Exhibit 10.1

 

THIRD AMENDMENT AND EXCHANGE AGREEMENT

 

This Amendment and Exchange Agreement (the “Agreement”) is entered into as of
the 23rd day of October, 2017, by and between Helios and Matheson Analytics
Inc., a Delaware corporation with offices located at Empire State Building, 350
5th Avenue, New York, New York 10118 (the “Company”) and the investor signatory
hereto (the “Holder”), with reference to the following facts:

 

A.  Prior to the date hereof, pursuant to that Securities Purchase Agreement,
dated as of February 7, 2017, by and between the Company and the Holder (the
“February Securities Purchase Agreement”), the Company issued to the Holder,
among other things, a senior secured convertible note with an initial principal
amount of $5 million, convertible into shares of Common Stock, in accordance
with the terms of thereof (the “February Note”, as converted the “February
Conversion Shares”).

 

B.  Prior to the date hereof, pursuant to that Securities Purchase Agreement,
dated as of August 15, 2017, by and between the Company and the Holder (as
amended, the “August Securities Purchase Agreement”), the Company issued to the
Holder, among other things, senior secured convertible notes, convertible into
shares of Common Stock, in accordance with the terms of thereof (including any
senior secured convertible note issued in exchange therefore, the “August
Notes”).

 

C.  Prior to the date hereof, pursuant to that letter agreement (the “Letter
Agreement”), dated August 27, 2017, by and between the Company and the Holder,
the Holder agreed to convert $2.5 million in principal amount of the February
Note and accrued unpaid interest thereon into certain February Conversion Shares
(such aggregate number of February Conversion Shares, the “February Share
Amount”), subject to a right (the “February Exchange Right”) to exchange up to
an aggregate of the February Share Amount of shares of Common Stock, in whole or
in part, into a senior secured convertible note in the form of the February Note
(the “February Exchange Note”) upon delivery of a written exchange notice by the
Holder to the Company (each, a “February Exchange”).

 

D.  On October 13, 2017, the Holder exchanged one hundred thousand (100,000)
shares of Common Stock into a February Exchange Note with three hundred thousand
dollars ($300,000) in aggregate principal amount (the “New February Exchange
Note”).

 

E.  The Company and the Holder desire to exchange (collectively, the “Exchange”
or the “Transaction”) the New February Exchange Note for 947,218 shares of
Common Stock (collectively, the “Exchange Common Shares”) and Rights (as defined
below) to receive 552,782 Reserved Shares (as defined below). The Exchange
Shares and the Reserved Shares are referred to herein as the “Exchange Shares”
and together with the Rights, the “Exchange Securities”. The Exchange Securities
and this Agreement and such other documents and certificates related thereto are
collectively referred to herein as the “Exchange Documents”.

 

F.  The Exchange is being made in reliance upon the exemption from registration
provided by Section 4(a)(2) and Rule 144(d)(3)(ii) of the Securities Act of
1933, as amended (the “Securities Act”).

 

 

G.   Capitalized terms used but not otherwise defined herein shall have the
meanings set forth in the February Securities Purchase Agreement.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter contained, the parties hereto agree as follows:

 

1.  Exchange. On the date hereof, pursuant to Section 4(a)(2) and Rule
144(d)(3)(ii) of the Securities Act, the Holder hereby agrees to convey, assign
and transfer the New February Exchange Note to the Company in exchange for which
the Company agrees to issue the Exchange Common Shares and the Rights to the
Holder. On the date hereof, in exchange for the New February Exchange Note, the
Company shall deliver (a) the Exchange Common Shares to the Holder by
deposit/withdrawal at custodian in accordance with the instructions attached
hereto as Schedule I, which Exchange Common Shares shall be issued without
restricted legend and shall be freely tradable by the Holder (b) or cause to be
delivered to the Holder (or its designee) a certificate evidencing the Rights at
the address for delivery set forth on the Schedule of Buyers to the August
Securities Purchase Agreement .

