND MAY ONLY BE TRANSFERRED PURSUANT TO SUCH LOCK-UP AGREEMENT.

 

5.      Helios hereby represents and warrants that Helios has full power and authority to enter into this Lock-Up Agreement. All authority herein conferred or agreed to be conferred and any obligations of Helios shall be binding upon the successors, assigns or personal representatives of Helios.

 

6.      This Agreement will be governed by and construed under the laws of the State of New York without regard to conflicts-of-laws principles that would require the application of any other law. Any proceeding arising out of or relating to this Lock-Up Agreement may be brought in the state or federal courts located in the Borough of Manhattan, City of New York, New York and each of the parties irrevocably submits to the exclusive jurisdiction of each such court in any such proceeding, waives any objection it may now or hereafter have to venue or to convenience of forum, agrees that all claims in respect of the proceeding shall be heard and determined only in any such court and agrees not to bring any proceeding arising out of or relating to this Lock-Up Agreement in any other court.

 

 

[SIGNATURE PAGE FOLLOWS]

 

 
 

 

 

IN WITNESS WHEREOF , the Parties have executed this Lock-Up Agreement as of the date first above written.

 

 

 

 

HELIOS AND MATHESON ANALYTICS INC.  

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name: 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MOVIEPASS INC.

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name: 

 

 

 

Title:

 

 

 

 

 

 

[ Signature page to HMNY-MOVIEPASS – Lock-Up Agreement ]

 

Exhibit 10.7

 

VOTING PROXY AGREEMENT

 

PROXY AGREEMENT, dated as of [               ], 2017 (this “ Proxy Agreement ”) by and between Helios and Matheson Analytics Inc., a Delaware corporation (the “ Helios ”) and Mitch Lowe, an individual (“ Lowe ”), in his capacity as Chief Executive Officer of MoviePass Inc. (“ MoviePass ”). Capitalized terms used but not defined herein have the meanings ascribed to them in the SPA (as defined below).

 

RECITALS

 

WHEREAS, pursuant to that certain Securities Purchase Agreement by and between MoviePass and Helios, dated August 15, 2017 (the “ SPA ”), Helios has acquired the MoviePass Shares;

 

WHEREAS, as an inducement to MoviePass to enter into the SPA, MoviePass has required, and Helios has agreed, to grant this proxy to Lowe, in his capacity as Chief Executive Officer of MoviePass, with respect to the MoviePass Shares.

 

NOW, THEREFORE in consideration of the mutual covenants and agreements set forth herein, the parties agree as follows:

 

ARTICLE I

VOTING PROXY

 

Section 1.01. Proxy .

 

(a) Helios hereby (i) grants to, and appoints, Lowe, in his capacity as Chief Executive Officer of MoviePass, Helios’ proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of Helios, to vote all of the MoviePass Shares that now are or hereafter may be held or otherwise beneficially owned by Helios, including any and all other shares of MoviePass Common Stock or other securities of MoviePass issued pursuant to a dividend, distribution, share split, recapitalization, division, combination or similar transaction in respect of the MoviePass Shares (the “ Covered Shares ”), (ii) revokes any and all proxies heretofore given in respect of the Covered Shares, and (iii) authorizes Mr. Lowe to file this Proxy Agreement and any substitution or revocation with MoviePass so that the existence of this Proxy Agreement is noted on the books and records of Helios.   If requested, Helios will execute supplementary proxies and consents to give effect to this Proxy Agreement in connection with any vote of capital stock of Helios or any Helios stockholder written consent solicitation. The power of attorney granted by Helios herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of Helios.  

 

(b) This Proxy Agreement is coupled with an interest and is granted in consideration of MoviePass entering into the SPA.

 

(c) The attorney-in-fact and proxy named above is hereby authorized and empowered by Helios at any time after the date hereof to act as Helios’ attorney-in-fact and proxy with respect to the Covered Shares and hereby agrees to vote the Covered Shares in the same proportion as the vote of all other holders of the MoviePass Common Stock, excluding any shares of MoviePass Common Stock held by Helios, and to exercise all voting, consent and similar rights of Helios with respect to the Covered Shares (including, without limitation, the power to execute and deliver written consents), at every annual, special, adjourned or postponed meeting of the stockholders of MoviePass and in every written consent in lieu of such a meeting. Helios shall not commit or agree to take any action inconsistent with the foregoing.

 

 
 

 

 

ARTICLE II

MISCELLANEOUS

 

Section 2.01. Effective Date . This Proxy Agreement shall become effective upon the date first written above.

 

Section 2.02. Applicable Law; Dispute Resolution . This Proxy Agreement shall be construed in accordance with and governed by the laws of the State of Delaware without regard to principles of conflict of laws. The parties agree that irreparable damage would occur in the event any of the provisions of this Proxy Agreement were not performed in accordance with the terms hereof and that such damage would not be adequately compensable in monetary damages. Accordingly, the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this Proxy Agreement, to enforce specifically the terms and provisions of this Proxy Agreement exclusively in the Court of Chancery or other federal or state courts of the State of Delaware, in addition to any other remedies at law or in equity, and each party agrees it will not take any action, directly or indirectly, in opposition to another party seeking relief. Each of the parties hereto agrees to waive any bonding requirement under any applicable law, in the case any other party seeks to enforce the terms by way of equitable relief. Furthermore, each of the parties hereto (a) consents to submit itself to the exclusive personal jurisdiction of the Court of Chancery or, to the extent that the Delaware Court of Chancery declines to exercise jurisdiction over the matter, other federal or state courts of the State of Delaware in the event any dispute arises out of this Proxy Agreement or the transactions contemplated by this Proxy Agreement, (b) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (c) agrees that it shall not bring any action relating to this Proxy Agreement or the transactions contemplated by this Proxy Agreement in any court other than the Court of Chancery or, to the extent that the Delaware Court of Chancery declines to exercise jurisdiction over the matter, other federal or state courts of the State of Delaware, and (d) each of the parties irrevocably consents to service of process by a reputable overnight mail delivery service, signature requested, to the address set forth below the signature of such party or to such address as subsequently modified by written notice given in accordance with Section 2.05 .

 

Section 2.03. Assigns . This Proxy Agreement may not be assigned, whether outright or by operation of law, by any party hereto without the prior written consent of the non-assigning party.

 

Section 2.04. Entire Agreement; Termination . This Proxy Agreement contains the entire understanding among the parties hereto and supersedes all prior written or oral agreements among them respecting the within subject matter, unless otherwise provided herein. There are no representations, agreements, arrangements or understandings, oral or written, among the parties hereto relating to the subject matter of this Proxy Agreement that are not fully expressed herein. This Agreement shall be effective as of the date hereof and shall continue in effect until and shall terminate on the later of (i) eighteen (18) months after the date on which MoviePass’ Common Stock began trading on the Nasdaq Stock Market or the New York Stock Exchange and (ii) the date on which Lowe is no longer the Chief Executive Officer of MoviePass.

 

Section 2.05. Notices. All notices and other communications given or made pursuant to this Proxy 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 2.05. 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.

 

 
 

 

 

Section 2.06. Waiver . No consent or waiver, express or implied, by any party to, or of any breach or default by another party in the performance of, this Proxy Agreement shall be construed as a consent to or waiver of any subsequent breach or default in the performance by such other party of the same or any other obligations hereunder.

 

Section 2.07. Counterparts . This Proxy Agreement may be executed in several counterparts, which shall be treated as originals for all purposes, and all counterparts so executed shall constitute one agreement, binding on all the parties hereto, notwithstanding that not all the parties are signatory to the original or the same counterpart. Any such counterpart shall be admissible into evidence as an original hereof against the person who executed it.

 

Section 2.08. Headings . The headings in this Proxy Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein.

 

Section 2.09. Severability . The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, including, without limitation, as a result of any rules and regulations of the SEC, Nasdaq or NYSE then applicable to Helios, the parties will substitute for any invalid, illegal or unenforceable provision a suitable and equitable provision that carries out, so far as may be valid, legal and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision. Section 2.10. Amendments and Waivers . The provisions of this Proxy Agreement may be modified or amended at any time and from time to time, and particular provisions of this Proxy Agreement may be waived or modified, with and only with an agreement or consent in writing signed by MoviePass, Lowe (or, if applicable, his duly appointed successor as Chief Executive Officer of MoviePass or any further successor thereto) and Helios.

 

Section 2.11. Further Assistance . The parties hereto shall execute and deliver all documents, provide all information and take or refrain from all such action as may be necessary or appropriate to achieve the purposes of this Proxy Agreement.

 

Section 2.12. Third Party Beneficiary . MoviePass is an intended third party beneficiary of this Proxy Agreement.

 

[ Remainder of Page Intentionally Left Blank ]

 

 
 

 

 

IN WITNESS WHEREOF this Proxy Agreement has been signed by each of the parties hereto, and shall be effective as of the date first above written.

 

 

 

 

HELIOS AND MATHESON

ANALYTICS INC.

 
       
 

By:

   
   

Name:

 
   

Title:

 
       
  Address:    
       
    350 5th Avenue, Suite 7520  
    New York, NY 10018  
       
       
       
       
    Mitch lowe  
       
       
  Address:  
   

Chief Executive Officer

MoviePass Inc.

175 Varick Street, Suite 604

New York, NY 10012

 

 

 

 

 

 

Acknowledged and Agreed:

 

MoviePass Inc.

 

By:

   
 

Name:

 
 

Title:

 

 

 

 

 

 

[Signature Page to Voting Proxy Agreement]  

 

Exhibit 10.8

 

VOTING PROXY AGREEMENT

 

PROXY AGREEMENT, dated as of [        ], 2017 (this “ Proxy Agreement ”) by and between MoviePass Inc., a Delaware corporation (the “ MoviePass ) and Theodore Farnsworth, an individual (“ Farnsworth ”), in his capacity as Chief Executive Officer of Helios and Matheson Analytics Inc. (“ Helios ”). Capitalized terms used but not defined herein have the meanings ascribed to them in the SPA (as defined below).

 

RECITALS

 

WHEREAS, pursuant to that certain Securities Purchase Agreement by and between MoviePass and Helios, dated August 15, 2017 (the “ SPA ”), MoviePass has acquired the Helios Closing Shares and may acquire the Helios Milestone Shares;

 

WHEREAS, as an inducement to Helios to enter into the SPA, Helios has required, and MoviePass has agreed, to grant this proxy to Farnsworth, in his capacity as Chief Executive Officer of Helios, with respect to the Helios Shares.

 

NOW, THEREFORE in consideration of the mutual covenants and agreements set forth herein, the parties agree as follows:

 

ARTICLE I

VOTING PROXY

 

Section 1.01. Proxy .

 

(a) MoviePass hereby (i) grants to, and appoints, Farnsworth, in his capacity as Chief Executive Officer of Helios, MoviePass’ proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of MoviePass, to vote all of the Helios Shares that now are or hereafter may be held or otherwise beneficially owned by MoviePass, including any and all other shares of Helios Common Stock or other securities of Helios issued pursuant to a dividend, distribution, share split, recapitalization, division, combination or similar transaction in respect of the Helios Shares (the “ Covered Shares ”), (ii) revokes any and all proxies heretofore given in respect of the Covered Shares, and (iii) authorizes Mr. Farnsworth to file this Proxy Agreement and any substitution or revocation with Helios so that the existence of this Proxy Agreement is noted on the books and records of Helios.   If requested, MoviePass will execute supplementary proxies and consents to give effect to this Proxy Agreement in connection with any vote of capital stock of MoviePass or any MoviePass stockholder written consent solicitation. The power of attorney granted by MoviePass herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of MoviePass.  

 

(b) This Proxy Agreement is coupled with an interest and is granted in consideration of Helios entering into the SPA.

 

(c) The attorney-in-fact and proxy named above is hereby authorized and empowered by MoviePass at any time after the date hereof to act as MoviePass’ attorney-in-fact and proxy with respect to the Covered Shares and hereby agrees to vote the Covered Shares in the same proportion as the vote of all other holders of the Common Stock, excluding any shares of Common Stock held by MoviePass, and to exercise all voting, consent and similar rights of MoviePass with respect to the Covered Shares (including, without limitation, the power to execute and deliver written consents), at every annual, special, adjourned or postponed meeting of the stockholders of Helios and in every written consent in lieu of such a meeting. MoviePass shall not commit or agree to take any action inconsistent with the foregoing.

 

 
 

 

 

ARTICLE II

MISCELLANEOUS

 

Section 2.01. Effective Date . This Proxy Agreement shall become effective upon the date first written above.

 

Section 2.02. Applicable Law; Dispute Resolution . This Proxy Agreement shall be construed in accordance with and governed by the laws of the State of Delaware without regard to principles of conflict of laws. The parties agree that irreparable damage would occur in the event any of the provisions of this Proxy Agreement were not performed in accordance with the terms hereof and that such damage would not be adequately compensable in monetary damages. Accordingly, the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this Proxy Agreement, to enforce specifically the terms and provisions of this Proxy Agreement exclusively in the Court of Chancery or other federal or state courts of the State of Delaware, in addition to any other remedies at law or in equity, and each party agrees it will not take any action, directly or indirectly, in opposition to another party seeking relief. Each of the parties hereto agrees to waive any bonding requirement under any applicable law, in the case any other party seeks to enforce the terms by way of equitable relief. Furthermore, each of the parties hereto (a) consents to submit itself to the exclusive personal jurisdiction of the Court of Chancery or, to the extent that the Delaware Court of Chancery declines to exercise jurisdiction over the matter, other federal or state courts of the State of Delaware in the event any dispute arises out of this Proxy Agreement or the transactions contemplated by this Proxy Agreement, (b) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (c) agrees that it shall not bring any action relating to this Proxy Agreement or the transactions contemplated by this Proxy Agreement in any court other than the Court of Chancery or, to the extent that the Delaware Court of Chancery declines to exercise jurisdiction over the matter, other federal or state courts of the State of Delaware, and (d) each of the parties irrevocably consents to service of process by a reputable overnight mail delivery service, signature requested, to the address set forth below the signature of such party or to such address as subsequently modified by written notice given in accordance with Section 2.05 .

 

Section 2.03. Assigns . This Proxy Agreement may not be assigned, whether outright or by operation of law, by any party hereto without the prior written consent of the non-assigning party.

 

Section 2.04. Entire Agreement; Termination . This Proxy Agreement contains the entire understanding among the parties hereto and supersedes all prior written or oral agreements among them respecting the within subject matter, unless otherwise provided herein. There are no representations, agreements, arrangements or understandings, oral or written, among the parties hereto relating to the subject matter of this Proxy Agreement that are not fully expressed herein. This Agreement shall be effective as of the date hereof and shall continue in effect until and shall terminate on the later of (i) eighteen (18) months after the date on which MoviePass’ Common Stock began trading on the Nasdaq Stock Market or the New York Stock Exchange and (ii) the date on which Farnsworth is no longer the Chief Executive Officer of Helios.

 

 
 

 

 

Section 2.05. Notices. All notices and other communications given or made pursuant to this Proxy 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 2.05. 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.

 

Section 2.06. Waiver . No consent or waiver, express or implied, by any party to, or of any breach or default by another party in the performance of, this Proxy Agreement shall be construed as a consent to or waiver of any subsequent breach or default in the performance by such other party of the same or any other obligations hereunder.

 

Section 2.07. Counterparts . This Proxy Agreement may be executed in several counterparts, which shall be treated as originals for all purposes, and all counterparts so executed shall constitute one agreement, binding on all the parties hereto, notwithstanding that not all the parties are signatory to the original or the same counterpart. Any such counterpart shall be admissible into evidence as an original hereof against the person who executed it.

 

Section 2.08. Headings . The headings in this Proxy Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein.

 

Section 2.09. Severability . The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, including, without limitation, as a result of any rules and regulations of the SEC, Nasdaq or NYSE then applicable to MoviePass, the parties will substitute for any invalid, illegal or unenforceable provision a suitable and equitable provision that carries out, so far as may be valid, legal and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision. Section 2.10. Amendments and Waivers . The provisions of this Proxy Agreement may be modified or amended at any time and from time to time, and particular provisions of this Proxy Agreement may be waived or modified, with and only with an agreement or consent in writing signed by Helios, Farnsworth (or, if applicable, his duly appointed successor as Chief Executive Officer of Helios or any further successor thereto) and MoviePass.

 

Section 2.11. Further Assistance . The parties hereto shall execute and deliver all documents, provide all information and take or refrain from all such action as may be necessary or appropriate to achieve the purposes of this Proxy Agreement.

 

Section 2.12. Third Party Beneficiary . Helios is an intended third party beneficiary of this Proxy Agreement.

 

[ Remainder of Page Intentionally Left Blank ]

 

 
 

 

 

IN WITNESS WHEREOF this Proxy Agreement has been signed by each of the parties hereto, and shall be effective as of the date first above written.

 

 

 

 

MOVIEPASS INC.

 
       
 

By:

   
   

Name:

 
   

Title:

 
       
 

Address:  

 
       
   

175 Varick Street, Suite 604

New York, NY 10012

 
       
       
       
       
    THEODORE FARNSWORTH  
     
     
 

Address:

 
     
   

Chief Executive Officer

Helios and Matheson Analytics Inc.

350 5th Avenue, Suite 7520

New York, NY 10018

 

 

 

 

 

Acknowledged and Agreed:

 

Helios and Matheson Analytics Inc.

 

By:

 
 

Name:

 

Title:

 

 

 

 

[Signature Page to Voting Proxy Agreement]  

Exhibit 10.9

 

MOVIEPASS INC.

 

SECOND AMENDED AND RESTATED
SUBORDINATED CONVERTIBLE NOTE PURCHASE AGREEMENT

 

This Second Amended and Restated Subordinated Convertible Note Purchase Agreement (this “ Agreement ”) is made as of August 15, 2017 by and between MoviePass Inc., a Delaware corporation (the “ Company ”), and each of the purchasers listed on Exhibit A attached to this Agreement (each a “ Purchaser ” and together the “ Purchasers ”).

 

RECITALS

 

A.     The Company and certain of the Purchasers (the “ Existing Purchasers ”) have previously entered into that certain Subordinated Convertible Note Purchase Agreement dated as of June 9, 2016, as amended and restated by that certain Amended and Restated Subordinated Convertible Note Purchase Agreement dated as of January 22, 2017 (the “ Amended and Restated NPA ”), which was amended by that certain Amendment No. 1 to the Amended and Restated Subordinated Convertible Note Purchase Agreement dated as of February 1, 2017 (“ Amendment No. 1 ”, and, collectively with the Amended and Restated NPA, the “ Prior Agreement ”), pursuant to which the Company issued and sold certain convertible promissory notes in substantially the form attached to this Agreement as Exhibit B to the Existing Purchasers (the “ Prior Notes ”).

 

B.      The Company and the Existing Purchasers desire to amend and restate the Prior Agreement in its entirety as set forth herein, and, pursuant to Section 11(c) of the Prior Agreement, the Prior Agreement can be amended by the holders of at least a majority of the aggregate unpaid principal amount of the Prior Notes (the “ Requisite Majority ”).

 

C.      The undersigned Existing Purchasers represent the Requisite Majority.

 

D.      The Company desires to issue and sell to Helios and Matheson Analytics Inc., a Delaware corporation (“ Helios ”), and Helios desires to purchase from the Company, a subordinated convertible promissory note in substantially the form attached to this Agreement as Exhibit C (the “ HMA Note ”) which shall be convertible on the terms stated therein into equity securities of the Company, and which shall be pari passu in right of repayment with the Prior Notes, except as to the differential treatment of the HMA Note contemplated by Section 2 of the HMA Note.

 

E.      The HMA Note is being sold and issued to Helios as contemplated by Subsection 1.1(c)(ii)(A) of that certain Securities Purchase Agreement, dated the date hereof, between the Company and Helios (the “ SPA ”).

 

F.      The HMA Note and the Prior Notes are referred to herein collectively as the “ Notes ”. The Notes and the equity securities issuable upon conversion thereof (and any securities issuable upon conversion of such equity securities) are referred to herein collectively as the “ Securities .” Capitalized terms not otherwise defined herein have the meaning given to them in the Notes.

 

 
 

 

 

AGREEMENT

 

The parties hereby agree as follows:

 

A.            Amendment of Prior Agreement . Pursuant to Section 11(c) of the Prior Agreement, effective and contingent upon execution of this Agreement by the Company and the Requisite Majority, the Prior Agreement is hereby amended and restated in its entirety to read as set forth in this Agreement, and the Company and the Existing Purchasers shall be bound by the provisions hereof as the sole agreement of the Company and the Purchasers with respect to the subject matter hereof. Each Prior Note shall be deemed a ‘‘Note” pursuant to this Agreement, and each Existing Purchaser shall be deemed a “Purchaser” pursuant to this Agreement. The obligations of each Purchaser hereunder are several and not joint.

 

B.             Amendment of Prior Notes . The Company and the Existing Purchasers agree that the rights and obligations of the Existing Purchasers pursuant to the Prior Notes shall remain unchanged, except as provided herein.

 

1.      Purchase and Sale of Notes .

 

(a)            Sale and Issuance of Notes . Subject to the terms and conditions of this Agreement, each Purchaser agrees to purchase at the applicable Closing (as defined below) and the Company agrees to sell and issue to each Purchaser at such Closing a Note, in the form of Exhibit B attached hereto with respect to the Existing Purchasers and in the form of Exhibit C with respect to Helios, in the principal amount set forth opposite such Purchaser’s name on Exhibit A . The purchase price of each Note shall be equal to 100% of the principal amount of such Note. The Company’s agreements with each of the Purchasers are separate agreements, and the sales of the Notes to each of the Purchasers are separate sales.

 

(b)            Closing; Delivery .

 

(i)       The purchase and sale of the Notes shall take place remotely by the electronic exchange among the parties and their counsel of all documents and deliverables required under this Agreement on the date hereof, or in such other manner or at such other time and place as the Company and the Purchasers mutually agree upon, orally or in writing (which time and place are designated as the “ Initial Closing ”). In the event there is more than one closing, the term “Closing” shall apply to each such closing, unless otherwise specified herein.

 

(ii)      At each Closing, the Company shall deliver to each Purchaser the Note to be purchased by such Purchaser at such Closing against (A) payment of the purchase price therefor by check payable to the Company or by wire transfer to a bank designated by the Company, (B) delivery of counterpart signature pages to this Agreement and the applicable Note, and (C) delivery of a validly completed and executed IRS Form W-8BEN / W-8BEN-E, IRS Form W-9 or similar form, as applicable, establishing such Purchaser’s exemption from withholding tax, which forms are attached to this Agreement as Exhibit D .

 

(iii)     The Company shall not sell any additional Notes following the date hereof.

 

 
2

 

 

2.            Stock Purchase Agreement . Each Purchaser understands and agrees that the conversion of the Notes into equity securities of the Company will require such Purchaser’s execution of certain agreements relating to the purchase and sale of such securities as well as any rights relating to such equity securities.

 

3.            Notes to Rank Pari Passu; Subordination of Notes to Senior Indebtedness; Notes Senior to Future Incurred Indebtedness .

 

(a)            Notes to Rank Pari Passu . The Notes and all other obligations of the Company under this Agreement are and at all times shall remain direct and unsecured obligations of the Company ranking pari passu as against the assets of the Company with all other Notes from time to time issued and outstanding hereunder without any preference among themselves.

 

(b)            Subordination of Notes to Senior Indebtedness . The indebtedness evidenced by the Notes shall be expressly subordinated, to the extent and in the manner set forth in the Notes, in right of payment to the prior payment in full of all of the Company’s Senior Indebtedness, and each Purchaser hereby agrees to enter into such agreements and take such additional action as may be necessary to perfect such subordination.

 

(c)           Notes Senior to Future Incurred Indebtedness . The Notes shall be senior in right of payment to any indebtedness, other than Senior Indebtedness, incurred by the Company from and after the date hereof and the Company hereby agrees to cause any holder of such future incurred indebtedness of the Company to enter into such agreements and to take such additional action as may be necessary to subordinate such future incurred indebtedness as a condition precedent to incurring such indebtedness.

 

4.              Representations and Warranties of the Company . The Company hereby represents and warrants to each Purchaser that, as of the Initial Closing:

 

(a)      Organization, Good Standing and Qualification . The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on the business, assets (including intangible assets), liabilities, condition (financial or otherwise) property or results of operation of the Company (a “ Material Adverse Effect ”).

 

(b)      Authorization . All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and the authorization, sale, issuance and delivery of the Notes, the shares of the Company’s capital stock issuable on conversion thereof, and the performance of all obligations of the Company hereunder and thereunder has been taken or will be taken prior to the Initial Closing, except that the Company has not obtained the necessary corporate approval for the authorization of any shares of Next Equity Securities. This Agreement and the Notes, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

 

 
3

 

 

(c)      Disqualification . The Company is not disqualified from relying on Rule 506 of Regulation D (“Rule 506”) under the Securities Act of 1933, as amended (the “ Securities Act ”) for any of the reasons stated in Rule 506(d) in connection with the issuance and sale of the Notes to the Purchasers. The Company has furnished to each Purchaser, a reasonable time prior to the date hereof, a description in writing of any matters that would have triggered disqualification under Rule 506(d) but which occurred before September 23, 2013, in each case, in compliance with the disclosure requirements of Rule 506.

 

(d)      Governmental Consents and Filings . Assuming the accuracy of the representations made by the Purchasers in Section 5 of this Agreement, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of the Company in connection with the consummation of the transactions contemplated by this Agreement, except for filings pursuant to applicable state securities laws and Regulation D of the Securities Act.

 

(e)      Litigation . There is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or, to the Company’s knowledge, currently threatened against the Company that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. Neither the Company nor, to the Company’s knowledge, any of its officers or directors is a party to or named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality (in the case of officers and directors, such as would affect the Company). There is no action, suit, proceeding or investigation by the Company pending or which the Company intends to initiate. The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened (or any basis therefor known to the Company) involving the prior employment of any of the Company’s employees, their services provided in connection with the Company’s business, or any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers.

 

(f)      Intellectual Property . To its knowledge, the Company owns or possesses sufficient legal rights to all patents, trademarks, service marks, tradenames, copyrights, trade secrets, licenses, information and proprietary rights and processes necessary for its business without any conflict with, or infringement of, the rights of others. The Company is not a party to any licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights and processes or intellectual property rights of any other person or entity, in each case, other than licenses or other agreements entered into in the ordinary course of business. The Company has not received any communications alleging that the Company has violated or, by conducting its business, would violate any of the patents, trademarks, service marks, tradenames, copyrights, trade secrets or other proprietary rights or processes of any other person or entity. Each employee, consultant and officer of the Company has executed an agreement with the Company regarding confidentiality and proprietary information and assignment of intellectual property. The Company is not aware that any of its employees or consultants is in violation thereof, and the Company will use its best efforts to prevent any such violation.

 

 
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(g)      Compliance with Other Instruments . The Company is not in violation or default of any provisions of its Certificate of Incorporation or Bylaws, or of any instrument, judgment, order, writ, or decree, or under any note, indenture, mortgage, lease, agreement, contract or purchase order to which it is a party or by which it is bound or, to its knowledge, of any provision of federal or state statute, rule or regulation applicable to the Company. The execution, delivery and performance of this Agreement, the Notes, and the consummation of the transactions contemplated hereby or thereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company.

 

(h)      Title to Property and Assets . The Company owns its property and assets free and clear of all mortgages, deeds of trust, liens, loans and encumbrances, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do not materially impair the Company’s ownership or use of such property or assets. With respect to the property and assets it leases, the Company is in compliance in all material respects with such leases and, to its knowledge, holds a valid leasehold interest free of any liens, claims or encumbrances other than to the lessors of such property or assets.

 

5.               Representations and Warranties of the Purchasers . Each Purchaser hereby represents and warrants to the Company that, as of the date of the applicable Closing:

 

(a)      Authorization . Such Purchaser has full power and authority to enter into this Agreement . This Agreement, when executed and delivered by the Purchaser, will constitute a valid and legally binding obligation of the Purchaser, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

 

(b)      Purchase Entirely for Own Account . This Agreement is made with the Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s execution of this Agreement, the Purchaser hereby confirms, that the Securities to be acquired by the Purchaser will be acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Purchaser further represents that the Purchaser does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Purchaser either has not been formed for the specific purpose of acquiring the Securities, or each beneficial owner of equity securities of or equity interests in the Purchaser is an accredited investor as defined in Rule 50l (a) of Regulation D promulgated under the Securities Act.

 

 
5

 

 

(c)           Knowledge . The Purchaser is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities.

 

(d)           Restricted Securities . The Purchaser understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser’s representations as expressed herein. The Purchaser understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Purchaser must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Purchaser acknowledges that the Company has no obligation to register or qualify the Securities for resale. The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Purchaser’s control, and which the Company is under no obligation and may not be able to satisfy.

 

(e)           No Public Market . The Purchaser understands that no public market now exists for any of the securities issued by the Company, and that the Company has made no assurances that a public market will ever exist for the Securities.

 

(f)            Legends . The Purchaser understands that the Securities, and any securities issued in respect thereof or exchange therefor, may bear one or all of the following legends:

 

(i)      “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.”

 

(ii)     Any legend required by the securities laws of any state to the extent such laws are applicable to the Securities or any securities issued in respect thereof or exchange therefor.

 

 
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(g)           Accredited or Sophisticated Investor . Each of the Existing Purchasers hereby represents that he, she or it is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. Helios hereby represents that Helios (i) is a sophisticated investor; (ii) does not require the assistance of an investment advisor or other purchaser representative to purchase the Securities; (iii) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its prospective investment in the Securities; (iv) has the ability to bear the economic risks of its prospective investment for an indefinite period of time; (v) can afford the complete loss of such investment; and (vi) recognizes that the investment in the Securities involves substantial risk.

 

(h)           Disqualification . The Purchaser represents that neither the Purchaser, nor any person or entity with whom Purchaser shares beneficial ownership of Company securities, is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(l)(i) to (viii) under the Securities Act. Purchaser also agrees to notify the Company if Purchaser or any person or entity with whom Purchaser shares beneficial ownership of Company securities becomes subject to such disqualifications after the date hereof (so long as Purchaser or any such person beneficially owns any equity securities of the Company).

 

(i)             Lock-up Agreement .

 

(i)        Lock-up Period; Agreement . If so requested by the Company or the underwriters in connection with the initial public offering of the Company’s securities registered under the Securities Act, excluding any resale registrations thereunder, Purchaser shall not sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company however or whenever acquired (except for those being registered) without the prior written consent of the Company or such underwriters, as the case may be, for 180 days from the effective date of the registration statement, plus such additional period, to the extent required by FINRA rules, up to a maximum of 216 days from the effective date of the registration statement, and Purchaser shall execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of such offering; provided , however , this provision shall terminate and be of no further force or effect as to Helios from and after the closing of the transaction contemplated in the SPA, and shall be superseded and replaced by the Lock-Up Agreement (as defined in the SPA) executed by Helios.

 

(ii)       Limitations . The obligations described in Section 5(i)(i) shall apply only if all officers and directors are subject to similar restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all 1% security holders of the Company, and shall not apply to a registration relating solely to employee benefit plans, or to a registration relating solely to a transaction pursuant to Rule 145 under the Securities Act.

 

(iii)      Stop-Transfer Instructions . In order to enforce the foregoing covenants, the Company may impose stop-transfer instructions with respect to the Company’s securities held by each Purchaser (and the securities of every other person subject to the restrictions in Section 5(i)(i)).

 

(iv)      Transferees Bound . Each Purchaser agrees that prior to the Company’s initial public offering (which excludes any resale registrations under the Securities Act) it will not transfer securities of the Company unless each transferee agrees in writing to be bound by all of the provisions of this Section 5(i).

 

 
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(j)      Foreign Investors . If a Purchaser is not a United States person (as defined by Rule 902(k) under the Securities Act), such Purchaser hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Securities, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of the Securities. Such Purchaser’s subscription and payment for, and his or her continued beneficial ownership of the Securities, will not violate any applicable securities or other laws of Purchaser’s jurisdiction. Such Purchaser also hereby represents that such Purchaser is not a “10-percent shareholder” as defined in Section 871(h) of the Internal Revenue Code of 1986, as amended.

 

(k)      Foreign Investment Regulations . Each Purchaser represents that any consideration to be paid for Securities pursuant to this Agreement does not derive from activity that is or was contrary to law or from a person or location that is or was the subject of a United States embargo or other economic sanction and that no consideration to be paid for Securities in accordance with this Agreement will provide the basis for liability for any person under United States anti-money laundering laws or economic sanctions laws. Each Purchaser represents that neither such Purchaser nor any of its nominees or affiliates is on the specially designated OFAC list or similar European Union watch list.

 

6.       Additional Rights of Helios and Existing Purchasers .

 

(a)      Right of First Refusal . From the date hereof and until the earlier of eighteen (18) months after the date on which shares of the Company’s common stock began trading on The Nasdaq Stock Market or New York Stock Exchange or the third anniversary of the date hereof, notwithstanding any SPA Termination or repayment, prepayment or conversion of the HMA Note prior to such time, if the Company proposes to offer or sell any Next Equity Securities, the Company shall first offer such Next Equity Securities to Helios.

 

(i)      The Company shall give prior written notice (the “ Offer Notice ”) to Helios, stating (A) its bona fide intention to offer such Next Equity Securities, (B) the number of such Next Equity Securities to be offered, and (C) the price and terms, if any, upon which it proposes to offer such Next Equity Securities.

 

(ii)      By written notification to the Company within twenty (20) days after the Offer Notice is given, Helios may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, all or a portion of the Next Equity Securities. The closing of any sale pursuant to this Section 6(a) shall occur within the later of ninety (90) days of the date that the Offer Notice is given and the date of initial sale of Next Equity Securities pursuant to Section 6(a)(iii) .

 

 
8

 

 

(iii)     If all Next Equity Securities referred to in the Offer Notice are not elected to be purchased or acquired as provided in Section 6(a)(ii), the Company may, during the ninety (90) day period following the expiration of the periods provided in Section 6(a)(ii), offer and sell the remaining unsubscribed portion of such Next Equity Securities to any person(s) or entity/entities at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice. If the Company does not enter into an agreement for the sale of the Next Equity Securities within such period, or if such agreement is not consummated within thirty (30) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Next Equity Securities shall not be offered unless first reoffered to Helios in accordance with this Section 6(a).

 

(b)           Most Favored Terms . Subject to Section 11(c) hereof, in the event that any of the Prior Notes is amended to provide for terms that are more favorable than the terms of the Prior Note set forth in Exhibit B hereto, then each outstanding Prior Note shall be deemed to be amended to incorporate such more favorable terms without any additional action to be taken by the Company or the holders of such Prior Notes. Subject to Section 11(c), in the event that any of the Prior Notes is amended to provide for terms that are more favorable than the terms of the HMA Note set forth in Exhibit C hereto, then the HMA Note shall be deemed to be amended to incorporate such more favorable terms without any additional action to be taken by the Company or the holder of the HMA Note. Upon the request by any holder of a Note, the Company may issue a new Note incorporating such updated terms in exchange for the cancellation of the previously outstanding Note. The Company shall not offer or pay any consideration to any holder of a Note in connection with an amendment or waiver of any Note or this Agreement without offering and paying the same such consideration to all other holders of the Notes on a pro rata basis.

 

(c)            Acquisition Transactions .

 

(i)     Right of First Look .

 

(A) From the date hereof and until the earlier of the Closing (as defined in the SPA) or satisfaction in full of all obligations of the Company under the Note issued to Helios (the “ Look Period ”), if the Company determines to commence any process that involves soliciting, initiating or encouraging (including by way of furnishing nonpublic information), or taking any other action to knowingly facilitate, any inquiries or the making of any proposal or offer (including, without limitation, any proposal or offer to its stockholders) that constitutes, or may reasonably be expected to lead to, any Acquisition Transaction (as defined below), the Company shall first notify Helios in writing as promptly as practicable after having made such determination and shall negotiate in good faith with Helios on an exclusive basis for a period of not less than thirty (30) days from the date of receipt of such notice with respect to an Acquisition Transaction.

 

(B) An “ Acquisition Transaction ” means any of the following (other than the transactions contemplated by the SPA) in one transaction or a series of related transactions: (1) any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or other similar transaction involving the Company or any subsidiary of the Company; (2) any sale, lease, exchange, transfer or other disposition to a person or entity of assets or businesses that constitute or represent 10% or more of the total revenue, operating income or assets of the Company and its subsidiaries, taken as a whole; or (3) any tender offer or exchange offer for capital stock of the Company.

 

 
9

 

 

(ii) Right of Last Look .

 

(A) During the Look Period, if the Company determines to pursue a proposal or offer from a third party to effect an Acquisition Transaction (a “ Third Party Offer ”), the Company shall first notify Helios in writing as promptly as practicable after having made such determination (which notice shall specify the material terms and conditions thereof and the identity of such third party (including material agreements or proposed material agreements)) (the “ Determination Notice ”). Helios shall then have ten (10) business days (the “ Counteroffer Period ”) following the date that such Determination Notice is received by Helios to notify the Company in writing if it wishes to make an offer for an Acquisition Transaction in lieu of such Third Party Offer, which notice shall include the form and amount of consideration and the structure of the Acquisition Transaction proposed by Helios (the “ Helios Proposal ”). After the expiration of the Counteroffer Period, if (1) the Company has not received a Helios Proposal or (2) the board of directors of the Company (the “ Board ”) has determined that such Third Party Offer constitutes a Superior Proposal (as defined below), the Board may furnish information to, and enter into discussions with, the third party who made the Third Party Offer and the Company shall be free thereafter (without liability to Helios) to enter into a definitive agreement formalizing the Third Party Offer with such third party.

 

(B) A “ Superior Proposal ” means a Third Party Offer that the Board determines, in its good faith judgment (after consultation with a financial advisor reasonably acceptable to Helios), to be (1) more favorable to the stockholders of the Company from a financial point of view than the Helios Proposal (including any amendments) and (2) reasonably capable of being completed, taking into account all financial, legal, regulatory and other aspects of such Third Party Offer; provided , however , that any such offer shall not be deemed to be a “Superior Proposal” if any financing required to consummate the transaction contemplated by such offer is not highly likely to be obtained.

 

7.              Conditions of the Purchasers’ Obligations at Closing . The obligations of each Purchaser to the Company under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

 

(a)      Representations and Warranties . The representations and warranties of the Company contained in Section 4 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing.

 

(b)      Qualifications . All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be obtained and effective as of the Closing.

 

 
10

 

 

8.              Conditions of the Company’s Obligations at Closing . The obligations of the Company to each Purchaser under this Agreement are subject to the fulfillment, on or before the applicable Closing, of each of the following conditions, unless otherwise waived:

 

(a)     Representations and Warranties. The representations and warranties of each Purchaser contained in Section 5 shall be true on and as of the applicable Closing with the same effect as though such representations and warranties had been made on and as of the applicable Closing.

 

(b)      Qualifications . All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be obtained and effective as of the applicable Closing.

 

(c)      Delivery of Form W-8 BEN or Form W-9 . Each Purchaser shall have completed and delivered to the Company a validly executed IRS Form W-8 BEN or IRS Form W-9, as applicable, establishing such Purchaser’s exemption from withholding tax.

 

9.             Finder’s Fee . Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. Each Purchaser agrees, severally and not jointly, to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which such Purchaser or any of its officers, employees, or representatives is responsible. The Company agrees to indemnify and hold harmless each Purchaser from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

 

10.            Exculpation Among Purchasers . Each Purchaser acknowledges that it is not relying upon any person, firm or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. Each Purchaser agrees that no Purchaser nor the respective controlling persons, officers, directors, partners, agents, or employees of any Purchaser shall be liable for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the Securities.

 

11.            Miscellaneous .

 

(a)      Governing Law; Venue . The validity, interpretation, construction and performance of this Agreement, and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto 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 Agreement shall be in the state or federal courts located in the City of Los Angeles in the State of California.

 

(b)      Entire Agreement . This Agreement and the documents referred to herein constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto are expressly canceled.

 

 
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(c)      Amendments and Waivers . Any term of this Agreement may be amended or waived only with the written consent of the Company, Helios and the holders of at least a majority of the aggregate unpaid principal amount of the Prior Notes, provided that Section 6(b) of this Agreement may be amended or waived only with the written consent of the holders of all of the then-outstanding Notes. Any amendment or waiver effected in accordance with this Section 11(c) shall be binding upon each Purchaser and each transferee of the Securities, each future holder of all such Securities, and the Company. Notwithstanding anything to the contrary in the Prior Notes, so long as the HMA Note remains outstanding, the Prior Notes shall not be amended and no provision thereof may be waived by the Company or any holder thereof without the prior written consent of Helios.

 

(d)      Successors and Assigns . Except as otherwise provided in this Agreement, this Agreement, and the rights and obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives.

 

(e)      Notices . Any notice, demand or request required or permitted to be given under this Agreement 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 such party’s signature page or Exhibit A hereto, 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)      Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

 

(g)      Construction . This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

 

(h)      Counterparts . This Agreement 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 agreement. Execution of a facsimile or scanned copy will have the same force and effect as execution of an original, and a facsimile or scanned signature will be deemed an original and valid signature.

 

 
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(i)      Corporate Securities Law . THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF BUSINESS OVERSIGHT OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.

 

(j)      Waiver of Conflicts . Each party to this Agreement acknowledges that Orrick, Herrington & Sutcliffe LLP, counsel for the Company, has in the past performed and may continue to perform legal services for certain of the Purchasers in matters unrelated to the transactions described in this Agreement, including the representation of such Purchasers in venture capital financings and other matters. Accordingly, each party to this Agreement hereby (a) acknowledges that they have had an opportunity to ask for information relevant to this disclosure; and (b) gives its informed consent to Orrick, Herrington & Sutcliffe LLP’s representation of certain of the Purchasers in such unrelated matters and to Orrick, Herrington & Sutcliffe LLP’s representation of the Company in connection with this Agreement and the transactions contemplated hereby.

 

[Signature Pages Follow]

 

 
13

 

 

The parties have executed this Second Amended and Restated Subordinated Convertible Note Purchase Agreement as of the date first written above.

 

 

 

THE COMPANY :  

       

 

MOVIEPASS INC.  

       

 

By:

   
    (Signature)  
       
       
  Name:    
       
  Title:    
       
 

Address: 175 Varick Street, Suite 604

                 New York, NY 10012

 

 

 

 

[Signature Page to the Second Amended and Restated Subordinated Convertible Note
Purchase Agreement of MoviePass Inc.]

 

 

 

 

The parties have executed this Second Amended and Restated Subordinated Convertible Note Purchase Agreement as of the date first written above.

 

 

 

 

THE PURCHASERS:

       
       

 

By:

 

 
    (Signature)  
       
       
  Name:    
  Title:    
       
 

Address:

 

 

 

 

[ Signature Page to the Second Amended and Restated Subordinated Convertible Note
Purchase Agreement of MoviePass Inc.]

 

 

 

 

EXHIBIT A

 

SCHEDULE OF PURCHASERS

 


Name and Address

Note Principal
Amount


Purchase Date

[●]

[●]

 

[●]

 

 

 

 

 

EXHIBIT B

 

FORM OF PRIOR NOTE

 

 

 

 

 

 

 

EXHIBIT C

 

FORM OF HMA NOTE

 

 

 

 

 

EXHIBIT D

 

PURCHASER WITHHOLDING EXEMPTIONS

 

 

 
 

 

 



 

 

DISCLOSURE SCHEDULES TO THE

 

SECURITIES PURCHASE AGREEMENT

 

 



 

These Disclosure Schedules are being delivered by Helios and Matheson Analytics Inc., a Delaware corporation (the “Company”), to each buyer identified on the signature pages to that certain Securities Purchase Agreement, dated August 15, 2017 (the “Agreement”). Capitalized terms used herein, but not defined herein, shall have the respective meanings ascribed thereto in the Agreement.