 

2.   Ratifications, Waivers; Deferrals, Consents; Terminations.

 

(a)   Ratifications. Except as otherwise expressly provided herein, the February
Securities Purchase Agreement, the August Securities Purchase Agreement, each
other Transaction Document (as defined in the February Securities Purchase
Agreement) and each other Transaction Document (as defined in the August
Securities Purchase Agreement), is, and shall continue to be, in full force and
effect and is hereby ratified and confirmed in all respects, except that on and
after the date hereof: (i) all references in the February Securities Purchase
Agreement to “this Agreement”, “hereto”, “hereof”, “hereunder” or words of like
import referring to the February Securities Purchase Agreement shall mean the
February Securities Purchase Agreement as amended by this Agreement, and (ii)
all references in the other Transaction Documents (as defined in the August
Securities Purchase Agreement), to the “Securities Purchase Agreement”,
“thereto”, “thereof”, “thereunder” or words of like import referring to the
Securities Purchase Agreement shall mean the August Securities Purchase
Agreement as amended by this Agreement.

 

(b)  Waiver of Prior Defaults; Acknowledgement of No Current Defaults. The
Holder hereby acknowledges and agrees that, for and in consideration of the
agreements contained herein, the Holder does hereby fully, finally,
unconditionally and irrevocably waive any and all Events of Default (as defined
in the August Notes) known by the Holder to have occurred prior to the date
hereof, including, without limitation, any failure by the Company to pay
Interest due under the August Notes prior to the date of this Agreement (the
“Waived Defaults”). The Holder hereby acknowledges that, after giving effect to
the foregoing waiver and the Exchange, the Holder has no actual knowledge of any
Events of Default (as defined in the August Notes) that remain outstanding as of
the date hereof. The Holder hereby acknowledges that, after giving effect to the
foregoing waiver and the Exchange, as of the date of this Agreement, the Holder
is not entitled to any of the rights or remedies set forth in Section 4(b) of
the August Notes with respect to the Waived Defaults.

 

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(c)   Termination of February Exchange Right. Effective as of the time of
delivery of the Exchange Common Shares to the Holder in accordance with Section
1 above, the Holder hereby waives its February Exchange Right pursuant to the
Letter Agreement to effect any additional exchanges of Common Stock into
February Exchange Notes.

 

(d)   Deferral of Payment of Interest. Effective as of the time of delivery of
the Exchange Common Shares to the Holder in accordance with Section 1 above, the
Holder hereby agrees to defer the Company’s obligation to pay any Interest (as
defined in the August Notes) under the August Notes until the earlier to occur
of (x) each Conversion Date (as defined in the August Notes), solely with
respect to such portion of Interest included in the Conversion Amount (as
defined in the August Notes) subject to the applicable conversion on such
Conversion Date, (y) each Redemption Date, solely with respect to such portion
of Interest included in the Conversion Amount subject to the redemption on such
Redemption Date and (z) the Maturity Date (as defined in the August Notes).

 

(e)   Waiver of Adjustment Rights under Warrant. The Holder hereby waives any
and all adjustment rights under Section 2 of the Common Stock Purchase Warrant
issued to the Holder pursuant to the August Securities Purchase Agreement solely
to the extent arising from the issuance of the Exchange Securities and not with
respect to any other issuance of securities by the Company from time to time.

 

(f)   Consents.

 

(i)  The Holder hereby waives any prohibition in the Transaction Documents (as
defined in the August Securities Purchase Agreement) or any other agreement with
the Company prohibiting the Company from waiving any provision of any lockup
agreement with Helios and Matheson Information Technology Ltd. to permit the
sale, in its discretion, of up to 170,000 shares of Common Stock without any
further waiting period, notwithstanding anything in such lockup agreement or
other agreement to the contrary; provided, that, notwithstanding anything in
such lockup agreement or other agreement to the contrary, Helios and Matheson
Information Technology Ltd. concurrently waives its right to sell 170,000 shares
of Common Stock as set forth in a written communication from an authorized
signatory of the Holder to the Company and its counsel on September 19, 2017.
For the avoidance of doubt, the Company hereby represents to the Holder that the
number of shares of Common Stock, in the aggregate, permitted by the Company to
be resold by Helios and Matheson Information Technology Ltd. prior to the
Maturity Date (as defined in the August Notes) (or such earlier date as no
August Notes remain outstanding) is 170,000 shares of Common Stock.

 

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(ii)  The Holder hereby consents to the Company obtaining Permitted Senior
Secured Indebtedness (as defined below), notwithstanding any prohibition thereof
set forth in the August Notes or any other Transaction Document (as defined in
the August Securities Purchase Agreement). The Company and the Holder hereby
further agree that such consent, for purposes of the August Notes, shall have
the effect of such Permitted Senior Secured Indebtedness constituting “Permitted
Indebtedness” (as defined in the August Notes) under the August Notes and the
Liens securing such Permitted Senior Secured Indebtedness constituting
“Permitted Liens” (as defined in the August Notes) under the August Note. For
the purpose of this Agreement, the following definitions shall apply: (A) “Bank”
means any commercial bank having capital and surplus of not less than
$250,000,000 in the case of U.S. banks and $100,000,000 (or the U.S. dollar
equivalent as of the date of determination) in the case of foreign banks; and
(B) “Permitted Senior Secured Indebtedness” means the principal of (and premium,
if any), interest on, and all fees and other amounts (including, without
limitation, any reasonable out-of-pocket costs, enforcement expenses (including
reasonable out-of-pocket legal fees and disbursements), collateral protection
expenses and other reimbursement or indemnity obligations relating thereto)
payable by Company and/or its Subsidiaries under or in connection with any
credit facility to be entered into by the Company and/or its Subsidiaries with
one or more Banks; provided, however, that so long as any of the August Notes
remain outstanding, (i) the aggregate outstanding amount of such Permitted
Senior Secured Indebtedness (taking into account the maximum amounts which may
be advanced under the loan documents evidencing such Permitted Senior Secured
Indebtedness) is not less than $20 million, but does not at any time exceed $100
million (with at least $20 million of such amount being available for funding
immediately without any material condition precedent to such funding, including,
without limitation, any financial covenant condition); (ii) the term of such
Permitted Senior Secured Indebtedness is at least two years; (iii) no cash
payments shall be permitted to be due thereunder (and the holder of such Senior
Secured Indebtedness shall have no rights to demand any payments thereunder
(including without limitation, upon the occurrence of any default thereunder));
(iv) such Senior Secured Indebtedness is non-convertible and has no
equity-linked security related thereto other than warrants for the purchase of
common stock (in an aggregate amount not to exceed 1,000,000 shares of Common
Stock (as adjusted for stock splits, stock dividends, stock combinations,
recapitalizations and similar events)) exercisable at no less than the last
closing bid price on the Principal Market preceding the date a definitive
agreement is entered into between the Company and the applicable Bank with
respect to such Permitted Senior Secured Indebtedness, which exercise price and
aggregate number of shares of Common Stock issuable thereunder, in each case,
shall not be subject to adjustment, whether upon any issuance of securities at a
price below the exercise price of such warrant then in effect or for any other
reason, other than standard adjustments upon the occurrence of any stock split,
stock dividend, stock combination, recapitalization or other similar event; (v)
the interest rate (including, any original issuance discount, if any) of such
Senior Secured Indebtedness shall not exceed ten percent (10%) per annum; (vi)
the Company shall not be required to comply with any financial covenants, if
any, in the agreement evidencing such Permitted Senior Secured Indebtedness
until the first anniversary of the date of issuance of such Permitted Senior
Secured Indebtedness;; and (vii) nothing in any agreement evidencing such (or
relating to) the Permitted Senior Secured Indebtedness shall contravene or
otherwise limit or prohibit any term or condition of this Agreement, the Rights,
the August Notes, the August Warrant or any other Transaction Document (as
defined in the August Securities Purchase Agreement) as modified by this
Agreement or any other agreement by and between the Company (and/or any of its
Subsidiaries) and the Holder as modified by this Agreement.

 

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(iii)  Effective as of the time of delivery of the Exchange Common Shares to the
Holder in accordance with Section 1 above, the Holder hereby consents to the
Company dissolving its subsidiary HMNY Zone Loan LLC.