 

The inclusion of any information in these Disclosure Schedules shall not be deemed to be an admission or evidence of the materiality of such information, nor shall it establish a standard of materiality for any purpose whatsoever. Matters reflected in these Disclosure Schedules are not necessarily limited to matters required by the Agreement to be disclosed in these Disclosure Schedules. Neither the specification of any dollar amount in the representations and warranties contained in the Agreement nor the inclusion of any specific item in these Disclosure Schedules is intended to imply that such amounts, higher or lower amounts, the items so included or other items, are or are not material, and no Party shall use the fact of the setting of such amounts or the fact of the inclusion of any such item in these Disclosure Schedules in any dispute or controversy between the Parties as to whether any obligation, item or matter is or is not material, or may constitute an event or condition which could be considered to have a Material Adverse Effect.

 

No disclosure in these Disclosure Schedules relating to any possible or alleged breach or violation of any Law or contract shall be construed as an admission or indication that any such breach or violation exists or has actually occurred. In disclosing the information in these Disclosure Schedules, each of the Company and its Subsidiaries expressly does not waive any attorney-client privilege associated with such information or any protection afforded by the work-product doctrine with respect to any of the matters disclosed or discussed herein. References in these Disclosure Schedules to any Contract or other agreement, whether or not binding, include references to such contract’s or other agreement’s exhibits, annexes and schedules.

 

 
 

 

 

Section 3(a)

 

Subsidiaries

 

1.     Helios and Matheson Global Services Private Limited, a corporation incorporated under the laws of India, of which the Company owns 99.99% of the outstanding equity and voting power.

 

2.     Zone Technologies, Inc., a Nevada corporation (“Zone”), which is a wholly owned subsidiary of the Company.

 

3.     HMNY Zone Loan LLC (“NewSub”), a Delaware limited liability company, which is a wholly owned subsidiary of the Company.

 

 
 

 

 

Section 3(g)

 

Placement Agent Fee

 

Fee Amount:

 

(1) eight percent (8.00%) of the gross cash proceeds actually received by the Company pursuant to the Notes and the Warrants, as and when applicable; plus (2) a warrant to purchase 8% of the number of shares of the Company’s common stock (“Common Stock”) into which the unrestricted principal of the Notes becomes convertible, as and when applicable, at an exercise price equal to the greater of (i) the applicable conversion price of the Series A Note or Series B Note, as applicable and (ii) the consolidated closing bid price of Common Stock on the Principal Market on the date Palladium becomes entitled to the warrant, without regard to any increase in shares issuable under a ratchet, “true up” or similar provision of the Notes.

 

 
 

 

 

Section 3(r)(iii)

 

Affiliate Shares

 

Number of shares of Common Stock reserved for issuance pursuant to Convertible Securities (other than the Notes and the Warrants): 16,923,639 shares of Common Stock, among which a total of 15,518,639 shares are reserved in the three accounts for prior note offerings to Hudson Bay and a total of 1,005,000 shares are reserved for the Company’s 2014 Equity Incentive Plan.

 

Number of shares of Common Stock owned by “affiliates”: 3,521,352 shares of Common Stock.

 

 
 

 

 

Section 3(s)

 

Indebtedness and Other Contracts

 

The Company issued (1) convertible notes dated December 2, 2016 in the aggregate principal amount of $ 6,720,000 of which $1,076,818 in aggregate principal amount is outstanding; and (2) convertible notes dated February 7, 2017 in the aggregate principal amount of $5,681,818 of which $5,000,000 in aggregate principal amount is outstanding. In connection with this indebtedness, UCC Financing Statements have been filed in Delaware and Nevada to reflect the creditor’s security interest in certain collateral of the Company, Zone and NewSub.

 

Zone issued a promissory note to NewSub dated September 7, 2016, as amended by the Amendment dated October 25, 2016, in the aggregate principal amount of $1,113,305. In connection with this indebtedness, a UCC Financing Statement has been filed in Nevada to reflect NewSub’s security interest in certain collateral of Zone.

 

The Company has material customer service contracts with the Company’s four largest customers.

 

In addition, the Company has entered into that certain Securities Purchase Agreement and the related transaction documents with MoviePass Inc., dated as of August 15, 2017 (the “MoviePass SPA”).

 

 
 

 

 

Section 3(t)

 

Litigation

 

(1)     On August 24, 2016, 3839 Holdings LLC (“3839 Holdings”) filed a summons and complaint in the Supreme Court of the State of New York, New York County, against Theodore Farnsworth (“Mr. Farnsworth”), Highland Holdings Group, Inc. (“HHGI”) and Zone Technologies, Inc. (“Zone”), collectively referred to as the “Zone Defendants”. The claims arise out of 3839 Holdings’ purchase of a 10% interest in HHGI and an unsuccessful real estate investment. The Complaint asserted claims for: (i) breach of contract, breach of the implied covenant of good faith and fair dealing and breach of fiduciary duty against Mr. Farnsworth and HHGI; (ii) unjust enrichment against Mr. Farnsworth and Zone; (iii) fraudulent conveyance against all of the Zone Defendants; and (iv) alter ego liability against Mr. Farnsworth for HHGI’s obligations. The suit also sought, as part of any final relief it may obtain after trial, an injunction against the merger between Zone and the Company, along with an award of attorneys’ fees.

 

On or about December 7, 2016, 3839 Holdings amended the complaint to add the Company as a defendant, alleging claims against the Company for unjust enrichment, fraudulent conveyance, aiding and abetting a fraudulent conveyance, tortious interference with contract, permanent injunction and attorneys’ fees and cost. 3839 Holdings seeks compensation from the Company and the Zone Defendants in an amount of no less than $3 million plus prejudgment interest, attorney’s fees and costs and expenses. 3839 Holdings is also seeking an injunction to prevent the Company and the Zone Defendants from transferring or disposing of assets.

 

The Company and Zone believe that the claims are baseless and intend to vigorously defend the action.

 

(2)     The Company has received demand letters dated February 23, 2017 and March 9, 2017 on behalf of certain minority stockholders, which letters have been provided to the Buyers and their counsel. There has been no further correspondence.

 

 
 

 

 

Section 3(x) (ii)

 

Intellectual Property Rights

 

None.

 

 
 

 

 

Section 3(nn)

 

Management

 

The following matters relate to the Company’s stockholder, Helios & Matheson Information Technology, Ltd., an Indian corporation (“HMIT”).

 

 

1.

In the Matter of The Companies Act, 1956 and HMIT . A petition was filed on April 18. 2015 by EXIM Bank, USA in the Madras High Court (Tamil Nadu, India) seeking for winding up of HMIT under ss. 433, 434 of Companies Act, 1956. Loans in an approximate amount of $12 million were made by UPS Capital Credit, USA to HMIT’s subsidiary, Helios and Matheson (Singapore) Pte. Ltd., and guaranteed by HMIT. At the time of default, approximately $3.8 million in principle amount remained unpaid. EXIM Bank claims that UPS Capital Credit has assigned the loan to them, and have initiated winding up proceedings on that ground by giving a power of attorney to an Indian agent. HMIT is contesting the maintainability of the claim made by Export Import Bank of the ground of jurisdiction and the matter is pending before the Madras High Court. The Madras High Court has in the meanwhile declined to grant any interim relief to the Petitioner, EXIM Bank when the same was pressed for by EXIM Bank in the summer of 2015. The matter is still pending before the Madras High Court with no adverse order or finding against HMIT, till date.

 

 

2.

Complaint filed by Dr. Ranjith Sindoori against HMIT . A complaint was filed against HMIT on April 1, 2015 by Dr. Ranjith Sindoori with the Economic Offenses Headquarters, a division of the Chennai City Police Department. The complaint alleges a violation of Section 5 of the Tamil Nadu Protection of Investors Deposits Act and connected ss. 420 of Indian Penal Code. Dr. Sindoori alleged that he had deposited a total of $5,950,000 rupees (or approximately $88,000) with HMIT on which he was to receive a 12% return. The money was not repaid to Dr. Sindoori in accordance with the terms of the deposit agreement. The matter is under investigation and no charge-sheet has been filed.

 

 

3.

In the Matter of The Companies Act, 1956 and HMIT . In February 2015, Mrs. Baby Sundaram, along with her husband Mr. Sundaram and a certain L. George Williams filed petitions seeking winding up of HMIT under ss. 433, 434 of Companies Act, 1956. Mr. and Mrs. Sundaram alleged that they deposited approximately $6,000 with HMIT and were not repaid in accordance with the terms of the deposit agreement. Mr. Williams alleged that he deposited approximately $4,500 and that he was not repaid in accordance with the terms of the deposit agreement. The Company proposed a plan to repay its smaller creditors first and deposited substantial sums before the Court (about 10 Crores INR), but due to the objections of a few of the creditors, the Company Court took a view that the plan was unworkable, thereby admitting the said petitions. On appeal, the Appellate Bench of the Madras High Court stayed in the ruling, in view of the prima facie errors in the approach of the single judge of the Company Court and in part because the HMIT had deposited adequate funds with the lower court to repay the all of the smaller creditors. The appeal is pending final adjudication before the Appellate Bench of the Madras High Court.

 

 
 

 

 

 

4.

Action by the Securities and Exchange Board of India . On January 31, 2011, the Securities and Exchange Board of India (“SEBI”) concluded that HMIT violated certain of SEBI’s rules as they related to disclosures made by HMIT in a press release dated May 11, 2005, which was sent to the Indian stock exchanges on May 12, 2005, regarding the acquisition of the company vMoksha. SEBI concluded that the press release contained misstatements and withheld price sensitive information from investors who were thereby misled. SEBI imposed a monetary penalty on HMIT of approximately $41,000. HMIT appealed the decision before the Securities Appellate Tribunal (Mumbai). On November 16, 2011, the Securities Appellate Tribunal determined that the press release did not contain misstatements but confirmed that price sensitive information was withheld. Based on its findings, the Securities Appellate Tribunal reduced the penalty from approximately $41,000 to approximately $25,000.

 

 
 

 

 

Section 4(d)

 

Use of Proceeds

 

The Company shall use the proceeds to pay (i) $5,000,000 in cash to MoviePass, Inc. upon signing of the MoviePass SPA in exchange for a convertible note of MoviePass; and (ii) up to $10,000,000 to MoviePass pursuant to a subordinated convertible promissory note to be issued by the Company to MoviePass, Inc. upon the closing of the transactions contemplated by the MoviePass SPA, in accordance with the terms thereof.

 

 
 

 

 

Section 7(a)(xxiii)

 

Principal Stockholders

 

(1) Theodore Farnsworth, an individual; (2) Helios & Matheson Information Technology, Ltd, an Indian corporation, and (3) its wholly-owned subsidiary, Helios & Matheson Inc., a Delaware corporation .

 

 

Exhibit 10.10

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the “ Agreement ”), dated as of August 15, 2017, is by and among 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 each of the investors listed on the Schedule of Buyers attached hereto (individually, a “ Buyer ” and collectively, the “ Buyers ”).

 

RECITALS

 

A.     The Company and each Buyer is executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “ 1933 Act ”), and Rule 506(b) of Regulation D (“ Regulation D ”) as promulgated by the United States Securities and Exchange Commission (the “ SEC ”) under the 1933 Act.

 

B.     The Company has authorized (i) a new series of senior secured convertible notes of the Company, in the aggregate original principal amount of $10,050,000, substantially in the form attached hereto as Exhibit A-1 (the “ Series A Notes ”), which Series A Notes shall be convertible into shares of Common Stock (as defined below) (the shares of Common Stock issuable pursuant to the terms of the Series A Notes, including, without limitation, upon conversion or otherwise, collectively, the “ Series A Conversion Shares ”), in accordance with the terms of the Notes and (ii) a new series of senior secured convertible notes of the Company, in the aggregate original principal amount of $250,000, substantially in the form attached hereto as Exhibit A-2 (the “ Series B Notes ”, and together with the Series A Notes, the “ Notes ”), which Series B Notes shall be convertible into shares of Common Stock (as defined below) (the shares of Common Stock issuable pursuant to the terms of the Series B Notes, including, without limitation, upon conversion or otherwise, collectively, the “ Series B Conversion Shares ”, and together with the Series A Conversion Shares, the “ Conversion Shares ”), in accordance with the terms of the Series B Notes.

 

C.     Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (i) a Series A Note in the aggregate original principal amount set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers (the “ Initial Series A Note ”), (ii) a Series A Note in the aggregate original principal amount set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers (the “ Additional Series A Note ”), (iii) a Series B Note in the aggregate original principal amount set forth opposite such Buyer’s name in column (5) on the Schedule of Buyers; and (iv) a warrant to initially acquire up to that aggregate number of additional shares of Common Stock set forth opposite such Buyer’s name in column (6) on the Schedule of Buyers (the “ Warrants ”)(as exercised, collectively, the “ Warrant Shares ”).

 

D.     At the Closing, the parties hereto shall execute and deliver a Registration Rights Agreement, in the form attached hereto as Exhibit B (the “ Registration Rights Agreement ”), pursuant to which the Company has agreed to provide certain registration rights with respect to the Registrable Securities (as defined in the Registration Rights Agreement), under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

 

 
 

 

 

E.     The Notes, Conversion Shares, the Warrants and Warrant Shares are collectively referred to herein as the “ Securities .”

 

F.     On December 1, 2016, the Company and certain investors (including a Buyer) (the “ December Buyers ”) entered into a securities purchase agreement (the “ December Securities Purchase Agreement ”), pursuant to which such December Buyers purchased certain senior secured convertible notes of the Company (the “ December Notes ”).

 

G.     On February 7, 2017, the Company and certain investors (including a Buyer) (the “ February Buyers ”) entered into a securities purchase agreement (the “ February Securities Purchase Agreement ”), pursuant to which such February Buyers purchased certain senior secured convertible notes of the Company (the “ February Notes ”).

 

H.     The Notes will rank pari passu with the December Notes and the February Notes and senior to all outstanding and future indebtedness of the Company, and its Subsidiaries (as defined below) (other than Permitted Indebtedness (as defined in the Notes) secured by Permitted Liens (as defined in the Notes)) and will be secured by a security interest in the Collateral (as defined in the Security Agreement (as defined below)), pursuant to (i) a security agreement in the form attached hereto as Exhibit D (the “ Security Agreement ”) and (ii) a guaranty executed by each U.S. Subsidiary of the Company, in the form attached hereto as Exhibit E (the “ Guaranty ”, and together with the Security Agreement, the Perfection Certificate (as defined below) and the other security documents and agreements entered into in connection with this Agreement and each of such other documents and agreements, as each may be amended or modified from time to time, collectively, the “ Security Documents ”) pursuant to which the U.S. Subsidiaries of the Company shall guarantee the obligations of the Company under the Transaction Documents (as defined below).

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each Buyer hereby agree as follows:

 

1.            PURCHASE AND SALE OF NOTES AND WARRANTS.

 

(a)      Purchase of Notes and Warrants . Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees to purchase from the Company on the Closing Date (as defined below) (i) an Initial Series A Note in the original principal amount as is set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers, (ii) an Additional Series A Note in the original principal amount as is set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers; (iii) a Series B Note in the original principal amount as is set forth opposite such Buyer’s name in column (5) on the Schedule of Buyers and (iii) Warrants to initially acquire up to that aggregate number of Warrant Shares as is set forth opposite such Buyer’s name in column (6) on the Schedule of Buyers.

 

 
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(b)      Closing . The closing (the “ Closing ”) of the purchase of the Notes and the Warrants by the Buyers shall occur at the offices of Kelley Drye & Warren LLP, 101 Park Avenue, New York, NY 10178. The date and time of the Closing (the “ Closing Date ”) shall be 10:00 a.m., New York time, on the first (1st) Business Day on which the conditions to the Closing set forth in Sections 6 and 7 below are satisfied or waived (or such other date as is mutually agreed to by the Company and each Buyer). As used herein “ Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to remain closed.

 

(c)     Purchase Price . The aggregate purchase price for the Notes and the Warrants to be purchased by each Buyer (the “ Purchase Price ”) shall be the aggregate amount as set forth opposite such Buyer’s name in column (7) on the Schedule of Buyers, consisting of (i) a payment in cash of such aggregate amount as set forth opposite such Buyer’s name in column (8) on the Schedule of Buyers (the “ Cash Purchase Price ”) (less, in the case of any Buyer, the amounts withheld pursuant to Section 4(g)) to the Company for the Notes and the Warrants to be issued and sold to such Buyer at the Closing, by wire transfer of immediately available funds in accordance with the Flow of Funds Letter (as defined below) and (ii) the issuance by such Buyer of a promissory note in the form attached hereto as Exhibit F (each, an “ Investor Note ”, and collectively, the “ Investor Notes ”) in the aggregate original principal amount set forth opposite such Buyer’s name in column (9) on the Schedule of Buyers (each, an “ Investor Note Amount ”). Each Buyer shall pay, whether by a payment in cash or delivery of an Investor Note, approximately $0.875 for each $1.00 of principal amount of Notes and related Warrants to be purchased by such Buyer at the Closing. Each Buyer and the Company agree that the Notes and the Warrants constitute an “investment unit” for purposes of Section 1273(c)(2) of the Internal Revenue Code of 1986, as amended (the “ Code ”). The Buyers and the Company mutually agree that the allocation of the issue price of such investment unit between the Notes and the Warrants in accordance with Section 1273(c)(2) of the Code and Treasury Regulation Section 1.1273-2(h) shall be an aggregate amount allocated to the Warrants and to the Notes as the parties shall mutually agree on or prior to the Closing Date, and neither the Buyers nor the Company shall take any position inconsistent with such allocation in any tax return or in any judicial or administrative proceeding in respect of taxes. In addition, at the Closing, an authorized person of such Buyer shall certify in a written certificate in the form attached hereto as Exhibit G (the “ Investor Collateral Certificate ”) that as of the Closing Date the bank account described on Schedule I to such Investor Note, which secures such Investor Note in accordance therewith, contains at least the Investor Note Amount of cash, in U.S. dollars and immediately available funds (and shall keep a cash amount equal to the principal of such Investor Note in such bank account as long as such Investor Note remains outstanding).

 

(d)      Form of Payment . On the Closing Date, (i) each Buyer shall (A) pay its respective Cash Purchase Price (less, in the case of any Buyer, the amounts withheld pursuant to Section 4(g)) to the Company for the Notes and the Warrants to be issued and sold to such Buyer at the Closing, by wire transfer of immediately available funds in accordance with the Flow of Funds Letter (as defined below) and (B) deliver an Investor Note to the Collateral Agent in such original principal amount as is set forth across from such Buyer’s name in column (6) of the Schedule of Buyers and (ii) the Company shall deliver to each Buyer (A) an Initial Series A Note in the aggregate original principal amount as is set forth opposite such Buyer’s name in column (3) of the Schedule of Buyers, (B) an Additional Series A Note in the aggregate original principal amount as is set forth opposite such Buyer’s name in column (4) of the Schedule of Buyers, (C) a Series B Note in the aggregate original principal amount as is set forth opposite such Buyer’s name in column (5) of the Schedule of Buyers and (D) a Warrant pursuant to which such Buyer shall have the right to initially acquire up to such aggregate number of Warrant Shares as is set forth opposite such Buyer’s name in column (6) of the Schedule of Buyers, in each case, duly executed on behalf of the Company and registered in the name of such Buyer or its designee.

 

 
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(e)            Consent; Variable Price Securities Acknowledgment .

 

(i)        December Note Consent . The December Buyer signatory hereto, in its capacity as a holder of December Notes, hereby consents to the transactions contemplated hereby (x) agrees the Notes shall constitute Permitted Indebtedness (as defined in the December Notes) and Permitted Liens (as defined in the December Notes) thereunder, which shall rank pari passu with the Notes, (y) waives any violation of Sections 4(k) and 4(n) of the December Securities Purchase Agreement with respect hereto and (z) immediately prior to the Closing, the December Buyer shall prepay $230,000 of that certain promissory note of the December Buyer issued as payment of the purchase price of the December Note. The Company hereby acknowledges and agrees that the Series B Note, upon issuance in accordance herewith, constitutes a Variable Price Security (as defined in the December Note) and, from and after the Closing, any holder of a December Note shall have the right to substitute the Alternate Conversion Price (as defined in the Series B Note) for the Conversion Price in the December Note pursuant to Section 7(b) of the December Note and the Company has obtained the consent of the Principal Market (as defined below) with respect thereto. The December Buyer acknowledges and agrees that notwithstanding anything set forth in the December Notes or the related Security Agreement (as defined in the December Notes, the “ December Security Agreement ”), MoviePass (as defined below) shall not be required to be a Grantor (as defined in the December Security Agreement) under the December Security Agreement.

 

(ii)      February Note Consent . The February Buyer signatory hereto, in its capacity as a holder of February Notes, hereby consents to the transactions contemplated hereby (x) agrees the Notes shall constitute Permitted Indebtedness (as defined in the February Notes) and Permitted Liens (as defined in the February Notes) thereunder, which shall rank pari passu with the Notes, (y) waives any violation of Sections 4(k) and 4(n) of the February Securities Purchase Agreement with respect hereto and (z) immediately prior to the Closing, the February Buyer shall prepay $5,000,000 of that certain promissory note of the February Buyer issued as payment of the purchase price of the February Note. The Company hereby acknowledges and agrees that the Series B Note, upon issuance in accordance herewith, constitutes a Variable Price Security (as defined in the February Note) and, from and after the Closing, any holder of a February Note shall have the right to substitute the Alternate Conversion Price (as defined in the Series B Note) for the Conversion Price in the February Note pursuant to Section 7(b) of the February Note and the Company has obtained the consent of the Principal Market (as defined below) with respect thereto. The February Buyer acknowledges and agrees that notwithstanding anything set forth in the February Notes or the related Security Agreement (as defined in the February Notes, the “ February Security Agreement ”), MoviePass shall not be required to be a Grantor (as defined in the February Security Agreement) under the February Security Agreement.

 

2.            BUYER’S REPRESENTATIONS AND WARRANTIES.

 

Each Buyer, severally and not jointly, represents and warrants to the Company with respect to only itself that, as of the date hereof and as of the Closing Date:

 

(a)        Organization; Authority . Such Buyer is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents (as defined below) to which it is a party and otherwise to carry out its obligations hereunder and thereunder.

 

(b)        No Public Sale or Distribution . Such Buyer (i) is acquiring its Note and Warrants, (ii) upon conversion of its Note will acquire the Conversion Shares issuable upon conversion thereof, and (iii) upon exercise of its Warrants (other than pursuant to a Cashless Exercise (as defined in the Warrants)) will acquire the Warrant Shares issuable upon exercise thereof, in each case, for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof in violation of applicable securities laws, except pursuant to sales registered or exempted under the 1933 Act; provided, however, by making the representations herein, such Buyer does not agree, or make any representation or warranty, to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption from registration under the 1933 Act. Such Buyer does not presently have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities in violation of applicable securities laws. For purposes of this Agreement, “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any Governmental Entity or any department or agency thereof

 

 
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(c)      Accredited Investor Status . Such Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.

 

(d)      Reliance on Exemptions . Such Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire the Securities.

 

(e)      Information . Such Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities that have been requested by such Buyer. Such Buyer and its advisors, if any, have been afforded (i) the opportunity to ask questions of and receive answers from the Company concerning the terms and conditions of the offering of the Notes and the merits and risks of investing in the Notes; and (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment. Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify, amend or affect such Buyer's right to rely on the Company's representations and warranties contained herein. Such Buyer understands that its investment in the Securities involves a high degree of risk. Such Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.

 

(f)      No Governmental Review . Such Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

 

 
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(g)      Transfer or Resale . Such Buyer understands that except as provided in the Registration Rights Agreement and Section 4(h) hereof: (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the Company (if requested by the Company) an opinion of counsel, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) such Buyer provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor rule thereto) (collectively, “ Rule 144 ”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC promulgated thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. Notwithstanding the foregoing, the Securities may be pledged in connection with a bona fide margin account or other loan or financing arrangement secured by the Securities and such pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Buyer effecting a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document (as defined in Section 3(b)), including, without limitation, this Section 2(g).

 

(h)      Validity; Enforcement . This Agreement and the Registration Rights Agreement have been duly and validly authorized, executed and delivered on behalf of such Buyer and shall constitute the legal, valid and binding obligations of such Buyer enforceable against such Buyer in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

(i)      No Conflicts . The execution, delivery and performance by such Buyer of this Agreement and the Registration Rights Agreement and the consummation by such Buyer of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of such Buyer, or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Buyer is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to such Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of such Buyer to perform its obligations hereunder.

 

(j)      Company’s Representation and Warranties . Buyer acknowledges and agrees that the Company does not make and has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.

 

 
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3.            REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents and warrants to each of the Buyers that, as of the date hereof and as of the Closing Date:

 

(a)      Organization and Qualification . Each of the Company and each of its Subsidiaries are entities duly organized and validly existing and in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authority to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. Each of the Company and each of its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to have a Material Adverse Effect (as defined below). As used in this Agreement, “ Material Adverse Effect ” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any Subsidiary, individually or taken as a whole, (ii) the transactions contemplated hereby or in any of the other Transaction Documents or (iii) the authority or ability of the Company or any of its Subsidiaries to perform any of their respective obligations under any of the Transaction Documents (as defined below). Other than the Persons (as defined below) set forth on Schedule 3(a), the Company has no Subsidiaries. “ Subsidiaries ” means any Person in which the Company, directly or indirectly, (I) owns any of the outstanding capital stock or holds any equity or similar interest of such Person or (II) controls or operates all or any part of the business, operations or administration of such Person, and each of the foregoing, is individually referred to herein as a “ Subsidiary .”

 

(b)      Authorization; Enforcement; Validity . The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents and to issue the Securities in accordance with the terms hereof and thereof. Each Subsidiary has the requisite power and authority to enter into and perform its obligations under the Transaction Documents to which it is a party. The execution and delivery of this Agreement and the other Transaction Documents by the Company and its Subsidiaries, and the consummation by the Company and its Subsidiaries of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Notes and the reservation for issuance and issuance of the Conversion Shares issuable upon conversion of the Notes and the issuance of the Warrants and the reservation for issuance and the issuance of the Warrant Shares issuable upon exercise of the Warrants) have been duly authorized by the Company’s board of directors and each of its Subsidiaries’ board of directors or other governing body, as applicable, and other than (i) the filing with the SEC of one or more Registration Statements in accordance with the requirements of the Registration Rights Agreement, (ii) a Form D with the SEC and any other filings as may be required by any state securities agencies, (iii) the Form 8-K Filing, (iv) a Listing of Additional Shares Notification with the Principal Market, and (v) the Stockholder Approval (as defined below) (collectively, the “ Required Filings and Approvals ”) no further filing, consent or authorization is required by the Company, its Subsidiaries, their respective boards of directors or their stockholders or other governing body. This Agreement has been, and the other Transaction Documents to which it is a party will be prior to the Closing, duly executed and delivered by the Company, and each constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities law. Prior to the Closing, the Transaction Documents to which each Subsidiary is a party will be duly executed and delivered by each such Subsidiary, and shall constitute the legal, valid and binding obligations of each such Subsidiary, enforceable against each such Subsidiary in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities law. “ Transaction Documents ” means, collectively, this Agreement, the Notes, the Warrants, the Investor Note, the Security Documents, the Registration Rights Agreement, the Voting and Lockup Agreement, the Irrevocable Transfer Agent Instructions (as defined below) and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection with the transactions contemplated hereby and thereby, as may be amended from time to time.

 

 
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(c)      Issuance of Securities . The issuance of the Notes and the Warrants are duly authorized and upon issuance in accordance with the terms of the Transaction Documents shall be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, mortgages, defects, claims, liens, pledges, charges, taxes, rights of first refusal, encumbrances, security interests and other encumbrances (collectively “ Liens ”) with respect to the issuance thereof. As of the Closing, the Company shall have reserved from its duly authorized capital stock not less than the greater of (i) 15 million shares of Common Stock and (ii) the sum of (A) 200% of the maximum number of Conversion Shares issuable upon conversion of the Series A Notes (assuming for purposes hereof that (x) the Series A Notes are convertible at the Alternate Conversion Price (as defined in the Series A Notes) assuming an Alternate Conversion Date (as defined in the Series A Notes) as of the Closing Date, (y) interest on the Series A Notes shall accrue through the eight month anniversary of the Closing Date and will be converted in shares of Common Stock at a conversion price equal to the Alternate Conversion Price (as defined in the Series A Notes) assuming an Alternate Conversion Date (as defined in the Series A Notes) as of the Closing Date and (z) any such conversion shall not take into account any limitations on the conversion of the Series A Notes set forth in the Series A Notes); (B) 200% of the maximum number of Conversion Shares issuable upon conversion of the Series B Notes (assuming for purposes hereof that (x) the Series B Notes are convertible at the Alternate Conversion Price (as defined in the Series B Notes) assuming an Alternate Conversion Date (as defined in the Series B Notes) as of the Closing Date, (y) interest on the Series B Notes shall accrue through the eight month anniversary of the Closing Date and will be converted in shares of Common Stock at a conversion price equal to the Alternate Conversion Price (as defined in the Series B Notes) assuming an Alternate Conversion Date (as defined in the Series B Notes) as of the Closing Date and (z) any such conversion shall not take into account any limitations on the conversion of the Series B Notes set forth in the Series B Notes); and (C) 125% of the maximum number of Warrant Shares initially issuable upon exercise of the Warrants (without taking into account any limitations on the exercise of the Warrants set forth therein). Upon issuance or conversion in accordance with the Notes or exercise in accordance with the Warrants (as the case may be), the Conversion Shares, and the Warrant Shares, respectively, when issued, will be validly issued, fully paid and nonassessable and free from all preemptive or similar rights or Liens with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Subject to the accuracy of the representations and warranties of the Buyers in this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the 1933 Act.

 

 
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(d)      No Conflicts . The execution, delivery and performance of the Transaction Documents by the Company and its Subsidiaries and the consummation by the Company and its Subsidiaries of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Notes and the reservation for issuance and issuance of the Conversion Shares issuable upon conversion of the Notes and the issuance of the Warrants and the reservation for issuance and the issuance of the Warrant Shares issuable upon exercise of the Warrants) will not (i) result in a violation of the Certificate of Incorporation (as defined below) (including, without limitation, any certificate of designation contained therein), Bylaws (as defined below), certificate of formation, memorandum of association, articles of association, bylaws or other organizational documents of the Company or any of its Subsidiaries, or any capital stock or other securities of the Company or any of its Subsidiaries, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) in any respect under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, foreign, federal and state securities laws and regulations and the rules and regulations of the Nasdaq Capital Market (the Principal Market ”) and including all applicable foreign, federal and state laws, rules and regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected.

 

(e)      Consents . Neither the Company nor any Subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with (other than the filing with the SEC of one or more Registration Statements in accordance with the requirements of the Registration Rights Agreement, a Listing of Additional Shares Notification filed with the Principal Market, a Form D with the SEC and any other filings as may be required by any state securities agencies), any Governmental Entity (as defined below) or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its respective obligations under or contemplated by the Transaction Documents, in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company or any Subsidiary is required to obtain pursuant to the preceding sentence have been or will be obtained or effected on or prior to the Closing Date, and neither the Company nor any of its Subsidiaries are aware of any facts or circumstances which might prevent the Company or any of its Subsidiaries from obtaining or effecting any of the registration, application or filings contemplated by the Transaction Documents. Assuming receipt of the Stockholder Approval to the extent required pursuant to Nasdaq Listing Rule 5635 for conversion of the Notes, the Company is not in violation of the requirements of the Principal Market and has no knowledge of any other facts or circumstances which could reasonably lead to delisting or suspension of the Common Stock in the foreseeable future. “ Governmental Entity ” means any nation, state, county, city, town, village, district, or other political jurisdiction of any nature, federal, state, local, municipal, foreign, or other government, governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal), multi-national organization or body; or body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature or instrumentality of any of the foregoing, including any entity or enterprise owned or controlled by a government or a public international organization or any of the foregoing.

 

 
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(f)      Acknowledgment Regarding Buyer’s Purchase of Securities . The Company acknowledges and agrees that each Buyer is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and that no Buyer is (i) an officer or director of the Company or any of its Subsidiaries, (ii) an “affiliate” (as defined in Rule 144) of the Company or any of its Subsidiaries or (iii) to its knowledge, a “beneficial owner” of more than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”)). The Company further acknowledges that no Buyer is acting as a financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice given by a Buyer or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to such Buyer’s purchase of the Securities. The Company further represents to each Buyer that the Company’s and each Subsidiary’s decision to enter into the Transaction Documents to which it is a party has been based solely on the independent evaluation by the Company, each Subsidiary and their respective representatives.

 

(g)      No General Solicitation; Placement Agent’s Fees . Neither the Company, nor any of its Subsidiaries or affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for Persons engaged by any Buyer or its investment advisor) relating to or arising out of the transactions contemplated hereby, including, without limitation, placement agent fees payable to Palladium Capital Advisors LLC, as placement agent (the “ Placement Agent ”) in connection with the sale of the Securities. The fees and expenses of the Placement Agent to be paid by the Company or any of its Subsidiaries are as set forth on Schedule 3(g) attached hereto. The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without limitation, attorney's fees and out-of-pocket expenses) arising in connection with any such claim. The Company acknowledges that it has engaged the Placement Agent in connection with the sale of the Securities. Other than the Placement Agent, neither the Company nor any of its Subsidiaries has engaged any placement agent or other agent in connection with the offer or sale of the Securities.

 

(h)      No Integrated Offering . None of the Company, its Subsidiaries or any of their affiliates, nor any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the issuance of any of the Securities under the 1933 Act, whether through integration with prior offerings or otherwise, or cause this offering of the Securities to require approval of stockholders of the Company for purposes of the 1933 Act or under any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of the Principal Market. None of the Company, its Subsidiaries, their affiliates nor any Person acting on their behalf will take any action or steps that would require registration of the issuance of any of the Securities under the 1933 Act (other than pursuant to the Registration Rights Agreement and any other registration rights agreement among the Company and the Buyers) or cause the offering of any of the Securities to be integrated with other offerings of securities of the Company.

 

 
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(i)      Dilutive Effect . The Company understands and acknowledges that the number of Conversion Shares and Warrant Shares will increase in certain circumstances. The Company further acknowledges that its obligation to issue the Conversion Shares pursuant to the terms of the Notes in accordance with this Agreement and the Notes and the Warrant Shares upon the exercise of the Warrants in accordance with this Agreement, the Notes and the Warrants is, in each case, absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company.

 

(j)      Application of Takeover Protections; Rights Agreement . The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including, without limitation, any distribution under a rights agreement), stockholder rights plan or other similar anti-takeover provision under the Certificate of Incorporation, Bylaws or other organizational documents or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to any Buyer as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Securities and any Buyer’s ownership of the Securities. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of shares of Common Stock or a change in control of the Company or any of its Subsidiaries.

 

(k)      SEC Documents; Financial Statements . During the two (2) years prior to the date hereof, the Company has timely filed all reports, schedules, forms, proxy statements, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof, including without limitation, Current Reports on Form 8-K filed by the Company with the SEC whether required to be filed or not (but excluding Item 7.01 thereunder), and all exhibits and appendices included therein (other than Exhibits 99.1 to Form 8-K) and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “ SEC Documents ”). The Company has delivered or has made available to the Buyers or their respective representatives true, correct and complete copies of each of the SEC Documents not available on the EDGAR system. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto as in effect as of the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles (“ GAAP ”), consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which will not be material, either individually or in the aggregate). No other information provided by or on behalf of the Company to any of the Buyers which is not included in the SEC Documents (including, without limitation, information referred to in Section 2(e) of this Agreement or in the disclosure schedules to this Agreement) contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein not misleading, in the light of the circumstance under which they are or were made. The Company is not currently contemplating to amend or restate any of the financial statements (including, without limitation, any notes or any letter of the independent accountants of the Company with respect thereto) included in the SEC Documents (the “ Financial Statements ”), nor is the Company currently aware of facts or circumstances which would require the Company to amend or restate any of the Financial Statements, in each case, in order for any of the Financials Statements to be in compliance with GAAP and the rules and regulations of the SEC. The Company has not been informed by its independent accountants that they recommend that the Company amend or restate any of the Financial Statements or that there is any need for the Company to amend or restate any of the Financial Statements.

 

 
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(l)      Absence of Certain Changes . Except as set forth in the SEC Documents, since the date of the Company’s most recent audited financial statements contained in a Form 10-K, there has been no material adverse change and no material adverse development in the business, assets, liabilities, properties, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any of its Subsidiaries. Since the date of the Company’s most recent audited financial statements contained in a Form 10-K, neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, outside of the ordinary course of business or (iii) except as disclosed in the SEC Documents, made any capital expenditures, individually or in the aggregate, outside of the ordinary course of business. Neither the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor does the Company or any Subsidiary have any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so. The Company and its Subsidiaries, individually and on a consolidated basis, are not as of the date hereof, and after giving effect to the transactions contemplated hereby to occur at the Closing, will not be Insolvent (as defined below). For purposes of this Section 3(l), “ Insolvent ” means, (i) with respect to the Company and its Subsidiaries, on a consolidated basis, (A) the present fair saleable value of the Company’s and its Subsidiaries’ assets is less than the amount required to pay the Company’s and its Subsidiaries’ total Indebtedness (as defined below), (B) the Company and its Subsidiaries are unable to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (C) the Company and its Subsidiaries intend to incur or believe that they will incur debts that would be beyond their ability to pay as such debts mature; and (ii) with respect to the Company and each Subsidiary, individually, (A) the present fair saleable value of the Company’s or such Subsidiary’s (as the case may be) assets is less than the amount required to pay its respective total Indebtedness, (B) the Company or such Subsidiary (as the case may be) is unable to pay its respective debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (C) the Company or such Subsidiary (as the case may be) intends to incur or believes that it will incur debts that would be beyond its respective ability to pay as such debts mature. Neither the Company nor any of its Subsidiaries has engaged in any business or in any transaction, and is not about to engage in any business or in any transaction, for which the Company’s or such Subsidiary’s remaining assets constitute unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted.

 

 
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(m)      No Undisclosed Events, Liabilities, Developments or Circumstances . Except as set forth in the SEC Documents, no event, liability, development or circumstance has occurred or exists, or is reasonably expected to exist or occur with respect to the Company, any of its Subsidiaries or any of their respective businesses, properties, liabilities, prospects, operations (including results thereof) or condition (financial or otherwise), that (i) would be required to be disclosed by the Company under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced, (ii) could have a material adverse effect on any Buyer’s investment hereunder or (iii) could have a Material Adverse Effect.

 

(n)      Conduct of Business; Regulatory Permits . Neither the Company nor any of its Subsidiaries is in violation of any term of or in default under its Certificate of Incorporation, any certificate of designation, preferences or rights of any other outstanding series of preferred stock of the Company or any of its Subsidiaries or Bylaws or their organizational charter, certificate of formation, memorandum of association, articles of association, Certificate of Incorporation or certificate of incorporation or bylaws, respectively. Except as set forth in the SEC Documents, neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except in all cases for possible violations which could not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth in the SEC Documents, without limiting the generality of the foregoing, the Company is not in violation of any of the rules, regulations or requirements of the Principal Market and has no knowledge of any facts or circumstances that could reasonably lead to delisting or suspension of the Common Stock by the Principal Market in the foreseeable future. During the two years prior to the date hereof, (i) the Common Stock has been listed or designated for quotation on the Principal Market, (ii) trading in the Common Stock has not been suspended by the SEC or the Principal Market and (iii) the Company has received no communication, written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the Common Stock from the Principal Market. The Company and each of its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. There is no agreement, commitment, judgment, injunction, order or decree binding upon the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries is a party which has or would reasonably be expected to have the effect of prohibiting or materially impairing any business practice of the Company or any of its Subsidiaries, any acquisition of property by the Company or any of its Subsidiaries or the conduct of business by the Company or any of its Subsidiaries as currently conducted other than such effects, individually or in the aggregate, which have not had and would not reasonably be expected to have a Material Adverse Effect on the Company or any of its Subsidiaries.

 

 
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(o)      Foreign Corrupt Practices . Neither the Company, the Company’s subsidiary or any director, officer, agent, employee, nor any other person acting for or on behalf of the foregoing (individually and collectively, a “ Company Affiliate ”) have violated the U.S. Foreign Corrupt Practices Act (the “ FCPA ”) or any other applicable anti-bribery or anti-corruption laws, nor has any Company Affiliate offered, paid, promised to pay, or authorized the payment of any money, or offered, given, promised to give, or authorized the giving of anything of value, to any officer, employee or any other person acting in an official capacity for any Governmental Entity to any political party or official thereof or to any candidate for political office (individually and collectively, a “ Government Official ”) or to any person under circumstances where such Company Affiliate knew or was aware of a high probability that all or a portion of such money or thing of value would be offered, given or promised, directly or indirectly, to any Government Official, for the purpose of:

 

(i)     (A) influencing any act or decision of such Government Official in his/her official capacity, (B) inducing such Government Official to do or omit to do any act in violation of his/her lawful duty, (C) securing any improper advantage, or (D) inducing such Government Official to influence or affect any act or decision of any Governmental Entity, or

 

(ii)     assisting the Company or its Subsidiaries in obtaining or retaining business for or with, or directing business to, the Company or its Subsidiaries.

 

(p)      Sarbanes-Oxley Act . The Company and each Subsidiary is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, and any and all applicable rules and regulations promulgated by the SEC thereunder.

 

(q)      Transactions With Affiliates . Except as set forth in the SEC Documents, no current or former employee, partner, director, officer or stockholder (direct or indirect) of the Company or its Subsidiaries, or any associate, or, to the knowledge of the Company, any affiliate of any thereof, or any relative with a relationship no more remote than first cousin of any of the foregoing, is presently, or has ever been, (i) a party to any transaction with the Company or its Subsidiaries (including any contract, agreement or other arrangement providing for the furnishing of services by, or rental of real or personal property from, or otherwise requiring payments to, any such director, officer or stockholder or such associate or affiliate or relative Subsidiaries (other than for ordinary course services as employees, officers or directors of the Company or any of its Subsidiaries)) or (ii) the direct or indirect owner of an interest in any corporation, firm, association or business organization which is a competitor, supplier or customer of the Company or its Subsidiaries (except for a passive investment (direct or indirect) in less than 5% of the common stock of a company whose securities are traded on or quoted through an Eligible Market (as defined in the Notes)), nor does any such Person receive income from any source other than the Company or its Subsidiaries which relates to the business of the Company or its Subsidiaries or should properly accrue to the Company or its Subsidiaries. No employee, officer, stockholder or director of the Company or any of its Subsidiaries or member of his or her immediate family is indebted to the Company or its Subsidiaries, as the case may be, nor is the Company or any of its Subsidiaries indebted (or committed to make loans or extend or guarantee credit) to any of them, other than (i) for payment of salary for services rendered, (ii) reimbursement for reasonable expenses incurred on behalf of the Company, and (iii) for other standard employee benefits made generally available to all employees or executives (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of the Company).

 

 
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(r)            Equity Capitalization.

 

(i)             Definitions :

 

(A)     “ Common Stock ” means (x) the Company’s shares of common stock, $0.01 par value per share, and (y) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

 

(B)     “ Preferred Stock ” means (x) the Company’s blank check preferred stock, $0.01 par value per share, the terms of which may be designated by the board of directors of the Company in a certificate of designations and (y) any capital stock into which such preferred stock shall have been changed or any share capital resulting from a reclassification of such preferred stock (other than a conversion of such preferred stock into Common Stock in accordance with the terms of such certificate of designations).