 

(g)    Release of Security Interest. Effective as of the time of delivery of the
Exchange Common Shares to the Holder in accordance with Section 1 above, (i) the
Holder hereby releases all security interests granted by the Company or any of
its Subsidiaries to the Holder pursuant to the Transaction Documents (as defined
in the February Securities Purchase Agreement) and the Transaction Documents (as
defined in the August Securities Purchase Agreement), (ii) each Security
Agreement (as defined in each of the February Securities Purchase Agreement and
August Securities Purchase Agreement) are hereby terminated and (iii) the Holder
hereby authorizes the Company to file Termination Statements on Form UCC-3 for
the Company and its Subsidiaries with respect to such security interest.

 

(h)  Amendment to Exchange Cap of August Notes. The section of the August Notes
titled “Exchange Cap” is hereby amended to replace the date “September 15, 2017”
with “October 31, 2017”.

 

3.   Representations and Warranties. As of the date hereof:

 

3.1   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) listed in the SEC Documents,
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.” For purposes of this Agreement, (x) “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 and (y) “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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3.2   Authorization and Binding Obligation. The Company has the requisite power
and authority to enter into and perform its obligations under this Agreement and
the Rights and each of the other agreements entered into by the parties hereto
in connection with the transactions contemplated by the Exchange Documents and
to consummate the Transaction (including, without limitation, the issuance of
the Rights and the Exchange Common Shares (the “Exchange Primary Securities”) in
accordance with the terms hereof). The execution and delivery of the Exchange
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Exchange Primary Securities and the reservation for issuance and issuance of
Reserved Shares issuable upon exercise of the Rights has been duly authorized by
the Company’s Board of Directors and no further filing, consent, or
authorization is required by the Company, its Board of Directors or its
stockholders. This Agreement and the other Exchange Documents have been duly
executed and delivered by the Company, and constitute the legal, valid and
binding obligations of the Company, enforceable against the Company 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 laws.

 

3.3   No Conflict. Except as set forth on Schedule 3.3, the execution, delivery
and performance of the Exchange Documents by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Exchange Primary Securities and the
reservation for issuance and issuance of Reserved Shares issuable upon exercise
of the Rights) will not (i) result in a violation of the Certificate of
Incorporation (as defined below) or any other organizational documents of the
Company or any of its Subsidiaries, any capital stock of the Company or any of
its Subsidiaries or Bylaws (as defined below) 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) 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 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 federal
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 except, in the case of clause (ii) or (iii)
above, to the extent such violations that would not reasonably be expected to
have a Material Adverse Effect.

 

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3.4   No 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 Securities and Exchange Commission (the
“SEC”) of a Form D with the SEC, any other filings as may be required by any
state securities agencies, filing of UCC financing statements and approval by
the Principal Market of a listing of additional shares application in respect of
the Exchange Shares as required by Section 7 hereof), any court, governmental
agency 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 Exchange 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 obtained or effected on or prior to the date
hereof, 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 Exchange Documents. Except as disclosed in the SEC
Documents, the Company is not in violation of the requirements of the Principal
Market and has no knowledge of any facts or circumstances which would reasonably
lead to delisting or suspension of the Common Stock in the foreseeable future.

 

3.5   Securities Law Exemptions. Assuming the accuracy of the representations
and warranties of the Holder contained herein, the offer and issuance by the
Company of the Exchange Securities is exempt from registration under the
Securities Act pursuant to the exemption provided by Section 4(a)(2) and Rule
144(d)(3)(ii) thereof.

 

3.6   Status of Notes; Issuance of Exchange Securities. The Exchange Common
Shares shall not bear any restrictive legend and shall be freely tradeable by
the Holder pursuant to and in accordance with Rule 144. The issuance of the
Rights has been duly authorized and upon issuance in accordance with the terms
of the Exchange Documents shall be validly issued, fully paid and non-assessable
and free from all Liens. Upon issuance in accordance herewith or pursuant to the
Rights, as applicable, the Exchange Common Shares and the Reserved Shares,
respectively, when issued, will be validly issued, fully paid and nonassessable
and free from all Liens with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Stock. By virtue of
Rule 4(a)(2) and Rule 144(d)(3)(ii) under the Securities Act, each of the
Exchange Securities will have a Rule 144 holding period that will be deemed to
have commenced as of February 8, 2017, the date of the original issuance of the
February Note to the Holder.

 

3.7   Transfer Taxes. On the date hereof, all share transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection
with the issuance of the Exchange Primary Securities to be exchanged with the
Holder 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.

 

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3.8   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 Holder or its 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 the
Holder which is not included in the SEC Documents (including, without
limitation, information 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.

 

3.9   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-Q, 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-Q,
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
on the date hereof, will not be Insolvent.

 

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3.10    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)
would reasonably expected to have a material adverse effect on the Holder’s
investment hereunder or (iii) would reasonably be expected to have a Material
Adverse Effect.

 

3.11    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 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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3.12    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, consultants, 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 February 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).

 

3.13    Equity Capitalization.

 

(a)    Definitions:

 

(i)   “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.

 

(ii)   “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).

 

 10 

 

(b)   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, 9,625,442 are issued and
outstanding as of the date hereof, 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 unless otherwise specified below: (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, which have been issued, (IV) 150,000 S-8 registered shares to an
employee of Zone, which shall be subject to an 18 month lockup agreement, (V)
778,000 unregistered shares to independent contractors of the Company for
services rendered or to be rendered, 728,000 of which shall be subject to an 18
month lockup agreement and 50,000 of which shall be subject to a 24 month lockup
agreement, , and (VI) upon completion of the transactions contemplated by the
MoviePass SPA, as amended, 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 237,500 unregistered shares to
Palladium Capital Advisors, LLC (“Palladium”) as a financial advisory fee in
connection with the transactions contemplated by the MoviePass SPA, as amended,
and up to an additional 166,667 unregistered shares to Palladium in the event
the Company exercises its right to purchase additional shares of MoviePass Inc.
pursuant to that certain Investment Option Agreement dated as of October 11,
2017, in accordance with the placement agent agreement between Palladium and the
Company.

 

(c)    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 3.13 sets forth the number
of shares of Common Stock that are (A) reserved for issuance pursuant to
Convertible Securities (other than the Rights) 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.

 

(d)   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; (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 Exchange 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.

 

 11 

 

(e)    Organizational Documents. The Company has furnished to the Holder 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.

 

3.14    Indebtedness and Other Contracts. Neither the Company nor any of its
Subsidiaries, (i) except as disclosed in the SEC Documents or Schedule 3(s) of
the August Securities Purchase Agreement, 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, except as disclosed in the SEC
Documents, 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, except as disclosed in the SEC Documents;
(iv) except as waived by the Holder under Section 2(b) of this Agreement, 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.

 

3.15    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 that would reasonably be expected to have a Material
Adverse Effect on the Company or its Subsidiaries, whether of a civil or
criminal nature or otherwise, in their capacities as such, except as disclosed
in the SEC Documents or in Schedule 3(t) of the August Securities Purchase
Agreement. 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.

 

 12 

 

3.16    Disclosure. The Company confirms that neither it nor any other Person
acting on its behalf has provided the Holder or its agents or counsel with any
information that constitutes or would 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 Exchange Documents. The Company understands and confirms
that the Holder will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the Holder
regarding the Company and its Subsidiaries, their businesses and the
transactions contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Company or any of its Subsidiaries is true and
correct and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
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. 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 announced or
disclosed.

 

4.   Holder’s Representations and Warranties. As a material inducement to the
Company to enter into this Agreement and consummate the Exchange, the Holder
represents, warrants and covenants with and to the Company as follows:

 

4.1  Reliance on Exemptions. The Holder understands that the Exchange Securities
are being offered and exchanged 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 the
Holder’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Holder set forth herein and in the
Exchange Documents in order to determine the availability of such exemptions and
the eligibility of the Holder to acquire the Exchange Securities.