 

(ii)            Authorized and Outstanding Capital Stock . As of the date hereof, the authorized capital stock of the Company consists of (A) One Hundred Million (100,000,000) shares of Common Stock, of which, 7,071,799 are issued and outstanding as of the date hereof and none of which are reserved for issuance pursuant to Convertible Securities (as defined below) other than the Helios Shares (as defined in the Securities Purchase Agreement, dated as of August 15, 2017 (the “ MoviePass SPA ”), by and between the Company and MoviePass Inc., a Delaware corporation (“ MoviePass ”), as in effect as of the date hereof), the February Notes, the December Notes, the Warrants, the warrants to be issued to the Placement Agent as specified on Schedule 3(g) hereof (the “ Placement Agent Warrants ”)) and the warrants issued and issuable to the Placement Agent as partial compensation in connection with each of the February Securities Purchase Agreement and the December Securities Purchase Agreement, in each case exercisable or exchangeable for, or convertible into, shares of Common Stock, and (B) Two Million shares of Preferred Stock, none of which are issued and outstanding. No shares of Common Stock are held in the treasury of the Company. In addition to the foregoing, the board of directors of the Company (and, where applicable, the compensation committee thereof) have authorized the issuance of the following compensatory awards of Common Stock for which no award agreements exist as of the date hereof and which have not been issued as of the date hereof: (I) 40,000 S-8 shares per year to each independent director of the Company, which shall be subject to an 18 month lockup agreement, (II) 50,000 unregistered shares to the Company’s Chief Innovation Officer, which shall be subject to an 18 month lockup agreement, (III) 120,000 S-8 registered shares to a consultant of Zone, (IV) 150,000 S-8 registered shares to an employee of Zone, which shall be subject to an 18 month lockup agreement, (V) 478,000 unregistered shares to independent contractors of the Company for services rendered or to be rendered, which shall be subject to an 18 month lockup agreement, (VI) 8,333 unregistered shares to the Strawberry Ministry pursuant to that certain Endorsement Agreement, dated as of March 2, 2017, between the Company and the Strawberry Ministry, and (VII) upon completion of the transactions contemplated by the MoviePass SPA, 500,000 unregistered shares to each of Ted Farnsworth (Chief Executive Officer and Chairman of the board) and Muralikrishna Gadiyaram (a non-independent director and consultant of the Company), which shall be subject to an 18 month lockup agreement, and 208,333 unregistered shares to Palladium Capital Advisors, LLC as a financial advisory fee in connection with the transactions contemplated by the MoviePass SPA ((I)-(VII), collectively, the “ Granted Unissued Shares ”).

 

 
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(iii)      Valid Issuance; Available Shares; Affiliates . All of such outstanding shares are duly authorized and have been, or upon issuance will be, validly issued and are fully paid and nonassessable. Schedule 3(r)(iii) sets forth the number of shares of Common Stock that are (A) reserved for issuance pursuant to Convertible Securities (as defined below) (other than the Notes and the Warrants) and (B) that are, as of the date hereof, owned by Persons who are “affiliates” (as defined in Rule 405 of the 1933 Act and calculated based on the assumption that only officers, directors and holders of at least 10% of the Company’s issued and outstanding Common Stock are “affiliates” without conceding that any such Persons are “affiliates” for purposes of federal securities laws) of the Company or any of its Subsidiaries.

 

(iv)      Existing Securities; Obligations . Except as disclosed in the SEC Documents: (A) none of the Company’s or any Subsidiary’s shares, interests or capital stock is subject to preemptive rights or any other similar rights or Liens suffered or permitted by the Company or any Subsidiary; (B) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares, interests or capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares, interests or capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares, interests or capital stock of the Company or any of its Subsidiaries; (C) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except pursuant to the Registration Rights Agreement); (D) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (E) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities; and (F) neither the Company nor any Subsidiary has any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement.

 

 
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(v)      Organizational Documents . The Company has furnished to the Buyers true, correct and complete copies of the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the “ Certificate of Incorporation ”), and the Company’s bylaws, as amended and as in effect on the date hereof (the “ Bylaws ”), and the terms of all Convertible Securities and the material rights of the holders thereof in respect thereto.

 

(s)      Indebtedness and Other Contracts . Neither the Company nor any of its Subsidiaries, (i) except as disclosed on Schedule 3(s) , has any outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound, (ii) is a party to any contract, agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument could reasonably be expected to result in a Material Adverse Effect, (iii) has any financing statements securing obligations in any amounts filed in connection with the Company or any of its Subsidiaries; (iv) is in violation of any term of, or in default under, any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect, or (v) is a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries have any liabilities or obligations required to be disclosed in the SEC Documents which are not so disclosed in the SEC Documents, other than those incurred in the ordinary course of the Company’s or its Subsidiaries’ respective businesses and which, individually or in the aggregate, do not or could not have a Material Adverse Effect. For purposes of this Agreement: (x) “ Indebtedness ” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, “capital leases” in accordance with GAAP) (other than trade payables entered into in the ordinary course of business consistent with past practice), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; and (y) “ Contingent Obligation ” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

 

 
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(t)      Litigation . There is no action, suit, arbitration, proceeding, inquiry or investigation before or by the Principal Market, any court, public board, other Governmental Entity, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries, the Common Stock or any of the Company’s or its Subsidiaries’ officers or directors , whether of a civil or criminal nature or otherwise, in their capacities as such, except as set forth in Schedule 3(t) . No director, officer or employee of the Company or any of its subsidiaries has willfully violated 18 U.S.C. §1519 or engaged in spoliation in reasonable anticipation of litigation. Without limitation of the foregoing, there has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company, any of its Subsidiaries or any current or former director or officer of the Company or any of its Subsidiaries. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the 1933 Act or the 1934 Act. Neither the Company nor any of its Subsidiaries is subject to any order, writ, judgment, injunction, decree, determination or award of any Governmental Entity.

 

(u)      Insurance . The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for, and neither the Company nor any such Subsidiary has any reason to believe that it will be unable to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

 

(v)      Employee Relations . Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or employs any member of a union. The Company and its Subsidiaries believe that their relations with their employees are good. No executive officer (as defined in Rule 501(f) promulgated under the 1933 Act) or other key employee of the Company or any of its Subsidiaries has notified the Company or any such Subsidiary that such officer intends to leave the Company or any such Subsidiary or otherwise terminate such officer’s employment with the Company or any such Subsidiary. To the Company’s knowledge, no executive officer or other key employee of the Company or any of its Subsidiaries is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer or other key employee (as the case may be) does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

 
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(w)           Title .

 

(i)      Real Property . Each of the Company and its Subsidiaries holds good title to all real property, leases in real property, facilities or other interests in real property owned or held by the Company or any of its Subsidiaries (the “ Real Property ”) owned by the Company or any of its Subsidiaries (as applicable). The Real Property is free and clear of all Liens and is not subject to any rights of way, building use restrictions, exceptions, variances, reservations, or limitations of any nature except for (a) Liens for current taxes not yet due and (b) zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto. Any Real Property held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company or any of its Subsidiaries.

 

(ii)      Fixtures and Equipment . Each of the Company and its Subsidiaries (as applicable) has good title to, or a valid leasehold interest in, the tangible personal property, equipment, improvements, fixtures, and other personal property and appurtenances that are used by the Company or its Subsidiary in connection with the conduct of its business (the “ Fixtures and Equipment ”). The Fixtures and Equipment are structurally sound, are in good operating condition and repair, are adequate for the uses to which they are being put, are not in need of maintenance or repairs except for ordinary, routine maintenance and repairs and are sufficient for the conduct of the Company’s and/or its Subsidiaries’ businesses (as applicable) in the manner as conducted prior to the Closing. Each of the Company and its Subsidiaries owns all of its Fixtures and Equipment free and clear of all Liens except for (a) liens for current taxes not yet due and (b) zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto.

 

(x)           Intellectual Property Rights . The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, original works of authorship, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and registrations therefor (“ Intellectual Property Rights ”) necessary to conduct their respective businesses as now conducted. None of the Company or its Subsidiaries owns any patents. Except as set forth in Schedule 3(x)(ii), none of the Company's Intellectual Property Rights have expired or terminated or have been abandoned or are expected to expire or terminate or are expected to be abandoned, within three years from the date of this Agreement. The Company does not have any knowledge of any infringement by the Company or its Subsidiaries of Intellectual Property Rights of others. There is no claim, action or proceeding being made or brought, or to the knowledge of the Company or any of its Subsidiaries, being threatened, against the Company or any of its Subsidiaries regarding its Intellectual Property Rights. Neither the Company nor any of its Subsidiaries is aware of any facts or circumstances that could reasonably be expected to give rise to any of the foregoing infringements or claims, actions or proceedings. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights

 

 
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(y)         Environmental Laws .    (i) The Company and its Subsidiaries (A) are in compliance with any and all Environmental Laws (as defined below), (B) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (C) are in compliance with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (A), (B) and (C), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The term “ Environmental Laws ” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “ Hazardous Materials ”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

 

(ii)      No Hazardous Materials :

 

(A)     have been disposed of or otherwise released from any Real Property of the Company or any of its Subsidiaries in violation of any Environmental Laws; or

 

(B)     to the Company’s knowledge, are present on, over, beneath, in or upon an Real Property or any portion thereof in quantities that would constitute a violation of any Environmental Laws. To the Company’s knowledge, no prior use by the Company or any of its Subsidiaries of any Real Property has occurred that violates any Environmental Laws, which violation would have a material adverse effect on the business of the Company or any of its Subsidiaries.

 

(iii)     Neither the Company nor any of its Subsidiaries knows of any other person who or entity which has stored, treated, recycled, disposed of or otherwise located on any Real Property any Hazardous Materials, including, without limitation, such substances as asbestos and polychlorinated biphenyls.

 

 
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(iv)     None of the Real Property are on any federal or state “Superfund” list or Liability Information System (“ CERCLIS ”) list or any state environmental agency list of sites under consideration for CERCLIS, nor subject to any environmental related Liens.

 

(z)      Subsidiary Rights . The Company or one of its Subsidiaries has the unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries as owned by the Company or such Subsidiary.

 

(aa)      Tax Status . The Company and each of its Subsidiaries (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company and its Subsidiaries know of no basis for any such claim. The Company is not operated in such a manner as to qualify as a passive foreign investment company, as defined in Section 1297 of Code. The net operating loss carryforwards (“ NOLs ”) for United States federal income tax purposes of the consolidated group of which the Company is the common parent, if any, shall not be adversely effected by the transactions contemplated hereby. The transactions contemplated hereby do not constitute an “ownership change” within the meaning of Section 382 of the Code, thereby preserving the Company’s ability to utilize such NOLs.

 

(bb)      Internal Accounting and Disclosure Controls . The Company and each of its Subsidiaries maintains internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the 1934 Act) that is effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference. The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the 1934 Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure. Neither the Company nor any of its Subsidiaries has received any notice or correspondence from any accountant, Governmental Entity or other Person relating to any potential material weakness or significant deficiency in any part of the internal controls over financial reporting of the Company or any of its Subsidiaries.

 

 
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(cc)      Off Balance Sheet Arrangements . There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its 1934 Act filings and is not so disclosed or that otherwise could be reasonably likely to have a Material Adverse Effect.

 

(dd)      Investment Company Status . The Company is not, and upon consummation of the sale of the Securities will not be, an “investment company,” an affiliate of an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.

 

(ee)      Acknowledgement Regarding Buyers’ Trading Activity . It is understood and acknowledged by the Company that (i) following the public disclosure of the transactions contemplated by the Transaction Documents, in accordance with the terms thereof, none of the Buyers have been asked by the Company or any of its Subsidiaries to agree, nor has any Buyer agreed with the Company or any of its Subsidiaries other than pursuant to Section 4(gg) hereof, to desist from effecting any transactions in or with respect to (including, without limitation, purchasing or selling, long and/or short) any securities of the Company, or “derivative” securities based on securities issued by the Company or to hold any of the Securities for any specified term; (ii) any Buyer, and counterparties in “derivative” transactions to which any such Buyer is a party, directly or indirectly, presently may have a “short” position in the Common Stock which was established prior to such Buyer’s knowledge of the transactions contemplated by the Transaction Documents; and (iii) each Buyer shall not be deemed to have any affiliation with or control over any arm’s length counterparty in any “derivative” transaction. The Company further understands and acknowledges that following the public disclosure of the transactions contemplated by the Transaction Documents pursuant to the 8-K Filing (as defined below) one or more Buyers may engage in hedging and/or trading activities (including, without limitation, the location and/or reservation of borrowable shares of Common Stock ) at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value and/or number of the Warrant Shares or Conversion Shares, as applicable, deliverable with respect to the Securities are being determined and such hedging and/or trading activities, if any, can reduce the value of the existing stockholders’ equity interest in the Company both at and after the time the hedging and/or trading activities are being conducted. The Company acknowledges that such aforementioned hedging and/or trading activities (including, without limitation, the location and/or reservation of borrowable shares of Common Stock ) do not constitute a breach of this Agreement, the Notes, the Warrants or any other Transaction Document or any of the documents executed in connection herewith or therewith.

 

(ff)      Manipulation of Price . Neither the Company nor any of its Subsidiaries has, and, to the knowledge of the Company, no Person acting on their behalf has, directly or indirectly, (i) taken any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company or any of its Subsidiaries to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities (other than the Placement Agent), (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company or any of its Subsidiaries or (iv) paid or agreed to pay any Person for research services with respect to any securities of the Company or any of its Subsidiaries.

 

 
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(gg)      U.S. Real Property Holding Corporation . Neither the Company nor any of its Subsidiaries is, or has ever been, and so long as any of the Securities are held by any of the Buyers, shall become, a U.S. real property holding corporation within the meaning of Section 897 of the Code, and the Company and each Subsidiary shall so certify upon any Buyer’s request.

 

(hh)      Registration Eligibility . The Company is eligible to register the Registrable Securities for resale by the Buyers using Form S-3 promulgated under the 1933 Act.

 

(ii)        Transfer Taxes . On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the issuance, sale and transfer of the Securities to be sold to each Buyer hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.

 

(jj)        Bank Holding Company Act . Neither the Company nor any of its Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the “ BHCA ”) and to regulation by the Board of Governors of the Federal Reserve System (the “ Federal Reserve ”). Neither the Company nor any of its Subsidiaries or affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

(kk)      Shell Company Status . The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i).

 

(ll)        Illegal or Unauthorized Payments; Political Contributions . Neither the Company nor any of its Subsidiaries nor, to the best of the Company’s knowledge (after reasonable inquiry of its officers and directors), any of the officers, directors, employees, agents or other representatives of the Company or any of its Subsidiaries or any other business entity or enterprise with which the Company or any Subsidiary is or has been affiliated or associated, has, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services, whether or not in contravention of applicable law, (i) as a kickback or bribe to any Person or (ii) to any political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving the direct or indirect use of funds of the Company or any of its Subsidiaries.

 

(mm)     Money Laundering . The Company and its Subsidiaries are in compliance with, and have not previously violated, the USA Patriot Act of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, without limitation, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, but not limited, to (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.

 

 
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(nn)         Management . Except as set forth in Schedule 3(nn) hereto, during the past five year period, no current or former officer or director or, to the knowledge of the Company, no current ten percent (10%) or greater stockholder of the Company or any of its Subsidiaries has been the subject of:

 

(i)       a petition under bankruptcy laws or any other insolvency or moratorium law or the appointment by a court of a receiver, fiscal agent or similar officer for such Person, or any partnership in which such person was a general partner at or within two years before the filing of such petition or such appointment, or any corporation or business association of which such person was an executive officer at or within two years before the time of the filing of such petition or such appointment;

 

(ii)      a conviction in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations that do not relate to driving while intoxicated or driving under the influence);

 

(iii)     any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining any such person from, or otherwise limiting, the following activities:

 

(1)     Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the United States Commodity Futures Trading Commission or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

 

(2)     Engaging in any particular type of business practice; or

 

(3)     Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of securities laws or commodities laws;

 

(iv)     any order, judgment or decree, not subsequently reversed, suspended or vacated, of any authority barring, suspending or otherwise limiting for more than sixty (60) days the right of any such person to engage in any activity described in the preceding sub paragraph, or to be associated with persons engaged in any such activity;

 

(v)     a finding by a court of competent jurisdiction in a civil action or by the SEC or other authority to have violated any securities law, regulation or decree and the judgment in such civil action or finding by the SEC or any other authority has not been subsequently reversed, suspended or vacated; or

 

 
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(vi)     a finding by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding has not been subsequently reversed, suspended or vacated.

 

(oo)      Stock Option Plans . The Company has one equity incentive plan from which equity incentive awards may be granted to eligible recipients thereunder, namely the Helios and Matheson Analytics Inc. 2014 Equity Incentive Plan (the “ Equity Incentive Plan ”), and has not granted any awards thereunder other than 120,000 shares of Common Stock to a consultant, provided that the Company’s board of directors has authorized the grant of 5,000 shares of Common Stock per calendar quarter to independent directors of the Company for the duration of their service, none of which have yet been issued.

 

(pp)      No Disagreements with Accountants and Lawyers . There are no material disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company's ability to perform any of its obligations under any of the Transaction Documents. In addition, on or prior to the date hereof, the Company has no reason to believe that it will need to restate any such financial statements or any part thereof.

 

(qq)      No Disqualification Events . With respect to Securities to be offered and sold hereunder in reliance on Rule 506(b) under the 1933 Act (“ Regulation D Securities ”), none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering contemplated hereby, any beneficial owner of 20% or more of the Company's outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the 1933 Act) connected with the Company in any capacity at the time of sale (each, an “ Issuer Covered Person ” and, together, “ Issuer Covered Persons ”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a “ Disqualification Event ”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Buyers a copy of any disclosures provided thereunder.

 

(rr)        Other Covered Persons . The Company is not aware of any Person (other than the Placement Agent) that has been or will be paid (directly or indirectly) remuneration for solicitation of Buyers or potential purchasers in connection with the sale of any Regulation D Securities.

 

(ss)      No Additional Agreements . The Company does not have any agreement or understanding with any Buyer with respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.

 

 
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(tt)        Public Utility Holding Act . None of the Company nor any of its Subsidiaries is a “holding company,” or an “affiliate” of a “holding company,” as such terms are defined in the Public Utility Holding Act of 2005.

 

(uu)      Federal Power Act . None of the Company nor any of its Subsidiaries is subject to regulation as a “public utility” under the Federal Power Act, as amended.

 

(vv)      Ranking of Notes . No Indebtedness of the Company, at the Closing, will be senior to, or pari passu with, the Notes in right of payment, whether with respect to payment or redemptions, interest, damages, upon liquidation or dissolution or otherwise, other than the December Notes and the February Notes.

 

(ww)     Disclosure . The Company confirms that neither it nor any other Person acting on its behalf has provided any of the Buyers or their agents or counsel with any information that constitutes or could reasonably be expected to constitute material, non-public information concerning the Company or any of its Subsidiaries, other than the existence of the transactions contemplated by this Agreement and the other Transaction Documents. The Company understands and confirms that each of the Buyers will rely on the foregoing representations in effecting transactions in securities of the Company. Each press release issued by the Company or any of its Subsidiaries during the twelve (12) months preceding the date of this Agreement did not at the time of release contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. To the Company’s knowledge, no event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, liabilities, prospects, operations (including results thereof) or conditions (financial or otherwise), which, under applicable law, rule or regulation, requires public disclosure at or before the date hereof or announcement by the Company but which has not been so publicly disclosed. The Company acknowledges and agrees that no Buyer makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 2.

 

4.            COVENANTS.

 

(a)      Best Efforts . Each Buyer shall use its best efforts to timely satisfy each of the covenants hereunder and conditions to be satisfied by it as provided in Section 6 of this Agreement. The Company shall use its best efforts to timely satisfy each of the covenants hereunder and conditions to be satisfied by it as provided in Section 7 of this Agreement.

 

(b)      Form D and Blue Sky . The Company shall file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to each Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to, qualify the Securities for sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyers on or prior to the Closing Date. Without limiting any other obligation of the Company under this Agreement, the Company shall timely make all filings and reports relating to the offer and sale of the Securities required under all applicable securities laws (including, without limitation, all applicable federal securities laws and all applicable “Blue Sky” laws), and the Company shall comply with all applicable foreign, federal, state and local laws, statutes, rules, regulations and the like relating to the offering and sale of the Securities to the Buyers.

 

 
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(c)      Reporting Status . Until the date on which the Buyers shall have sold all of the Registrable Securities (the “ Reporting Period ”), the Company shall timely file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would no longer require or otherwise permit such termination. The Company shall use reasonable best efforts to maintain its eligibility to register the Registrable Securities for resale by the Buyers on Form S-3, provided that Buyer acknowledges that such eligibility depends on the Company’s continued listing on the Principal Market.

 

(d)      Use of Proceeds . The Company shall use the proceeds from the sale of the Securities to pay its cash payment obligations under the Transaction Agreements (as defined in the MoviePass SPA) and for general corporate purposes, but not, directly or indirectly, for (i) except as set forth on Schedule 4(d), the satisfaction of any indebtedness of the Company or any of its Subsidiaries, (ii) the redemption or repurchase of any securities of the Company or any of its Subsidiaries, or (iii) the settlement of any outstanding litigation.

 

(e)      Financial Information . The Company agrees to send the following to each Investor (as defined in the Registration Rights Agreement) during the Reporting Period (i) unless the following are filed with the SEC through EDGAR and are available to the public through the EDGAR system, within one (1) Business Day after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, any interim reports or any consolidated balance sheets, income statements, stockholders’ equity statements and/or cash flow statements for any period other than annual, any Current Reports on Form 8-K and any registration statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) unless the following are either filed with the SEC through EDGAR or are otherwise widely disseminated via a recognized news release service (such as PR Newswire or Globe Newswire), on the same day as the release thereof, facsimile or PDF copies of all press releases issued by the Company or any of its Subsidiaries and (iii) unless the following are filed with the SEC through EDGAR, copies of any notices and other information made available or given to the stockholders of the Company generally, contemporaneously with the making available or giving thereof to the stockholders.

 

(f)      Listing . The Company shall promptly secure the listing or designation for quotation (as the case may be) of all of the Registrable Securities upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed or designated for quotation (as the case may be) (subject to official notice of issuance) and shall maintain such listing or designation for quotation (as the case may be) of all Registrable Securities from time to time issuable under the terms of the Transaction Documents on such national securities exchange or automated quotation system. The Company shall maintain the Common Stock’s listing or authorization for quotation (as the case may be) on the Principal Market, The New York Stock Exchange, the NYSE American, the Nasdaq Global Market or the Nasdaq Global Select Market (each, an “ Eligible Market ”). Neither the Company nor any of its Subsidiaries shall take any action which could be reasonably expected to result in the delisting or suspension of the Common Stock on an Eligible Market. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 4(f). Notwithstanding the foregoing, Buyer acknowledges and accepts the risk of the Company’s potential delisting from the Principal Market for failure to meet the Principal Market’s minimum stockholders equity requirement as described in the Company’s SEC Documents and understands that the Company provides no assurance that it will regain compliance with the Principal Market’s minimum stockholders’ equity requirement.

 

 
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(g)      Fees . The Company shall reimburse the lead Buyer for all reasonable costs and expenses (whether the transaction is consummated or not) incurred by it or its affiliates in connection with the structuring, documentation, negotiation and closing of the transactions contemplated by the Transaction Documents (including, without limitation, as applicable, all reasonable legal fees of outside counsel and disbursements of Kelley Drye & Warren LLP, counsel to the lead Buyer, any other reasonable fees and expenses in connection with the structuring, documentation, negotiation and closing of the transactions contemplated by the Transaction Documents and due diligence and regulatory filings in connection therewith) (the “ Transaction Expenses ”) and shall be withheld by the lead Buyer from its Purchase Price at the Closing, less $30,000 previously paid by the Company to Kelley Drye & Warren LLP; provided, that the Company shall promptly reimburse Kelley Drye & Warren LLP on demand for all Transaction Expenses not so reimbursed through such withholding at the Closing. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, transfer agent fees, DTC (as defined below) fees or broker’s commissions (other than for Persons engaged by any Buyer) relating to or arising out of the transactions contemplated hereby (including, without limitation, any fees or commissions payable to the Placement Agent, who is the Company’s sole placement agent in connection with the transactions contemplated by this Agreement). The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with any claim relating to any such payment. Except as otherwise set forth in the Transaction Documents, each party to this Agreement shall bear its own expenses in connection with the sale of the Securities to the Buyers.

 

(h)      Pledge of Securities . Notwithstanding anything to the contrary contained in this Agreement, the Company acknowledges and agrees that the Securities may be pledged by an Investor in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Investor effecting a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document, including, without limitation, Section 2(g) hereof; provided that an Investor and its pledgee shall be required to comply with the provisions of Section 2(g) hereof in order to effect a sale, transfer or assignment of Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by a Buyer.

 

 
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(i)      Disclosure of Transactions and Other Material Information .

 

(i)      Disclosure of Transaction . On or before 9:30 a.m., New York time, on the first (1 st ) Business Day after the date of this Agreement, the Company shall file a Current Report on Form 8-K describing all the material terms of the transactions contemplated by the Transaction Documents in the form required by the 1934 Act and attaching all the material Transaction Documents (including, without limitation, this Agreement (and all schedules to this Agreement), the form of Notes, the Warrants, the form of Investor Note, the form of Security Agreement, the form of Guaranty, the form of Voting and Lockup Agreement and the form of the Registration Rights Agreement) (including all attachments, the “ 8-K Filing ”). From and after the filing of the 8-K Filing, the Company shall have disclosed all material, non-public information (if any) provided to any of the Buyers (other than the Placement Agent, the “ Investor Buyers ”) by the Company or any of its Subsidiaries or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents. In addition, effective upon the filing of the 8-K Filing, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, 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 Investor Buyers or any of their affiliates, on the other hand, shall terminate.

 

(ii)      Limitations on Disclosure . The Company shall not, and the Company shall cause each of its Subsidiaries and each of its and their respective officers, directors, employees and agents not to, provide any Investor Buyer with any material, non-public information regarding the Company or any of its Subsidiaries from and after the date hereof without the express prior written consent of such Investor Buyer (which may be granted or withheld in such Investor Buyer’s sole discretion). In the event of a breach of any of the foregoing covenants, including, without limitation, Section 4(o) of this Agreement, or any of the covenants or agreements contained in any other Transaction Document, by the Company, any of its Subsidiaries, or any of its or their respective officers, directors, employees and agents (as determined in the reasonable good faith judgment of such Investor Buyer), in addition to any other remedy provided herein or in the Transaction Documents, such Investor Buyer shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such breach or such material, non-public information, as applicable, without the prior approval by the Company, any of its Subsidiaries, or any of its or their respective officers, directors, employees or agents. No Investor Buyer shall have any liability to the Company, any of its Subsidiaries, or any of its or their respective officers, directors, employees, affiliates, stockholders or agents, for any such disclosure. To the extent that the Company delivers any material, non-public information to a Investor Buyer without such Investor Buyer's consent, the Company hereby covenants and agrees that such Investor Buyer shall not have any duty of confidentiality with respect to, or a duty not to trade on the basis of, such material, non-public information. Subject to the foregoing, neither the Company, its Subsidiaries nor any Investor Buyer 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 any Investor Buyer, to make the Press Release and any press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided that in the case of clause (i) each Investor Buyer shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release). Without the prior written consent of the applicable Buyer (which may be granted or withheld in such Buyer’s sole discretion), the Company shall not (and shall cause each of its Subsidiaries and affiliates to not) disclose the name of such Buyer in any filing, announcement, release or otherwise, except as such disclosure may be required by applicable law including, without limitation, in the 8-K Filing and in one or more registration statements filed pursuant to the Registration Rights Agreement in order to identify the Buyers as selling stockholders. Notwithstanding anything contained in this Agreement to the contrary and without implication that the contrary would otherwise be true, the Company expressly acknowledges and agrees that no Investor Buyer shall have (unless expressly agreed to by a particular Investor Buyer after the date hereof in a written definitive and binding agreement executed by the Company and such particular Investor Buyer (it being understood and agreed that no Investor Buyer may bind any other Investor Buyer with respect thereto)), any duty of confidentiality with respect to, or a duty not to trade on the basis of, any material, non-public information regarding the Company or any of its Subsidiaries. Each Buyer further acknowledges that the Company shall not be deemed to violate this Section 4(i) by disclosing the name of any Buyer that beneficially owns more than 4.99% of the Common Stock of the Company in accordance with the disclosure made by such Buyer in any Schedule 13D or Schedule 13G filed by such Buyer with the SEC.

 

 
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(iii)      Other Confidential Information. Disclosure Failures; Disclosure Delay Payments . In addition to other remedies set forth in this Section 4(i), and without limiting anything set forth in any other Transaction Document, at any time after the Closing Date if the Company, any of its Subsidiaries, or any of their respective officers, directors, employees or agents, provides any Investor Buyer with material non-public information relating to the Company or any of its Subsidiaries (each, the “ Confidential Information ”), the Company shall, on or prior to the applicable Required Disclosure Date (as defined below), publicly disclose such Confidential Information on a Current Report on Form 8-K or otherwise (each, a “ Disclosure ”). From and after such Disclosure, the Company shall have disclosed all Confidential Information provided to such Investor Buyer by the Company or any of its Subsidiaries or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents. In addition, effective upon such Disclosure, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, 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 Investor Buyers or any of their affiliates, on the other hand, shall terminate. In the event that the Company fails to effect such Disclosure on or prior to the Required Disclosure Date and such Investor Buyer shall have possessed Confidential Information for at least ten (10) consecutive Trading Days (each, a “ Disclosure Failure ”), then, as partial relief for the damages to such Investor Buyer by reason of any such delay in, or reduction of, its ability to buy or sell shares of Common Stock after such Required Disclosure Date (which remedy shall not be exclusive of any other remedies available at law or in equity), the Company shall pay to such Investor Buyer an amount in cash equal to the greater of (I) two percent (2%) of the aggregate Purchase Price and (II) the applicable Disclosure Restitution Amount, on each of the following dates (each, a “ Disclosure Delay Payment Date ”): (i) on the date of such Disclosure Failure and (ii) on every thirty (30) day anniversary such Disclosure Failure until the earlier of (x) the date such Disclosure Failure is cured and (y) such time as all such non-public information provided to such Investor Buyer shall cease to be Confidential Information (as evidenced by a certificate, duly executed by an authorized officer of the Company to the foregoing effect) (such earlier date, as applicable, a “ Disclosure Cure Date ”). Following the initial Disclosure Delay Payment for any particular Disclosure Failure, without limiting the foregoing, if a Disclosure Cure Date occurs prior to any thirty (30) day anniversary of such Disclosure Failure, then such Disclosure Delay Payment (prorated for such partial month) shall be made on the third (3rd) Business Day after such Disclosure Cure Date. The payments to which an Investor shall be entitled pursuant to this Section 4(l)(iii) are referred to herein as “ Disclosure Delay Payments. ” In the event the Company fails to make Disclosure Delay Payments in a timely manner in accordance with the foregoing, such Disclosure Delay Payments shall bear interest at the rate of two percent (1.25%) per month (prorated for partial months) until paid in full.

 

 
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(iv)          For the purpose of this Agreement the following definitions shall apply:

 

(1)      “ Disclosure Failure Market Price ” means, as of any Disclosure Delay Payment Date, the price computed as the quotient of (I) the sum of the five (5) highest VWAPs (as defined in the Notes) of the Common Stock during the applicable Disclosure Restitution Period (as defined below), divided by (II) five (5) (such period, the “Disclosure Failure Measuring Period ”). All such determinations to be appropriately adjusted for any share dividend, share split, share combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such Disclosure Failure Measuring Period.

 

(2)     “ Disclosure Restitution Amount ” means, as of any Disclosure Delay Payment Date, the product of (x) difference of (I) the Disclosure Failure Market Price less (II) the lowest purchase price, per share of Common Stock, of any Common Stock issued or issuable to such Investor Buyer pursuant to this Agreement or any other Transaction Documents, multiplied by (y) 10% of the aggregate daily dollar trading volume (as reported on Bloomberg (as defined in the Notes)) of the Common Stock on the Principal Market for each Trading Day (as defined in the Notes) either (1) with respect to the initial Disclosure Delay Payment Date, during the period commencing on the applicable Required Disclosure Date through and including the Trading Day immediately prior to the initial Disclosure Delay Payment Date or (2) with respect to each other Disclosure Delay Payment Date, during the period commencing the immediately preceding Disclosure Delay Payment Date through and including the Trading Day immediately prior to such applicable Disclosure Delay Payment Date (such applicable period, the “ Disclosure Restitution Period ”).

 

(3)     “ Required Disclosure Date ” means (x) if such Investor Buyer authorized the delivery of such Confidential Information, either (I) if the Company and such Investor Buyer have mutually agreed upon a date (as evidenced by an e-mail or other writing) of Disclosure of such Confidential Information, such agreed upon date or (II) otherwise, the seventh (7 th ) calendar day after the date such Investor Buyer first received any Confidential Information or (y) if such Investor Buyer did not authorize the delivery of such Confidential Information, the first (1 st ) Business Day after such Investor Buyer’s receipt of such Confidential Information.

 

 
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(j)       Additional Registration Statements . Until the Applicable Date (as defined below) and at any time thereafter while any Registration Statement is not effective or the prospectus contained therein is not available for use or any Current Public Information Failure (as defined in the Registration Rights Agreement) exists, the Company shall not file a registration statement under the 1933 Act relating to securities that are not the Registrable Securities (other than a registration statement registering Excluded Securities, a registration statement on Form S-8 or such supplements or amendments to registration statements that are outstanding and have been declared effective by the SEC as of the date hereof (solely to the extent necessary to keep such registration statements effective and available and not with respect to any Subsequent Placement); provided, however, the foregoing shall not prohibit the Company from filing a prospectus supplement to its effective shelf registration statement on Form S-3 (SEC Registration No. 333-212550) in respect of a Subsequent Placement so long as such prospectus supplement is not filed during the Restricted Period (as defined below). “ Applicable Date ” means the earlier of (x) the first date on which the resale by the Investor Buyers of all the Registrable Securities required to be filed on the initial Registration Statement (as defined in the Registration Rights Agreement) 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 (y) 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).

 

 
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(k)      Additional Issuance of Securities . So long as any Investor Buyer beneficially owns any December Notes, February Notes, Series A Notes or Series B Notes, the Company will not, without the prior written consent of the Required Holders, issue any Notes (other than to the Buyers as contemplated hereby) and the Company shall not issue any other securities that would cause a breach or default under the Notes or the Warrants. The Company agrees that for the period commencing on the date hereof and ending on the date immediately following the later of (x) the six month anniversary of the Closing Date and (y) 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 shall 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 ”). Notwithstanding the foregoing, this Section 4(k) shall not apply in respect of the issuance of (i) shares of Common Stock or standard options to purchase Common Stock to directors, officers, consultants or employees of the Company in their capacity as such pursuant to an Approved Stock Plan (including, without limitation, the Equity Incentive Plan, as amended on or prior to the date hereof), provided that (x) the exercise price of any such options is not lowered after issuance, none of such options are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adversely affects any of the Investor Buyers and (y) such Options and Common Stock will be subject to a lock-up agreement, in form and substance reasonably satisfactory to the Required Holders, effective during the period commencing on the date of issuance through and including the thirtieth (30 th ) calendar day after only $560,000 or less in aggregate principal amount of Notes remain outstanding; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the date hereof, provided that the conversion, exercise or other method of issuance (as the case may be) of any such Convertible Security is made solely pursuant to the conversion, exercise or other method of issuance (as the case may be) provisions of such Convertible Security that were in effect on the date immediately prior to the date of this Agreement, the conversion, exercise or issuance price of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) is not lowered after issuance, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are otherwise materially changed in any manner that adversely affects any of the Investor Buyers; (iii) the Placement Agent Warrants (including any Placement Agent warrants remaining to be issued pursuant to the February Securities Purchase Agreement); (iv) the Warrant Shares, (v) the Conversion Shares, (vi) the Granted Unissued Shares, and (vii) the Helios Shares (as defined in the MoviePass SPA) (each of the foregoing in clauses (i) through (vii), collectively the “ Excluded Securities ”) and (viii) at any time no December Notes, February Notes, or Series B Notes remain outstanding, shares of Common Stock and/or Convertible Securities issued in one or more 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). “ Approved Stock Plan ” means any employee benefit plan, contract or arrangement or employment or consulting agreement which has been approved by the board of directors of the Company prior to or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee, officer, director or consultant for services provided to the Company in their capacity as such. “ Convertible Securities ” means any capital stock or other security of the Company or any of its Subsidiaries that is at any time and under any circumstances directly or indirectly convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any capital stock or other security of the Company (including, without limitation, Common Stock) or any of its Subsidiaries.

 

 
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(l)      Reservation of Shares . So long as any of the Notes or Warrants remain outstanding, the Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than (i) the greater of (I) 15 million shares of Common Stock (II) the sum of (A) 200% of the maximum number of Conversion Shares issuable upon conversion of the Series A Notes (assuming for purposes hereof that (x) the Series A Notes are convertible at the Alternate Conversion Price (as defined in the Series A Notes) assuming an Alternate Conversion Date (as defined in the Series A Notes) as of the applicable time of determination, (y) interest on the Series A Notes shall accrue through the eight month anniversary of the Closing Date and will be converted in shares of Common Stock at a conversion price equal to the Alternate Conversion Price (as defined in the Series A Notes) assuming an Alternate Conversion Date (as defined in the Series A Notes) as of the applicable time of determination and (z) any such conversion shall not take into account any limitations on the conversion of the Series A Notes set forth in the Series A Notes); (B) 200% of the maximum number of Conversion Shares issuable upon conversion of the Series B Notes (assuming for purposes hereof that (x) the Series B Notes are convertible at the Alternate Conversion Price (as defined in the Series B Notes) assuming an Alternate Conversion Date (as defined in the Series B Notes) as of the applicable time of determination, (y) interest on the Series B Notes shall accrue through the eight month anniversary of the Closing Date and will be converted in shares of Common Stock at a conversion price equal to the Alternate Conversion Price (as defined in the Series B Notes) assuming an Alternate Conversion Date (as defined in the Series B Notes) as of the applicable time of determination and (z) any such conversion shall not take into account any limitations on the conversion of the Series B Notes set forth in the Series B Notes); and (C) 125% of the maximum number of Warrant Shares issuable upon exercise of all the Warrants then outstanding (without regard to any limitations on the exercise of the Warrants set forth therein) (collectively, the “ Required Reserve Amount ”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 4(l) be reduced other than proportionally in connection with any conversion, exercise and/or redemption, as applicable of Notes and Warrants. If at any time the number of shares of Common Stock authorized and reserved for issuance is not sufficient to meet the Required Reserve Amount, the Company will promptly take all corporate action necessary to authorize and reserve a sufficient number of shares, including, without limitation, calling a special meeting of stockholders to authorize additional shares to meet the Company's obligations pursuant to the Transaction Documents, in the case of an insufficient number of authorized shares, obtain stockholder approval of an increase in such authorized number of shares, and voting the management shares of the Company in favor of an increase in the authorized shares of the Company to ensure that the number of authorized shares is sufficient to meet the Required Reserve Amount.

 

(m)      Conduct of Business . The business of the Company and its Subsidiaries shall not be conducted in violation of any law, ordinance or regulation of any Governmental Entity, except where such violations would not reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect.

 

 
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(n)          Other Notes; Variable Securities . So long as any Investor Buyer holds any of the Securities, the Company and each Subsidiary shall be prohibited from effecting or entering into any agreement to effect any Subsequent Placement involving a Variable Rate Transaction (other than this Agreement). “ Variable Rate Transaction ” means a transaction in which the Company or any Subsidiary (i) issues or sells any Convertible Securities either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such Convertible Securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such Convertible Securities or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock, other than pursuant to a customary “weighted average” anti-dilution provision or (ii) enters into any agreement (including, without limitation, an equity line of credit or an “at-the-market” offering) whereby the Company or any Subsidiary may sell securities at a future determined price (other than standard and customary “preemptive” or “participation” rights). Each Buyer shall be entitled to obtain injunctive relief against the Company and its Subsidiaries to preclude any such issuance, which remedy shall be in addition to any right to collect damages.

 

(o)         Participation Right . At any time on or prior to the later of (x) the date no Notes remain outstanding and (y) the second anniversary of the Closing Date, neither the Company nor any of its Subsidiaries shall, directly or indirectly, effect any Subsequent Placement unless the Company shall have first complied with this Section 4(o). The Company acknowledges and agrees that the right set forth in this Section 4(o) is a right granted by the Company, separately, to each Investor Buyer.

 

(i)     At least two (2) Trading Days prior to any proposed or intended private Subsequent Placement (and five (5) trading days for any public Subsequent Placement), the Company shall deliver to each Investor Buyer a written notice (each such notice, a “ Pre-Notice ”), which Pre-Notice shall not contain any information (including, without limitation, material, non-public information) other than: (A) if the proposed Offer Notice (as defined below) constitutes or contains material, non-public information, a statement asking whether the Investor is willing to accept material non-public information or (B) if the proposed Offer Notice does not constitute or contain material, non-public information, (x) a statement that the Company proposes or intends to effect a Subsequent Placement, (y) a statement that the statement in clause (x) above does not constitute material, non-public information and (z) a statement informing such Investor Buyer that it is entitled to receive an Offer Notice (as defined below) with respect to such Subsequent Placement upon its written request. Upon the written request of an Investor Buyer within two (2) Trading Days after the Company’s delivery to such Investor Buyer of such Pre-Notice, and only upon a written request by such Investor Buyer, the Company shall promptly, but no later than one (1) Trading Day after such request, deliver to such Investor Buyer an irrevocable written notice (the “ Offer Notice ”) of any proposed or intended issuance or sale or exchange (the “ Offer ”) of the securities being offered (the “ Offered Securities ”) in a Subsequent Placement, which Offer Notice shall (A) identify and describe the Offered Securities, (B) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (C) identify the Persons (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (D) offer to issue and sell to or exchange with such Investor Buyer in accordance with the terms of the Offer such Investor Buyer’s pro rata portion of 50% of the Offered Securities, provided that the number of Offered Securities which such Investor Buyer shall have the right to subscribe for under this Section 4(o) shall be (x) based on such Investor Buyer’s pro rata portion of the aggregate original principal amount of the Notes purchased hereunder by all Investor Buyers (the “ Basic Amount ”), and (y) with respect to each Investor Buyer that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of other Investor Buyers as such Investor Buyer shall indicate it will purchase or acquire should the other Investor Buyers subscribe for less than their Basic Amounts (the “ Undersubscription Amount ”), which process shall be repeated until each Investor Buyer shall have an opportunity to subscribe for any remaining Undersubscription Amount.

 

 
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(ii)     To accept an Offer, in whole or in part, such Investor Buyer must deliver a written notice to the Company prior to the end of the fifth (5 th ) Business Day (in the case of a public Subsequent Placement) or the second (2nd) Business Day (in the case of a public Subsequent Placement) after such Investor Buyer’s receipt of the Offer Notice (the “ Offer Period ”), setting forth the portion of such Investor Buyer’s Basic Amount that such Investor Buyer elects to purchase and, if such Investor Buyer shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Investor Buyer elects to purchase (in either case, the “ Notice of Acceptance ”). If the Basic Amounts subscribed for by all Investor Buyers are less than the total of all of the Basic Amounts, then each Investor Buyer who has set forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, if the Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the “ Available Undersubscription Amount ”), each Investor Buyer who has subscribed for any Undersubscription Amount shall be entitled to purchase only that portion of the Available Undersubscription Amount as the Basic Amount of such Investor Buyer bears to the total Basic Amounts of all Investor Buyers that have subscribed for Undersubscription Amounts, subject to rounding by the Company to the extent it deems reasonably necessary. Notwithstanding the foregoing, if the Company desires to modify or amend the terms and conditions of the Offer prior to the expiration of the Offer Period, the Company may deliver to each Investor Buyer a new Offer Notice and the Offer Period shall expire on the fifth (5 th ) Business Day after such Investor Buyer’s receipt of such new Offer Notice.