 

4.2  No Governmental Review. The Holder 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 Exchange Securities
or the fairness or suitability of the investment in the Exchange Securities nor
have such authorities passed upon or endorsed the merits of the offering of the
Exchange Securities.

 

4.3  Validity; Enforcement. This Agreement and the Exchange Documents to which
the Holder is a party have been duly and validly authorized, executed and
delivered on behalf of the Holder and shall constitute the legal, valid and
binding obligations of the Holder enforceable against the Holder 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.

 

 13 

 

4.5  No Conflicts. The execution, delivery and performance by the Holder of this
Agreement and the Exchange Documents to which the Holder is a party, and the
consummation by the Holder of the transactions contemplated hereby and thereby
will not (i) result in a violation of the organizational documents of the Holder
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 the Holder 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 the Holder, except
in the case of clauses (ii) and (iii) above, for such conflicts, defaults,
rights or violations which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of the
Holder to perform its obligations hereunder.

 

4.6  Investment Risk; Sophistication. The Holder is acquiring the Exchange
Securities hereunder in the ordinary course of its business. The Holder has such
knowledge, sophistication, and experience in business and financial matters so
as to be capable of evaluation of the merits and risks of the prospective
investment in the Exchange Securities, and has so evaluated the merits and risk
of such investment. The Holder is an “accredited investor” as defined in
Regulation D under the Securities Act.

 

4.7  Ownership of New February Exchange Note. The Holder owns the New February
Exchange Note free and clear of any Liens (other than the obligations pursuant
to this Agreement, the Transaction Documents (as defined in the February
Securities Purchase Agreement) and applicable securities laws).

 

5.   Disclosure of Transaction. The Company shall, on or before 8:30 a.m., New
York City Time, on or prior to the first business day after the date of this
Agreement, file a Current Report on Form 8-K describing the terms of the
transactions contemplated hereby in the form required by the 1934 Act and
attaching the Exchange Documents, to the extent they are required to be filed
under the 1934 Act, that have not previously been filed with the SEC by the
Company (including, without limitation, this Agreement) as exhibits to such
filing (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 up to such time to the Holder by the Company or
any of its Subsidiaries or any of their respective officers, directors,
employees or agents. 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 with respect to the transactions contemplated by
the Exchange Documents or as otherwise disclosed in the 8-K Filing, whether
written or oral, between the Company, any of its Subsidiaries or any of their
respective officers, directors, affiliates, employees or agents, on the one
hand, and any of the Holder or any of their affiliates, on the other hand, shall
terminate. Neither the Company, its Subsidiaries nor the Holder shall issue any
press releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, the Company shall be entitled, without
the prior approval of the Holder, to make a press release or other public
disclosure with respect to such transactions (i) in substantial conformity with
the 8-K Filing and contemporaneously therewith or (ii) as is required by
applicable law and regulations (provided that in the case of clause (i) the
Holder 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 Holder (which may be granted or withheld in the Holder’s
sole discretion), except as required by applicable law, the Company shall not
(and shall cause each of its Subsidiaries and affiliates to not) disclose the
name of the Holder in any filing, announcement, release or otherwise.

 

 14 

 

6.   No Integration. None of the Company, its Subsidiaries, any of their
affiliates, or any Person acting on their behalf shall, directly or indirectly,
make any offers or sales of any security (as defined in the Securities Act) or
solicit any offers to buy any security or take any other actions, under
circumstances that would require registration of any of the Exchange Securities
under the Securities Act or cause this offering of the Exchange Securities to be
integrated with such offering or any prior offerings by the Company for purposes
of Regulation D under the Securities Act.

 

7.   Listing. The Company shall promptly secure the listing or designation for
quotation (as applicable) of all of the Exchange Shares upon the Principal
Market (subject to official notice of issuance) and shall maintain such listing
of all the Exchange Shares from time to time issuable under the terms of the
Exchange Documents. The Company shall maintain the Common Stock’s authorization
for quotation on the Principal Market. Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock on the Principal Market. The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 7.

 

8.   Fees. The Company shall promptly reimburse Kelley Drye & Warren, LLP
(counsel to the lead investor), on demand, for all reasonable, documented costs
and expenses incurred by it in connection with preparing and delivering this
Agreement (including, without limitation, all reasonable, documented legal fees
and disbursements in connection therewith, and due diligence in connection with
the transactions contemplated thereby) in an aggregate amount not to exceed
$15,000.

 

9.   Holding Period. For the purposes of Rule 144, the Company acknowledges that
the holding period of (a) the Exchange Common Shares may be tacked onto the
holding period of the New February Exchange Note, and (b) the Rights (and upon
exercise of the Rights, the Reserved Shares) may be tacked onto the holding
period of the New February Exchange Note, and the Company agrees not to take a
position contrary to this Section 9. The Company acknowledges and agrees that
(assuming the Holder is not an affiliate of the Company) (i) upon issuance in
accordance with the terms hereof, the Exchange Common Shares and, upon exercise
of the Rights, the Reserved Shares, respectively, are, as of the date hereof,
eligible to be resold pursuant to Rule 144, (ii) the Company is not aware of any
event reasonably likely to occur that would reasonably be expected to result in
the Exchange Shares becoming ineligible to be resold by the Holder pursuant to
Rule 144 and (iii) in connection with any resale of any Exchange Shares pursuant
to Rule 144, the Holder shall solely be required to provide reasonable
assurances that such Exchange Shares are eligible for resale, assignment or
transfer under Rule 144, which shall not include an opinion of Holder’s counsel.
The Company shall be responsible for any transfer agent fees or DTC fees or
legal fees of the Company’s counsel with respect to the removal of legends, if
any, or issuance of Exchange Shares in accordance herewith.

 

10.   Blue Sky. The Company shall make all filings and reports relating to the
Exchange required under applicable securities or “Blue Sky” laws of the states
of the United States following the date hereof, if any.

 

 15 

 

11.   Right to Issue Shares.

 

11.1    General. On the date hereof, as par, the Company shall issue to the
Holder rights (the “Rights”) to receive 552,782 shares of Common Stock
(collectively, the “Reserved Shares”) to the Holder, which shall have such terms
and conditions as set forth in this Section 11. The Company and the Holder
hereby agree that no additional consideration is payable in connection with the
issuance of the Rights or the exercise of the Rights.

 

11.2    Exercise of Right of Issuance of Shares. Subject to the terms hereof,
the exercise of the Rights may be made, in whole or in part, at any time or
times on or after the date hereof by delivery to the Company (or such other
office or agency of the Company as it may designate by notice in writing to the
registered Holder at the address of the Holder appearing on the books of the
Company) of a duly executed PDF copy of the Notice of Issuance Form annexed
hereto as Exhibit A (each, a “Notice of Issuance”, and the corresponding date
thereof, the “Exercise Date”). Partial exercises of the Rights resulting in
issuances of a portion of the total number of Reserved Shares available
thereunder shall have the effect of lowering the outstanding number of Reserved
Shares purchasable thereunder in an amount equal to the applicable number of
Reserved Shares issued. The Holder and the Company shall maintain records
showing the number of Reserved Shares issued and the date of such issuances. The
Company shall deliver any objection to any Notice of Issuance Form within one
(1) Trading Day of receipt of such notice. The Holder acknowledges and agrees
that, by reason of the provisions of this paragraph, following each exercise of
the Rights issued hereunder and the issuance of a portion of the Reserved Shares
pursuant thereto, the number of Reserved Shares available for issuance pursuant
to the Rights issued hereunder at any given time may be less than the amount
stated in the recitals hereof.

 

11.3    Delivery of Reserved Shares. The Reserved Shares issued hereunder shall
be transmitted by the Transfer Agent to the Holder by crediting the account of
the Holder’s prime broker with The Depository Trust Company through its
Deposit/Withdrawal at Custodian system (“DWAC”) if the Company is then a
participant in such system and either (A) there is an effective registration
statement permitting the issuance of the Reserved Shares to or resale of the
Reserved Shares by the Holder or (B) the Reserved Shares are eligible for resale
by the Holder without volume or manner-of-sale limitations pursuant to Rule 144,
and otherwise by physical delivery to the address specified by the Holder in the
Notice of Issuance by the date that is two (2) Trading Days after the delivery
to the Company of the Notice of Issuance (such date, the “Share Delivery
Deadline”). The Reserved Shares shall be deemed to have been issued, and Holder
or any other person so designated to be named therein shall be deemed to have
become the holder of record of such shares for all purposes, as of the date the
Rights have been exercised.