 

(iii)     The Company shall have ten (10) Business Days from the expiration of the Offer Period above (A) to offer, issue, sell or exchange all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by a Investor Buyer (the “ Refused Securities ”) pursuant to a definitive agreement(s) (the “ Subsequent Placement Agreement ”), but only to the offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring Person or Persons or less favorable to the Company than those set forth in the Offer Notice and (B) to publicly announce (x) the execution of such Subsequent Placement Agreement, and (y) either (I) the consummation of the transactions contemplated by such Subsequent Placement Agreement or (II) the termination of such Subsequent Placement Agreement, which shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement and any documents contemplated therein filed as exhibits thereto.

 

 
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(iv)     In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in Section 4(o)(iii) above), then each Investor Buyer may, at its sole option and in its sole discretion, withdraw its Notice of Acceptance or reduce the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that such Investor Buyer elected to purchase pursuant to Section 4(o)(ii) above multiplied by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold to Investor Buyers pursuant to this Section 4(o) prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities. In the event that any Investor Buyer so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities have again been offered to the Investor Buyers in accordance with Section 4(o)(i) above.

 

(v)     Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, such Investor Buyer shall acquire from the Company, and the Company shall issue to such Investor Buyer, the number or amount of Offered Securities specified in its Notice of Acceptance, as reduced pursuant to Section 4(o)(iv) above if such Investor Buyer has so elected, upon the terms and conditions specified in the Offer. The purchase by such Investor Buyer of any Offered Securities is subject in all cases to the preparation, execution and delivery by the Company and such Investor Buyer of a separate purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to such Investor Buyer and its counsel.

 

(vi)     Any Offered Securities not acquired by a Investor Buyer or other Persons in accordance with this Section 4(o) may not be issued, sold or exchanged until they are again offered to such Investor Buyer under the procedures specified in this Agreement.

 

(vii)     The Company and each Investor Buyer agree that if any Investor Buyer elects to participate in the Offer, (x) neither the Subsequent Placement Agreement with respect to such Offer nor any other transaction documents related thereto (collectively, the “ Subsequent Placement Documents ”) shall include any term or provision whereby such Investor Buyer shall be required to agree to any restrictions on trading as to any securities of the Company or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, any agreement previously entered into with the Company or any instrument received from the Company, and (y) any registration rights set forth in such Subsequent Placement Documents shall be similar in all material respects to the registration rights contained in the Registration Rights Agreement.

 

 
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(viii)     Notwithstanding anything to the contrary in this Section 4(o) and unless otherwise agreed to by such Investor Buyer, the Company shall either confirm in writing to such Investor Buyer that the transaction with respect to the Subsequent Placement has been abandoned or shall publicly disclose its intention to issue the Offered Securities, in either case, in such a manner such that such Investor Buyer will not be in possession of any material, non-public information, by the tenth (10th) Business Day following delivery of the Offer Notice. If by such tenth (10th) Business Day, no public disclosure regarding a transaction with respect to the Offered Securities has been made, and no notice regarding the abandonment of such transaction has been received by such Investor Buyer, such transaction shall be deemed to have been abandoned and such Investor Buyer shall not be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries. Should the Company decide to pursue such transaction with respect to the Offered Securities, the Company shall provide such Investor Buyer with another Offer Notice and such Investor Buyer will again have the right of participation set forth in this Section 4(o). The Company shall not be permitted to deliver more than one such Offer Notice to such Investor Buyer in any sixty (60) day period, except as expressly contemplated by the last sentence of Section 4(o)(ii).

 

(ix)     The restrictions contained in this Section 4(o) shall not apply in connection with the issuance of any Excluded Securities The Company shall not circumvent the provisions of this Section 4(o) by providing terms or conditions to one Investor Buyer that are not provided to all.

 

(p)          Dilutive Issuances . For so long as any Notes or Warrants remain outstanding, the Company shall not, in any manner, enter into or affect any Dilutive Issuance (as defined in the Notes) if the effect of such Dilutive Issuance is to cause the Company to be required to issue upon conversion of any Notes or exercise of any Warrant any shares of Common Stock in excess of that number of shares of Common Stock which the Company may issue upon conversion of the Notes and exercise of the Warrants without breaching the Company’s obligations under the rules or regulations of the Principal Market.

 

(q)          Passive Foreign Investment Company . The Company shall conduct its business, and shall cause its Subsidiaries to conduct their respective businesses, in such a manner as will ensure that the Company will not be deemed to constitute a passive foreign investment company within the meaning of Section 1297 of the Code.

 

(r)           Restriction on Redemption and Cash Dividends . So long as any Notes are outstanding, the Company shall not, directly or indirectly, redeem, or declare or pay any cash dividend or distribution on, any securities of the Company without the prior express written consent of the Required Holders.

 

(s)          Corporate Existence . So long as any Buyer beneficially owns any Notes or Warrants, the Company shall not be party to any Fundamental Transaction (as defined in the Notes) unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the Notes and the Warrants.

 

 
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(t)      Stock Splits . Until the Notes and all notes issued pursuant to the terms thereof are no longer outstanding, the Company shall not effect any stock combination, reverse stock split or other similar transaction (or make any public announcement or disclosure with respect to any of the foregoing) without the prior written consent of the Required Holders (as defined below), except as required by an Eligible Market to provide for the eligibility or continued eligibility of the Common Stock for listing or quotation on such market.

 

(u)      Conversion and Exercise Procedures . Each of the form of Exercise Notice (as defined in the Warrants) included in the Warrants and the form of Conversion Notice (as defined in the Notes) included in the Notes set forth the totality of the procedures required of the Buyers in order to exercise the Warrants or convert the Notes. Except as provided in Section 5(d), no additional legal opinion, other information or instructions shall be required of the Buyers to exercise their Warrants or convert their Notes. The Company shall honor exercises of the Warrants and conversions of the Notes and shall deliver the Conversion Shares and Warrant Shares in accordance with the terms, conditions and time periods set forth in the Notes and Warrants.

 

(v)      Regulation M . The Company will not take any action prohibited by Regulation M under the 1934 Act, in connection with the distribution of the Securities contemplated hereby.

 

(w)      General Solicitation . None of the Company, any of its affiliates (as defined in Rule 501(b) under the 1933 Act) or any person acting on behalf of the Company or such affiliate will solicit any offer to buy or offer or sell the Securities by means of any form of general solicitation or general advertising within the meaning of Regulation D, including: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar medium or broadcast over television or radio; and (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.

 

(x)      Integration . None of the Company, any of its affiliates (as defined in Rule 501(b) under the 1933 Act), or any person acting on behalf of the Company or such affiliate will sell, offer for sale, or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the 1933 Act) which will be integrated with the sale of the Securities in a manner which would require the registration of the Securities under the 1933 Act or require stockholder approval under the rules and regulations of the Principal Market and the Company will take all action that is appropriate or necessary to assure that its offerings of other securities will not be integrated for purposes of the 1933 Act or the rules and regulations of the Principal Market, with the issuance of Securities contemplated hereby.

 

(y)      Notice of Disqualification Events . The Company will notify the Buyers in writing, prior to the Closing Date of (i) any Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person.

 

 
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(z)      Subsidiary Guarantee . Until such initial time as the only Principal outstanding under the Notes consists of Restricted Principal (as defined in the Notes), upon any entity becoming direct, or indirect, Subsidiary of the Company or a Subsidiary that has executed or joined, as applicable, the Guaranty (each, a “ Permitted Subsidiary ”), the Company shall cause each such Permitted Subsidiary to become party to the Guaranty by executing a joinder to the Guaranty reasonably satisfactory in form and substance to the Required Holders. The Company shall not permit its Permitted Subsidiary, Zone Technologies, Inc. (“ Zone ”), or any other Person to effect any transfer of any assets of Zone to the Company or any Subsidiary of the Company other than a Permitted Subsidiary without the prior written consent of the Required Holders.

 

(aa)      Stockholder Approval . The Company shall provide each stockholder entitled to vote at a special meeting of stockholders of the Company (the “ Stockholder Meeting ”), which shall be promptly called and held not later than October 31, 2017 (the “ Stockholder Meeting Deadline ”), a proxy statement, in a form reasonably acceptable to the Buyers and Kelley Drye & Warren LLP, at the expense of the Company, with the Company obligated to reimburse the expenses of Kelley Drye & Warren LLP incurred in connection therewith, soliciting each such stockholder’s affirmative vote at the Stockholder Meeting for approval of resolutions (“ Stockholder Resolutions ”) providing for the issuance of all of the Securities in accordance with Nasdaq Listing Rule 5635 (the “ Stockholder Approval ”, and the date the Stockholder Approval is obtained, the “ Stockholder Approval Date ”), and the Company shall use its reasonable best efforts to solicit its stockholders’ approval of such resolutions and to cause the Board of Directors of the Company to recommend to the stockholders that they approve such resolutions. The Company shall be obligated to seek to obtain the Stockholder Approval by the Stockholder Meeting Deadline. If, despite the Company's reasonable best efforts the Stockholder Approval is not obtained on or prior to the Stockholder Meeting Deadline, the Company shall cause an additional Stockholder Meeting to be held on or prior to December 31, 2017. If, despite the Company's reasonable best efforts the Stockholder Approval is not obtained after such subsequent stockholder meetings, the Company shall cause an additional Stockholder Meeting to be held semi-annually thereafter until such Stockholder Approval is obtained.

 

(bb)      No Waiver of Voting and Lockup Agreements . The Company shall not amend, waive or modify any provision of any of the Voting and Lockup Agreements (as defined below).

 

(cc)      Collateral Agent . Each Buyer hereby (i) appoints Hudson Bay Master Fund Ltd., as the collateral agent hereunder and under the other Security Documents (in such capacity, the “ Collateral Agent ”), and (ii) authorizes the Collateral Agent (and its officers, directors, employees and agents) to take such action on such Buyer’s behalf in accordance with the terms hereof and thereof. The Collateral Agent shall not have, by reason hereof or any of the other Security Documents, a fiduciary relationship in respect of any Buyer. Neither the Collateral Agent nor any of its officers, directors, employees or agents shall have any liability to any Buyer for any action taken or omitted to be taken in connection hereof or any other Security Document except to the extent caused by its own gross negligence or willful misconduct, and each Buyer agrees to defend, protect, indemnify and hold harmless the Collateral Agent and all of its officers, directors, employees and agents (collectively, the “ Collateral Agent Indemnitees ”) from and against any losses, damages, liabilities, obligations, penalties, actions, judgments, suits, fees, costs and expenses (including, without limitation, reasonable attorneys’ fees, costs and expenses) incurred by such Collateral Agent Indemnitee, whether direct, indirect or consequential, arising from or in connection with the performance by such Collateral Agent Indemnitee of the duties and obligations of Collateral Agent pursuant hereto or any of the Security Documents. The Collateral Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Holders, and such instructions shall be binding upon all holders of Notes; provided, however, that the Collateral Agent shall not be required to take any action which, in the reasonable opinion of the Collateral Agent, exposes the Collateral Agent to liability or which is contrary to this Agreement or any other Transaction Document or applicable law. The Collateral Agent shall be entitled to rely upon any written notices, statements, certificates, orders or other documents or any telephone message believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Agreement or any of the other Transaction Documents and its duties hereunder or thereunder, upon advice of counsel selected by it.

 

 
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(dd)         Successor Collateral Agent.

 

(i)     The Collateral Agent may resign from the performance of all its functions and duties hereunder and under the other Transaction Documents at any time by giving at least ten (10) Business Days’ prior written notice to the Company and each holder of Notes. Such resignation shall take effect upon the acceptance by a successor Collateral Agent of appointment pursuant to clauses (ii) and (iii) below or as otherwise provided below. If at any time the Collateral Agent (together with its affiliates) beneficially owns less than $100,000 in aggregate principal amount of Notes, the Required Holders may, by written consent, remove the Collateral Agent from all its functions and duties hereunder and under the other Transaction Documents.

 

(ii)     Upon any such notice of resignation or removal, the Required Holders shall appoint a successor collateral agent. Upon the acceptance of any appointment as Collateral Agent hereunder by a successor agent, such successor collateral agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the collateral agent, and the Collateral Agent shall be discharged from its duties and obligations under this Agreement and the other Transaction Documents. After the Collateral Agent’s resignation or removal hereunder as the collateral agent, the provisions of this Section 4(dd) shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Collateral Agent under this Agreement and the other Transaction Documents.

 

(iii)     If a successor collateral agent shall not have been so appointed within ten (10) Business Days of receipt of a written notice of resignation or removal, the Collateral Agent shall then appoint a successor collateral agent who shall serve as the Collateral Agent until such time, if any, as the Required Holders appoint a successor collateral agent as provided above.

 

(iv)     In the event that a successor Collateral Agent is appointed pursuant to the provisions of this Section 4(dd) that is not a Buyer or an affiliate of any Buyer (or the Required Holders or the Collateral Agent (or its successor), as applicable, notify the Company that they or it wants to appoint such a successor Collateral Agent pursuant to the terms of this Section 4(dd), the Company and each Subsidiary thereof covenants and agrees to promptly take all actions reasonably requested by the Required Holders or the Collateral Agent (or its successor), as applicable, from time to time, to secure a successor Collateral Agent satisfactory to the requesting part(y)(ies), in their sole discretion, including, without limitation, by paying all reasonable and customary fees and expenses of such successor Collateral Agent, by having the Company and each Subsidiary thereof agree to indemnify any successor Collateral Agent pursuant to reasonable and customary terms and by each of the Company and each Subsidiary thereof executing a collateral agency agreement or similar agreement and/or any amendment to the Security Documents reasonably requested or required by the successor Collateral Agent.

 

 
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(ee)      Closing Documents . On or prior to fourteen (14) calendar days after the Closing Date, the Company agrees to deliver, or cause to be delivered, electronically to each Buyer and Kelley Drye & Warren LLP a complete closing set of the executed Transaction Documents, Securities and any other document required to be delivered to any party pursuant to Section 7 hereof or otherwise (which may be photocopies or pdf versions of executed copies).

 

(ff)      No Short Sales . So long as any Notes remain outstanding, during any five (5) Trading Day period immediately preceding any Interest Date (as defined in the Notes) and during any True Up Measuring Period or Alternate Conversion Measuring Period (each as defined in the applicable Notes), neither a Buyer nor any of its affiliates nor any entity managed or controlled by such Buyer nor any other Investor with respect to the Notes originally purchased by such Buyer hereunder (collectively, the “ Restricted Persons ” and each of the foregoing is referred to herein as a “ Restricted Person ”) shall, directly or indirectly, engage in any “Short Sales” of the Common Stock (other than any sale marked “short exempt” or any sale of shares deemed to be held “long” hereunder). For purposes hereof, “ Short Sales ” shall mean “short sales” as defined in Rule 200 promulgated under Regulation SHO under the 1934 Act (other than any sale marked “short exempt” or any sale of shares deemed to be held “long” hereunder). Notwithstanding the foregoing, no “Short Sale” or “short” position shall be deemed to exist as a result of any failure by the Company (or its agents) to deliver Conversion Shares upon conversion of the Notes to any Restricted Person converting such Notes. For purposes of determining whether a Restricted Person is deemed to have a “long” position in the Common Stock, at any given time of determination, such Restricted Person shall be deemed to hold “long” all Common Stock that is either (i) then owned by such Restricted Person, if any, or (ii) issuable to such Restricted Person as Conversion Shares pursuant to the terms of the Notes then held by such Restricted Person or (iii) issuable to such Restricted Person as Warrant Shares pursuant to the terms of the Warrants then held by such Restricted Person. Notwithstanding the foregoing, nothing contained herein shall (without implication that the contrary would otherwise be true) prohibit any Restricted Person from selling “long” (as defined under Rule 200 promulgated under Regulation SHO under the 1934 Act) the Securities or any other Common Stock then owned by such Restricted Person. The foregoing restrictions shall also apply to (x) the Alternate Conversion Measuring Period under the February Note in the event the February Buyer signatory hereto exercises its right under Section 1(e) hereof to substitute the Conversion Price of the February Note with the Alternate Conversion Price of the Series B Note and (y) the Cashless Measuring Period (as defined in the Warrant).

 

 
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5.            REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

 

(a)       Register . The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to each holder of Securities), a register for the Notes and the Warrants in which the Company shall record the name and address of the Person in whose name the Notes and the Warrants have been issued (including the name and address of each transferee), the principal amount of the Notes held by such Person, the number of Conversion Shares issuable pursuant to the terms of the Notes, and the number of Warrant Shares issuable upon exercise of the Warrants held by such Person. The Company shall keep the register open and available at all times during business hours for inspection of any Buyer or its legal representatives.

 

(b)       Transfer Agent Instructions . The Company shall issue irrevocable instructions to its transfer agent and any subsequent transfer agent (as applicable, the “ Transfer Agent ”) in a form acceptable to each of the Buyers (the “ Irrevocable Transfer Agent Instructions ”) to issue certificates or credit shares to the applicable balance accounts at The Depository Trust Company (“ DTC ”), registered in the name of each Buyer or its respective nominee(s), for the Conversion Shares and the Warrant Shares in such amounts as specified from time to time by each Buyer to the Company upon conversion of the Notes or the exercise of the Warrants (as the case may be). The Company represents and warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5(b), and stop transfer instructions to give effect to Section 2(g) hereof, will be given by the Company to its transfer agent with respect to the Securities, and that the Securities shall otherwise be freely transferable on the books and records of the Company, as applicable, to the extent provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale, assignment or transfer of the Securities in accordance with Section 2(g), the Company shall permit the transfer and shall promptly instruct its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment or transfer involves Conversion Shares or Warrant Shares sold, assigned or transferred pursuant to an effective registration statement or in compliance with Rule 144, the transfer agent shall issue such shares to such Buyer, assignee or transferee (as the case may be) without any restrictive legend in accordance with Section 5(d) below. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to a Buyer. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5(b) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5(b), that a Buyer shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. The Company shall cause its counsel to issue the legal opinion referred to in the Irrevocable Transfer Agent Instructions to the Company’s transfer agent on each Effective Date (as defined in the Registration Rights Agreement). Any fees (with respect to the transfer agent, counsel to the Company or otherwise) associated with the issuance of such opinion or the removal of any legends on any of the Securities shall be borne by the Company.

 

 
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(c)      Legends . Each Buyer understands that the Securities have been issued (or will be issued in the case of the Conversion Shares and the Warrant Shares) pursuant to an exemption from registration or qualification under the 1933 Act and applicable state securities laws, and except as set forth below, the Securities shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):

 

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE [EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

(d)      Removal of Legends . Certificates evidencing Securities shall not be required to contain the legend set forth in Section 5(c) above or any other legend (i) while a registration statement (including a Registration Statement) covering the resale of such Securities is effective under the 1933 Act, (ii) following any sale of such Securities pursuant to Rule 144 (assuming the transferor is not an affiliate of the Company), (iii) if such Securities are eligible to be sold, assigned or transferred under Rule 144 (provided that a Buyer provides the Company with reasonable assurances that such Securities are eligible for sale, assignment or transfer under Rule 144 which shall not include an opinion of Buyer’s counsel), (iv) in connection with a sale, assignment or other transfer (other than under Rule 144), provided that such Buyer provides the Company with an opinion of counsel to such Buyer, in a generally acceptable form, to the effect that such sale, assignment or transfer of the Securities may be made without registration under the applicable requirements of the 1933 Act or (v) if such legend is not required under applicable requirements of the 1933 Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the SEC). If a legend is not required pursuant to the foregoing, the Company shall no later than three (3) Trading Days (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade initiated on the date such Buyer delivers such legended certificate representing such Securities to the Company) following the delivery by a Buyer to the Company or the transfer agent (with notice to the Company) of a legended certificate representing such Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), together with any other deliveries from such Buyer as may be required above in this Section 5(d), as directed by such Buyer, either: (A) provided that the Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer Program and such Securities are Conversion Shares or Warrant Shares, credit the aggregate number of shares of Common Stock to which such Buyer shall be entitled to such Buyer’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver (via reputable overnight courier) to such Buyer, a certificate representing such Securities that is free from all restrictive and other legends, registered in the name of such Buyer or its designee (the date by which such credit is so required to be made to the balance account of such Buyer’s or such Buyer’s designee with DTC or such certificate is required to be delivered to such Buyer pursuant to the foregoing is referred to herein as the “ Required Delivery Date ”, and the date such shares of Common Stock are actually delivered without restrictive legend to such Buyer or such Buyer’s designee with DTC, as applicable, the “ Share Delivery Date ”). The Company shall be responsible for any transfer agent fees or DTC fees with respect to any issuance of Securities or the removal of any legends with respect to any Securities in accordance herewith.

 

 
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(e)      Failure to Timely Deliver; Buy-In . If the Company fails to, for any reason or for no reason, to issue and deliver (or cause to be delivered) to a Buyer (or its designee) by the Required Delivery Date, either (I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, a certificate for the number of Conversion Shares or Warrant Shares (as the case may be) to which such Buyer is entitled and register such Conversion Shares or Warrant Shares (as the case may be) on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of such Buyer or such Buyer’s designee with DTC for such number of Conversion Shares or Warrant Shares (as the case may be) submitted for legend removal by such Buyer pursuant to Section 5(d) above or (II) if the Registration Statement covering the resale of the Conversion Shares or Warrant Shares (as the case may be) submitted for legend removal by such Buyer pursuant to Section 5(d) above (the “ Unavailable Shares ”) is not available for the resale of such Unavailable Shares and the Company fails to promptly, but in no event later than as required pursuant to the Registration Rights Agreement (x) so notify such Buyer and (y) deliver the Conversion Shares or Warrant Shares (as the case may be) electronically without any restrictive legend by crediting such aggregate number of Conversion Shares or Warrant Shares (as the case may be) submitted for legend removal by such Buyer pursuant to Section 5(d) above to such Buyer’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause (II) is hereinafter referred as a “ Notice Failure ” and together with the event described in clause (I) above, a “ Delivery Failure ”), then, in addition to all other remedies available to such Buyer, the Company shall pay in cash to such Buyer on each day after the Share Delivery Date and during such Delivery Failure an amount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to such Buyer on or prior to the Required Delivery Date and to which such Buyer is entitled, and (B) any trading price of the Common Stock selected by such Buyer in writing as in effect at any time during the period beginning on the date of the delivery by such Buyer to the Company of the applicable Conversion Shares or Warrant Shares (as the case may be) and ending on the applicable Share Delivery Date. In addition to the foregoing, if on or prior to the Required Delivery Date either (I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver a certificate to a Buyer and register such shares of Common Stock on the Company's share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, credit the balance account of such Buyer or such Buyer’s designee with DTC for the number of shares of Common Stock to which such Buyer submitted for legend removal by such Buyer pursuant to Section 5(d) above (ii) below or (II) a Notice Failure occurs, and if on or after such Trading Day such Buyer purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Buyer of shares of Common Stock submitted for legend removal by such Buyer pursuant to Section 5(d) above that such Buyer is entitled to receive from the Company (a “ Buy-In ”), then the Company shall, within three (3) Trading Days after such Buyer’s request and in such Buyer’s discretion, either (i) pay cash to such Buyer in an amount equal to such Buyer’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any, for the shares of Common Stock so purchased) (the “ Buy-In Price ”), at which point the Company’s obligation to so deliver such certificate or credit such Buyer’s balance account shall terminate and such shares shall be cancelled, or (ii) promptly honor its obligation to so deliver to such Buyer a certificate or certificates or credit the balance account of such Buyer or such Buyer’s designee with DTC representing such number of shares of Common Stock that would have been so delivered if the Company timely complied with its obligations hereunder and pay cash to such Buyer in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Conversion Shares or Warrant Shares (as the case may be) that the Company was required to deliver to such Buyer by the Required Delivery Date multiplied by (B) the lowest Closing Sale Price (as defined in the Notes) of the Common Stock on any Trading Day during the period commencing on the date of the delivery by such Buyer to the Company of the applicable Conversion Shares or Warrant Shares (as the case may be) and ending on the date of such delivery and payment under this clause (ii). Nothing shall limit such Buyer’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares of Common Stock) as required pursuant to the terms hereof. Notwithstanding anything herein to the contrary, with respect to any given Notice Failure and/or Delivery Failure, this Section 5(e) shall not apply to the applicable Buyer the extent the Company has already paid such amounts in full to such Buyer with respect to such Notice Failure and/or Delivery Failure, as applicable, pursuant to the analogous sections of the Note or Warrant, as applicable, held by such Buyer.

 

 
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(f)            FAST Compliance . While any Warrants remain outstanding, the Company shall maintain a transfer agent that participates in the DTC Fast Automated Securities Transfer Program.

 

6.            CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

 

(a)           The obligation of the Company hereunder to issue and sell the Notes and the related Warrants to each Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing each Buyer with prior written notice thereof:

 

(i)      Such Buyer shall have duly executed and delivered to the Company an Investor Collateral Certificate and, at the Company’s direction, an Investor Note to the Collateral Agent in such original principal amount as is set forth across from such Buyer’s name in column (9) of the Schedule of Buyers.

 

 
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(ii)      Such Buyer and each other Buyer shall have delivered to the Company the Cash Purchase Price (less, in the case of any Buyer, the amounts withheld pursuant to Section 4(g)) for the Note and the related Warrants being purchased by such Buyer at the Closing by wire transfer of immediately available funds in accordance with the Flow of Funds Letter.

 

(iii)     Such Buyer shall have executed each of the other Transaction Documents to which it is a party and delivered the same to the Company.

 

(iv)     The representations and warranties of such Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date), and such Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Buyer at or prior to the Closing Date.

 

7.           CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.

 

(a)          The obligation of each Buyer hereunder to purchase its Note and its related Warrants at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Buyer’s sole benefit and may be waived by such Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:

 

(i)       The Company and each Subsidiary (as the case may be) shall have duly executed and delivered to such Buyer each of the Transaction Documents to which it is a party and the Company shall have duly executed and delivered to such Buyer (A) an Initial Series A Note in such aggregate original principal amount as is set forth across from such Buyer’s name in column (3) of the Schedule of Buyers as being purchased by such Buyer at the Closing pursuant to this Agreement, (B) an Additional Series A Note in such aggregate original principal amount as is set forth across from such Buyer’s name in column (4) of the Schedule of Buyers as being purchased by such Buyer at the Closing pursuant to this Agreement, (C) a Series B Note in such aggregate original principal amount as is set forth across from such Buyer’s name in column (5) of the Schedule of Buyers as being purchased by such Buyer at the Closing pursuant to this Agreement; and (D) a Warrant initially exercisable for such aggregate number of Warrant Shares as is set forth across from such Buyer’s name in column (6) of the Schedule of Buyers, in each case, as being purchased by such Buyer at the Closing pursuant to this Agreement.

 

(ii)      Such Buyer shall have received the opinion of Mitchell Silberberg & Knupp LLP, the Company’s corporate counsel, dated as of the Closing Date, in the form acceptable to such Buyer.

 

 
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(iii)      The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form acceptable to such Buyer, which instructions shall have been delivered to and acknowledged in writing by the Company’s transfer agent.

 

(iv)      The Company shall have delivered to such Buyer a certificate evidencing the formation and good standing of the Company, HMNY Zone Loan LLC and Zone in each such entity’s jurisdiction of formation issued by the Secretary of State (or comparable office) of such jurisdiction of formation as of a date within ten (10) days of the Closing Date.

 

(v)       The Company shall have delivered to such Buyer (A) a certificate evidencing the good standing of each of the Company and Zone issued by the Secretary of State of Delaware and Nevada, respectively, and (B) a certificate evidencing the Company’s qualification as a foreign corporation and good standing issued by the Secretary of State of each of New York and California (as to the Company), as of a date within ten (10) days of the Closing Date.

 

(vi)      The Company shall have delivered to such Buyer a certified copy of the Certificate of Incorporation as certified by the Delaware Secretary of State within ten (10) days of the Closing Date.

 

(vii)     Zone shall have delivered to such Buyer a certified copy of its Articles of Incorporation as certified by the Secretary of State (or comparable office) of Nevada within ten (10) days of the Closing Date.

 

(viii)     The Company, HMNY Zone Loan LLC and Zone shall have delivered to such Buyer a certificate, in the form acceptable to such Buyer, executed by the Secretary of the Company, HMNY Zone Loan LLC and Zone and dated as of the Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted by the Company’s and Zone’s respective board of directors in a form reasonably acceptable to such Buyer, (ii) the Certificate of Incorporation of the Company and Articles of Incorporation of Zone, (iii) the Bylaws of the Company and Zone, each as in effect at the Closing and (iv) the certificate of formation and limited liability company agreement of HMNY Zone Loan LLC.

 

(ix)       Each and every representation and warranty of the Company shall be true and correct in all material respects (except for such representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the Closing Date. Such Buyer shall have received a certificate, duly executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Buyer in the form acceptable to such Buyer.

 

 
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(x)        The Company shall have delivered to such Buyer a letter from the Company’s transfer agent certifying the number of shares of Common Stock outstanding on the Closing Date immediately prior to the Closing.

 

(xi)       The Common Stock (A) shall be designated for quotation or listed (as applicable) on the Principal Market and (B) shall not have been suspended, as of the Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall suspension by the SEC or the Principal Market have been threatened, as of the Closing Date, either (I) in writing by the SEC or the Principal Market or (II) by falling below the minimum maintenance requirements of the Principal Market.

 

(xii)      The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Securities, including without limitation, those required by the Principal Market, if any.

 

(xiii)     No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or Governmental Entity of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.

 

(xiv)     Since the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result in a Material Adverse Effect.

 

(xv)     The Company shall have obtained approval of the Principal Market to list or designate for quotation (as the case may be) the Conversion Shares and the Warrant Shares.

 

(xvi)     Within two (2) Business Days prior to the Closing, the Company shall have delivered or caused to be delivered to each Buyer (A) certified copies of requests for copies of information on Form UCC-11, listing all effective financing statements which name as debtor the Company or Zone and which are filed in such office or offices as may be necessary or, in the opinion of the Buyers, desirable to perfect the security interests purported to be created hereby, together with copies of such financing statements, none of which, except as otherwise agreed in writing by the Buyers, shall cover any of the Collateral (as defined in any Security Agreement), and the results of searches for any tax Lien and judgment Lien filed against such Person or its property, which results, except as otherwise agreed to in writing by the Buyers, shall not show any such Liens; and (B) a perfection certificate, duly completed and executed by the Company and each of its Subsidiaries, in form and substance satisfactory to the Buyers.

 

(xvii)    The Company shall have directed each Buyer to deliver such Buyer’s Investor Note to the Collateral Agent and the Collateral Agent shall have physical possession of each Investor Note at the Closing.

 

 
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(xviii)   In accordance with the terms of the Security Documents, the Company shall have delivered to the Collateral Agent (A) original certificates (I) representing 100% of the outstanding capital stock of Zone, and all promissory notes required to be pledged thereunder, in each case, accompanied by undated stock powers and allonges executed in blank and other proper instruments of transfer and (B) appropriate financing statements on Form UCC-1 to be duly filed in such office or offices as may be necessary or, in the opinion of the Collateral Agent, desirable to perfect the security interests purported to be created by each Security Document (the “ Perfection Certificate ”).

 

(xix)     The Collateral Agent shall have received all promissory notes required to be pledged thereunder, accompanied by undated stock powers and allonges executed in blank and other proper instruments of transfer.

 

(xx)     The Collateral Agent shall have received the Company Security Agreement, duly executed by the Company, and all promissory notes required to be pledged thereunder, accompanied by undated stock powers and allonges executed in blank and other proper instruments of transfer.

 

(xxi)     Such Buyer shall have received a letter on the letterhead of the Company, duly executed by the Chief Executive Officer of the Company, setting forth the wire amounts of each Buyer and the wire transfer instructions of the Company with respect to the Cash Purchase Price set forth in column (8) of the Schedule of Buyers (the “ Flow of Funds Letter ”).

 

(xxii)     The Company shall have duly executed and delivered to such Buyer voting and lockup agreements, each in the form of Exhibit H hereof (the “ Voting and Lockup Agreement ”), duly executed and delivered to such Buyer by the Company, on one hand, and, in separate Voting and Lockup Agreements, on the other hand, each stockholder listed on schedule 7(a)(xxiii) (the “ Principal Stockholders ”), representing approximately 49% of the outstanding Common Stock of the Company as of the date hereof.

 

(xxiii)    The Principal Stockholders shall have duly executed and delivered the Written Consent to the Company and such Buyer.

 

(xxiv)    The Company and its Subsidiaries shall have delivered to such Buyer such other documents, instruments or certificates relating to the transactions contemplated by this Agreement as such Buyer or its counsel may reasonably request.

 

8.            TERMINATION.

 

In the event that the Closing shall not have occurred with respect to a Buyer within five (5) days of the date hereof, then such Buyer shall have the right to terminate its obligations under this Agreement with respect to itself at any time on or after the close of business on such date without liability of such Buyer to any other party; provided, however, (i) the right to terminate this Agreement under this Section 8 shall not be available to such Buyer if the failure of the transactions contemplated by this Agreement to have been consummated by such date is the result of such Buyer’s breach of this Agreement and (ii) the abandonment of the sale and purchase of the Notes and the Warrants shall be applicable only to such Buyer providing such written notice, provided further that no such termination shall affect any obligation of the Company under this Agreement to reimburse such Buyer for the expenses described in Section 4(g) above. Nothing contained in this Section 8 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.

 

 
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9.            MISCELLANEOUS.

 

(a)      Governing Law; Jurisdiction; Jury Trial . All questions concerning the construction, validity, enforcement and interpretation of this Agreement 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. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or under any of the other Transaction Documents or with any transaction contemplated hereby or thereby, 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. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude any Buyer from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to such Buyer or to enforce a judgment or other court ruling in favor of such Buyer. EACH PARTY 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 UNDER ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT , ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY .

 

(b)      Counterparts . This Agreement 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. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

 

 
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(c)      Headings; Gender . The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.

 

(d)      Severability; Maximum Payment Amounts . If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s). Notwithstanding anything to the contrary contained in this Agreement or any other Transaction Document (and without implication that the following is required or applicable), it is the intention of the parties that in no event shall amounts and value paid by the Company and/or any of its Subsidiaries (as the case may be), or payable to or received by any of the Buyers, under the Transaction Documents (including without limitation, any amounts that would be characterized as “interest” under applicable law) exceed amounts permitted under any applicable law. Accordingly, if any obligation to pay, payment made to any Buyer, or collection by any Buyer pursuant the Transaction Documents is finally judicially determined to be contrary to any such applicable law, such obligation to pay, payment or collection shall be deemed to have been made by mutual mistake of such Buyer, the Company and its Subsidiaries and such amount shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by the applicable law. Such adjustment shall be effected, to the extent necessary, by reducing or refunding, at the option of such Buyer, the amount of interest or any other amounts which would constitute unlawful amounts required to be paid or actually paid to such Buyer under the Transaction Documents. For greater certainty, to the extent that any interest, charges, fees, expenses or other amounts required to be paid to or received by such Buyer under any of the Transaction Documents or related thereto are held to be within the meaning of “interest” or another applicable term to otherwise be violative of applicable law, such amounts shall be pro-rated over the period of time to which they relate.

 

 
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(e)      Entire Agreement; Amendments . This Agreement, the other Transaction Documents and the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein supersede all other prior oral or written agreements between the Buyers, the Company, its Subsidiaries, their affiliates and Persons acting on their behalf, including, without limitation, any transactions by any Buyer with respect to Common Stock or the Securities, and the other matters contained herein and therein, and this Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein contain the entire understanding of the parties solely with respect to the matters covered herein and therein; provided, however, nothing contained in this Agreement or any other Transaction Document shall (or shall be deemed to) (i) have any effect on any agreements any Buyer has entered into with, or any instruments any Buyer has received from, the Company or any of its Subsidiaries prior to the date hereof with respect to any prior investment made by such Buyer in the Company or (ii) waive, alter, modify or amend in any respect any obligations of the Company or any of its Subsidiaries, or any rights of or benefits to any Buyer or any other Person, in any agreement entered into prior to the date hereof between or among the Company and/or any of its Subsidiaries and any Buyer, or any instruments any Buyer received from the Company and/or any of its Subsidiaries prior to the date hereof, and all such agreements and instruments shall continue in full force and effect. Except as specifically set forth herein or therein, neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. For clarification purposes, the Recitals are part of this Agreement. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Required Holders (as defined below), and any amendment to any provision of this Agreement made in conformity with the provisions of this Section 9(e) shall be binding on all Buyers and holders of Securities, as applicable; provided that no such amendment shall be effective to the extent that it (A) applies to less than all of the holders of the Securities then outstanding or (B) imposes any obligation or liability on any Buyer without such Buyer’s prior written consent (which may be granted or withheld in such Buyer’s sole discretion). No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party, provided that the Required Holders may waive any provision of this Agreement, and any waiver of any provision of this Agreement made in conformity with the provisions of this Section 9(e) shall be binding on all Buyers and holders of Securities, as applicable, provided that no such waiver shall be effective to the extent that it (1) applies to less than all of the holders of the Securities then outstanding (unless a party gives a waiver as to itself only) or (2) imposes any obligation or liability on any Buyer without such Buyer’s prior written consent (which may be granted or withheld in such Buyer’s sole discretion). No consideration (other than reimbursement of legal fees) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration also is offered to all of the parties to the Transaction Documents, all holders of the Notes or all holders of the Warrants (as the case may be). From the date hereof and while any Notes or Warrants are outstanding, the Company shall not be permitted to receive any consideration from a Buyer or a holder of Notes or Warrants that is not otherwise contemplated by the Transaction Documents in order to, directly or indirectly, induce the Company or any Subsidiary (i) to treat such Buyer or holder of Notes or Warrants in a manner that is more favorable than to other similarly situated Buyers or holders of Notes or Warrants, as applicable, or (ii) to treat any Buyer(s) or holder(s) of Notes or Warrants in a manner that is less favorable than the Buyer or holder of Notes or Warrants that is paying such consideration; provided, however, that the determination of whether a Buyer has been treated more or less favorably than another Buyer shall disregard any securities of the Company purchased or sold by any Buyer. The Company has not, directly or indirectly, made any agreements with any Buyers relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this Agreement, no Buyer has made any commitment or promise or has any other obligation to provide any financing to the Company, any Subsidiary or otherwise. As a material inducement for each Buyer to enter into this Agreement, the Company expressly acknowledges and agrees that (x) no due diligence or other investigation or inquiry conducted by a Buyer, any of its advisors or any of its representatives shall affect such Buyer’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement or any other Transaction Document and (y) unless a provision of this Agreement or any other Transaction Document is expressly preceded by the phrase “except as disclosed in the SEC Documents,” nothing contained in any of the SEC Documents shall affect such Buyer’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement or any other Transaction Document. “ Required Holders ” means (I) prior to the Closing Date, each Buyer entitled to purchase Notes at the Closing and (II) on or after the Closing Date, holders of a majority of the Registrable Securities as of such time (excluding any Registrable Securities held by the Company or any of its Subsidiaries as of such time) issued or issuable hereunder or pursuant to the Notes and/or the Warrants (or the Buyers, with respect to any waiver or amendment of Section 4(o)); provided, that such Buyers or holders of Registrable Securities, as applicable, must include Hudson Bay Master Fund Ltd. so long as it beneficially owns any of the Registrable Securities (on an as-converted and as-exercised basis without regard to any limitations on conversion or exercise thereof).

 

 
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(f)        Notices . Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) or electronic mail; or (iii) one (1) Business Day after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same. The addresses, facsimile numbers and e-mail addresses for such communications shall be:

 

If to the Company:

 

Helios and Matheson Analytics Inc.
Empire State Building

350 5th Avenue

New York, New York 10118
Telephone: (212) 979-8228
Facsimile: (212) 979-2517
Attention: Chief Executive Officer
E-Mail: pat.k@hmny.com

 

 
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With a copy (for informational purposes only) to:

 

Mitchell Silberberg & Knupp LLP
11377 W. Olympic Blvd.

Los Angeles, CA 90065
Telephone: (310) 312-3106
Facsimile: (310) 312-3100
Attention: Kevin Friedmann, Esq.
E-Mail: kxf@msk.com

 

If to the Transfer Agent:

 

Computershare
211 Quality Circle, Suite 210

College Station, TX 77845
Telephone: (502) 301-6102
Facsimile: (866) 519-2854
Attention: Jade Larimore
E-Mail: Jade.Larimore@computershare.com

 

If to a Buyer, to its address, e-mail address and facsimile number set forth on the Schedule of Buyers, with copies to such Buyer’s representatives as set forth on the Schedule of Buyers,

 

with a copy (for informational purposes only) to:

 

Kelley Drye & Warren LLP
101 Park Avenue
New York, NY 10178
Telephone: (212) 808-7540
Facsimile: (212) 808-7897
Attention: Michael A. Adelstein, Esq.
E-mail: madelstein@kelleydrye.com

 

or to such other address, e-mail address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change, provided that Kelley Drye & Warren LLP shall only be provided copies of notices sent to the lead Buyer. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine or e-mail containing the time, date, recipient facsimile number and, with respect to each facsimile transmission, an image of the first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.

 

(g)      Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any purchasers of any of the Notes and Warrants. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Required Holders, including, without limitation, by way of either (i) a Fundamental Transaction (as defined in the Warrants) unless the Company is in compliance with the applicable provisions governing Fundamental Transactions (as defined in the Warrants) set forth in the Warrants or (ii) a Fundamental Transaction (as defined in the Notes) unless the Company is in compliance with the applicable provisions governing Fundamental Transactions (as defined in the Notes) set forth in the Notes. A Buyer may assign some or all of its rights hereunder in connection with any transfer of any of its Securities without the consent of the Company, in which event such assignee shall be deemed to be a Buyer hereunder with respect to such assigned rights.

 

 
55

 

 

(h)      No Third Party Beneficiaries . This Agreement 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, other than the Indemnitees referred to in Section 9(k).

 

(i)      Survival . The representations, warranties, agreements and covenants shall survive the Closing. Each Buyer shall be responsible only for its own representations, warranties, agreements and covenants hereunder.

 

(j)      Further Assurances . Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

(k)      Indemnification . In consideration of each Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless each Buyer and each holder of any Securities and all of their stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons’ agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “ Indemnitees ”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “ Indemnified Liabilities ”), incurred by any Indemnitee as a result of, or arising out of, or relating to (i) any misrepresentation or breach of any representation or warranty made by the Company or any Subsidiary in any of the Transaction Documents, (ii) any breach of any covenant, agreement or obligation of the Company or any Subsidiary contained in any of the Transaction Documents or (iii) any cause of action, suit, proceeding or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company or any Subsidiary) or which otherwise involves such Indemnitee that arises out of or results from (A) the execution, delivery, performance or enforcement of any of the Transaction Documents, (B) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, (C) any disclosure properly made by such Buyer pursuant to Section 4(i), or (D) the status of such Buyer or holder of the Securities either as an investor in the Company pursuant to the transactions contemplated by the Transaction Documents or as a party to this Agreement (including, without limitation, as a party in interest or otherwise in any action or proceeding for injunctive or other equitable relief). To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. Except as otherwise set forth herein, the mechanics and procedures with respect to the rights and obligations under this Section 9(k) shall be the same as those set forth in Section 6 of the Registration Rights Agreement.

 

 
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(l)      Construction . The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. No specific representation or warranty shall limit the generality or applicability of a more general representation or warranty. Each and every reference to share prices, shares of Common Stock and any other numbers in this Agreement that relate to the Common Stock shall be automatically adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions that occur with respect to the Common Stock after the date of this Agreement. Notwithstanding anything in this Agreement to the contrary, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty against, or a prohibition of, any actions with respect to the borrowing of, arrangement to borrow, identification of the availability of, and/or securing of, securities of the Company in order for such Buyer (or its broker or other financial representative) to effect short sales or similar transactions in the future, subject to and in accordance with Section 4(ff) hereof (titled “No Short Sales”).

 

(m)      Remedies . Each Buyer and in the event of assignment by Buyer of its rights and obligations hereunder, each holder of Securities, shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event that it or any Subsidiary fails to perform, observe, or discharge any or all of its or such Subsidiary’s (as the case may be) obligations under the Transaction Documents, any remedy at law would inadequate relief to the Buyers. The Company therefore agrees that the Buyers shall be entitled to specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security. The remedies provided in this Agreement and the other Transaction Documents shall be cumulative and in addition to all other remedies available under this Agreement and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief).

 

(n)      Withdrawal Right . Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Buyer exercises a right, election, demand or option under a Transaction Document and the Company or any Subsidiary does not timely perform its related obligations within the periods therein provided, then such Buyer may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company or such Subsidiary (as the case may be), any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

 

 
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(o)           Payment Set Aside; Currency . To the extent that the Company makes a payment or payments to any Buyer hereunder or pursuant to any of the other Transaction Documents or any of the Buyers enforce or exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. Unless otherwise expressly indicated, all dollar amounts referred to in this Agreement and the other Transaction Documents are in United States Dollars (“ U.S. Dollars ”), and all amounts owing under this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “ Exchange Rate means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation.

 

(p)           Judgment Currency .

 

(i)         If for the purpose of obtaining or enforcing judgment against the Company in connection with this Agreement or any other Transaction Document in any court in any jurisdiction it becomes necessary to convert into any other currency (such other currency being hereinafter in this Section 9(p) referred to as the “ Judgment Currency ”) an amount due in US Dollars under this Agreement, the conversion shall be made at the Exchange Rate prevailing on the Trading Day immediately preceding:

 

(1)     the date actual payment of the amount due, in the case of any proceeding in the courts of New York or in the courts of any other jurisdiction that will give effect to such conversion being made on such date: or

 

(2)     the date on which the foreign court determines, in the case of any proceeding in the courts of any other jurisdiction (the date as of which such conversion is made pursuant to this Section 9(p)(i)(2) being hereinafter referred to as the “ Judgment Conversion Date ”).

 

(ii)        If in the case of any proceeding in the court of any jurisdiction referred to in Section 9(p)(i)(2) above, there is a change in the Exchange Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the applicable party shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the Exchange Rate prevailing on the date of payment, will produce the amount of US Dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing on the Judgment Conversion Date.

 

 
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(iii)       Any amount due from the Company under this provision shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of this Agreement or any other Transaction Document.

 

(q)           Independent Nature of Buyers’ Obligations and Rights . The obligations of each Buyer under the Transaction Documents are several and not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers as, and the Company acknowledges that the Buyers do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Buyers are in any way acting in concert or as a group or entity, and the Company shall not assert any such claim with respect to such obligations or the transactions contemplated by the Transaction Documents or any matters, and the Company acknowledges that the Buyers are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by the Transaction Documents. The decision of each Buyer to purchase Securities pursuant to the Transaction Documents has been made by such Buyer independently of any other Buyer. Each Buyer acknowledges that no other Buyer has acted as agent for such Buyer in connection with such Buyer making its investment hereunder and that no other Buyer will be acting as agent of such Buyer in connection with monitoring such Buyer’s investment in the Securities or enforcing its rights under the Transaction Documents. The Company and each Buyer confirms that each Buyer has independently participated with the Company and its Subsidiaries in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Buyer shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Buyer to be joined as an additional party in any proceeding for such purpose. The use of a single agreement to effectuate the purchase and sale of the Securities contemplated hereby was solely in the control of the Company, not the action or decision of any Buyer, and was done solely for the convenience of the Company and its Subsidiaries and not because it was required or requested to do so by any Buyer. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company, each Subsidiary and a Buyer, solely, and not between the Company, its Subsidiaries and the Buyers collectively and not between and among the Buyers.

 

(r)          Performance Date . If the date by which any obligation under any of the Transaction Documents must be performed occurs on a day other than a Business Day, then the date by which such performance is required shall be the next Business Day following such date.

 

[ signature pages follow ]

 

 
59

 

 

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written above.

 

 

 

COMPANY:

 

     
 

HELIOS AND MATHESON ANALYTICS INC.

 

 

 

 

 

       

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written above.

 

 

 

BUYER, DECEMBER BUYER AND

FEBRUARY BUYER:

 

     
 

HUDSON BAY MASTER FUND LTD

 

 

 

 

 

       

 

 

 

 

 

By:

/s/ George Antonopoulos

 

 

 

Name: George Antonopoulos

 

 

 

Title: Authorized Signatory

 

 

 

 

 

SCHEDULE OF BUYERS

 

 

(1)

(2)

 

(3)

 

(4)

 

(5)

 

(6)

(7)

(8)

(9)

(10)

Buyer

Address and Facsimile Number

Original Principal Amount of Initial Series A
Notes

Original Principal Amount of Additional
Series A

Notes

Original Principal Amount of Series B

Notes

Aggregate Number of Warrant Shares

Purchase Price

Cash Purchase Price

Original Principal Amount of Investor Notes

Legal Representative’s
Address and Facsimile Number

                   


Hudson Bay

Master Fund Ltd.


Please deliver any notices other than

Pre-Notices to:

 

777 Third Avenue, 30th Floor
New York, NY 10017
Attention: Yoav Roth
Facsimile: (212) 571-1279
E-mail: investments@hudsonbaycapital.com
Residence: Cayman Islands

 

Please deliver any Pre-Notice to:

 

777 Third Ave., 30th Floor

New York, NY 10017

Facsimile: (646) 214-7946

Attention: Scott Black

General Counsel and Chief Compliance Officer

 

$1,250,000

 

$8,800,000

 

$250,000

 

[      ]

 

$9,020,000

 

$220,000

 

$8,800,000


Kelley Drye & Warren LLP

101 Park Avenue

New York, NY 10178

Telephone: (212) 808-7540

Facsimile: (212) 808-7897

Attention: Michael A. Adelstein, Esq.

 

Exhibit 10.11

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”), dated as of August __, 2017, is by and among 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 undersigned buyers (each, a “ Buyer ,” and collectively, the “ Buyers ”).

 

RECITALS

 

A.     In connection with the Securities Purchase Agreement by and among the parties hereto, dated as of August __, 2017 (the “ Securities Purchase Agreement ”), the Company has agreed, upon the terms and subject to the conditions of the Securities Purchase Agreement, to issue and sell to each Buyer (i) the Notes (as defined in the Securities Purchase Agreement) which will be convertible into Conversion Shares (as defined in the Securities Purchase Agreement) in accordance with the terms of the Notes and (ii) the Warrants (as defined in the Securities Purchase Agreement) which will be exercisable to purchase Warrant Shares (as defined in the Securities Purchase Agreement) in accordance with the terms of the Warrants.

 

B.     To induce the Buyers to consummate the transactions contemplated by the Securities Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “ 1933 Act ”), and applicable state securities laws.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Buyers hereby agree as follows:

 

1.              Definitions.

 

Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Securities Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

 

(a)     “ Business Day ” means any day other than Saturday, Sunday or any other day on which commercial banks in New York, New York are authorized or required by law to remain closed.

 

(b)     “ Closing Date ” shall have the meaning set forth in the Securities Purchase Agreement.

 

(c)     “ Effective Date ” means the date that the applicable Registration Statement has been declared effective by the SEC.

 

 
 

 

 

(d)     “ Effectiveness Deadline ” means (i) with respect to the initial Registration Statement required to be filed pursuant to Section 2(a), the earlier of the (A) 90 th calendar day after the Closing Date (or the 120th calendar day after the Closing Date in the event that such Registration Statement is subject to a limited or full review by the SEC) and (B) 2nd Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement will not be reviewed or will not be subject to further review and (ii) with respect to any additional Registration Statements that may be required to be filed by the Company pursuant to this Agreement, the earlier of the (A) 90 th calendar day following the date on which the Company was required to file such additional Registration Statement (or the 120th calendar day after the Closing Date in the event that such Registration Statement is subject to a limited or full review by the SEC) and (B) 2 nd Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement will not be reviewed or will not be subject to further review.

 

(e)     “ Filing Deadline ” means (i) with respect to the initial Registration Statement required to be filed pursuant to Section 2(a), the 30 th calendar day after the Closing Date and (ii) with respect to any additional Registration Statements that may be required to be filed by the Company pursuant to this Agreement, the date on which the Company was required to file such additional Registration Statement pursuant to the terms of this Agreement.

 

(f)     “ Investor ” means a Buyer or any transferee or assignee of any Registrable Securities, Notes or Warrants, as applicable, to whom a Buyer assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9 and any transferee or assignee thereof to whom a transferee or assignee of any Registrable Securities, Notes or Warrants, as applicable, assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9.

 

(g)     “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization or a government or any department or agency thereof.

 

(h)     “ register ,” “ registered ,” and “ registration ” refer to a registration effected by preparing and filing one or more Registration Statements in compliance with the 1933 Act and pursuant to Rule 415 and the declaration of effectiveness of such Registration Statement(s) by the SEC.

 

(i)     “ Registrable Securities ” means (i) the Conversion Shares, (ii) the Warrant Shares and (iii) any capital stock of the Company issued or issuable with respect to the Conversion Shares, the Warrant Shares, the Notes or the Warrants, including, without limitation, (1) as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise and (2) shares of capital stock of the Company into which the shares of Common Stock (as defined in the Notes) are converted or exchanged and shares of capital stock of a Successor Entity (as defined in the Notes) into which the shares of Common Stock are converted or exchanged, in each case, without regard to any limitations on conversion of the Notes or exercise of the Warrants.

 

(j)     “ Registration Statement ” means a registration statement or registration statements of the Company filed under the 1933 Act covering Registrable Securities.

 

 
2

 

 

(k)     “ Required Holders ” means, as of any given time, the holders of at least a majority of the Registrable Securities as of such time (excluding any Registrable Securities held by the Company or any of its Subsidiaries as of such time).

 

(l)     “ Required Registration Amount ” means, as of any given date, 125% of the sum of (i) the maximum number of Conversion Shares then issuable upon conversion of the Notes (assuming for purposes hereof that (x) the Notes are convertible at 50% of the Conversion Price (as defined in the Notes) in effect on such given date, (y) interest on the Notes shall accrue through the eight month anniversary of the Closing Date and will be converted in shares of Common Stock at an interest conversion price equal to the Interest Conversion Price (as defined in the Notes) assuming an Interest Date (as defined in the Note) as of such given date and (z) any such calculation shall not take into account any limitations on the conversion of the Notes set forth in the Notes) and (ii) the maximum number of Warrant Shares issuable upon exercise of the Warrants (without taking into account any limitations on the exercise of the Warrants set forth therein), all subject to adjustment as provided in Section 2(d) and/or Section 2(f).

 

(m)     “ Rule 144 ” means Rule 144 promulgated by the SEC under the 1933 Act, as such rule may be amended from time to time, or any other similar or successor rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration.

 

(n)     “ Rule 415 ” means Rule 415 promulgated by the SEC under the 1933 Act, as such rule may be amended from time to time, or any other similar or successor rule or regulation of the SEC providing for offering securities on a continuous or delayed basis.

 

(o)     “ SEC ” means the United States Securities and Exchange Commission or any successor thereto.

 

2.              Registration.

 

(a)      Mandatory Registration . The Company shall prepare and, as soon as practicable, but in no event later than the Filing Deadline, file with the SEC an initial Registration Statement on Form S-3 covering the resale of all of the Registrable Securities, provided that such initial Registration Statement shall register for resale at least the number of shares of Common Stock equal to the Required Registration Amount as of the date such Registration Statement is initially filed with the SEC; provided further that if Form S-3 is unavailable for such a registration, the Company shall use such other form as is required by Section 2(c). Such initial Registration Statement, and each other Registration Statement required to be filed pursuant to the terms of this Agreement, shall contain (except if otherwise directed by the Required Holders) the “ Selling Stockholders ” and “ Plan of Distribution ” sections in substantially the form attached hereto as Exhibit B . The Company shall use its best efforts to have such initial Registration Statement, and each other Registration Statement required to be filed pursuant to the terms of this Agreement, declared effective by the SEC as soon as practicable, but in no event later than the applicable Effectiveness Deadline for such Registration Statement.

 

 
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(b)      Legal Counsel . Subject to Section 5 hereof, Kelley Drye & Warren LLP, counsel solely to the lead investor (“ Legal Counsel ”) shall review and oversee any registration, solely on behalf of the lead investor, pursuant to this Section 2.

 

(c)      Ineligibility to Use Form S-3 . In the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on Form S-1 or another appropriate form reasonably acceptable to the Required Holders and (ii) undertake to register the resale of the Registrable Securities on Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of all Registration Statements then in effect until such time as a Registration Statement on Form S-3 covering the resale of all the Registrable Securities has been declared effective by the SEC and the prospectus contained therein is available for use.

 

(d)      Sufficient Number of Shares Registered . In the event the number of shares available under any Registration Statement is insufficient to cover all of the Registrable Securities required to be covered by such Registration Statement or an Investor’s allocated portion of the Registrable Securities pursuant to Section 2(h), the Company shall amend such Registration Statement (if permissible), or file with the SEC a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover at least the Required Registration Amount as of the Trading Day immediately preceding the date of the filing of such amendment or new Registration Statement, in each case, as soon as practicable, but in any event not later than twenty (20) days after the necessity therefor arises (but taking account of any Staff position with respect to the date on which the Staff will permit such amendment to the Registration Statement and/or such new Registration Statement (as the case may be) to be filed with the SEC) . The Company shall use its best efforts to cause such amendment to such Registration Statement and/or such new Registration Statement (as the case may be) to become effective as soon as practicable following the filing thereof with the SEC, but in no event later than the applicable Effectiveness Deadline for such Registration Statement. For purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed “insufficient to cover all of the Registrable Securities” if at any time the number of shares of Common Stock available for resale under the applicable Registration Statement is less than the product determined by multiplying (i) the Required Registration Amount as of such time by (ii) 0.90. The calculation set forth in the foregoing sentence shall be made without regard to any limitations on conversion, amortization and/or redemption of the Notes or exercise of the Warrants (and such calculation shall assume (A) that the Notes are then convertible in full into shares of Common Stock at the thenprevailing Conversion Rate (as defined in the Notes), and (B) the initial outstanding principal amount of the Notes remains outstanding through the scheduled Maturity Date (as defined in the Notes) and no redemptions of the Notes occur prior to the scheduled Maturity Date and (C) the Warrants are then exercisable in full into shares of Common Stock at the then prevailing Exercise Price (as defined in the Warrants)).

 

 
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(e)      Effect of Failure to File and Obtain and Maintain Effectiveness of any Registration Statement . If (i) a Registration Statement covering the resale of all of the Registrable Securities required to be covered thereby (disregarding any reduction pursuant to Section 2(f)) and required to be filed by the Company pursuant to this Agreement is (A) not filed with the SEC on or before the Filing Deadline for such Registration Statement (a “ Filing Failure ”) (it being understood that if the Company files a Registration Statement without affording each Investor and Legal Counsel the opportunity to review and comment on the same as required by Section 3(c) hereof, the Company shall be deemed to not have satisfied this clause (i)(A) and such event shall be deemed to be a Filing Failure) or (B) not declared effective by the SEC on or before the Effectiveness Deadline for such Registration Statement (an “ Effectiveness Failure ”) (it being understood that if on the Business Day immediately following the Effective Date for such Registration Statement the Company shall not have filed a “final” prospectus for such Registration Statement with the SEC under Rule 424(b) in accordance with Section 3(b) (whether or not such a prospectus is technically required by such rule), the Company shall be deemed to not have satisfied this clause (i)(B) and such event shall be deemed to be an Effectiveness Failure), (ii) other than during an Allowable Grace Period (as defined below), on any day after the Effective Date of a Registration Statement sales of all of the Registrable Securities required to be included on such Registration Statement (disregarding any reduction pursuant to Section 2(f)) cannot be made pursuant to such Registration Statement (including, without limitation, because of a failure to keep such Registration Statement effective, a failure to disclose such information as is necessary for sales to be made pursuant to such Registration Statement, a suspension or delisting of (or a failure to timely list) the shares of Common Stock on the Principal Market (as defined in the Securities Purchase Agreement) or any other limitations imposed by the Principal Market, or a failure to register a sufficient number of shares of Common Stock or by reason of a stop order) or the prospectus contained therein is not available for use for any reason (a “ Maintenance Failure ”), or (iii) if a Registration Statement is not effective for any reason or the prospectus contained therein is not available for use for any reason, and either (x) the Company fails for any reason to satisfy the requirements of Rule 144(c)(1), including, without limitation, the failure to satisfy the current public information requirement under Rule 144(c) or (y) the Company has ever been an issuer described in Rule 144(i)(1)(i) or becomes such an issuer in the future, and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2) (a “ Current Public Information Failure ”) as a result of which any of the Investors are unable to sell Registrable Securities without restriction under Rule 144 (including, without limitation, volume restrictions), then, as partial relief for the damages to any holder by reason of any such delay in, or reduction of, its ability to sell the underlying shares of Common Stock (which remedy shall not be exclusive of any other remedies available at law or in equity, including, without limitation, specific performance), the Company shall pay to each holder of Registrable Securities relating to such Registration Statement an amount in cash equal to one and one half percent (1.5%) of the product of (x) the number of Registrable Securities of such Investor required hereunder to be included in such Registration Statement and (y) the Closing Sale Price (as defined in the Notes) as of the Trading Day immediately prior to the date a Registration Delay Payment (as defined below) is due hereunder (1) on the date of such Filing Failure, Effectiveness Failure, Maintenance Failure or Current Public Information Failure, as applicable, and (2) on every thirty (30) day anniversary of (I) a Filing Failure until such Filing Failure is cured; (II) an Effectiveness Failure until such Effectiveness Failure is cured; (III) a Maintenance Failure until such Maintenance Failure is cured; and (IV) a Current Public Information Failure until the earlier of (i) the date such Current Public Information Failure is cured and (ii) such time that such public information is no longer required pursuant to Rule 144 (in each case, pro rated for periods totaling less than thirty (30) days). The payments to which a holder of Registrable Securities shall be entitled pursuant to this Section 2(e) are referred to herein as “ Registration Delay Payments”, it being understood that no Registration Delay Payments shall be payable to an Investor with respect to a Filing Failure, an Effectiveness Failure, a Maintenance Failure or a Current Public Information Failure to the exent (x) such Registration Delay Payments relate to such Registrable Securities such Investor elects not to include in such Registration Statement or (y) such Investor fails to timely perform its obligations hereunder. Following the initial Registration Delay Payment for any particular event or failure (which shall be paid on the date of such event or failure, as set forth above), without limiting the foregoing, if an event or failure giving rise to the Registration Delay Payments is cured prior to any thirty (30) day anniversary of such event or failure, then such Registration Delay Payment shall be made on the third (3 rd ) Business Day after such cure. In the event the Company fails to make Registration Delay Payments in a timely manner in accordance with the foregoing, such Registration Delay Payments shall bear interest at the rate of one and one half percent (1.5%) per month (prorated for partial months) until paid in full. Notwithstanding the foregoing, no Registration Delay Payments shall be owed to an Investor (other than with respect to a Maintenance Failure resulting from a suspension or delisting of (or a failure to timely list) the shares of Common Stock on the Principal Market) with respect to any period during which all of such Investor’s Registrable Securities may be sold by such Investor without restriction under Rule 144 (including, without limitation, volume restrictions) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable).

 

 
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(f)      Offering . Notwithstanding anything to the contrary contained in this Agreement in the event the staff of the SEC (the “ Staff ”) or the SEC seeks to characterize any offering pursuant to a Registration Statement filed pursuant to this Agreement as constituting an offering of securities by, or on behalf of, the Company, or in any other manner, such that the Staff or the SEC do not permit such Registration Statement to become effective and used for resales in a manner that does not constitute such an offering and that permits the continuous resale at the market by the Investors participating therein (or as otherwise may be acceptable to each Investor) without being named therein as an “underwriter,” then the Company shall reduce the number of shares to be included in such Registration Statement by all Investors until such time as the Staff and the SEC shall so permit such Registration Statement to become effective as aforesaid. In making such reduction, the Company shall reduce the number of shares to be included by all Investors on a pro rata basis (based upon the number of Registrable Securities otherwise required to be included for each Investor) unless the inclusion of shares by a particular Investor or a particular set of Investors are resulting in the Staff or the SEC’s “by or on behalf of the Company” offering position, in which event the shares held by such Investor or set of Investors shall be the only shares subject to reduction (and if by a set of Investors on a pro rata basis by such Investors or on such other basis as would result in the exclusion of the least number of shares by all such Investors); provided, that, with respect to such pro rata portion allocated to any Investor, such Investor may elect the allocation of such pro rata portion among the Registrable Securities of such Investor. In addition, in the event that the Staff or the SEC requires any Investor seeking to sell securities under a Registration Statement filed pursuant to this Agreement to be specifically identified as an ”underwriter” in order to permit such Registration Statement to become effective, and such Investor does not consent to being so named as an underwriter in such Registration Statement, then, in each such case, the Company shall reduce the total number of Registrable Securities to be registered on behalf of such Investor, until such time as the Staff or the SEC does not require such identification or until such Investor accepts such identification and the manner thereof. Any reduction pursuant to this paragraph will first reduce all Registrable Securities other than those issued pursuant to the Securities Purchase Agreement. In the event of any reduction in Registrable Securities pursuant to this paragraph, the Company shall not be obligated to make any Registration Delay Payments pursuant to Section 2(e) with respect to such reduced number of Registrable Securities as a result thereof, but each affected Investor shall have the right to require, upon delivery of a written request to the Company signed by such Investor, the Company to file a registration statement within twenty (20) days of such request (subject to any restrictions imposed by Rule 415 or required by the Staff or the SEC) for resale by such Investor in a manner acceptable to such Investor, and the Company shall following such request cause to be and keep effective such registration statement in the same manner as otherwise contemplated in this Agreement for registration statements hereunder, in each case until such time as: (i) all Registrable Securities held by such Investor have been registered and sold pursuant to an effective Registration Statement in a manner acceptable to such Investor or (ii) all Registrable Securities may be resold by such Investor without restriction (including, without limitation, volume limitations) pursuant to Rule 144 (taking account of any Staff position with respect to “affiliate” status) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or (iii) such Investor agrees to be named as an underwriter in any such Registration Statement in a manner acceptable to such Investor as to all Registrable Securities held by such Investor and that have not theretofore been included in a Registration Statement under this Agreement (it being understood that the special demand right under this sentence may be exercised by an Investor multiple times and with respect to limited amounts of Registrable Securities in order to permit the resale thereof by such Investor as contemplated above).

 

 
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(g)      Piggyback Registrations . Without limiting any obligation of the Company hereunder or under the Securities Purchase Agreement, if there is not an effective Registration Statement covering all of the Registrable Securities or the prospectus contained therein is not available for use and the Company shall determine to prepare and file with the SEC a registration statement or offering statement relating to an offering for its own account or the account of others under the 1933 Act of any of its equity securities (other than on Form S-4 or Form S-8 (each as promulgated under the 1933 Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or a business combination subject to Rule 145 under the 1933 Act or equity securities issuable in connection with the Company’s stock option or other employee benefit plans), then the Company shall deliver to each Investor a written notice of such determination and, if within fifteen (15) days after the date of the delivery of such notice, any such Investor shall so request in writing, the Company shall include in such registration statement or offering statement all or any part of such Registrable Securities such Investor requests to be registered; provided, however, the Company shall not be required to register any Registrable Securities pursuant to this Section 2(g) that are eligible for resale pursuant to Rule 144 without restriction (including, without limitation, volume restrictions) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or that are the subject of a then-effective Registration Statement.

 

(h)      Allocation of Registrable Securities . The initial number of Registrable Securities included in any Registration Statement and any increase in the number of Registrable Securities included therein shall be allocated pro rata among the Investors based on the number of Registrable Securities held by each Investor at the time such Registration Statement covering such initial number of Registrable Securities or increase thereof is declared effective by the SEC. In the event that an Investor sells or otherwise transfers any of such Investor’s Registrable Securities, each transferee or assignee (as the case may be) that becomes an Investor shall be allocated a pro rata portion of the then-remaining number of Registrable Securities included in such Registration Statement for such transferor or assignee (as the case may be). Any shares of Common Stock included in a Registration Statement and which remain allocated to any Person which ceases to hold any Registrable Securities covered by such Registration Statement shall be allocated to the remaining Investors, pro rata based on the number of Registrable Securities then held by such Investors which are covered by such Registration Statement.

 

 
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(i)      No Inclusion of Other Securities . The Company shall in no event include any securities other than Registrable Securities on any Registration Statement filed in accordance herewith (other than, for the avoidance of doubt, pursuant to Section 2(g)) without the prior written consent of the Required Holders. Until the Applicable Date (as defined in the Securities Purchase Agreement), the Company shall not enter into any agreement providing any registration rights to any of its security holders, except as otherwise permitted under the Securities Purchase Agreement. or with respect to Excluded Securities (as defined in the Securities Purchase Agreement).

 

3.              Related Obligations.

 

The Company shall use its best efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof, and, pursuant thereto, the Company shall have the following obligations:

 

(a)     The Company shall promptly prepare and file with the SEC a Registration Statement with respect to all the Registrable Securities (but in no event later than the applicable Filing Deadline) and use its best efforts to cause such Registration Statement to become effective as soon as practicable after such filing (but in no event later than the Effectiveness Deadline). Subject to Allowable Grace Periods, the Company shall keep each Registration Statement effective (and the prospectus contained therein available for use) pursuant to Rule 415 for resales by the Investors on a delayed or continuous basis at then-prevailing market prices (and not fixed prices) at all times until the earlier of (i) the date as of which all of the Investors may sell all of the Registrable Securities required to be covered by such Registration Statement (disregarding any reduction pursuant to Section 2(f)) without restriction pursuant to Rule 144 (including, without limitation, volume restrictions) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or (ii) the date on which the Investors shall have sold all of the Registrable Securities covered by such Registration Statement (the “ Registration Period ”). Notwithstanding anything to the contrary contained in this Agreement, the Company shall ensure that, when filed and at all times while effective, each Registration Statement (including, without limitation, all amendments and supplements thereto) and the prospectus (including, without limitation, all amendments and supplements thereto) used in connection with such Registration Statement (1) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading and (2) will disclose (whether directly or through incorporation by reference to other SEC filings to the extent permitted) all material information regarding the Company and its securities. The Company shall submit to the SEC, within one (1) Business Day after the later of the date that (i) the Company learns that no review of a particular Registration Statement will be made by the Staff or that the Staff has no further comments on a particular Registration Statement (as the case may be) and (ii) the consent of Legal Counsel is obtained pursuant to Section 3(c) (which consent shall be immediately sought), a request for acceleration of effectiveness of such Registration Statement to a time and date not later than twenty-four (24) hours after the submission of such request. The Company shall respond in writing to comments made by the SEC in respect of a Registration Statement as soon as practicable, but in no event later than fifteen (15) Business Days after the receipt of comments by or notice from the SEC that an amendment is required in order for a Registration Statement to be declared effective.

 

 
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(b)     Subject to Section 3(r) of this Agreement, the Company shall prepare and file with the SEC such amendments (including, without limitation, post-effective amendments) and supplements to each Registration Statement and the prospectus used in connection with each such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep each such Registration Statement effective at all times during the Registration Period for such Registration Statement, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of the Company required to be covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement; provided, however, by 8:30 a.m. (New York time) on the Business Day immediately following each Effective Date, the Company shall file with the SEC in accordance with Rule 424(b) under the 1933 Act the final prospectus to be used in connection with sales pursuant to the applicable Registration Statement (whether or not such a prospectus is technically required by such rule). In the case of amendments and supplements to any Registration Statement which are required to be filed pursuant to this Agreement (including, without limitation, pursuant to this Section 3(b)) by reason of the Company filing a report on Form 8-K, Form 10-Q or Form 10-K or any analogous report under the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”), the Company shall, if permitted under the applicable rules and regulations of the SEC, have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the 1934 Act report is filed which created the requirement for the Company to amend or supplement such Registration Statement.

 

(c)     The Company shall (A) permit Legal Counsel and legal counsel for each other Investor to review and comment upon (i) each Registration Statement at least five (5) Business Days prior to its filing with the SEC and (ii) all amendments and supplements to each Registration Statement (including, without limitation, the prospectus contained therein) (except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any similar or successor reports, collectively, the “ Excluded Review Materials ”)) within a reasonable number of days prior to their filing with the SEC, and (B) not file any Registration Statement or amendment or supplement thereto (other than Excluded Review Materials) in a form to which Legal Counsel or any legal counsel for any other Investor reasonably objects. The Company shall not submit a request for acceleration of the effectiveness of a Registration Statement or any amendment or supplement thereto or to any prospectus contained therein without the prior consent of Legal Counsel, which consent shall not be unreasonably withheld. The Company shall promptly furnish to Legal Counsel and legal counsel for each other Investor, without charge, (i) copies of any correspondence from the SEC or the Staff to the Company or its representatives relating to each Registration Statement, provided that such correspondence shall not contain any material, non-public information regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), (ii) after the same is prepared and filed with the SEC, one (1) copy of each Registration Statement and any amendment(s) and supplement(s) thereto, including, without limitation, financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, and all exhibits, unless such materials are publicly available via EDGAR, and (iii) upon the effectiveness of each Registration Statement, one (1) copy of the prospectus included in such Registration Statement and all amendments and supplements thereto. The Company, Legal Counsel and legal counsel for each other Investor shall reasonably cooperate in connection with the Company’s performance of its obligations pursuant to this Section 3.

 

 
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(d)     The Company shall promptly furnish to each Investor whose Registrable Securities are included in any Registration Statement, without charge, (i) after the same is prepared and filed with the SEC, at least one (1) copy of each Registration Statement and any amendment(s) and supplement(s) thereto, including, without limitation, financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, all exhibits and each preliminary prospectus, unless such materials are publicly available on EDGAR, (ii) upon the effectiveness of each Registration Statement, ten (10) copies of the prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request from time to time) and (iii) such other documents, including, without limitation, copies of any preliminary or final prospectus, as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor.

 

(e)     The Company shall use its reasonable best efforts to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by Investors of the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions, such amendments (including, without limitation, post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify Legal Counsel, legal counsel for each other Investor and each Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

 

 
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(f)     The Company shall notify Legal Counsel, legal counsel for each other Investor and each Investor in writing of the happening of any event, as promptly as practicable after becoming aware of such event, as a result of which the prospectus included in a Registration Statement, as then in effect, may include an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, non-public information regarding the Company or any of its Subsidiaries), and, subject to Section 3(r), promptly prepare a supplement or amendment to such Registration Statement and such prospectus contained therein to correct such untrue statement or omission and deliver ten (10) copies of such supplement or amendment to Legal Counsel, legal counsel for each other Investor and each Investor (or such other number of copies as Legal Counsel, legal counsel for each other Investor or such Investor may reasonably request). The Company shall also promptly notify Legal Counsel, legal counsel for each other Investor and each Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to Legal Counsel, legal counsel for each other Investor and each Investor by facsimile or e-mail on the same day of such effectiveness and by overnight mail), and when the Company receives written notice from the SEC that a Registration Statement or any post-effective amendment will be reviewed by the SEC, (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate; and (iv) of the receipt of any request by the SEC or any other federal or state governmental authority for any additional information relating to the Registration Statement or any amendment or supplement thereto or any related prospectus. The Company shall respond as promptly as practicable to any comments received from the SEC with respect to each Registration Statement or any amendment thereto (it being understood and agreed that the Company’s response to any such comments shall be delivered to the SEC no later than fifteen (15) Business Days after the receipt thereof).

 

(g)     The Company shall (i) use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of each Registration Statement or the use of any prospectus contained therein, or the suspension of the qualification, or the loss of an exemption from qualification, of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and (ii) notify Legal Counsel, legal counsel for each other Investor and each Investor who holds Registrable Securities of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.

 

(h)     If any Investor may be required under applicable securities law to be described in any Registration Statement as an underwriter and such Investor consents to so being named an underwriter, at the request of any Investor, the Company shall furnish to such Investor, on the date of the effectiveness of such Registration Statement and thereafter from time to time on such dates as an Investor may reasonably request (i) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the Investors, and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the Investors.

 

 
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(i)     If any Investor may be required under applicable securities law to be described in any Registration Statement as an underwriter and such Investor consents to so being named an underwriter, upon the written request of such Investor, the Company shall make available for inspection by (i) such Investor, (ii) legal counsel for such Investor and (iii) one (1) firm of accountants or other agents retained by such Investor (collectively, the “ Inspectors ”), all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “ Records ”), as shall be reasonably deemed necessary by each Inspector, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request; provided, however, each Inspector shall agree in writing to hold in strict confidence and not to make any disclosure (except to such Investor) or use of any Record or other information which the Company’s board of directors determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (1) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the 1933 Act, (2) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (3) the information in such Records has been made generally available to the public other than by disclosure in violation of this Agreement or any other Transaction Document (as defined in the Securities Purchase Agreement). Such Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein (or in any other confidentiality agreement between the Company and such Investor, if any) shall be deemed to limit any Investor’s ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations.

 

(j)     The Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required to be disclosed in such Registration Statement pursuant to the 1933 Act, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other Transaction Document. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor, at such Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.

 

 
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(k)     Without limiting any obligation of the Company under the Securities Purchase Agreement, the Company shall use its reasonable best efforts either to (i) cause all of the Registrable Securities covered by each Registration Statement to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, (ii) secure designation and quotation of all of the Registrable Securities covered by each Registration Statement on an Eligible Market (as defined in the Securities Purchase Agreement), or (iii) if, despite the Company’s reasonable best efforts to satisfy the preceding clauses (i) or (ii) the Company is unsuccessful in satisfying the preceding clauses (i) or (ii), without limiting the generality of the foregoing, to use its best efforts to arrange for at least two market makers to register with the Financial Industry Regulatory Authority (“ FINRA ”) as such with respect to such Registrable Securities. In addition, the Company shall cooperate with each Investor and any broker or dealer through which any such Investor proposes to sell its Registrable Securities in effecting a filing with FINRA pursuant to FINRA Rule 5110 as requested by such Investor. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 3(k).

 

(l)     The Company shall cooperate with the Investors who hold Registrable Securities being offered and, to the extent applicable, facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts (as the case may be) as the Investors may reasonably request from time to time and registered in such names as the Investors may request.

 

(m)     If requested by an Investor, the Company shall as soon as practicable after receipt of notice from such Investor and subject to Section 3(r) hereof, (i) incorporate in a prospectus supplement or post-effective amendment such information as an Investor reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering; (ii) make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration Statement or prospectus contained therein if reasonably requested by an Investor holding any Registrable Securities.

 

(n)     The Company shall use its best efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.

 

(o)     The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the 1933 Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the applicable Effective Date of each Registration Statement.

 

(p)     The Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.

 

 
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(q)     Within one (1) Business Day after a Registration Statement which covers Registrable Securities is declared effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that such Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A .

 

(r)     Notwithstanding anything to the contrary herein (but subject to the last sentence of this Section 3(r)), at any time after the Effective Date of a particular Registration Statement, the Company may delay the disclosure of material, non-public information concerning the Company or any of its Subsidiaries the disclosure of which at the time is not, in the good faith opinion of the board of directors of the Company, in the best interest of the Company and, in the opinion of counsel to the Company, otherwise required (a “ Grace Period ”), provided that the Company shall promptly notify the Investors in writing of the (i) existence of material, non-public information giving rise to a Grace Period (provided that in each such notice the Company shall not disclose the content of such material, non-public information to any of the Investors) and the date on which such Grace Period will begin and (ii) date on which such Grace Period ends, provided further that (I) no Grace Period shall exceed ten (10) consecutive days and during any three hundred sixty five (365) day period all such Grace Periods shall not exceed an aggregate of thirty (30) days, (II) the first day of any Grace Period must be at least five (5) Trading Days after the last day of any prior Grace Period and (III) no Grace Period may exist during the sixty (60) Trading Day period immediately following the Effective Date of such Registration Statement (provided that such sixty (60) Trading Day period shall be extended by the number of Trading Days during such period and any extension thereof contemplated by this proviso during which such Registration Statement is not effective or the prospectus contained therein is not available for use) (each, an “ Allowable Grace Period ”). For purposes of determining the length of a Grace Period above, such Grace Period shall begin on and include the date the Investors receive the notice referred to in clause (i) above and shall end on and include the later of the date the Investors receive the notice referred to in clause (ii) above and the date referred to in such notice. The provisions of Section 3(g) hereof shall not be applicable during the period of any Allowable Grace Period. Upon expiration of each Grace Period, the Company shall again be bound by the first sentence of Section 3(f) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable. Notwithstanding anything to the contrary contained in this Section 3(r), the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreement in connection with any sale of Registrable Securities with respect to which such Investor has entered into a contract for sale, and delivered a copy of the prospectus included as part of the particular Registration Statement to the extent applicable, prior to such Investor’s receipt of the notice of a Grace Period and for which the Investor has not yet settled.

 

(s)     The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by each Investor of its Registrable Securities pursuant to each Registration Statement.

 

 
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(t)     Neither the Company nor any Subsidiary or affiliate thereof shall identify any Investor as an underwriter in any public disclosure or filing with the SEC, the Principal Market or any Eligible Market and any Buyer being deemed an underwriter by the SEC shall not relieve the Company of any obligations it has under this Agreement or any other Transaction Document (as defined in the Securities Purchase Agreement); provided, however, that the foregoing shall not prohibit the Company from including the disclosure found in the "Plan of Distribution" section attached hereto as Exhibit B in the Registration Statement .

 

(u)     Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Buyers in this Agreement or otherwise conflicts with the provisions hereof.

 

4.              Obligations of the Investors.

 

(a)     At least five (5) Business Days prior to the first anticipated filing date of each Registration Statement, the Company shall notify each Investor in writing of the information the Company requires from each such Investor with respect to such Registration Statement. It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect and maintain the effectiveness of the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.

 

(b)     Each Investor, by such Investor’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of each Registration Statement hereunder, unless such Investor has notified the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable Securities from such Registration Statement.

 

(c)     Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of 3(f), such Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until such Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(g) or the first sentence of Section 3(f) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary in this Section 4(c), the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreement in connection with any sale of Registrable Securities with respect to which such Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of Section 3(f) and for which such Investor has not yet settled.

 

(d)     Each Investor covenants and agrees that it will comply with the prospectus delivery requirements of the 1933 Act as applicable to it or an exemption therefrom in connection with sales of Registrable Securities pursuant to a Registration Statement.

 

 
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5.              Expenses of Registration.

 

All reasonable expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, FINRA filing fees (if any) and fees and disbursements of counsel for the Company shall be paid by the Company. The Company shall reimburse Legal Counsel for its fees and disbursements in connection with registration, filing or qualification pursuant to Sections 2 and 3 of this Agreement which amount shall be limited to $5,000 for each such registration, filing or qualification.

 

6.              Indemnification.

 

(a)     To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor and each of its directors, officers, shareholders, members, partners, employees, agents, advisors, representatives (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding the lack of such title or any other title) and each Person, if any, who controls such Investor within the meaning of the 1933 Act or the 1934 Act and each of the directors, officers, shareholders, members, partners, employees, agents, advisors, representatives (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding the lack of such title or any other title) of such controlling Persons (each, an “ Indemnified Person ”), against any losses, obligations, claims, damages, liabilities, contingencies, judgments, fines, penalties, charges, costs (including, without limitation, court costs, reasonable attorneys’ fees and costs of defense and investigation), amounts paid in settlement or expenses, joint or several, (collectively, “ Claims ”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an Indemnified Person is or may be a party thereto (“ Indemnified Damages ”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“ Blue Sky Filing ”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading or (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement or (iv) any voliation of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, “ Violations ”). Subject to Section 6(c), the Company shall reimburse the Indemnified Persons, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person for such Indemnified Person expressly for use in connection with the preparation of such Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 3(d); and (ii) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of any of the Registrable Securities by any of the Investors pursuant to Section 9.

 

 
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(b)     In connection with any Registration Statement in which an Investor is participating, such Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act, and the Company’s legal counsel named under the heading “Legal Matters” in such Registration Statement (each, an “ Indemnified Party ”), against any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case, to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(c) and the below provisos in this Section 6(b), such Investor will reimburse an Indemnified Party any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such Claim; provided, however, the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld or delayed, provided further that such Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the applicable sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of any of the Registrable Securities by any of the Investors pursuant to Section 9.

 

 
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(c)     Promptly after receipt by an Indemnified Person or Indemnified Party (as the case may be) under this Section 6 of notice of the commencement of any action or proceeding (including, without limitation, any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party (as the case may be) shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party (as the case may be); provided, however, an Indemnified Person or Indemnified Party (as the case may be) shall have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the indemnifying party if: (i) the indemnifying party has agreed in writing to pay such fees and expenses; (ii) the indemnifying party shall have failed promptly to assume the defense of such Claim and to employ counsel reasonably satisfactory to such Indemnified Person or Indemnified Party (as the case may be) in any such Claim; or (iii) the named parties to any such Claim (including, without limitation, any impleaded parties) include both such Indemnified Person or Indemnified Party (as the case may be) and the indemnifying party, and such Indemnified Person or such Indemnified Party (as the case may be) shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Person or such Indemnified Party and the indemnifying party (in which case, if such Indemnified Person or such Indemnified Party (as the case may be) notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, then the indemnifying party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the indemnifying party, provided further that in the case of clause (iii) above the indemnifying party shall not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for such Indemnified Person or Indemnified Party (as the case may be). The Indemnified Party or Indemnified Person (as the case may be) shall reasonably cooperate with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person (as the case may be) which relates to such action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person (as the case may be) reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent; provided, however, the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person (as the case may be), consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person (as the case may be) of a release from all liability in respect to such Claim or litigation, and such settlement shall not include any admission as to fault on the part of the Indemnified Party. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person (as the case may be) with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party (as the case may be) under this Section 6, except to the extent that the indemnifying party is materially and adversely prejudiced in its ability to defend such action.

 

(d)     The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.

 

 
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(e)     The indemnity and contribution agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

 

7.              Contribution.

 

To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however: (i) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 6 of this Agreement, (ii) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (iii) contribution by any seller of Registrable Securities shall be limited in amount to the amount of net proceeds received by such seller from the applicable sale of such Registrable Securities pursuant to such Registration Statement. Notwithstanding the provisions of this Section 7, no Investor shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Investor from the applicable sale of the Registrable Securities subject to the Claim exceeds the amount of any damages that such Investor has otherwise been required to pay, or would otherwise be required to pay under Section 6(b), by reason of such untrue or alleged untrue statement or omission or alleged omission.

 

8.              Reports Under the 1934 Act.

 

With a view to making available to the Investors the benefits of Rule 144, the Company agrees to:

 

(a)     make and keep public information available, as those terms are understood and defined in Rule 144;

 

(b)     file with the SEC in a timely manner, subject to any extension periods permitted by applicable SEC rules and regulations, all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements (it being understood and agreed that nothing herein shall limit any obligations of the Company under the Securities Purchase Agreement) and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

 

(c)     furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company, if true, that it has complied with the reporting, submission and posting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company with the SEC if such reports are not publicly available via EDGAR, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.

 

 
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9.              Assignment of Registration Rights.

 

All or any portion of the rights under this Agreement shall be automatically assignable by each Investor to any transferee or assignee (as the case may be) of all or any portion of such Investor’s Registrable Securities, Notes or Warrants if: (i) such Investor agrees in writing with such transferee or assignee (as the case may be) to assign all or any portion of such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such transfer or assignment (as the case may be); (ii) the Company is, within a reasonable time after such transfer or assignment (as the case may be), furnished with written notice of (a) the name and address of such transferee or assignee (as the case may be), and (b) the securities with respect to which such registration rights are being transferred or assigned (as the case may be); (iii) immediately following such transfer or assignment (as the case may be) the further disposition of such securities by such transferee or assignee (as the case may be) is restricted under the 1933 Act or applicable state securities laws if so required; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence such transferee or assignee (as the case may be) agrees in writing with the Company to be bound by all of the provisions contained herein; (v) such transfer or assignment (as the case may be) shall have been made in accordance with the applicable requirements of the Securities Purchase Agreement, the Notes and the Warrants (as the case may be); and (vi) such transfer or assignment (as the case may be) shall have been conducted in accordance with all applicable federal and state securities laws.

 

10.            Amendment of Registration Rights.

 

Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Required Holders; provided that any such amendment or waiver that complies with the foregoing, but that disproportionately, materially and adversely affects the rights and obligations of any Investor relative to the comparable rights and obligations of the other Investors shall require the prior written consent of such adversely affected Investor. Any amendment or waiver effected in accordance with this Section 10 shall be binding upon each Investor and the Company, provided that no such amendment shall be effective to the extent that it (1) applies to less than all of the holders of Registrable Securities or (2) imposes any obligation or liability on any Investor without such Investor’s prior written consent (which may be granted or withheld in such Investor’s sole discretion). No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration (other than the reimbursement of legal fees) also is offered to all of the parties to this Agreement.

 

11.            Miscellaneous.

 

(a)     Solely for purposes of this Agreement, a Person is deemed to be a holder of Registrable Securities whenever such Person owns, or is deemed to own, of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record owner of such Registrable Securities.

 

 
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(b)     Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile or electronic mail (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Business Day after deposit with a nationally recognized overnight delivery service with next day delivery specified, in each case, properly addressed to the party to receive the same. The addresses, facsimile numbers and email addresses for such communications shall be:

 

If to the Company:

 

Helios and Matheson Analytics Inc..
Empire State Building
350 Fifth Avenue

 

New York, New York 10118
Telephone: (212) 979-8228
Facsimile: (212) 979-2517
Attention: Chief Executive Officer
Email: pat.k@hmny.com

 

With a copy (for informational purposes only) to:

 

Mitchell Silberberg & Knupp LLP
11377 W. Olympic Blvd.
Los Angeles,CA 90065
Telephone: (310) 312-3106
Facsimile: (310) 312-3100
Attention: Kevin Friedman, Esq.
Email: ksx@msk.com

 

If to the Transfer Agent:

 

Computershare
211 Quality Circle, Suite 210
College Station, TX 77845
Telephone: (502) 301-6102
Facsimile: (866) 519-2854
Attention: Jade Larimore
Email: Jade.Larimore@computershare.com

 

 
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If to Legal Counsel:

 

Kelley Drye & Warren LLP
101 Park Avenue
New York, NY 10178
Telephone: (212) 808-7540
Facsimile: (212) 808-7897
Attention: Michael A. Adelstein, Esq.
Email: madelstein@kelleydrye.com

 

If to a Buyer, to its address, facsimile number and/or email address set forth on the Schedule of Buyers attached to the Securities Purchase Agreement, with copies to such Buyer’s representatives as set forth on the Schedule of Buyers, or to such other address, facsimile number, and/or email address and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change, provided that Kelley Drye & Warren LLP shall only be provided notices sent to the lead investor. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine or email containing the time, date, recipient facsimile number or email address and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

 

(c)     Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. The Company and each Investor acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that each party hereto shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement by any other party hereto and to enforce specifically the terms and provisions hereof (without the necessity of showing economic loss and without any bond or other security being required), this being in addition to any other remedy to which any party may be entitled by law or equity.

 

(d)     All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Chicago, Illinois, 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. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY 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 HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

 
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(e)     If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

(f)     This Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein constitute the entire agreement among the parties hereto and thereto solely with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein supersede all prior agreements and understandings among the parties hereto solely with respect to the subject matter hereof and thereof; provided, however, nothing contained in this Agreement or any other Transaction Document shall (or shall be deemed to) (i) have any effect on any agreements any Investor has entered into with the Company or any of its Subsidiaries prior to the date hereof with respect to any prior investment made by such Investor in the Company, (ii) waive, alter, modify or amend in any respect any obligations of the Company or any of its Subsidiaries or any rights of or benefits to any Investor or any other Person in any agreement entered into prior to the date hereof between or among the Company and/or any of its Subsidiaries and any Investor and all such agreements shall continue in full force and effect or (iii) limit any obligations of the Company under any of the other Transaction Documents.

 

(g)     Subject to compliance with Section 9 (if applicable), this Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto. This Agreement is not for the benefit of, nor may any provision hereof be enforced by, any Person, other than the parties hereto, their respective permitted successors and assigns and the Persons referred to in Sections  6 and 7 hereof.

 

(h)     The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.

 

 
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(i)     This Agreement 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. In the event that any signature is delivered by facsimile transmission or by an email which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

 

(j)     Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

(k)     The language used in this Agreement 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. Notwithstanding anything to the contrary set forth in Section 10, terms used in this Agreement but defined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date in such other Transaction Documents unless otherwise consented to in writing by each Investor.

 

(l)     All consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise specified in this Agreement, by the Required Holders, determined as if all of the outstanding Notes then held by the Investors have been converted for Registrable Securities without regard to any limitations on redemption, amortization and/or conversion of the Notes and the outstanding Warrants then held by Investors have been exercised for Registrable Securities without regard to any limitations on exercise of the Warrants.

 

(m)     This Agreement 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.

 

 
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(n)     The obligations of each Investor under this Agreement and the other Transaction Documents are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under this Agreement or any other Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute the Investors as, and the Company acknowledges that the Investors do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Investors are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by the Transaction Documents or any matters, and the Company acknowledges that the Investors are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by this Agreement or any of the other the Transaction Documents. Each Investor shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained herein was solely in the control of the Company, not the action or decision of any Investor, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Investor. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and an Investor, solely, and not between the Company and the Investors collectively and not between and among Investors.

 

[signature page follows]

 

 
25

 

 

IN WITNESS WHEREOF , each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

 

 

 

COMPANY :

 

     
 

HELIOS AND MATHESON ANALYTICS INC.

 

 

 

 

 

       

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

IN WITNESS WHEREOF , each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

 

 

BUYERS:

 

     
 

HUDSON BAY MASTER FUND LTD

 

 

 

 

 

       

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

EXHIBIT A

 

FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT

 

______________________
______________________
______________________
Attention: _____________

 

Re:      Helios and Matheson Analytics Inc.

 

Ladies and Gentlemen:

 

[We are][I am] counsel to Helios and Matheson Analytics Inc., a Delaware corporation (the “ Company ”), and have represented the Company in connection with that certain Securities Purchase Agreement (the “ Securities Purchase Agreement ”), dated August __, 2017, entered into by and among the Company and the buyers named therein (collectively, the “ Holders ”) pursuant to which the Company issued to the Holders senior secured convertible notes (the “ Notes ”) convertible into the Company’s shares of common stock, $0.01 par value per share (the “ Common Stock ”) and warrants exercisable for shares of Common Stock (the “ Warrants ”). Pursuant to the Securities Purchase Agreement, the Company also has entered into a Registration Rights Agreement with the Holders (the “ Registration Rights Agreement ”) pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement), including the shares of Common Stock issuable upon conversion of the Notes and the exercise of the Warrants, under the Securities Act of 1933, as amended (the “ 1933 Act ”). In connection with the Company’s obligations under the Registration Rights Agreement, on August__, 2017, the Company filed a Registration Statement on Form [S-1][S-3] (File No. 333-_____________) (the “ Registration Statement ”) with the Securities and Exchange Commission (the “ SEC ”) relating to the Registrable Securities which names each of the Holders as a selling stockholder thereunder.

 

In connection with the foregoing, [we][I] advise you that [a member of the SEC’s staff has advised [us][me] by telephone that [the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS]] [an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS]] has been posted on the web site of the SEC at www.sec.gov] and [we][I] have no knowledge, after a review of information posted on the website of the SEC at http://www.sec.gov/litigation/stoporders.shtml, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the 1933 Act pursuant to the Registration Statement.

 

 

 

 

This letter shall serve as our standing written confirmation to you that the shares of Common Stock underlying the Notes and Warrants are freely transferable by the Holders pursuant to the Registration Statement. You need not require further letters from us to effect any future legend-free issuance or reissuance of such shares of Common Stock to the Holders as contemplated by the Company’s Irrevocable Transfer Agent Instructions dated _________ __, 20__.

 

 

Very truly yours,

 

[ISSUER’S COUNSEL]

 

By:_____________ _________

 

 

CC:     Hudson Bay Master Fund Ltd

 

 

 

 

EXHIBIT B

 

SELLING STOCKHOLDERS

 

The shares of common stock being offered by the selling stockholders are those issuable to the selling stockholders upon conversion of the notes and exercise of the warrants. For additional information regarding the issuance of the notes and the warrants, see “Private Placement of Notes and Warrants” above. We are registering the shares of common stock in order to permit the selling stockholders to offer the shares for resale from time to time. Except for the ownership of the notes and the warrants issued pursuant to the Securities Purchase Agreement, the selling stockholders have not had any material relationship with us within the past three years.

 

The table below lists the selling stockholders and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder) of the shares of common stock held by each of the selling stockholders. The second column lists the number of shares of common stock beneficially owned by the selling stockholders, based on their respective ownership of shares of common stock, notes and warrants, as of ________, 201_, assuming conversion of the notes and exercise of the warrants held by each such selling stockholder on that date but taking account of any limitations on conversion and exercise set forth therein.

 

The third column lists the shares of common stock being offered by this prospectus by the selling stockholders and does not take in account any limitations on (i) conversion of the notes set forth therein; or (ii) exercise of the warrants set forth therein.

 

In accordance with the terms of a registration rights agreement with the holders of the notes and the warrants, this prospectus generally covers the resale of, as of any given date, (i) the sum of 125% of the maximum number of shares of common stock then issuable upon conversion of the Notes, including conversion of interest on the notes through the eight month anniversary of the date of issuance, determined as if the outstanding notes (including interest on the notes through eight month anniversary of the date of issuance) were converted in full (without regard to any limitations on conversion or exercise contained therein solely for the purpose of such calculation) at a conversion price, interest conversion price equal to 50% of the conversion price of the Notes in effect on such given date, and (ii) the maximum number of shares of common stock issued or issuable upon exercise of the warrants, in each case, determined as if the outstanding notes (including interest on the notes through April __, 2018) and warrants were converted or exercised (as the case may be) in full (without regard to any limitations on conversion or exercise contained therein solely for the purpose of such calculation) at a conversion price, interest conversion price, alternate conversion price or exercise price (as the case may be) calculated as of the trading day immediately preceding the date this registration statement was initially filed with the SEC. Because the mandatory conversion price of the notes may differ from the conversion price in effect and the exercise price of the warrants may be adjusted, the number of shares that will actually be issued may be more or less than the number of shares being offered by this prospectus. The fourth column assumes the sale of all of the shares offered by the selling stockholders pursuant to this prospectus.

 

 

 

 

Under the terms of the notes and the warrants, a selling stockholder may not convert the notes or exercise of the warrants to the extent (but only to the extent) such selling stockholder or any of its affiliates would beneficially own a number of shares of our common stock which would exceed (i) 9.99% of the outstanding shares of the Company or (ii) the selling stockholder’s pro rata portion of the aggregate number of shares of common stock which we may issue upon conversion of the notes or otherwise pursuant to the terms of the notes without breaching our obligations under the rules or regulations of the Nasdaq Capital Market. The number of shares in the second column reflects these limitations. The selling stockholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”

 

 

Name of Selling Stockholder

Number of Shares of

Common Stock Owned

Prior to Offering

Maximum Number of Shares

of Common Stock to be Sold

Pursuant to this Prospectus

Number of Shares of

Common Stock of

Owned After Offering

 


Hudson Bay Master Fund Ltd (1)

     
       
       
       
       
       
       
       
       

 

(1)

[                   ]

 

 

 

 

PLAN OF DISTRIBUTION

 

We are registering the shares of common stock issuable upon conversion of the notes and exercise of the warrants to permit the resale of these shares of common stock by the holders of the notes and warrants from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock, although we will receive the exercise price of any warrants not exercised by the selling stockholders on a cashless exercise basis. We will bear all fees and expenses incident to our obligation to register the shares of common stock.

 

The selling stockholders may sell all or a portion of the shares of common stock held by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions, pursuant to one or more of the following methods:

 

 

on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;

 

 

in the over-the-counter market;

 

 

in transactions otherwise than on these exchanges or systems or in the over-the-counter market;

 

 

through the writing or settlement of options, whether such options are listed on an options exchange or otherwise;

 

 

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

 

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

 

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

 

an exchange distribution in accordance with the rules of the applicable exchange;

 

 

privately negotiated transactions;

 

 

short sales made after the date the Registration Statement is declared effective by the SEC;

 

 

 

 

 

broker-dealers may agree with a selling security holder to sell a specified number of such shares at a stipulated price per share;

 

 

a combination of any such methods of sale; and

 

 

any other method permitted pursuant to applicable law.

 

The selling stockholders may also sell shares of common stock under Rule 144 promulgated under the Securities Act of 1933, as amended, if available, rather than under this prospectus. In addition, the selling stockholders may transfer the shares of common stock by other means not described in this prospectus. If the selling stockholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.

 

The selling stockholders may pledge or grant a security interest in some or all of the notes, warrants or shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

 

To the extent required by the Securities Act and the rules and regulations thereunder, the selling stockholders and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed, which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.

 

 

 

 

Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

 

There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this prospectus forms a part.

 

The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.

 

We will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be $[     ] in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, a selling stockholder will pay all underwriting discounts and selling commissions, if any. We will indemnify the selling stockholders against liabilities, including some liabilities under the Securities Act in accordance with the registration rights agreements or the selling stockholders will be entitled to contribution. We may be indemnified by the selling stockholders against civil liabilities, including liabilities under the Securities Act that may arise from any written information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance with the related registration rights agreements or we may be entitled to contribution.

 

Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.

 

Exhibit 10.12

 

SECURITY AND PLEDGE AGREEMENT

 

SECURITY AND PLEDGE AGREEMENT , dated as of August __, 2017 (this “ Agreement ”), made by 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 each of the undersigned direct and indirect Domestic Subsidiaries of the Company from time to time, if any (each a “ Grantor ” and together with the Company, collectively, the “ Grantors ”), in favor of Hudson Bay Master Fund Ltd , in its capacity as collateral agent (in such capacity, the “ Collateral Agent ” as hereinafter further defined) for the Noteholders (as defined below) party to the Securities Purchase Agreement, dated as of August __, 2017 (as amended, modified, supplemented, extended, renewed, restated or replaced from time to time, the “ Securities Purchase Agreement ”).

 

W I T N E S S E T H :

 

WHEREAS, the Company and each party listed as a “Buyer” on the Schedule of Buyers attached to the Securities Purchase Agreement (each a “ Buyer ” and collectively, the “ Buyers ”) are parties to the Securities Purchase Agreement, pursuant to which the Company shall be required to sell, and the Buyers shall purchase or have the right to purchase, (i) the “Notes” issued pursuant thereto (as such Notes may be amended, modified, supplemented, extended, renewed, restated, replaced or otherwise modified from time to time in accordance with the terms thereof, collectively, the “ Notes ”) and (ii) the Warrants (as defined in the Securities Purchase Agreement);

 

WHEREAS, the Company and certain other Grantors from time to time (each a “ Guarantor ” and collectively, the “ Guarantors ”) may execute and deliver one or more guarantees (each, a “ Guaranty ” and collectively, the “ Guaranties ”) in form and substance acceptable to and in favor of the Collateral Agent, for the benefit of itself and the Noteholders, with respect to the Company’s obligations under the Securities Purchase Agreement, the Notes and the other “Transaction Documents” (as defined below);

 

WHEREAS, it is a condition precedent to the Buyers’ obligation to purchase the Notes issued pursuant to the Securities Purchase Agreement that the Grantors shall have executed and delivered to the Collateral Agent this Agreement providing for the grant to the Collateral Agent, for the benefit of the Noteholders, of a valid, enforceable, and perfected security interest in all personal property of each Grantor to secure all of the Company’s obligations under the Transaction Documents and the Guarantors’ obligations under the Guaranties, as applicable; and

 

WHEREAS, each Grantor has determined that the execution, delivery and performance of this Agreement directly benefits, and is in the best interest of, such Grantor.

 

NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to induce the Buyers to perform under the Securities Purchase Agreement, each Grantor agrees with the Collateral Agent, for the benefit of the Collateral Agent and the Noteholders, as follows:

 

 
 

 

 

SECTION 1.      Definitions .

 

(a)     Reference is hereby made to the Securities Purchase Agreement and the Notes for a statement of the terms thereof. All terms used in this Agreement and the recitals hereto which are defined in the Securities Purchase Agreement, the Notes or in the Code, and which are not otherwise defined herein shall have the same meanings herein as set forth therein; provided that terms used herein which are defined in the Code on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of the Code except as the Collateral Agent may otherwise determine.

 

(b)     The following terms shall have the respective meanings provided for in the Code: “Accounts”, “Account Debtor”, “Cash Proceeds”, “Noncash Proceeds”, “Certificate of Title”, “Chattel Paper”, “Commercial Tort Claim”, “Commodity Account”, “Commodity Contracts”, “Deposit Account”, “Documents”, “Electronic Chattel Paper”, “Equipment”, “Fixtures”, “General Intangibles”, “Goods”, “Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit Rights”, “Payment Intangibles”, “Proceeds”, “Promissory Notes”, “Security”, “Record”, “Security Account”, “Software”, and “Supporting Obligations”.

 

(c)     As used in this Agreement, the following terms shall have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms:

 

Affiliate of any Person means any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person and any officer or director of such Person. A Person shall be deemed to be “controlled by” any other Person if such Person possesses, directly or indirectly, power to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managers or power to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.

 

Bankruptcy Code ” means Chapter 11 of Title 11 of the United States Code, 11 U.S.C §§ 101 et seq. (or other applicable bankruptcy, insolvency or similar laws).

 

Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed.

 

Buyer ” or “ Buyers ” shall have the meaning set forth in the recitals hereto.

 

Capital Stock ” means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock (including, without limitation, any warrants, options, rights or other securities exercisable or convertible into equity interests or securities of such Person), and (ii) with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person.

 

Closing Date ” means the date the Company initially issues the Notes pursuant to the terms of the Securities Purchase Agreement.

 

 
2

 

 

Code ” means Articles 8 or 9 of the Uniform Commercial Code as in effect from time to time in the State of New York; provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “Code” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.

 

Collateral ” shall have the meaning set forth in Section 2(a) of this Agreement.

 

Collateral Agent ” shall have the meaning set forth in the preamble hereto.

 

Company ” shall have the meaning set forth in the preamble hereto.

 

Controlled Account Agreement ” means a deposit account control agreement or securities account control agreement with respect to a Pledged Account, in form and substance satisfactory to the Collateral Agent, as the same may be amended, modified, supplemented, extended, renewed, restated or replaced from time to time.

 

Controlled Accounts” means the Deposit Accounts, Commodity Accounts, Securities Accounts, and/or Foreign Currency Controlled Account of the Grantors listed on Schedule IV attached hereto.

 

Copyright Licenses ” means all licenses, contracts or other agreements, whether written or oral, naming any Grantor as licensee or licensor and providing for the grant of any right to use or sell any works covered by any Copyright (including, without limitation, all Copyright Licenses set forth in Schedule II hereto).

 

Copyrights ” means all domestic and foreign copyrights, whether registered or not, including, without limitation, all copyright rights throughout the universe (whether now or hereafter arising) in any and all media (whether now or hereafter developed), in and to all original works of authorship fixed in any tangible medium of expression, acquired or used by any Grantor (including, without limitation, all copyrights described in Schedule II hereto), all applications, registrations and recordings thereof (including, without limitation, applications, registrations and recordings in the United States Copyright Office or in any similar office or agency of the United States or any other country or any political subdivision thereof), and all reissues, divisions, continuations, continuations in part and extensions or renewals thereof.

 

Domestic Subsidiary ” means any Subsidiary other than a Foreign Subsidiary.

 

Event of Default ” shall have the meaning set forth in Section 4(a) of the Notes.

 

Excluded Collateral ” means the voting Capital Stock of any Foreign Subsidiary to the extent that (x) such Capital Stock represents more than 65% of the issued and outstanding voting Capital Stock of such Foreign Subsidiary and (y) pledging more than 65% of the total outstanding voting Capital Stock of such Foreign Subsidiary would result in a material adverse tax consequence to a Grantor.

 

 
3

 

 

Foreign Currency Controlled Accounts” means any Controlled Account of the Company or its Subsidiaries holding non-United States dollar deposits.

 

Foreign Subsidiary ” means any Subsidiary of a Grantor organized under the laws of a jurisdiction other than the United States, any of the states thereof, Puerto Rico or the District of Columbia.

 

GAAP ” means U.S. generally accepted accounting principles consistently applied.

 

Governmental Authority ” means any nation or government, any Federal, state, city, town, municipality, county, local, foreign or other political subdivision thereof or thereto and any department, commission, board, bureau, instrumentality, agency or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

 

Guaranteed Obligations ” shall have the meaning set forth in Section 2 of each Guaranty.

 

Guarantor ” or “ Guarantors ” shall have the meaning set forth in the recitals hereto.

 

Guaranty ” or “ Guaranties ” shall have the meaning set forth in the recitals hereto.

 

Insolvency Proceeding ” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, or extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

 

Intellectual Property ” means, collectively, the Copyrights, Trademarks and Patents.

 

Intellectual Property Security Agreement ” means the Intellectual Property Security Agreement required to be delivered pursuant to Section 5(h)(i) of this Agreement, in the form attached hereto as Exhibit A .

 

Licenses ” means, collectively, the Copyright Licenses, the Trademark Licenses and the Patent Licenses.

 

Lien ” means any mortgage, lien, pledge, charge, security interest, adverse claim or other encumbrance upon or in any property or assets.

 

MoviePass ” means MoviePass Inc., a Delaware corporation.

 

MoviePass SPA ” means that certain Securities Purchase Agreement by and between the Company and MoviePass dated as of August __, 2017.

 

Notes ” shall have the meaning set forth in the recitals hereto.

 

“Noteholders” means, at any time, the holders of the Notes at such time.

 

 
4

 

 

Obligations ” shall have the meaning set forth in Section 3 of this Agreement.

 

Paid in Full” or “ Payment in Full” means the indefeasible payment in full in cash of all of the Obligations.

 

Patent Licenses ” means all licenses, contracts or other agreements, whether written or oral, naming any Grantor as licensee or licensor and providing for the grant of any right to manufacture, use or sell any invention covered by any Patent (including, without limitation, all Patent Licenses set forth in Schedule II hereto).

 

Patents ” means all domestic and foreign letters patent, design patents, utility patents, industrial designs, inventions, trade secrets, ideas, concepts, methods, techniques, processes, proprietary information, technology, know-how, formulae, rights of publicity and other general intangibles of like nature, now existing or hereafter acquired (including, without limitation, all domestic and foreign letters patent, design patents, utility patents, industrial designs, inventions, trade secrets, ideas, concepts, methods, techniques, processes, proprietary information, technology, know-how and formulae described in Schedule II hereto), all applications, registrations and recordings thereof (including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office, or in any similar office or agency of the United States or any other country or any political subdivision thereof), and all reissues, reexaminations, divisions, continuations, continuations in part and extensions or renewals thereof.

 

Perfection Requirement” or “Perfection Requirements ” shall have the meaning set forth in Section 4(j) of this Agreement.

 

Person ” means an individual, corporation, limited liability company, partnership, association, joint-stock company, trust, unincorporated organization, joint venture or other enterprise or entity or Governmental Authority.

 

Pledged Accounts ” means all of each Grantor’s right, title and interest in all of its Deposit Accounts, Commodity Accounts and Securities Accounts (in all cases, including, without limitation, all Controlled Accounts and Foreign Currency Control Accounts).

 

Pledged Entity ” means, each Person listed from time to time on Schedule IV hereto as a “Pledged Entity,” together with each other Person, any right in or interest in or to all or a portion of whose Capital Stock is acquired or otherwise owned by a Grantor after the date hereof.

 

Pledged Equity ” means all of each Grantor’s right, title and interest in and to all of the Securities and Capital Stock now or hereafter owned by such Grantor, regardless of class or designation, including all substitutions therefor and replacements thereof, all proceeds thereof and all rights relating thereto, also including any certificates representing the Securities and/or Capital Stock, the right to receive any certificates representing any of the Securities and/or Capital Stock, all warrants, options, share appreciation rights and other rights, contractual or otherwise, in respect thereof, and the right to receive dividends, distributions of income, profits, surplus, or other compensation by way of income or liquidating distributions, in cash or in kind, and cash, instruments, and other property from time to time received, receivable, or otherwise distributed in respect of or in addition to, in substitution of, on account of, or in exchange for any or all of the foregoing.

 

 
5

 

 

Pledged Operating Agreements ” means all of each Grantor’s rights, powers and remedies under the limited liability company operating agreements of each of the Pledged Entities that are limited liability companies, as may be amended, modified, supplemented, extended, renewed, restated or replaced from time to time.

 

Pledged Partnership Agreements ” means all of each Grantor’s rights, powers, and remedies under the partnership agreements of each of the Pledged Entities that are partnerships, as may be amended, modified, supplemented, extended, renewed, restated or replaced from time to time.

 

Securities Purchase Agreement ” shall have the meaning set forth in the recitals hereto.

 

“Subsidiary” means any Person in which a Grantor directly or indirectly, (i) owns any of the outstanding Capital Stock or holds any equity or similar interest of such Person or (ii) controls or operates all or any part of the business, operations or administration of such Person, and all of the foregoing, collectively, “ Subsidiaries ”.

 

Trademark Licenses ” means all licenses, contracts or other agreements, whether written or oral, naming any Grantor as licensor or licensee and providing for the grant of any right concerning any Trademark, together with any goodwill connected with and symbolized by any such licenses, contracts or agreements and the right to prepare for sale or lease and sell or lease any and all Inventory now or hereafter owned by any Grantor and now or hereafter covered by such licenses, contracts or agreements (including, without limitation, all Trademark Licenses described in Schedule II hereto).

 

Trademarks ” means all domestic and foreign trademarks, service marks, collective marks, certification marks, trade names, business names, d/b/a’s, assumed names, Internet domain names, trade styles, designs, logos and other source or business identifiers and all general intangibles of like nature, now or hereafter owned, adopted, acquired or used by any Grantor (including, without limitation, all domestic and foreign trademarks, service marks, collective marks, certification marks, trade names, business names, d/b/a’s, assumed names, Internet domain names, trade styles, designs, logos and other source or business identifiers described in Schedule II hereto), all applications, registrations and recordings thereof (including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or any other country or any political subdivision thereof), and all reissues, extensions or renewals thereof, together with all goodwill of the business symbolized by such marks and all customer lists, formulae and other Records of any Grantor relating to the distribution of products and services in connection with which any of such marks are used.

 

Transaction Documents ” shall have the meaning set forth in Section 3 of the Securities Purchase Agreement.

 

 
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SECTION 2.      Grant of Security Interest .

 

(a)           As collateral security for the due and punctual payment and performance all of the Obligations, as and when due, each Grantor hereby pledges and assigns to the Collateral Agent, for itself and for the benefit of the Noteholders, and grants to the Collateral Agent, for itself and for the benefit of the Noteholders, a continuing security interest in, all personal property and assets of such Grantor, wherever located and whether now or hereafter existing and whether now owned or hereafter acquired, of every kind, nature and description, whether tangible or intangible (collectively, the “ Collateral ”), including, without limitation, the following:

 

(i)        all Accounts;

 

(ii)       all Chattel Paper (whether tangible or Electronic Chattel Paper);

 

(iii)      all Commercial Tort Claims, including, without limitation, those specified on Schedule VI hereto;

 

(iv)      all Documents;

 

(v)       all Equipment;

 

(vi)      all Fixtures;

 

(vii)     all General Intangibles (including, without limitation, all Payment Intangibles);

 

(viii)     all Goods;

 

(ix)       all Instruments (including, without limitation, all Promissory Notes, each Investor Note (as defined in the Securities Purchase Agreement), and each certificated Security);

 

(x)        all Inventory;

 

(xi)       all Investment Property (and, regardless of whether classified as Investment Property under the Code, all Pledged Equity, Pledged Operating Agreements and Pledged Partnership Agreements);

 

(xii)      all Intellectual Property and all Licenses;

 

(xiii)     all Letter-of-Credit Rights;

 

(xiv)     all Pledged Accounts, all cash and other property from time to time deposited therein, and all monies and property in the possession or under the control of the Collateral Agent or any Noteholder or any Affiliate, representative, agent or correspondent of the Collateral Agent or any such Noteholder;

 

(xv)      all Supporting Obligations;

 

 
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(xvi)     all other tangible and intangible personal property of each Grantor (whether or not subject to the Code), including, without limitation, all Deposit Accounts and other accounts and all cash and all investments therein, all proceeds, products, offspring, accessions, rents, profits, income, benefits, substitutions and replacements of and to any of the property of any Grantor described in the preceding clauses of this Section  2 (a) (including, without limitation, any proceeds of insurance thereon and all causes of action, claims and warranties now or hereafter held by each Grantor in respect of any of the items listed above), and all books, correspondence, files and other Records, including, without limitation, all tapes, desks, cards, Software, data and computer programs in the possession or under the control of any Grantor or any other Person from time to time acting for any Grantor, in each case, to the extent of such Grantor’s rights therein, that at any time evidence or contain information relating to any of the property described in the preceding clauses of this Section  2 (a) or are otherwise necessary or helpful in the collection or realization thereof;

 

(xvii)     all Securities issued by MoviePass to the Company or any other Guarantor including but not limited to the Capital Stock of MoviePass and convertible promissory note issued or issuable by MoviePass to the Company pursuant to the applicable Transaction Agreement (as defined in the MoviePass SPA); and

 

(xviii)    all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of any and all of the foregoing Collateral;

 

in each case howsoever any Grantor’s interest therein may arise or appear (whether by ownership, security interest, claim or otherwise).

 

(b)     Notwithstanding anything herein to the contrary, the term “ Collateral ” shall not include any Excluded Collateral.

 

(c)     Each Grantor agrees not to further encumber, or permit any other Lien to exist that encumbers, any of its Copyrights, Copyright applications, Copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any Licenses, Patents, Patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, Trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, and the goodwill of the business of such Grantor connected with and symbolized thereby, know-how, operating manuals, trade secret rights, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing, in each case without the Collateral Agent’s prior written consent (which consent may be withheld or given in the Collateral Agent’s sole discretion).

 

(d)     The Grantors agree that the pledge of the shares of Capital Stock acquired by a Grantor of any and all Persons now or hereafter existing who is a Foreign Subsidiary may be supplemented by one or more separate pledge agreements, deeds of pledge, share charges or other similar agreements or instruments, executed and delivered by the relevant Grantors in favor of the Collateral Agent, which pledge agreements will provide for the pledge of such shares of Capital Stock in accordance with the laws of the applicable foreign jurisdiction. With respect to such shares of Capital Stock, the Collateral Agent may, at any time and from time to time, in its sole discretion, take such actions in such foreign jurisdictions that will result in the perfection of the Lien created in such shares of Capital Stock.

 

 
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(e)     In addition, to secure the prompt and complete payment, performance and observance of the Obligations and in order to induce the Buyers as aforesaid, each Grantor hereby grants to the Collateral Agent, for itself and for the ratable benefit of the Noteholders, a right of set-off against the property of such Grantor held by the Collateral Agent, for itself and for the ratable benefit of the Noteholders, consisting of property described above in Section 2(a) now or hereafter in the possession or custody of or in transit to the Collateral Agent, for any purpose, including safekeeping, collection or pledge, for the account of such Grantor, or as to which such Grantor may have any right or power; provided that such right shall only to be exercised after an Event of Default has occurred and is continuing.

 

SECTION 3.      Security for Obligations . The security interest created hereby in the Collateral constitutes continuing collateral security for all of the following obligations, whether direct or indirect, absolute or contingent, and whether now existing or hereafter incurred (collectively, the “ Obligations ”):

 

(a)      (i) the payment by the Company and each Grantor, as and when due and payable (by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all amounts from time to time owing by it in respect of the Securities Purchase Agreement, this Agreement, the Notes and the other Transaction Documents, and (ii) in the case of the Guarantors, the payment by such Guarantors, as and when due and payable of all Guaranteed Obligations under the Guaranties, including, without limitation, in both cases, (A) all principal of, interest, make-whole and other amounts on the Notes (including, without limitation, all interest, make-whole and other amounts that accrues after the commencement of any Insolvency Proceeding of any Grantor, whether or not the payment of such interest is enforceable or is allowable in such Insolvency Proceeding), and (B) all fees, interest, premiums, penalties, contract causes of action, costs, commissions, expense reimbursements, indemnifications and all other amounts due or to become due under this Agreement or any of the Transaction Documents; and

 

(b)     the due performance and observance by each Grantor of all of its other obligations from time to time existing in respect of any of the Transaction Documents, including without limitation, with respect to any conversion or redemption rights of the Noteholders under the Notes.

 

Section 4.      Representations and Warranties . Each Grantor represents and warrants as follows:

 

(a)      Schedule I hereto sets forth (i) the exact legal name of each Grantor, and (ii) the state of incorporation, organization or formation and the organizational identification number of each Grantor in such state. The information set forth in Schedule I hereto with respect to such Grantor is true and accurate in all respects. Such Grantor has not previously changed its name (or operated under any other name), jurisdiction of organization or organizational identification number from those set forth in Schedule I hereto except as disclosed in Schedule I hereto.

 

 
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(b)     There is no pending or, to its knowledge, written notice threatening any action, suit, proceeding or claim affecting any Grantor before any Governmental Authority or any arbitrator, or any order, judgment or award issued by any Governmental Authority or arbitrator, in each case, that may adversely affect the grant by any Grantor, or the perfection, of the security interest purported to be created hereby in the Collateral, or the exercise by the Collateral Agent of any of its rights or remedies hereunder.

 

(c)     All Federal, state and local tax returns and other reports required by applicable law to be filed by any Grantor have been filed, or extensions have been obtained, and all taxes, assessments and other governmental charges imposed upon any Grantor or any property of any Grantor (including, without limitation, all federal income and social security taxes on employees’ wages) and which have become due and payable on or prior to the date hereof have been paid, except to the extent contested in good faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP.

 

(d)     All Equipment, Fixtures, Goods and Inventory of each Grantor now existing are, and all Equipment, Fixtures, Goods and Inventory of each Grantor hereafter existing will be, located and/or based at the addresses specified therefor in Schedule III hereto, except that each Grantor will give the Collateral Agent written notice of any change in the location of any such Collateral within 20 days of such change, other than to locations set forth on Schedule III hereto (and with respect to which the Collateral Agent has filed financing statements and otherwise fully perfected its Liens thereon). Each Grantor’s principal place of business and chief executive office, the place where each Grantor keeps its Records concerning the Collateral and all originals of all Chattel Paper are located and will continue to be located at the addresses specified therefor in Schedule III hereto. None of the Accounts is or will be evidenced by Promissory Notes or other Instruments.

 

(e)     Set forth in Schedule IV hereto is a complete and accurate list, as of the date of this Agreement, of (i) each Promissory Note, Security and other Instrument owned by each Grantor, (ii) each Pledged Account of each Grantor, together with the name and address of each institution at which each such Pledged Account is maintained, the account number for each such Pledged Account and a description of the purpose of each such Pledged Account and (iii) the name of each Foreign Currency Controlled Account, together with the name and address of each institution at which each such Foreign Currency Controlled Account is maintained and the amount of cash or cash equivalents held in each such Foreign Currency Controlled Account. Set forth in Schedule II hereto is a complete and correct list of each trade name used by each Grantor and the name of, and each trade name used by, each Person from which each Grantor has acquired any substantial part of the Collateral.

 

(f)     Each Grantor has delivered to the Collateral Agent complete and correct copies of each License described in Schedule II hereto, including all schedules and exhibits thereto, which represent all of the Licenses of the Grantors existing on the date of this Agreement. Each such License sets forth the entire agreement and understanding of the parties thereto relating to the subject matter thereof, and there are no other agreements, arrangements or understandings, written or oral, relating to the matters covered thereby or the rights of such Grantor or any of its Affiliates in respect thereof. Each material License now existing is, and any material License entered into in the future will be, the legal, valid and binding obligation of the parties thereto, enforceable against such parties in accordance with its terms. No default under any material License by any such party has occurred, nor does any defense, offset, deduction or counterclaim exist thereunder in favor of any such party.

 

 
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(g)     Each Grantor owns and controls, or otherwise possesses adequate rights to use, all of its Intellectual Property, which is the only Intellectual Property necessary to conduct its business in substantially the same manner as conducted as of the date hereof. Schedule II hereto sets forth a true and complete list of all Intellectual Property and Licenses owned or used by each Grantor as of the date hereof, and applications for grant or registration of Intellectual Property. To the knowledge of each Grantor, all such Intellectual Property of such Grantor is subsisting and in full force and effect, has not been adjudged invalid or unenforceable, is valid and enforceable and has not been abandoned in whole or in part. Except as set forth in Schedule II , no such Intellectual Property is the subject of any licensing or franchising agreement. Except as set forth in Schedule II , no Grantor has any knowledge of any infringement upon or conflict with the Patent, Trademark, Copyright, trade secret rights of others and, each Grantor is not now infringing or in conflict with any Patent, Trademark, Copyright, trade secret or similar rights of others, and to the knowledge of each Grantor, no other Person is now infringing or in conflict in any material respect with any such properties, assets and rights owned or used by each Grantor. No Grantor has received any notice that it is violating or has violated the Trademarks, Patents, Copyrights, inventions, trade secrets, proprietary information and technology, know-how, formulae, rights of publicity or other intellectual property rights of any third party.

 

(h)     Each Grantor is and will be at all times the sole and exclusive owner of the Collateral pledged by such Grantor hereunder free and clear of any Liens, except for Permitted Liens thereon. No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording or filing office except such as (i) may have been filed in favor of the Collateral Agent and/or the Noteholders relating to this Agreement or the other Transaction Documents, and (ii) are securing Permitted Liens as of the date hereof and disclosed on Schedule VII hereto.

 

(i)     The exercise by the Collateral Agent of any of its rights and remedies hereunder will not contravene any law or any contractual restriction binding on or otherwise affecting each Grantor or any of its properties and will not result in or require the creation of any Lien, upon or with respect to any of its properties.

 

 
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(j)     No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority, is required for (i) the grant by each Grantor, or the perfection, of the security interest purported to be created hereby in the Collateral, or (ii) the exercise by the Collateral Agent of any of its rights and remedies hereunder, except for (A) the filing under the Code as in effect in the applicable jurisdiction of the financing statements described in Schedule V hereto, all of which financing statements have been duly filed and are in full force and effect, (B) with respect to all Pledged Accounts, and all cash and other property from time to time deposited therein, the execution of a Controlled Account Agreement with the depository or other institution with which the applicable Pledged Accounts are maintained, as provided in Section 5(i) , (C) with respect to Commodity Contracts, the execution of a control agreement with the commodity intermediary with which such Commodity Contract is carried, as provided in this Section 4(j) , (D) with respect to the perfection of the security interest created hereby in the United States Intellectual Property and Licenses, the recording of the appropriate Intellectual Property Security Agreement in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, (E) with respect to the perfection of the security interest created hereby in foreign Intellectual Property and Licenses, registrations and filings in jurisdictions located outside of the United States and covering rights in such jurisdictions relating to such foreign Intellectual Property and Licenses, (F) with respect to the perfection of the security interest created hereby in any Letter-of-Credit Rights, the consent of the issuer of the applicable letter of credit to the assignment of proceeds as provided in the Code as in effect in the applicable jurisdiction, (G) with respect to Investment Property constituting uncertificated securities, the applicable Grantor causing the issuer thereof either (i) to register the Collateral Agent as the registered owner of such securities or (ii) to agree in an authenticated record with such Grantor and the Collateral Agent that such issuer will comply with instructions with respect to such securities originated by the Collateral Agent without further consent of such Grantor, such authenticated record to be in form and substance satisfactory to the Collateral Agent, (H) with respect to Investment Property constituting certificated securities or instruments, such items to be delivered to and held by or on behalf of the Collateral Agent pursuant hereto in suitable form for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Collateral Agent, (I) with respect to any action that may be necessary to obtain control of Collateral constituting Commodity Contracts, Electronic Chattel Paper or Letter of Credit Rights, the taking of such actions, and (J) the Collateral Agent having possession of all Documents, Chattel Paper, Instruments and cash constituting Collateral (subclauses (A) through (J) each a “ Perfection Requirement ” and collectively, the “ Perfection Requirements ”).

 

(k)     This Agreement creates in favor of the Collateral Agent a legal, valid and enforceable security interest in the Collateral, as security for the Obligations. The performance of the Perfection Requirements results in the perfection of such security interest in the Collateral. Such security interest is (or in the case of Collateral in which each Grantor obtains rights after the date hereof, will be), subject only to Permitted Liens and the Perfection Requirements, a first priority, valid, enforceable and perfected security interests in all personal property of each Grantor (other than Excluded Collateral). Such recordings and filings and all other action necessary to perfect and protect such security interest have been duly taken (and, in the case of Collateral in which any Grantor obtains rights after the date hereof, will be duly taken), except for the Collateral Agent’s having possession of all Documents, Chattel Paper, Instruments and cash constituting Collateral after the date hereof and the other actions, filings and recordations described above, including the Perfection Requirements.

 

(l)     As of the date hereof, no Grantor holds any Commercial Tort Claims or has knowledge of any pending Commercial Tort Claims, except for the Commercial Tort Claims described in Schedule VI .

 

(m)     All of the Pledged Equity is presently owned by the applicable Grantor as set forth in Schedule IV , and is presently represented by the certificates listed on Schedule IV hereto (if applicable). As of the date hereof, there are no existing options, warrants, calls or commitments of any character whatsoever relating to the Pledged Equity other than as contemplated and permitted by the Transaction Documents. Each Grantor is the sole holder of record and the sole beneficial owner of the Pledged Equity, as applicable. None of the Pledged Equity has been issued or transferred in violation of the securities registration, securities disclosure or similar laws of any jurisdiction to which such issuance or transfer may be subject. The Pledged Equity constitutes 100% or such other percentage as set forth on Schedule IV of the issued and outstanding shares of Capital Stock of the applicable Pledged Entity.

 

 
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(n)     Such Grantor (i) is a corporation, limited liability company or limited partnership, as applicable, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, organization or formation, (ii) has all requisite corporate, limited liability company or limited partnership power and authority to conduct its business as now conducted and as presently contemplated and to execute and deliver this Agreement and each other Transaction Document to which such Grantor is a party, and to consummate the transactions contemplated hereby and thereby and (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except where the failure to be so qualified would not result in a Material Adverse Effect.

 

(o)     The execution, delivery and performance by each Grantor of this Agreement and each other Transaction Document to which such Grantor is a party (i) have been duly authorized by all necessary corporate, limited liability company or limited partnership action, (ii) do not and will not contravene its charter or by-laws, limited liability company or operating agreement, certificate of partnership or partnership agreement, as applicable, or any applicable law or any contractual restriction binding on such Grantor or its properties, (iii) do not and will not result in or require the creation of any Lien (other than pursuant to any Transaction Document) upon or with respect to any of its assets or properties, and (iv) do not and will not result in any default, noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of any material permit, license, authorization or approval applicable to it or its operations or any of its assets or properties.

 

(p)     This Agreement and each of the other Transaction Documents to which any Grantor is or will be a party, when delivered, will be, a legal, valid and binding obligation of such Grantor, enforceable against such Grantor in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, suretyship or other similar laws and equitable principles (regardless of whether enforcement is sought in equity or at law).

 

(q)     There are no conditions precedent to the effectiveness of this Agreement that have not been satisfied or waived.

 

 
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SECTION 5.      Covenants as to the Collateral . So long as any of the Obligations shall remain outstanding, unless the Collateral Agent shall otherwise consent in writing:

 

(a)      Further Assurances . Each Grantor will, at its expense, at any time and from time to time, promptly execute and deliver all further instruments and documents and take all further action that the Collateral Agent may reasonably request in order to: (i) perfect and protect the security interest of the Collateral Agent created hereby; (ii) enable the Collateral Agent to exercise and enforce its rights and remedies hereunder in respect of the Collateral, including, without limitation, the Controlled Accounts; or (iii) otherwise effect the purposes of this Agreement, including, without limitation: (A) marking conspicuously all Chattel Paper and each License and, at the request of the Collateral Agent, each of its Records pertaining to the Collateral with a legend, in form and substance satisfactory to the Collateral Agent, indicating that such Chattel Paper, License or Collateral is subject to the security interest created hereby, (B) delivering and pledging to the Collateral Agent each Promissory Note, Security (subject to the limitations set forth in Section  2 ), Chattel Paper or other Instrument, now or hereafter owned by any Grantor, duly endorsed and accompanied by executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent, (C) executing and filing (to the extent, if any, that any Grantor’s signature is required thereon) or authenticating the filing of, such financing or continuation statements, or amendments thereto, as may be necessary or that the Collateral Agent may reasonably request in order to perfect and preserve the security interest created hereby, (D) furnishing to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral in each case as the Collateral Agent may reasonably request, all in reasonable detail, (E) if any Collateral shall be in the possession of a third party, notifying such Person of the Collateral Agent’s security interest created hereby and obtaining a written acknowledgment from such Person, in form and substance reasonably satisfactory to the Collateral Agent, that such Person holds possession of the Collateral for the benefit of the Collateral Agent (for the benefit the Noteholders), (F) if at any time after the date hereof, any Grantor acquires or holds any Commercial Tort Claim, promptly notifying the Collateral Agent in a writing signed by such Grantor setting forth a brief description of such Commercial Tort Claim and granting to the Collateral Agent a security interest therein and in the proceeds thereof, which writing shall incorporate the provisions hereof and shall be in form and substance satisfactory to the Collateral Agent, (G) upon the acquisition after the date hereof by any Grantor of any motor vehicle or other Equipment subject to a certificate of title or ownership (other than a motor vehicle or Equipment that is subject to a purchase money security interest), causing the Collateral Agent to be listed as the lienholder on such certificate of title or ownership and delivering evidence of the same to the Collateral Agent in accordance with Section 5(l) hereof; and (H) taking all actions required by the Code or by other law, as applicable, in any relevant Code jurisdiction, or by other law as applicable in any foreign jurisdiction.

 

(b)      Location of Collateral . Each Grantor will keep the Collateral (i) at the locations specified therefor on Schedule III hereto, or (ii) at such other locations set forth on Schedule III and with respect to which the Collateral Agent has filed financing statements and otherwise fully perfected its Liens thereon, or (iii) at such other locations in the United States, provided that 30 days prior to any change in the location of any Collateral to such other location, or upon the acquisition of any Collateral to be kept at such other locations, the Grantors shall give the Collateral Agent written notice thereof and deliver to the Collateral Agent a new Schedule III indicating such new locations and such other written statements and schedules as the Collateral Agent may require.

 

(c)      Condition of Equipment . Each Grantor will maintain or cause to be maintained and preserved in good condition, repair and working order, ordinary wear and tear excepted, the Equipment (necessary or useful to its business) and will forthwith, or in the case of any loss or damage to any Equipment of any Grantor within a commercially reasonable time after the occurrence thereof, make or cause to be made all repairs, replacements and other improvements in connection therewith which are necessary or desirable, consistent with past practice, or which the Collateral Agent may request to such end. Any Grantor will promptly furnish to the Collateral Agent a statement describing in reasonable detail any such loss or damage in excess of $25,000 per occurrence to any Equipment.

 

 
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(d)          Taxes, Etc . Each Grantor agrees to pay promptly when due all property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Equipment and Inventory, except to the extent the validity thereof is being contested in good faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to which adequate reserves in accordance with GAAP have been set aside for the payment thereof.

 

(e)           Insurance .

 

(i)     Each Grantor will, at its own expense, maintain insurance (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks, in such form and with responsible and reputable insurance companies or associations as is required by any Governmental Authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated and in any event, in amount, adequacy and scope reasonably satisfactory to the Collateral Agent.

 

(ii)     To the extent requested by the Collateral Agent at any time and from time to time, each such policy for liability insurance shall provide for all losses to be paid on behalf of the Collateral Agent and any Grantor as their respective interests may appear, and each policy for property damage insurance shall provide for all losses to be adjusted with, and paid directly to, the Collateral Agent. In addition to and without limiting the foregoing, to the extent requested by the Collateral Agent at any time and from time to time, each such policy shall in addition (A) name the Collateral Agent as an additional insured party and/or loss payee, as applicable, thereunder (without any representation or warranty by or obligation upon the Collateral Agent) as its interests may appear, (B) contain an agreement by the insurer that any loss thereunder shall be payable to the Collateral Agent on its own account notwithstanding any action, inaction or breach of representation or warranty by any Grantor, (C) provide that there shall be no recourse against the Collateral Agent for payment of premiums or other amounts with respect thereto, and (D) provide that at least 30 days’ prior written notice of cancellation, lapse, expiration or other adverse change shall be given to the Collateral Agent by the insurer. Any Grantor will, if so requested by the Collateral Agent, deliver to the Collateral Agent original or duplicate policies of such insurance (including certificates demonstrating compliance with this Section 5(e) ) and, as often as the Collateral Agent may reasonably request, a report of a reputable insurance broker with respect to such insurance. Any Grantor will also, at the request of the Collateral Agent, execute and deliver instruments of assignment of such insurance policies and cause the respective insurers to acknowledge notice of such assignment.

 

(iii)     Reimbursement under any liability insurance maintained by any Grantor pursuant to this Section  5(e) may be paid directly to the Person who shall have incurred liability covered by such insurance. In the case of any loss involving damage to Equipment or Inventory, to the extent paragraph (iv) of this Section  5(e) is not applicable, any proceeds of insurance involving such damage shall be paid to the Collateral Agent, and any Grantor will make or cause to be made the necessary repairs to or replacements of such Equipment or Inventory, and any proceeds of insurance maintained by any Grantor pursuant to this Section 5(e) (except as otherwise provided in paragraph (iv) in this Section 5(e) ) shall be paid by the Collateral Agent to any Grantor as reimbursement for the reasonable costs of such repairs or replacements.

 

 
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(iv)     Notwithstanding anything to the contrary in subsection 5(e)(iii) above, following and during the continuance of an Event of Default, all insurance payments in respect of each Grantor’s properties and business shall be paid to the Collateral Agent and applied as specified in Section  7(b) hereof.

 

(f)            Provisions Concerning the Accounts and the Licenses .

 

(i)     Each Grantor will (A) give the Collateral Agent at least 30 days’ prior written notice of any change in such Grantor’s name, identity or organizational structure, (B) maintain its jurisdiction of incorporation, organization or formation as set forth in Schedule I hereto, (C) immediately notify the Collateral Agent upon obtaining an organizational identification number, if on the date hereof such Grantor did not have such identification number, and (D) keep adequate records concerning the Collateral and permit representatives of the Collateral Agent during normal business hours on reasonable notice to such Grantor, to inspect and make abstracts from such records.

 

(ii)     Each Grantor will (except as otherwise provided in this subsection (f)), continue to collect, at its own expense, all amounts due or to become due under the Accounts. In connection with such collections, any Grantor may (and, at the Collateral Agent’s direction, will) take such action as any Grantor or the Collateral Agent may deem necessary or advisable to enforce collection or performance of the Accounts; provided , however , that the Collateral Agent shall have the right at any time following the occurrence and during the continuance of an Event of Default to notify the Account Debtors or obligors under any Accounts of the assignment of such Accounts to the Collateral Agent and to direct such Account Debtors or obligors to make payment of all amounts due or to become due to any Grantor thereunder directly to the Collateral Agent or its designated agent and, upon such notification and at the expense of any Grantor and to the extent permitted by applicable law, to enforce collection of any such Accounts and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as any Grantor might have done. After receipt by any Grantor of a notice from the Collateral Agent that the Collateral Agent has notified, intends to notify, or has enforced or intends to enforce any Grantor’s rights against the Account Debtors or obligors under any Accounts as referred to in the proviso to the immediately preceding sentence, (A) all amounts and proceeds (including Instruments) received by any Grantor in respect of the Accounts shall be received in trust for the benefit of the Collateral Agent hereunder (for the benefit the Noteholders), shall be segregated from other funds of any Grantor and shall be forthwith paid over to the Collateral Agent in the same form as so received (with any necessary endorsement) to be applied as specified in Section  7(b) hereof, and (B) no Grantor will adjust, settle or compromise the amount or payment of any Account or release wholly or partly any Account Debtor or obligor thereof or allow any credit or discount thereon. In addition, upon the occurrence and during the continuance of an Event of Default, the Collateral Agent may (in its sole and absolute discretion) direct any or all of the banks and financial institutions with which any Grantor either maintains a Deposit Account or a lockbox (including, without limitation, any Controlled Account) or deposits the proceeds of any Accounts to send immediately to the Collateral Agent by wire transfer (to such deposit account as the Collateral Agent shall specify, or in such other manner as the Collateral Agent shall direct) all or a portion of such securities, cash, investments and other items held by such institution. Any such securities, cash, investments and other items so received by the Collateral Agent shall be applied as specified in accordance with Section  7(b) hereof.

 

 
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(iii)     Upon the occurrence and during the continuance of any breach or default under any material License referred to in Schedule II hereto by any party thereto other than any Grantor, each Grantor party thereto will, promptly after obtaining knowledge thereof, give the Collateral Agent written notice of the nature and duration thereof, specifying what action, if any, it has taken and proposes to take with respect thereto and thereafter will take reasonable steps to protect and preserve its rights and remedies in respect of such breach or default, or will obtain or acquire an appropriate substitute License.

 

(iv)     Each Grantor will, at its expense, promptly deliver to the Collateral Agent a copy of each notice or other communication received by it by which any other party to any material License referred to in Schedule II hereto purports to exercise any of its rights or affect any of its obligations thereunder, together with a copy of any reply by such Grantor thereto.

 

(v)     Each Grantor will exercise promptly and diligently each and every right which it may have under each material License (other than any right of termination) and will duly perform and observe in all respects all of its obligations under each material License and will take all action reasonably necessary to maintain such Licenses in full force and effect. No Grantor will, without the prior written consent of the Collateral Agent, cancel, terminate, amend or otherwise modify in any respect, or waive any provision of, any material License referred to in Schedule II hereto.

 

(g)           Transfers and Other Liens .

 

(i)     Except as otherwise expressly permitted in the other Transaction Documents, no Grantor shall, directly or indirectly, sell, lease, license, assign, transfer, spin-off, split-off, close, convey or otherwise dispose of any Collateral whether in a single transaction or a series of related transactions, other than (A) sales, leases, licenses, assignments, transfers, conveyances and other dispositions of such assets or rights by such Grantor for value in the ordinary course of business consistent with past practices and (B) sales of Inventory and product in the ordinary course of business.

 

(ii)     Except as permitted under Section 13(e) of the Notes, no Grantor shall, directly or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on any of its Capital Stock.

 

(iii)     No Grantor shall, directly or indirectly, without the prior written consent of the Required Holders issue any securities that would cause a breach or default under the Notes or the Securities Purchase Agreement.

 

 
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(iv)     No Grantor shall enter into, renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any Affiliate, except in the ordinary course of business in a manner and to an extent consistent with past practice and necessary or desirable for the prudent operation of its business, for fair consideration and on terms no less favorable to it than would be obtainable in a comparable arm’s length transaction with a Person that is not an Affiliate thereof.

 

(v)     No Grantor will create, suffer to exist or grant any Lien upon or with respect to any Collateral other than a Permitted Lien.

 

(h)           Intellectual Property .

 

(i)     If applicable, each Grantor shall duly execute and deliver the applicable Intellectual Property Security Agreement. Each Grantor (either itself or through licensees) will, and will cause each licensee thereof to, take all action necessary to maintain all of the Intellectual Property in full force and effect, including, without limitation, using the proper statutory notices, numbers and markings (relating to patent, trademark and copyright rights) and using the Trademarks on each applicable trademark class of goods in order to so maintain the Trademarks in full force and free from any claim of abandonment for non-use, and each Grantor will not (nor permit any licensee thereof to) do any act or knowingly omit to do any act whereby any Intellectual Property may become abandoned, cancelled or invalidated; provided , however , that so long as no Event of Default has occurred and is continuing, no Grantor shall have an obligation to use or to maintain any Intellectual Property (A) that relates solely to any product or work, that is no longer necessary or material and has been, or is in the process of being, discontinued, abandoned or terminated in the ordinary course of business and consistent with the exercise of reasonable business judgment, (B) that is being replaced with Intellectual Property substantially similar to the Intellectual Property that may be abandoned or otherwise become invalid, so long as the failure to use or maintain such Intellectual Property does not materially adversely affect the validity of such replacement Intellectual Property and so long as such replacement Intellectual Property is subject to the Lien created by this Agreement and does not have a material adverse effect on the business of any Grantor or (C) that is substantially the same as another Intellectual Property that is in full force, so long the failure to use or maintain such Intellectual Property does not materially adversely affect the validity of such replacement Intellectual Property and so long as such other Intellectual Property is subject to the Lien and security interest created by this Agreement and does not have a material adverse effect on the business of any Grantor. Each Grantor will cause to be taken all necessary steps in any proceeding before the United States Patent and Trademark Office and the United States Copyright Office or any similar office or agency in any other country or political subdivision thereof to maintain each registration of the Intellectual Property and application for registration of Intellectual Property (other than the Intellectual Property described in the proviso to the immediately preceding sentence), including, without limitation, filing of renewals, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings and payment of maintenance fees, filing fees, taxes or other governmental fees. If any Intellectual Property (other than Intellectual Property described in the proviso to the second sentence of subsection (i) of this clause (h)) is infringed, misappropriated, diluted or otherwise violated in any material respect by a third party, each Grantor shall (x) upon learning of such infringement, misappropriation, dilution or other violation, promptly notify the Collateral Agent and (y) promptly sue for infringement, misappropriation, dilution or other violation, seek injunctive relief where appropriate and recover any and all damages for such infringement, misappropriation, dilution or other violation, or take such other actions as such Grantor shall deem appropriate under the circumstances to protect such Intellectual Property. Each Grantor shall furnish to the Collateral Agent from time to time upon its request statements and schedules further identifying and describing the Intellectual Property and Licenses and such other reports in connection with the Intellectual Property and Licenses as the Collateral Agent may reasonably request, all in reasonable detail and promptly upon request of the Collateral Agent, following receipt by the Collateral Agent of any such statements, schedules or reports, each Grantor shall modify this Agreement by amending Schedule II hereto, as the case may be, to include any Intellectual Property and License, as the case may be, which is or hereafter becomes part of the Collateral under this Agreement and shall execute and authenticate such documents and do such acts as shall be necessary or, in the reasonable judgment of the Collateral Agent, desirable to subject such Intellectual Property and Licenses to the Lien and security interest created by this Agreement. Notwithstanding anything herein to the contrary, upon the occurrence and during the continuance of an Event of Default, no Grantor may abandon, surrender or otherwise permit any Intellectual Property to become abandoned, cancelled or invalid without the prior written consent of the Collateral Agent, and if any Intellectual Property is infringed, misappropriated, diluted or otherwise violated in any material respect by a third party, each Grantor will take such reasonable action as the Collateral Agent shall deem appropriate under the circumstances to protect such Intellectual Property.

 

 
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(ii)     In no event shall any Grantor, either itself or through any agent, employee, licensee or designee, file an application for the registration of any Patent, Trademark or Copyright or the United States Copyright Office or the United States Patent and Trademark Office, as applicable, or in any similar office or agency of the United States or any country or any political subdivision thereof unless it gives the Collateral Agent prior written notice thereof. Upon request of the Collateral Agent, any Grantor shall execute, authenticate and deliver any and all assignments, agreements, instruments, documents and papers as the Collateral Agent may reasonably request to evidence the Collateral Agent’s security interest hereunder in such Intellectual Property and the General Intangibles of any Grantor relating thereto or represented thereby, and each Grantor hereby appoints the Collateral Agent its attorney-in-fact to execute and/or authenticate and file all such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed, and such power (being coupled with an interest) shall be irrevocable until all Obligations are Paid in Full.

 

(i)             Pledged Accounts .

 

(A) Each Grantor shall cause each bank and other financial institution which maintains a Controlled Account (each a “ Controlled Account Bank ”) to execute and deliver to the Collateral Agent, in form and substance satisfactory to the Collateral Agent, a Controlled Account Agreement with respect to such Controlled Account, duly executed by each Grantor and such Controlled Account Bank, pursuant to which such Controlled Account Bank among other things shall irrevocably agree, with respect to such Controlled Account, that (i) at any time after any Grantor, the Collateral Agent or any Buyer shall have notified such Controlled Account Bank that an Event of Default has occurred or is continuing, such Controlled Account Bank will comply with any and all instructions originated by the Collateral Agent directing the disposition of the funds in such Controlled Account without further consent by such Grantor, (ii) such Controlled Account Bank shall waive, subordinate or agree not to exercise any rights of setoff or recoupment or any other claim against the applicable Controlled Account other than for payment of its service fees and other charges directly related to the administration of such Controlled Account and for returned checks or other items of payment, (iii) at any time after any Grantor, the Collateral Agent or any Buyer shall have notified such Controlled Account Bank that an Event of Default has occurred or is continuing, with respect to each such Controlled Account, such Controlled Account Bank shall not comply with any instructions, directions or orders of any form with respect to such Controlled Accounts other than instructions, directions or orders originated by the Collateral Agent, (iv) all funds deposited by any Grantor with such Controlled Account Bank shall be subject to a perfected, first priority security interest in favor of the Collateral Agent, and (v) upon receipt of written notice from the Collateral Agent during the continuance of an Event of Default, such Controlled Account Bank shall immediately send to the Collateral Agent by wire transfer (to such account as the Collateral Agent shall specify, or in such other manner as the Collateral Agent shall direct) all such funds and other items held by it. No Grantor shall create or maintain any Pledged Account without the prior written consent of the Collateral Agent and complying with the terms of this Agreement.

 

 
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(B) If at any time after the Closing Date, the average daily balance of any Account that is not subject to a Controlled Account Agreement exceeds $25,000 during any calendar month (including the calendar month in which the Closing Date occurs), the Company shall, either (x) within two (2) Business Days following such date, transfer to a Controlled Account an amount sufficient to reduce the total aggregate amount of the cash in such Account to an amount not in excess of $25,000 or (y) within twenty-one (21) calendar days following the last day of such calendar month, deliver to the Collateral Agent a Controlled Account Agreement with respect to such Account, duly executed by such Grantor and the depositary bank in which such Account is maintained.

 

(C) Notwithstanding anything to the contrary contained in Section 5(i)(B) above, and without limiting any of the foregoing, if at any time after the Closing Date, the total aggregate amount of the cash of the Company and any of its Subsidiaries, in the aggregate, that is not held in a Controlled Account exceeds $50,000 (the “ Maximum Free Cash Amount ”), the Company shall within two (2) Business Days following such date, either (x) transfer to a Controlled Account an amount sufficient to reduce the total aggregate amount of the cash that is not held in a Controlled Account to an amount not in excess of the Maximum Free Cash Amount or (y) deliver to the Collateral Agent a Controlled Account Agreement with respect to such Account (or Accounts), duly executed by such Grantor and the depositary bank in which such Account (or Accounts) is maintained, as necessary to reduce the total aggregate amount of the cash that is not held in a Controlled Account to an amount not in excess of the Maximum Free Cash Amount.

 

(j)             Motor Vehicles .

 

(i)     Upon the Collateral Agent’s written request, each Grantor shall deliver to the Collateral Agent originals of the certificates of title or ownership for each motor vehicle with a value in excess of $10,000 owned by it, with the Collateral Agent listed as lienholder, for the benefit of the Noteholders.

 

 
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(ii)     Each Grantor hereby appoints the Collateral Agent as its attorney-in-fact, effective the date hereof and terminating upon the termination of this Agreement, for the purpose of (A) executing on behalf of such Grantor title or ownership applications for filing with appropriate Governmental Authorities to enable motor vehicles now owned or hereafter acquired by such Grantor to be retitled and the Collateral Agent listed as lienholder thereof, (B) filing such applications with such Governmental Authorities, and (C) executing such other agreements, documents and instruments on behalf of, and taking such other action in the name of, such Grantor as the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof (including, without limitation, for the purpose of creating in favor of the Collateral Agent a perfected Lien on the motor vehicles and exercising the rights and remedies of the Collateral Agent hereunder). This appointment as attorney-in-fact is coupled with an interest and is irrevocable until all of the Obligations are Paid in Full.

 

(iii)     Any certificates of title or ownership delivered pursuant to the terms hereof shall be accompanied by odometer statements for each motor vehicle covered thereby.

 

(iv)     So long as no Event of Default shall have occurred and be continuing, upon the request of any Grantor, the Collateral Agent shall execute and deliver to any Grantor such instruments as such Grantor shall reasonably request to remove the notation of the Collateral Agent as lienholder on any certificate of title for any motor vehicle; provided , however , that any such instruments shall be delivered, and the release effective, only upon receipt by the Collateral Agent of a certificate from any Grantor stating that such motor vehicle is to be sold or has suffered a casualty loss (with title thereto in such case passing to the casualty insurance company therefor in settlement of the claim for such loss) and the amount that any Grantor will receive as sale proceeds or insurance proceeds. Any proceeds of such sale or casualty loss shall be paid to the Collateral Agent hereunder immediately upon receipt, to be applied to the Obligations then outstanding.

 

(k)      Control . Each Grantor hereby agrees to take any or all action that may be necessary or that the Collateral Agent may reasonably request in order for the Collateral Agent to obtain “control” in accordance with Sections 9-105 through 9-107 of the Code with respect to the following Collateral: (i) Electronic Chattel Paper, (ii) Investment Property, and (iii) Letter-of-Credit Rights.

 

(l)      Inspection and Reporting . Each Grantor shall permit the Collateral Agent, or any agent or representatives thereof or such professionals or other Persons as the Collateral Agent may designate (at Grantors’ sole cost and expense) (i) to examine and make copies of and abstracts from any Grantor’s records and books of account, (ii) to visit and inspect its properties, (iii) to verify materials, leases, Instruments, Accounts, Inventory and other assets of any Grantor from time to time, and (iv) to conduct audits, physical counts, appraisals and/or valuations, examinations at the locations of any Grantor. Each Grantor shall also permit the Collateral Agent, or any agent or representatives thereof or such attorneys, accountants or other professionals or other Persons as the Collateral Agent may designate to discuss such Grantor’s affairs, finances and accounts with any of its directors, officers, managerial employees, independent accountants or any of its other representatives. Without limiting the foregoing, the Collateral Agent may, at any time, in the Collateral Agent’s own name, in the name of a nominee of the Collateral Agent, or in the name of any Grantor communicate (by mail, telephone, facsimile or otherwise) with the Account Debtors of such Grantor, parties to contracts with such Grantor and/or obligors in respect of Instruments of such Grantor to verify with such Persons, to the Collateral Agent’s satisfaction, the existence, amount, terms of, and any other matter relating to, Accounts, Instruments, Chattel Paper, payment intangibles and/or other receivables.

 

 
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(m)      Future Subsidiaries . If any Grantor hereafter creates or acquires any Subsidiary, simultaneously with the creation or acquisition of such Subsidiary, such Grantor shall (i) if such Subsidiary is a Domestic Subsidiary, cause such Subsidiary to become a party to this Agreement as an additional “Grantor” hereunder, (ii) deliver to the Collateral Agent updated Schedules to this Agreement, as appropriate (including, without limitation, an updated Schedule IV to reflect the grant by such Grantor of a Lien on all Pledged Equity now or hereafter owned by such Grantor), (iii) if such Subsidiary is a Domestic Subsidiary, cause such Subsidiary to duly execute and deliver a guaranty of the Obligations in favor of the Collateral Agent in form and substance acceptable to the Collateral Agent, (iv) deliver to the Collateral Agent the stock certificates representing all of the Capital Stock of such Subsidiary, along with undated stock powers for each such certificates, executed in blank (or, if any such shares of Capital Stock are uncertificated, confirmation and evidence reasonably satisfactory to the Collateral Agent that the security interest in such uncertificated securities has been transferred to and perfected by the Collateral Agent, in accordance with Sections 8-313, 8-321 and 9-115 of the Code or any other similar or local or foreign law that may be applicable), and (v) duly execute and/or cause to be delivered to the Collateral Agent, in form and substance acceptable to the Collateral Agent, such opinions of counsel and other documents as the Collateral Agent shall request with respect thereto; provided, however, that MoviePass shall not be a Grantor under this Agreement and no Grantor shall be required to pledge any Excluded Collateral. Each Grantor hereby authorizes the Collateral Agent to attach such updated Schedules to this Agreement and agrees that all Pledged Equity listed on any updated Schedule delivered to the Collateral Agent shall for all purposes hereunder be considered Collateral. The Grantors agree that the pledge of the shares of Capital Stock acquired by a Grantor of Foreign Subsidiary may be supplemented by one or more separate pledge agreements, deeds of pledge, share charges, or other similar agreements or instruments, executed and delivered by the relevant Grantor in favor of the Collateral Agent, which pledge agreements will provide for the pledge of such shares of Capital Stock in accordance with the laws of the applicable foreign jurisdiction. With respect to such shares of Capital Stock, the Collateral Agent may, at any time and from time to time, in its sole discretion, take actions in such foreign jurisdictions that will result in the perfection of the Lien created in such shares of Capital Stock.

 

Section 6.      Additional Provisions Concerning the Collateral .

 

(a)     To the maximum extent permitted by applicable law, and for the purpose of taking any action that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, each Grantor hereby (i) authorizes the Collateral Agent to execute any such agreements, instruments or other documents in such Grantor’s name and to file such agreements, instruments or other documents in such Grantor’s name and in any appropriate filing office, (ii) authorizes the Collateral Agent at any time and from time to time to file, one or more financing or continuation statements, and amendments thereto, relating to the Collateral (including, without limitation, any such financing statements that (A) describe the Collateral as “all assets” or “all personal property” (or words of similar effect) or that describe or identify the Collateral by type or in any other manner as the Collateral Agent may determine regardless of whether any particular asset of such Grantor falls within the scope of Article 9 of the Code or whether any particular asset of such Grantor constitutes part of the Collateral, and (B) contain any other information required by Part 5 of Article 9 of the Code for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including, without limitation, whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor) and (iii) ratifies such authorization to the extent that the Collateral Agent has filed any such financing or continuation statements, or amendments thereto, prior to the date hereof. A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

 

 
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(b)     Each Grantor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact and proxy, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Collateral Agent’s discretion, to take any action and to execute any instrument which the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, (i) to obtain and adjust insurance required to be paid to the Collateral Agent pursuant to Section  5(e) hereof, (ii) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any Collateral, (iii) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper in connection with clause (i) or (ii) above, (iv) to file any claims or take any action or institute any proceedings which the Collateral Agent may deem necessary or desirable for the collection of any Collateral or otherwise to enforce the rights of the Collateral Agent and the Noteholders with respect to any Collateral, (v) to execute assignments, licenses and other documents to enforce the rights of the Collateral Agent and the Noteholders with respect to any Collateral, and (vi) to verify any and all information with respect to any and all Accounts. This power is coupled with an interest and is irrevocable until all of the Obligations are Paid in Full.

 

(c)     For the purpose of enabling the Collateral Agent to exercise rights and remedies hereunder, at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, each Grantor hereby grants to the Collateral Agent, to the extent assignable, an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to any Grantor) to use, assign, license or sublicense any Intellectual Property now owned or hereafter acquired by such Grantor, wherever the same may be located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof. Notwithstanding anything contained herein to the contrary, but subject to the provisions of the Securities Purchase Agreement that limit the right of any Grantor to dispose of its property, and Section  5(g) and Section  5(h) hereof, so long as no Event of Default shall have occurred and be continuing, any Grantor may exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of or take other actions with respect to the Intellectual Property in the ordinary course of its business and as otherwise expressly permitted by any of the other Transaction Documents. In furtherance of the foregoing, unless an Event of Default shall have occurred and be continuing, the Collateral Agent shall from time to time, upon the request of any Grantor, execute and deliver any instruments, certificates or other documents, in the form so requested, which such Grantor shall have certified are appropriate (in such Grantor’s judgment) to allow it to take any action permitted above (including relinquishment of the license provided pursuant to this clause (c) as to any Intellectual Property). Further, upon the Payment in Full of all of the Obligations, the Collateral Agent (subject to Section  10(e) hereof) shall release and reassign to any Grantor all of the Collateral Agent’s right, title and interest in and to the Intellectual Property, and the Licenses, all without recourse, representation or warranty whatsoever. The exercise of rights and remedies hereunder by the Collateral Agent shall not terminate the rights of the holders of any licenses or sublicenses theretofore granted by each Grantor in accordance with the second sentence of this clause (c). Each Grantor hereby releases the Collateral Agent from any claims, causes of action and demands at any time arising out of or with respect to any actions taken or omitted to be taken by the Collateral Agent under the powers of attorney granted herein other than actions taken or omitted to be taken through the Collateral Agent’s gross negligence or willful misconduct, as determined by a final determination of a court of competent jurisdiction.

 

 
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(d)         If any Grantor fails to perform any agreement or obligation contained herein, the Collateral Agent may itself perform, or cause performance of, such agreement or obligation, in the name of such Grantor or the Collateral Agent, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by such Grantor pursuant to Section  8 hereof and shall be secured by the Collateral.

 

(e)         The powers conferred on the Collateral Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.

 

(f)         Anything herein to the contrary notwithstanding (i) each Grantor shall remain liable under the Licenses and otherwise with respect to any of the Collateral to the extent set forth therein to perform all of its obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Collateral Agent of any of its rights hereunder shall not release any Grantor from any of its obligations under the Licenses or otherwise in respect of the Collateral, and (iii) the Collateral Agent shall not have any obligation or liability by reason of this Agreement under the Licenses or with respect to any of the other Collateral, nor shall the Collateral Agent be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

 

(g)         As long as no Event of Default shall have occurred and be continuing and until written notice shall be given to the applicable Grantor:

 

(i)     Each Grantor shall have the right, from time to time, to vote and give consents with respect to the Pledged Equity, or any part thereof for all purposes not inconsistent with the provisions of this Agreement, the Securities Purchase Agreement or any other Transaction Document; provided, however, that no vote shall be cast, and no consent shall be given or action taken, which would have the effect of impairing the position or interest of the Collateral Agent in respect of the Pledged Equity or which would authorize, effect or consent to (unless and to the extent expressly permitted by the Securities Purchase Agreement):

 

(A)     the dissolution or liquidation, in whole or in part, of a Pledged Entity;

 

 
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(B)     the consolidation or merger of a Pledged Entity with any other Person;

 

(C)     the sale, disposition or encumbrance of all or substantially all of the assets of a Pledged Entity, except for Liens in favor of the Collateral Agent;

 

(D)     any change in the authorized number of shares, the stated capital or the authorized share capital of a Pledged Entity or the issuance of any additional shares of its Capital Stock; or

 

(E)     the alteration of the voting rights with respect to the Capital Stock of a Pledged Entity.

 

(h)         (i)          Each Grantor shall be entitled, from time to time, to collect and receive for its own use all cash dividends and interest paid in respect of the Pledged Equity to the extent not in violation of the Securities Purchase Agreement other than any and all: (A) dividends and interest paid or payable other than in cash in respect of any Pledged Equity, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Equity; (B) dividends and other distributions paid or payable in cash in respect of any Pledged Equity in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in capital of a Pledged Entity; and (C) cash paid, payable or otherwise distributed, in respect of principal of, or in redemption of, or in exchange for, any Pledged Equity; provided, however, that until actually paid all rights to such distributions shall remain subject to the Lien created by this Agreement; and

 

(ii)      all dividends and interest (other than such cash dividends and interest as are permitted to be paid to any Grantor in accordance with clause (i) above) and all other distributions in respect of any of the Pledged Equity, whenever paid or made, shall be delivered to the Collateral Agent to hold as Pledged Equity and shall, if received by any Grantor, be received in trust for the benefit of the Collateral Agent (for the benefit the Noteholders), be segregated from the other property or funds of such Grantor, and be forthwith delivered to the Collateral Agent as Pledged Equity in the same form as so received (with any necessary endorsement).

 

 
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SECTION 7.      Remedies Upon Event of Default; Application of Proceeds . If any Event of Default shall have occurred and be continuing:

 

(a)     The Collateral Agent may exercise in respect of the Collateral, in addition to any other rights and remedies provided for herein, in any other Transaction Document or otherwise available to it, all of the rights and remedies of a secured party upon default under the Code (whether or not the Code applies to the affected Collateral), and also may (i) take absolute control of the Collateral, including, without limitation, transfer into the Collateral Agent’s name or into the name of its nominee or nominees (to the extent the Collateral Agent has not theretofore done so) and thereafter receive, for the benefit of the Noteholders, all payments made thereon, give all consents, waivers and ratifications in respect thereof and otherwise act with respect thereto as though it were the outright owner thereof, (ii) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Collateral Agent forthwith, assemble all or part of its respective Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place or places to be designated by the Collateral Agent that is reasonably convenient to both parties, and the Collateral Agent may enter into and occupy any premises owned or leased by any Grantor where the Collateral or any part thereof is located or assembled for a reasonable period in order to effectuate the Collateral Agent’s rights and remedies hereunder or under law, without obligation to any Grantor in respect of such occupation, and (iii) without notice except as specified below and without any obligation to prepare or process the Collateral for sale, (A) sell the Collateral or any part thereof in one or more parcels at public or private sale (including, without limitation, by credit bid), at any of the Collateral Agent’s offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Collateral Agent may deem commercially reasonable and/or (B) lease, license or dispose of the Collateral or any part thereof upon such terms as the Collateral Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice of sale or any other disposition of its respective Collateral shall be required by law, at least ten (10) days’ notice to any Grantor of the time and place of any public sale or the time after which any private sale or other disposition of its respective Collateral is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale or other disposition of any Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Grantor hereby waives any claims against the Collateral Agent and the Noteholders arising by reason of the fact that the price at which its respective Collateral may have been sold at a private sale was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the Obligations, even if the Collateral Agent accepts the first offer received and does not offer such Collateral to more than one offeree, and waives all rights that any Grantor may have to require that all or any part of such Collateral be marshaled upon any sale (public or private) thereof. Each Grantor hereby acknowledges that (i) any such sale of its respective Collateral by the Collateral Agent shall be made without warranty, (ii) the Collateral Agent may specifically disclaim any warranties of title, possession, quiet enjoyment or the like, and (iii) such actions set forth in clauses (i) and (ii) above shall not adversely affect the commercial reasonableness of any such sale of Collateral. In addition to the foregoing, (1) upon written notice to any Grantor from the Collateral Agent after and during the continuance of an Event of Default, such Grantor shall cease any use of the Intellectual Property or any trademark, patent or copyright similar thereto for any purpose described in such notice; (2) the Collateral Agent may, at any time and from time to time after and during the continuance of an Event of Default, upon 10 days’ prior notice to such Grantor, license, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any of the Intellectual Property, throughout the universe for such term or terms, on such conditions, and in such manner, as the Collateral Agent shall in its sole discretion determine; and (3) the Collateral Agent may, at any time, pursuant to the authority granted in Section  6 hereof or otherwise (such authority being effective upon the occurrence and during the continuance of an Event of Default), execute and deliver on behalf of such Grantor, one or more instruments of assignment of the Intellectual Property (or any application or registration thereof), in form suitable for filing, recording or registration in any country.

 

 
26

 

 

(b)     Any cash held by the Collateral Agent as Collateral and all Cash Proceeds received by the Collateral Agent in respect of any sale or disposition of or collection from, or other realization upon, all or any part of the Collateral shall be applied as follows (subject to the provisions of the Securities Purchase Agreement): first , to pay any fees, indemnities or expense reimbursements then due to the Collateral Agent (including those described in Section 8 hereof); second , to pay any fees, indemnities or expense reimbursements then due to the Noteholders, on a pro rata basis; third to pay interest due under the Notes owing to the Noteholders, on a pro rata basis; fourth , to pay or prepay principal in respect of the Notes, whether or not then due, owing to the Noteholders, on a pro rata basis; fifth , to pay or prepay any other Obligations, whether or not then due, in such order and manner as the Collateral Agent shall elect, consistent with the provisions of the Securities Purchase Agreement. Any surplus of such cash or Cash Proceeds held by the Collateral Agent and remaining after the Payment in Full of all of the Obligations shall be paid over to whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct.

 

(c)     In the event that the proceeds of any such sale, disposition, collection or realization are insufficient to pay all amounts to which the Collateral Agent and the Noteholders are legally entitled, each Grantor shall be, jointly and severally, liable for the deficiency, together with interest thereon at the highest rate specified in the Notes for interest on overdue principal thereof or such other rate as shall be fixed by applicable law, together with the costs of collection and the reasonable fees, costs, expenses and other charges of any attorneys employed by the Collateral Agent to collect such deficiency.

 

(d)     To the extent that applicable law imposes duties on the Collateral Agent to exercise remedies in a commercially reasonable manner, each Grantor acknowledges and agrees that it is commercially reasonable for the Collateral Agent (i) to fail to incur expenses deemed significant by the Collateral Agent to prepare Collateral for disposition or otherwise to transform raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against Account Debtors or other Persons obligated on Collateral or to remove Liens on or any adverse claims against Collateral, (iv) to exercise collection remedies against Account Debtors and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other Persons, whether or not in the same business as any Grantor, for expressions of interest in acquiring all or any portion of such Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi) to purchase insurance or credit enhancements to insure the Collateral Agent against risks of loss, collection or disposition of Collateral or to provide to the Collateral Agent a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by the Collateral Agent, to obtain the services of brokers, investment bankers, consultants, attorneys and other professionals to assist the Collateral Agent in the collection or disposition of any of the Collateral. Each Grantor acknowledges that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by the Collateral Agent would be commercially reasonable in the Collateral Agent’s exercise of remedies against the Collateral and that other actions or omissions by the Collateral Agent shall not be deemed commercially unreasonable solely on account of not being indicated in this Section. Without limitation upon the foregoing, nothing contained in this Section shall be construed to grant any rights to any Grantor or to impose any duties on the Collateral Agent that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section.

 

 
27

 

 

(e)     The Collateral Agent shall not be required to marshal any present or future collateral security (including, but not limited to, this Agreement and the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of the Collateral Agent’s rights hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising. To the extent that any Grantor lawfully may, each Grantor hereby agrees that it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of the Collateral Agent’s rights under this Agreement or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, each Grantor hereby irrevocably waives the benefits of all such laws.

 

SECTION 8.      Indemnity and Expenses .

 

(a)     Each Grantor agrees, jointly and severally, to defend, protect, indemnify and hold the Collateral Agent and each of the Noteholders harmless from and against any and all claims, damages, losses, liabilities, obligations, penalties, fees, costs and expenses (including, without limitation, reasonable legal fees, costs, expenses, and disbursements of such Person’s counsel) to the extent that they arise out of or otherwise result from this Agreement (including, without limitation, enforcement of this Agreement), except to the extent resulting from such Person’s gross negligence or willful misconduct, as determined by a final judgment of a court of competent jurisdiction no longer subject to appeal.

 

(b)     Each Grantor agrees, jointly and severally, to pay to the Collateral Agent upon demand the amount of any and all costs and expenses, including the reasonable fees, costs, expenses and disbursements of counsel for the Collateral Agent and of any experts and agents (including, without limitation, any collateral trustee which may act as agent of the Collateral Agent), which the Collateral Agent may incur in connection with (i) the preparation, negotiation, execution, delivery, recordation, administration, amendment, waiver or other modification or termination of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent hereunder, or (iv) the failure by any Grantor to perform or observe any of the provisions hereof.

 

 
28

 

 

SECTION 9.      Notices, Etc . All notices and other communications provided for hereunder shall be in writing and shall be mailed (by certified mail, first-class postage prepaid and return receipt requested), telecopied, e-mailed or delivered, if to any Grantor, to the Company’s address, or if to the Collateral Agent or any Noteholder, to it at its respective address, each as set forth in Section 9(f) of the Securities Purchase Agreement; or as to any such Person, at such other address as shall be designated by such Person in a written notice to all other parties hereto complying as to delivery with the terms of this Section  9 . All such notices and other communications shall be effective (a) if sent by certified mail, return receipt requested, when received or three (3) Business Days after deposited in the mails, whichever occurs first, (b) if telecopied or e-mailed, when transmitted (during normal business hours) and confirmation is received, and otherwise, the day after the notice or communication was transmitted and confirmation is received, or (c) if delivered in person, upon delivery. For the avoidance of doubt, all Foreign Subsidiaries, as Grantors, hereby appoint the Company as its agent for receipt of service of process and all notices and other communications in the United States at the address specified below.

 

SECTION 10.      Miscellaneous .

 

(a)     No amendment of any provision of this Agreement shall be effective unless it is in writing and signed by each Grantor and the Collateral Agent (and approved by the Required Holders), and no waiver of any provision of this Agreement, and no consent to any departure by each Grantor therefrom, shall be effective unless it is in writing and signed by each Grantor and the Collateral Agent (and approved by the Required Holders), and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment, modification or waiver of this Agreement shall be effective to the extent that it (1) applies to fewer than all of the holders of Notes or (2) imposes any obligation or liability on any holder of Notes without such holder’s prior written consent (which may be granted or withheld in such holder’s sole discretion).

 

(b)     No failure on the part of the Collateral Agent to exercise, and no delay in exercising, any right reasonably hereunder or under any of the other Transaction Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any such right reasonably preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the Collateral Agent or any Noteholder provided herein and in the other Transaction Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the Collateral Agent or any Noteholder under any of the other Transaction Documents against any party thereto are not conditional or contingent on any attempt by such Person to exercise any of its rights under any of the other Transaction Documents against such party or against any other Person, including but not limited to, any Grantor.

 

(c)     Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.

 

 
29

 

 

(d)        This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until Payment in Full of the Obligations, and (ii) be binding on each Grantor and all other Persons who become bound as debtor to this Agreement in accordance with Section 9-203(d) of the Code and shall inure, together with all rights and remedies of the Collateral Agent and the Noteholders hereunder, to the benefit of the Collateral Agent and the Noteholders and their respective permitted successors, transferees and assigns. Without limiting the generality of clause (ii) of the immediately preceding sentence, without notice to any Grantor, the Collateral Agent and the Noteholders may assign or otherwise transfer their rights and obligations under this Agreement and any of the other Transaction Documents, to any other Person and such other Person shall thereupon become vested with all of the benefits in respect thereof granted to the Collateral Agent and the Noteholders herein or otherwise. Upon any such assignment or transfer, all references in this Agreement to the Collateral Agent or any such Noteholder shall mean the assignee of the Collateral Agent or such Noteholder. None of the rights or obligations of any Grantor hereunder may be assigned or otherwise transferred without the prior written consent of the Collateral Agent, and any such assignment or transfer without such consent of the Collateral Agent shall be null and void.

 

(e)         Upon the Payment in Full of the Obligations, (i) this Agreement and the security interests created hereby shall terminate and all rights to the Collateral shall revert to the respective Grantor that granted such security interests hereunder, and (ii) the Collateral Agent will, upon any Grantor’s request and at such Grantor’s expense, (A) return to such Grantor such of the Collateral as shall not have been sold or otherwise disposed of or applied pursuant to the terms hereof and (B) execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination, all without any representation, warranty or recourse whatsoever.

 

(f)           Governing Law; Jurisdiction; Jury Trial .

 

(i)     All questions concerning the construction, validity, enforcement and interpretation of this Agreement 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.

 

(ii)     Each Grantor hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or under any of the other Transaction Documents or with any transaction contemplated hereby or thereby, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim, defense or objection 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. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Collateral Agent or the Noteholders from bringing suit or taking other legal action against any Grantor in any other jurisdiction to collect on a Grantor’s obligations or to enforce a judgment or other court ruling in favor of the Collateral Agent or a Noteholder.

 

 
30

 

 

(iii)      WAIVER OF JURY TRIAL, ETC . EACH GRANTOR IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.

 

(iv)     Each Grantor irrevocably and unconditionally waives any right it may have to claim or recover in any legal action, suit or proceeding referred to in this Section any special, exemplary, indirect, incidental, punitive or consequential damages.

 

(g)          Section headings herein are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

 

(h)          This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together constitute one and the same Agreement. Delivery of any executed counterpart of a signature page of this Agreement by pdf, facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

 

(i)           This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by the Collateral Agent, any Noteholder or any other Person (upon (i) the occurrence of any Insolvency Proceeding of any of the Company or any Grantor or (ii) otherwise, in all cases as though such payment had not been made).

 

SECTION 11.      Material Non-Public Information . Upon receipt or delivery by the Company of any notice in accordance with the terms of this Agreement, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Company or any of its Subsidiaries, the Company shall within one (1) Business Day after any such receipt or delivery publicly disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company so shall indicate to the Collateral Agent and any applicable Noteholder contemporaneously with delivery of such notice, and in the absence of any such indication, the Collateral Agent and each Noteholder shall be allowed to presume that all matters relating to such notice do not constitute material, non-public information relating to the Company or its Subsidiaries. Nothing contained in this Section 11 shall limit any obligations of the Company or the Company, or any rights of the Collateral Agent or any Noteholder, under Section 4(i) of the Securities Purchase Agreement.

 

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31

 

 

IN WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and delivered by its officer thereunto duly authorized, as of the date first above written.

 

 

GRANTORS :

 
       
 

Helios and Matheson Analytics Inc.

 
     
     
  By:    
    Name:  
    Title:  
       
 

HMNY ZONE LOAN LLC

 
     
     
  By:    
   

Name:

 
   

Title:

 
       
 

ZONE TECHNOLOGIES, INC.

 
     
     
  By:    
   

Name:

 
   

Title:

 

 

AGREED AND ACCEPTED AS OF THIS ___ OF _____ BY:

 

 

HUDSON BAY MASTER FUND LTD,
as Collateral Agent
       
 

 

 

 

 

 

By:

 

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

 

 

 
 

 

 

EXHIBIT A

 

FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

 

INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

This INTELLECTUAL PROPERTY SECURITY AGREEMENT (as amended, modified, supplemented, renewed, restated or replaced from time to time, this “ IP Security Agreement ”), dated _______________, ________, is made by the Persons listed on the signature pages hereof (collectively, the “ Grantors ”) in favor of Hudson Bay Master Fund Ltd, in its capacity as collateral agent (the “ Collateral Agent ”) for the Noteholders. All capitalized terms not otherwise defined herein shall have the meanings respectively ascribed thereto in the Security Agreement (as defined below).

 

WHEREAS, Helios and Matheson Analytics Inc., a Delaware corporation (the “ Company ”), and each party listed as a “Buyer” therein (collectively, the “ Buyers ”) are parties to that certain Securities Purchase Agreement, dated August __, 2017, pursuant to which the Company shall be required to sell, and the Buyers shall purchase or have the right to purchase, the “Notes” (as defined therein) issued pursuant thereto (as such Notes may be amended, modified, supplemented, renewed, restated or replaced from time to time in accordance with the terms thereof, collectively, the “ Notes ”);

 

WHEREAS, it is a condition precedent to the purchase of the Notes under the Securities Purchase Agreement that each Grantor has executed and delivered that certain Security and Pledge Agreement, dated August __, 2017, made by the Grantors to the Collateral Agent (as amended, modified, supplemented, renewed, restated or replaced from time to time, the “ Security Agreement ”); and

 

WHEREAS, under the terms of the Security Agreement, the Grantors have granted to the Collateral Agent, for the ratable benefit of the Collateral Agent and the Noteholders, a security interest in, among other property, certain intellectual property of the Grantors, and have agreed as a condition thereof to execute this IP Security Agreement for recording with the U.S. Patent and Trademark Office, the United States Copyright Office and other governmental authorities.

 

WHEREAS, the Grantors have determined that the execution, delivery and performance of this IP Security Agreement directly benefits, and is in the best interest of, the Grantors.

 

NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to induce the Buyers to perform under the Securities Purchase Agreement, each Grantor agrees with the Collateral Agent, for the benefit of the Noteholders, as follows

 

SECTION 1. Grant of Security . Each Grantor hereby grants to the Collateral Agent for the ratable benefit of the Collateral Agent and the Noteholders a security interest in all of such Grantor’s right, title and interest in and to the following (the “ Collateral ”):

 

(i)     the Patents and Patent applications set forth in Schedule A hereto;

 

 
 

 

 

(ii)     the Trademark and service mark registrations and applications set forth in Schedule B hereto (provided that no security interest shall be granted in United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable federal law), together with the goodwill symbolized thereby;

 

(iii)     all Copyrights, whether registered or unregistered, now owned or hereafter acquired by such Grantor, including, without limitation, the copyright registrations and applications and exclusive copyright licenses set forth in Schedule C hereto;

 

(iv)     all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations of any of the foregoing, all rights in the foregoing provided by international treaties or conventions, all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto;

 

(v)     any and all claims for damages and injunctive relief for past, present and future infringement, dilution, misappropriation, violation, misuse or breach with respect to any of the foregoing, with the right, but not the obligation, to sue for and collect, or otherwise recover, such damages; and

 

(vi)     any and all proceeds of, collateral for, income, royalties and other payments now or hereafter due and payable with respect to, and supporting obligations relating to, any and all of the Collateral of or arising from any of the foregoing.

 

SECTION 2. Security for Obligations . The grant of a security interest in, the Collateral by each Grantor under this IP Security Agreement secures the payment of all Obligations of such Grantor now or hereafter existing under or in respect of the Notes and the Transaction Documents, whether direct or indirect, absolute or contingent, and whether for principal, reimbursement obligations, interest, premiums, penalties, fees, indemnifications, contract causes of action, costs, expenses or otherwise.

 

SECTION 3. Recordation . Each Grantor authorizes and requests that the Register of Copyrights, the Commissioner for Patents and the Commissioner for Trademarks and any other applicable government officer record this IP Security Agreement.

 

SECTION 4. Execution in Counterparts . This IP Security Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

SECTION 5. Grants, Rights and Remedies . This IP Security Agreement has been entered into in conjunction with the provisions of the Security Agreement. Each Grantor does hereby acknowledge and confirm that the grant of the security interest hereunder to, and the rights and remedies of, the Collateral Agent with respect to the Collateral are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated herein by reference as if fully set forth herein.

 

 
 

 

 

SECTION 6. Governing Law; Jurisdiction; Jury Trial .

 

(i)     All questions concerning the construction, validity, enforcement and interpretation of this Agreement 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.

 

(ii)     Each Grantor hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or under any of the other Transaction Documents or with any transaction contemplated hereby or thereby, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim, defense or objection 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. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Collateral Agent or the Noteholders from bringing suit or taking other legal action against any Grantor in any other jurisdiction to collect on a Grantor’s obligations or to enforce a judgment or other court ruling in favor of the Collateral Agent or a Noteholder.

 

(iii)      WAIVER OF JURY TRIAL, ETC . EACH GRANTOR IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.

 

(iv)     Each Grantor irrevocably and unconditionally waives any right it may have to claim or recover in any legal action, suit or proceeding referred to in this Section any special, exemplary, indirect, incidental, punitive or consequential damages.

 

[The remainder of the page is intentionally left blank]

 

 
 

 

 

 

IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

 

  [__________]  

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

       
  Address for Notices:  
       
 

___________________

___________________

___________________

 

 

 
 

 

 

IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

 

 

 

[NAME OF GRANTOR]

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

       
  Address for Notices:  
       
 

___________________________________

___________________________________

___________________________________

 

 

 
 

 

 

Schedule A

 

Patents

 

 

Grantor

Country

Title

Application or
Patent No.

Application or

Registration

Date

Assignees

           
           

 

 
 

 

 

Schedule B

 

Trademarks

 

 

Grantor

Country

Trademark

Application or

Registration No.

Application or

Registration

Date

Assignees

           
           

 

 
 

 

 

Schedule C

 

Copyrights

 

 

Grantor

Country

Title

Type of Work

Application or

Registration

No.

Issue Date

Assignees

             
             

 

 
 

 

 

SCHEDULE I

 

 

Legal Names; Organizational Identification Numbers;
States or Jurisdiction of Incorporation, Organization or Formation

 

Grantor’s Name

State of Incorporation,

Organization or Formation

Federal
Employer I.D.

Organizational

I.D.

 
         
       
       
       

 

 
 

 

 

SCHEDULE II

 

 

Intellectual Property

 

Patents

 

 

Grantor

Country

Title

Application or
Patent No.

Application or

Registration

Date

Assignees

           
           

 

 

 

Trademarks

 

 

Grantor

Country

Trademark

Application or

Registration No.

Application or

Registration

Date

Assignees

           
           

 

 

 

Copyrights

 

 

Grantor

Country

Title

Type of Work

Application or

Registration

No.

Issue Date

Assignees

             
             

 

 
 

 

 

Licenses

 

 


Licensor


Licensee


Type


Scope


Term

         
         

 

 
 

 

 

SCHEDULE III

 

 

Locations

 

Grantor’s Name

Chief Executive

Office

Chief Place of

Business

Books and Records

Inventory,
Equipment, Etc.

         
         
         

 

 
 

 

 

SCHEDULE IV

 

 

Promissory Notes, Securities, Deposit Accounts,
Securities Accounts and Commodities Accounts

 

Securities

 

Grantor

Name of Issuer /

Pledged Entity

Description

Class

Certificate
No.(s)

         
         

 

 

Deposit Accounts, Securities Accounts and Commodities Accounts

 

Grantor

Name and Address of

Institution

Purpose of the

Account

Account No.

       
       
       
       
       
       
       
       

 

Foreign Currency Controlled Accounts

 

Entity

Name and Address of

Institution

Amount Held in Account

     
     
     

 

 
 

 

 

SCHEDULE V

 

 

Financing Statements

 

 

Grantor

Jurisdiction for Filing Financing Statement

   
   

 

 
 

 

 

SCHEDULE VI

 

 

Commercial Tort Claims

 

 
 

 

 

SCHEDULE VII

 

 

Permitted Liens

 

Exhibit 10.13

 

GUARANTY

 

This GUARANTY, dated as of ________________ (this “ Guaranty ”), is made by each of the undersigned (each a “ Guarantor ”, and collectively, the “ Guarantors ”), in favor of Hudson Bay Master Fund Ltd, in its capacity as collateral agent (in such capacity, the “ Collateral Agent ” as hereinafter further defined) for the “Buyers” party to the Securities Purchase Agreement (each as defined below).

 

W I T N E S S E T H :

 

WHEREAS, Helios and Matheson Analytics Inc., a Delaware corporation (the “ Company ”), and each party listed as a “ Buyer ” on the Schedule of Buyers attached thereto (collectively, the “ Buyers ”) are parties to the Securities Purchase Agreement, dated as of August __, 2017 (as amended, restated, extended, replaced or otherwise modified from time to time, the “ Securities Purchase Agreement ”), pursuant to which the Company shall be required to sell, and the Buyers shall purchase or have the right to purchase, (i) the “Notes” issued pursuant thereto (as such Notes may be amended, modified, supplemented, extended, renewed, restated, replaced or otherwise modified from time to time in accordance with the terms thereof, collectively, the “ Notes ”) and (ii) the Warrants (as defined in the Securities Purchase Agreement);

 

WHEREAS, the Securities Purchase Agreement requires that the Guarantors execute and deliver to the Collateral Agent, (i) a guaranty guaranteeing all of the obligations of the Company under the Securities Purchase Agreement, the Notes and the other Transaction Documents (as defined below); and (ii) a Security and Pledge Agreement, dated as of August __, 2017, granting the Collateral Agent a lien on and security interest in all of their assets and properties (the “ Security Agreement ”); and

 

WHEREAS, each Guarantor has determined that the execution, delivery and performance of this Guaranty directly benefits, and is in the best interest of, such Guarantor.

 

NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to induce the Buyers to perform under the Securities Purchase Agreement, each Guarantor hereby agrees with each Buyer as follows:

 

SECTION 1.      Definitions . Reference is hereby made to the Securities Purchase Agreement and the Notes for a statement of the terms thereof. All terms used in this Guaranty and the recitals hereto which are defined in the Securities Purchase Agreement or the Notes, and which are not otherwise defined herein shall have the same meanings herein as set forth therein. In addition, the following terms when used in the Guaranty shall have the meanings set forth below:

 

Bankruptcy Code ” means Chapter 11 of Title 11 of the United States Code, 11 U.S.C §§ 101 et seq. (or other applicable bankruptcy, insolvency or similar laws).

 

Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed.

 

Buyer ” or “ Buyers ” shall have the meaning set forth in the recitals hereto.

 

 
 

 

 

Capital Stock ” means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock (including, without limitation, any warrants, options, rights or other securities exercisable or convertible into equity interests or securities of such Person), and (ii) with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person.

 

“Collateral” means all assets and properties of the Company and each Guarantor, wherever located and whether now or hereafter existing and whether now owned or hereafter acquired, of every kind and description, tangible or intangible, including, without limitation, the collateral described in Section 2 of the Security Agreement.

 

Collateral Agent ” shall have the meaning set forth in the preamble hereto.

 

Company ” shall have the meaning set forth in the recitals hereto.

 

Governmental Authority ” means any nation or government, any Federal, state, city, town, municipality, county, local, foreign or other political subdivision thereof or thereto and any department, commission, board, bureau, instrumentality, agency or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

 

Guaranteed Obligations ” shall have the meaning set forth in Section 2 of this Guaranty.

 

Guarantor ” or “ Guarantors ” shall have the meaning set forth in the preamble hereto.

 

Indemnified Party ” shall have the meaning set forth in Section 13(a) of this Guaranty

 

Insolvency Proceeding ” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, or extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

 

Notes ” shall have the meaning set forth in the recitals hereto.

 

Obligations ” shall have the meaning set forth in Section 3 of the Security Agreement.

 

Other Taxes ” shall have the meaning set forth in Section 12(a)(iv) of this Guaranty.

 

Paid in Full” or “Payment in Full ” means the indefeasible payment in full in cash of all of the Guaranteed Obligations.

 

Person ” means an individual, corporation, limited liability company, partnership, association, joint-stock company, trust, unincorporated organization, joint venture or other enterprise or entity or Governmental Authority.

 

Securities Purchase Agreement ” shall have the meaning set forth in the recitals hereto.

 

 
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Security Agreement ” shall have the meaning set forth in the recitals hereto.

 

Subsidiary” means any Person in which a Guarantor directly or indirectly, (i) owns any of the outstanding Capital Stock or holds any equity or similar interest of such Person or (ii) controls or operates all or any part of the business, operations or administration of such Person, and all of the foregoing, collectively, “ Subsidiaries ”.

 

Taxes ” shall have the meaning set forth in Section 12(a) of this Guaranty.

 

Transaction Documents ” shall have the meaning set forth in Section 1 of the Security Agreement.

 

Transaction Party ” means the Company and each Guarantor, collectively, “ Transaction Parties ”.

 

SECTION 2.      Guaranty .

 

(a)     The Guarantors, jointly and severally, hereby unconditionally and irrevocably, guaranty to the Collateral Agent, for the benefit of the Collateral Agent and the Buyers, the punctual payment, as and when due and payable, by stated maturity or otherwise, of all Obligations, including, without limitation, all interest, make-whole and other amounts that accrue after the commencement of any Insolvency Proceeding of the Company or any Guarantor, whether or not the payment of such interest, make-whole and/or other amounts are enforceable or are allowable in such Insolvency Proceeding, and all fees, interest, premiums, penalties, causes of actions, costs, commissions, expense reimbursements, indemnifications and all other amounts due or to become due under any of the Transaction Documents (all of the foregoing collectively being the “ Guaranteed Obligations ”), and agrees to pay any and all costs and expenses (including counsel fees and expenses) incurred by the Collateral Agent in enforcing any rights under this Guaranty or any other Transaction Document. Without limiting the generality of the foregoing, each Guarantor’s liability hereunder shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Company to the Collateral Agent or any Buyer under the Securities Purchase Agreement and the Notes but for the fact that they are unenforceable or not allowable due to the existence of an Insolvency Proceeding involving any Transaction Party.

 

(b)     Each Guarantor, and by its acceptance of this Guaranty, the Collateral Agent and each Buyer, hereby confirms that it is the intention of all such Persons that this Guaranty and the Guaranteed Obligations of each Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal, provincial, state, or other applicable law to the extent applicable to this Guaranty and the Guaranteed Obligations of each Guarantor hereunder. To effectuate the foregoing intention, the Collateral Agent, the Buyers and the Guarantors hereby irrevocably agree that the Guaranteed Obligations of each Guarantor under this Guaranty at any time shall be limited to the maximum amount as will result in the Guaranteed Obligations of such Guarantor under this Guaranty not constituting a fraudulent transfer or conveyance.

 

 
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SECTION 3.        Guaranty Absolute; Continuing Guaranty; Assignments .

 

(a)         The Guarantors, jointly and severally, guaranty that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Transaction Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Collateral Agent or any Buyer with respect thereto. The obligations of each Guarantor under this Guaranty are independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against any Guarantor to enforce such obligations, irrespective of whether any action is brought against any Transaction Party or whether any Transaction Party is joined in any such action or actions. The liability of any Guarantor under this Guaranty shall be as a primary obligor (and not merely as a surety) and shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives, to the extent permitted by law, any defenses it may now or hereafter have in any way relating to, any or all of the following:

 

(i)      any lack of validity or enforceability of any Transaction Document;

 

(ii)     any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from any Transaction Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Transaction Party or extension of the maturity of any Guaranteed Obligations or otherwise;

 

(iii)    any taking, exchange, release or non-perfection of any Collateral;

 

(iv)    any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations;

 

(v)     any change, restructuring or termination of the corporate, limited liability company or partnership structure or existence of any Transaction Party;

 

(vi)    any manner of application of Collateral or any other collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any Collateral or any other collateral for all or any of the Guaranteed Obligations or any other Obligations of any Transaction Party under the Transaction Documents or any other assets of any Transaction Party or any of its Subsidiaries;

 

(vii)   any failure of the Collateral Agent or any Buyer to disclose to any Transaction Party any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Transaction Party now or hereafter known to the Collateral Agent or any Buyer (each Guarantor waiving any duty on the part of the Collateral Agent or any Buyer to disclose such information);

 

(viii)  taking any action in furtherance of the release of any Guarantor or any other Person that is liable for the Obligations from all or any part of any liability arising under or in connection with any Transaction Document without the prior written consent of the Collateral Agent; or

 

(ix)     any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Collateral Agent or any Buyer that might otherwise constitute a defense available to, or a discharge of, any Transaction Party or any other guarantor or surety.

 

 
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(b)     This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Collateral Agent, any Buyer, or any other Person upon the insolvency, bankruptcy or reorganization of any Transaction Party or otherwise, all as though such payment had not been made.

 

(c)     This Guaranty is a continuing guaranty and shall (i) remain in full force and effect until Payment in Full of the Guaranteed Obligations (other than inchoate indemnity obligations) and shall not terminate for any reason prior to the respective Maturity Date (as defined in each Note) of each Note (other than Payment in Full of the Guaranteed Obligations) and (ii) be binding upon each Guarantor and its respective successors and assigns. This Guaranty shall inure to the benefit of and be enforceable by the Collateral Agent, the Buyers, and their respective successors, and permitted pledgees, transferees and assigns. Without limiting the generality of the foregoing sentence, the Collateral Agent or any Buyer may pledge, assign or otherwise transfer all or any portion of its rights and obligations under and subject to the terms of any Transaction Document to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Collateral Agent or such Buyer (as applicable) herein or otherwise, in each case as provided in the Securities Purchase Agreement or such Transaction Document.

 

SECTION 4.      Waivers . To the extent permitted by applicable law, each Guarantor hereby waives promptness, diligence, protest, notice of acceptance and any other notice or formality of any kind with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that the Collateral Agent exhaust any right or take any action against any Transaction Party or any other Person or any Collateral. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated herein and that the waiver set forth in this Section  4 is knowingly made in contemplation of such benefits. The Guarantors hereby waive any right to revoke this Guaranty, and acknowledge that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. Without limiting the foregoing, to the extent permitted by applicable law, each Guarantor hereby unconditionally and irrevocably waives (a) any defense arising by reason of any claim or defense based upon an election of remedies by the Collateral Agent or any Buyer that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Guarantor or other rights of such Guarantor to proceed against any of the other Transaction Parties, any other guarantor or any other Person or any Collateral, and (b) any defense based on any right of set-off or counterclaim against or in respect of the Guaranteed Obligations of such Guarantor hereunder. Each Guarantor hereby unconditionally and irrevocably waives any duty on the part of the Collateral Agent or any Buyer to disclose to such Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Transaction Party or any of its Subsidiaries now or hereafter known by the Collateral Agent or a Buyer.

 

 
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SECTION 5.      Subrogation . No Guarantor may exercise any rights that it may now or hereafter acquire against any Transaction Party or any other guarantor that arise from the existence, payment, performance or enforcement of any Guarantor’s obligations under this Guaranty, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Collateral Agent or any Buyer against any Transaction Party or any other guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any Transaction Party or any other guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security solely on account of such claim, remedy or right, unless and until there has been Payment in Full of the Guaranteed Obligations. If any amount shall be paid to a Guarantor in violation of the immediately preceding sentence at any time prior to Payment in Full of the Guaranteed Obligations and all other amounts payable under this Guaranty, such amount shall be held in trust for the benefit of the Collateral Agent and shall forthwith be paid to the Collateral Agent to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Transaction Document, or to be held as Collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (a) any Guarantor shall make payment to the Collateral Agent of all or any part of the Guaranteed Obligations, and (b) there has been Payment in Full of the Guaranteed Obligations, the Collateral Agent will, at such Guarantor’s request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment by such Guarantor.

 

SECTION 6.      Representations, Warranties and Covenants .

 

(a)           Each Guarantor hereby represents and warrants as of the date first written above as follows:

 

(i)      such Guarantor (A) is a corporation, limited liability company or limited partnership duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization as set forth on the signature pages hereto, (B) has all requisite corporate, limited liability company or limited partnership power and authority to conduct its business as now conducted and as presently contemplated and to execute, deliver and perform its obligations under this Guaranty and each other Transaction Document to which such Guarantor is a party, and to consummate the transactions contemplated hereby and thereby and (C) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary except where the failure to be so qualified (individually or in the aggregate) would not result in a Material Adverse Effect (as defined in the Securities Purchase Agreement).

 

(ii)     The execution, delivery and performance by such Guarantor of this Guaranty and each other Transaction Document to which such Guarantor is a party (A) have been duly authorized by all necessary corporate, limited liability company or limited partnership action, (B) do not and will not contravene its charter, articles, certificate of formation or by-laws, its limited liability company or operating agreement or its certificate of partnership or partnership agreement, as applicable, or any applicable law or any contractual restriction binding on such Guarantor or its properties do not and will not result in or require the creation of any lien, security interest or encumbrance (other than pursuant to any Transaction Document) upon or with respect to any of its properties, and (C) do not and will not result in any default, noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of any material permit, license, authorization or approval applicable to it or its operations or any of its properties.

 

 
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(iii)     No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or other Person is required in connection with the due execution, delivery and performance by such Guarantor of this Guaranty or any of the other Transaction Documents to which such Guarantor is a party (other than expressly provided for in any of the Transaction Documents).

 

(iv)    This Guaranty has been duly executed and delivered by each Guarantor and is, and each of the other Transaction Documents to which such Guarantor is or will be a party, when executed and delivered, will be, a legal, valid and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms, except as may be limited by the Bankruptcy Code or other applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, suretyship or similar laws and equitable principles (regardless of whether enforcement is sought in equity or at law).

 

(v)     There is no pending or, to the best knowledge of such Guarantor, threatened action, suit or proceeding against such Guarantor or to which any of the properties of such Guarantor is subject, before any court or other Governmental Authority or any arbitrator that (A) if adversely determined, could reasonably be expected to have a Material Adverse Effect or (B) relates to this Guaranty or any of the other Transaction Documents to which such Guarantor is a party or any transaction contemplated hereby or thereby.

 

(vi)     Such Guarantor (A) has read and understands the terms and conditions of the Securities Purchase Agreement and the other Transaction Documents, and (B) now has and will continue to have independent means of obtaining information concerning the affairs, financial condition and business of the Company and the other Transaction Parties, and has no need of, or right to obtain from the Collateral Agent or any Buyer, any credit or other information concerning the affairs, financial condition or business of the Company or the other Transaction Parties.

 

(vii)   There are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived.

 

(b)     Each Guarantor covenants and agrees that until Payment in Full of the Guaranteed Obligations, it will comply with each of the covenants (except to the extent applicable only to a public company) which are set forth in Section 4 of the Securities Purchase Agreement as if such Guarantor were a party thereto.

 

SECTION 7.      Right of Set-off . Upon the occurrence and during the continuance of any Event of Default (as defined in each Note), the Collateral Agent and any Buyer may, and is hereby authorized to, at any time and from time to time, without notice to the Guarantors (any such notice being expressly waived by each Guarantor) and to the fullest extent permitted by law, set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Collateral Agent or any Buyer to or for the credit or the account of any Guarantor against any and all obligations of the Guarantors now or hereafter existing under this Guaranty or any other Transaction Document, irrespective of whether or not the Collateral Agent or any Buyer shall have made any demand under this Guaranty or any other Transaction Document and although such obligations may be contingent or unmatured. The Collateral Agent and each Buyer agrees to notify the relevant Guarantor promptly after any such set-off and application made by the Collateral Agent or such Buyer, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Collateral Agent or any Buyer under this Section  7 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Collateral Agent or such Buyer may have under this Guaranty or any other Transaction Document in law or otherwise.

 

 
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SECTION 8.      Limitation on Guaranteed Obligations.

 

(a)            Notwithstanding any provision herein contained to the contrary, each Guarantor’s liability hereunder shall be limited to an amount not to exceed as of any date of determination the greater of:

 

(i)      the amount of all Guaranteed Obligations, plus interest thereon at the applicable Interest Rate (as defined in each Note) as specified in the Note; and

 

(ii)     the amount which could be claimed by the Collateral Agent from any Guarantor under this Guaranty without rendering such claim voidable or avoidable under the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law after taking into account, among other things, Guarantor’s right of contribution and indemnification.

 

(b)           Each Guarantor agrees that the Guaranteed Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guaranty hereunder or affecting the rights and remedies of the Collateral Agent or any Buyer hereunder or under applicable law.

 

(c)           No payment made by the Company, any Guarantor, any other guarantor or any other Person or received or collected by the Collateral Agent or any other Buyer from the Company, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Guaranteed Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Guaranteed Obligations or any payment received or collected from such Guarantor in respect of the Guaranteed Obligations), remain liable for the Guaranteed Obligations up to the maximum liability of such Guarantor hereunder until after all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been Paid in Full.

 

SECTION 9.      Notices, Etc . Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Guaranty must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Business Day after deposit with an nationally recognized overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same. All notices and other communications provided for hereunder shall be sent, if to any Guarantor, to the Company’s address and/or facsimile number, or if to the Collateral Agent or any Buyer, to it at its respective address and/or facsimile number, each as set forth in Section 9(f) of the Securities Purchase Agreement

 

 
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SECTION 10.      Governing Law; Jurisdiction . All questions concerning the construction, validity, enforcement and interpretation of this Guaranty 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 jurisdiction other than the State of New York. Each Guarantor hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or under any of the other Transaction Documents or with any transaction contemplated hereby or thereby, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim, obligation or defense 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. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Collateral Agent or the Buyers from bringing suit or taking other legal action against any Guarantor in any other jurisdiction to collect on a Guarantor’s obligations or to enforce a judgment or other court ruling in favor of the Collateral Agent or a Buyer.

 

SECTION 11.      WAIVER OF JURY TRIAL, ETC . EACH GUARANTOR 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 UNDER ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS GUARANTY, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.

 

SECTION 12.      Taxes .

 

(a)        All payments made by any Guarantor hereunder or under any other Transaction Document shall be made in accordance with the terms of the respective Transaction Document and shall be made without set-off, counterclaim, withholding, deduction or other defense. Without limiting the foregoing, all such payments shall be made free and clear of and without deduction or withholding for any present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on the net income of the Collateral Agent or any Buyer by the jurisdiction in which the Collateral Agent or such Buyer is organized or where it has its principal lending office (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities, collectively or individually, “ Taxes ”). If any Guarantor shall be required to deduct or to withhold any Taxes from or in respect of any amount payable hereunder or under any other Transaction Document:

 

 
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(i)      the amount so payable shall be increased to the extent necessary so that after making all required deductions and withholdings (including Taxes on amounts payable to the Collateral Agent or any Buyer pursuant to this sentence) the Collateral Agent or each Buyer receives an amount equal to the sum it would have received had no such deduction or withholding been made,

 

(ii)     such Guarantor shall make such deduction or withholding,

 

(iii)     such Guarantor shall pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law, and

 

(iv)    as promptly as possible thereafter, such Guarantor shall send the Collateral Agent or each Buyer an official receipt (or, if an official receipt is not available, such other documentation as shall be satisfactory to the Collateral Agent, as the case may be) showing payment.  In addition, each Guarantor agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery, registration or enforcement of, or otherwise with respect to, this Guaranty or any other Transaction Document (collectively, “ Other Taxes ”).

 

(b)          Each Guarantor hereby indemnifies and agrees to hold each Indemnified Party harmless from and against Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 12 ) paid by any Indemnified Party  as a result of any payment made hereunder or from the execution, delivery, registration or enforcement of, or otherwise with respect to, this Guaranty or any other Transaction Document, and any liability (including penalties, interest and expenses for nonpayment, late payment or otherwise) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted.  This indemnification shall be paid within thirty (30) days from the date on which the Collateral Agent or such Buyer makes written demand therefor, which demand shall identify the nature and amount of such Taxes or Other Taxes.

 

(c)         If any Guarantor fails to perform any of its obligations under this Section 12 , such Guarantor shall indemnify the Collateral Agent and each Buyer for any taxes, interest or penalties that may become payable as a result of any such failure. The obligations of the Guarantors under this Section 12 shall survive the termination of this Guaranty and the payment of the Obligations and all other amounts payable hereunder.

 

SECTION 13.      Indemnification.

 

(a)        Without limitation of any other obligations of any Guarantor or remedies of the Collateral Agent or the Buyers under this Guaranty or applicable law, except to the extent resulting from such Indemnified Party’s gross negligence or willful misconduct, as determined by a final judgment of a court of competent jurisdiction no longer subject to appeal, each Guarantor shall, to the fullest extent permitted by law, indemnify, defend and save and hold harmless the Collateral Agent and each Buyer and each of their affiliates and their respective officers, directors, employees, agents and advisors (each, an “ Indemnified Party ”) from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party in connection with or as a result of any failure of any Guaranteed Obligations to be the legal, valid and binding obligations of any Transaction Party enforceable against such Transaction Party in accordance with their terms.

 

 
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(b)     Each Guarantor hereby also agrees that none of the Indemnified Parties shall have any liability (whether direct or indirect, in contract, tort or otherwise) or any fiduciary duty or obligation to any of the Guarantors or any of their respective affiliates or any of their respective officers, directors, employees, agents and advisors, and each Guarantor hereby agrees not to assert any claim against any Indemnified Party on any theory of liability, for special, indirect, consequential, incidental or punitive damages arising out of or otherwise relating to the facilities, the actual or proposed use of the proceeds of the advances, the Transaction Documents or any of the transactions contemplated by the Transaction Documents.

 

SECTION 14.      Miscellaneous .

 

(a)     Each Guarantor will make each payment hereunder in lawful money of the United States of America and in immediately available funds to the Collateral Agent or each Buyer, at such address specified by the Collateral Agent or such Buyer from time to time by notice to the Guarantors.

 

(b)     No amendment or waiver of any provision of this Guaranty and no consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by each Guarantor, the Collateral Agent and each Buyer, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

(c)     No failure on the part of the Collateral Agent or any Buyer to exercise, and no delay in exercising, any right or remedy hereunder or under any other Transaction Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder or under any Transaction Document preclude any other or further exercise thereof or the exercise of any other right or remedy. The rights and remedies of the Collateral Agent and the Buyers provided herein and in the other Transaction Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. The rights and remedies of the Collateral Agent and the Buyers under any Transaction Document against any party thereto are not conditional or contingent on any attempt by the Collateral Agent or any Buyer to exercise any of their respective rights or remedies under any other Transaction Document against such party or against any other Person.

 

(d)     Any provision of this Guaranty that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

 

 
11

 

 

(e)     This Guaranty is a continuing guaranty and shall (i) remain in full force and effect until Payment in Full of the Guaranteed Obligations (other than inchoate indemnity obligations) and shall not terminate for any reason prior to the respective Maturity Date of each Note (other than Payment in Full of the Guaranteed Obligations) and (ii) be binding upon each Guarantor and its respective successors and assigns. This Guaranty shall inure, together with all rights and remedies of the Collateral Agent hereunder, to the benefit of and be enforceable by the Collateral Agent, the Buyers, and their respective successors, and permitted pledgees, transferees and assigns. Without limiting the generality of the foregoing sentence, the Collateral Agent or any Buyer may pledge, assign or otherwise transfer all or any portion of its rights and obligations under and subject to the terms of the Securities Purchase Agreement or any other Transaction Document to any other Person in accordance with the terms thereof, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Collateral Agent or such Buyer (as applicable) herein or otherwise, in each case as provided in the Securities Purchase Agreement or such Transaction Document. None of the rights or obligations of any Guarantor hereunder may be assigned or otherwise transferred without the prior written consent of each Buyer.

 

(f)     This Guaranty and the other Transaction Documents reflect the entire understanding of the transaction contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, entered into before the date hereof.

 

(g)     Section headings herein are included for convenience of reference only and shall not constitute a part of this Guaranty for any other purpose.

 

SECTION 15.      Currency Indemnity.

 

If, for the purpose of obtaining or enforcing judgment against Guarantor in any court in any jurisdiction, it becomes necessary to convert into any other currency (such other currency being hereinafter in this Section 15 referred to as the “ Judgment Currency ”) an amount due under this Guaranty in any currency (the “ Obligation Currency ”) other than the Judgment Currency, the conversion shall be made at the rate of exchange prevailing on the Business Day immediately preceding (a) the date of actual payment of the amount due, in the case of any proceeding in the courts of courts of the jurisdiction that will give effect to such conversion being made on such date, or (b) the date on which the judgment is given, in the case of any proceeding in the courts of any other jurisdiction (the applicable date as of which such conversion is made pursuant to this Section 15 being hereinafter in this Section 15 referred to as the “ Judgment Conversion Date ”).

 

If, in the case of any proceeding in the court of any jurisdiction referred to in the preceding paragraph, there is a change in the rate of exchange prevailing between the Judgment Conversion Date and the date of actual receipt of the amount due in immediately available funds, the Guarantors shall pay such additional amount (if any, but in any event not a lesser amount) as may be necessary to ensure that the amount actually received in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of the Obligation Currency which could have been purchased with the amount of’ the Judgment Currency stipulated in the judgment or judicial order at the rate of exchange prevailing on the Judgment Conversion Date. Any amount due from the Guarantors under this Section 15 shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of this Guaranty.

 

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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed by its respective duly authorized officer, as of the date first above written.

 

 

GUARANTORS:

 

     
 

[___________]

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

[Signatures continue on following page]

 

 
13

 

 

ACCEPTED BY:

 
   
HUDSON BAY MASTER FUND LTD. ,  
as Collateral Agent
 
     
By:    
 

Name:
Title:

 

 

Exhibit 99.1

 

News


 

Contact: Stephanie Goldman/Mark Havenner

The Pollack PR Marketing Group

(310) 556-4443

sgoldman@ppmgcorp.com/mhavenner@ppmgcorp.com

 

 

Helios and Matheson Analytics Inc. To Acquire Majority Stake in MoviePass TM , Today’s #1 Movie Theater Subscription Service

 

MoviePass Launches New $9.95

No-Contract Monthly Movie Theater Subscription Program

With Plans to Disrupt the Entertainment Industry

 

MIAMI & NEW YORK (August 15, 2017)— Helios and Matheson Analytics Inc. (Nasdaq: HMNY) announced today that is has entered into a definitive agreement to acquire a majority stake of movie subscription technology company MoviePass Inc. HMNY’s innovative growth strategy through the expansion into industries with opportunities for big data and artificial intelligence innovations seeks to increase shareholder value.

 

MoviePass is led by Netflix co-founder and former Redbox president Mitch Lowe. Film marketing executive and producer Stacy Spikes co-founded MoviePass in 2011. Early investors include True Ventures, AOL Ventures and Chris Kelly, MoviePass' largest investor and former Chief Privacy Officer of Facebook.

 

HMNY continues to acquire companies on the cutting edge, with first-mover advantage, disruptive technology and solid management. MoviePass is available in over 91% of all theaters in the U.S. This includes AMC, Regal and Cinemark theaters along with independent theaters. The MoviePass app enables subscribers to see unlimited movies, in theaters with no blackout dates; no contracts; just a low flat $9.95 monthly fee.

 

“MoviePass was founded to make it easier for passionate moviegoers and casual fans to see films the way they’re meant to be seen — in the theater,” said Mitch Lowe, CEO of MoviePass. “Our vision has always been to make the moviegoing experience more affordable and enjoyable for our subscribers. We are changing the way consumers think about going to the movies by making it possible to experience a broader array of films — from the latest summer blockbuster to a critically-acclaimed documentary — through a subscription model. Today’s acquisition by Helios & Matheson is a huge step towards making our vision a reality by allowing us to introduce a new $9.95 nationwide subscription service that completely disrupts the movie industry in the same way that Netflix and Redbox have done in years past."

 

 
 

 

 

In July 2017, Drake Star Partners released an independent report on entertainment technology. The report states that, despite the marketing of Streaming Video On-Demand (SVOD) services such as Netflix and Amazon, 2016 box office dollars set a new record. The report additionally affirmed MoviePass a true win-win-win situation for the moviegoer, the movie studios and the theaters. For the subscribers -- who, incidentally, represent a powerful demographic with 75% of the user base under 35 -- the low subscription cost enables them to see more movies than they may otherwise wait to see in post-theater release, which is critically important to the films that currently make up the release schedule. It’s further reported that subscribers, on average, have increased their annual movie-going budget four-fold.

 

In addition, a 2016 independent report by Mather Economics found that MoviePass members showed a 100% increase in movie-going. This includes a 50% increase in mid-week attendance and a 123% increase in concession revenues. In short, the subscription trumps the pay-per-view approach, reducing its high customer acquisition cost to the MoviePass risk-free, contract-free model.

 

“I believe the technology platforms that Helios and Matheson has built over the years are a perfect fit for the MoviePass family,” said Ted Farnsworth, Helios and Matheson’s Chairman and

CEO. “With our big data and artificial intelligence platforms and other technologies that we own, we will be able to bring a significant technological advantage to MoviePass. Our mission at HMNY is to continuously be innovating, and this blending is a natural fit to take us up to the next level and beyond.”

 

MoviePass will continue its operations with existing leadership and continue to expand throughout the U.S. MoviePass has agreed, following the closing of this transaction, to apply for listing and seek to begin trading on the Nasdaq Stock Market or the New York Stock Exchange by March 31, 2018, at which point HMNY would remain the majority shareholder of MoviePass.

 

Madison Global Partners advised MoviePass and Palladium Capital Advisors advised HMNY on the transaction.

 

“As a Co-founder of MoviePass, the establishment of a subscription service has and continues to be the catalyst needed to reinvigorate the film industry,” said Stacy Spikes MoviePass COO.  This partnership with Helios and Matheson brings together the perfect combination of resources and innovation needed to bring that goal one step closer to reality. Our data continues to reinforce the amazing benefits of subscription for customers, theaters and studios. For our industry to remain relevant we must be bold and experiment with wild new ideas.”

 

“My past experience at Facebook gave me the wherewithal to see that MoviePass was destined to disrupt the movie and entertainment industry. As a passionate movie lover, I saw MoviePass as a great company to bring people back to the theater to share in the social experience only the big screen can provide,” said Chris Kelly.

 

 
 

 

 

Key Transaction Details

 

HMNY will file with the U.S. Securities and Exchange Commission (the “SEC”) a Current Report on Form 8-K with respect to the MoviePass transaction and a financing transaction with an institutional investor occurring simultaneously (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 and the applicable securities purchase agreements to be included as exhibits to the Current Report, together with the exhibits to such securities purchase agreements.

 

The closing of the MoviePass transaction is conditioned upon HMNY consummating an equity or equity-linked financing transaction with aggregate gross proceeds of at least $10 million, among other material conditions to be described in the Current Report.

 

HMNY’s two largest stockholders, collectively holding approximately 49% of HMNY’s outstanding shares of common stock, have agreed to vote in favor of the MoviePass transaction and concurrent financing transaction, as will be described in the Current Report, for purposes of compliance with Nasdaq Listing Rule 5635.

 

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 holding s include RedZone Map™, a safety and navigation app for iOS and Android user s, a community-based ecosystem that features a socially empowered safety map app that enhances mobile GPS navigation using advanced proprietary technology. Through TrendIt, Helios and Matheson 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 us www.hmny.com.

 

About MoviePass

MoviePass is a 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 unlimited movies. 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.

 

Additional Information for Stockholders of HMNY about the Proposed Transaction 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 transactions. 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 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 TRANSACTIONS.

 

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 transactions. 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, which was filed with the SEC on April 14, 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 transactions by reading the proxy statement and other public filings referred to above.

 

Cautionary Statement on Forward-looking Information

Certain statements in this communication contain forward-looking statements 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, including without limitation statements, regarding the expected completion of the acquisition, the time frame in which this will occur, the expected benefits to HMNY and MoviePass from completing the acquisition, and the expected financial performance of HMNY following completion of the acquisition. 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 (including, without limitation, the requisite equity or equity-linked financing transaction of HMNY with gross proceeds of at least $10 million upon which the MoviePass transaction is conditioned), the occurrence of any event, change or other circumstances that could give rise to the termination of the securities purchase agreement between MoviePass and HMNY, and general economic conditions. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.

 

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 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 are described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and other filings, including subsequent current and periodic reports, information statements and registration statements filed with the U.S. Securities and Exchange Commission. 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.

 

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