 

11.4    Charges, Taxes and Expenses. Issuance of Reserved Shares shall be made
without charge to the Holder for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be issued in
the name of the Holder. The Company shall pay all Transfer Agent fees required
for same-day processing of any Notice of Issuance.

 

 16 

 

11.5    Authorized Shares. The Company covenants that, during the period the
Rights are outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Reserved
Shares upon the exercise of the Rights. The Company further covenants that its
issuance of the Rights shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for the Reserved Shares upon the due exercise of the
Rights. The Company will take all such reasonable action as may be necessary to
assure that such Reserved Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the
Principal Market upon which the Common Stock may be listed. The Company
covenants that all Reserved Shares which may be issued upon the exercise of the
Rights represented by this Agreement will, upon exercise of the Rights, be duly
authorized, validly issued, fully paid and non-assessable and free from all
taxes, Liens and charges created by the Company in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue).

 

11.6    Impairment. Except and to the extent as waived or consented to by the
Holder, the Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, 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 Agreement, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of the
Holder as set forth in this Agreement against impairment. Without limiting the
generality of the foregoing, the Company will (i) not increase the par value of
any Reserved Shares above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (ii) take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable Reserved Shares upon the exercise of
the Rights and (iii) use reasonable best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof, as may be, necessary to enable the Company to perform its
obligations under this Agreement.

 

11.7    Authorizations. Before taking any action which would result in an
adjustment in the number of Reserved Shares for which the Rights provides for,
the Company shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or bodies
having jurisdiction thereof.

 

 17 

 

11.8    Limitations on Exercise.

 

(a)    Beneficial Ownership Limitations. The Company shall not effect the
exercise of any Rights, and the Holder shall not have the right to exercise any
portion of any Rights pursuant to the terms and conditions of this Agreement 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 9.9%
(the “Beneficial Ownership Limitation”) 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 (as defined
in the February Note) 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 the Rights issued hereunder 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,
nonexercised portion of the Rights 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) 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 11.8(a). For purposes of this Section 11.8(a),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
1934 Act (as defined in the February Note). For purposes of determining the
number of outstanding shares of Common Stock the Holder may acquire upon the
exercise of the Rights without exceeding the Beneficial Ownership Limitation,
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 Notice of Issuance 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 Notice of Issuance would otherwise
cause the Holder’s beneficial ownership, as determined pursuant to this Section
11.8(a), to exceed the Beneficial Ownership Limitation, the Holder must notify
the Company of a reduced number of shares of Common Stock to be purchased
pursuant to such Notice of Issuance. 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 the Rights,
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 the Rights results in
the Holder and the other Attribution Parties being deemed to beneficially own,
in the aggregate, more than the Beneficial Ownership Limitation 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 Beneficial
Ownership Limitation (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 (61st) day after delivery of such notice) or decrease the
Beneficial Ownership Limitation to any other percentage not in excess of 9.9% as
specified in such notice; provided that (i) any such increase in the Beneficial
Ownership Limitation will not be effective until the sixty-first (61st) 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 Rights that is not an Attribution Party of the Holder.
For purposes of clarity, the shares of Common Stock issuable pursuant to the
terms of the Rights hereunder in excess of the Beneficial Ownership Limitation
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 any Rights 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 11.8(a) 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 11.8(a) 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 Rights.

 

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(b)   Exchange Cap. At any time prior to the time the Company shall have
obtained stockholder approval for the issuance of shares of Common Stock
pursuant to the August Notes and the August Warrants pursuant to rules related
to the aggregate of offerings under NASDAQ Listing Rule 5635(d) (the
“Stockholder Approval”), the Company shall not issue any shares of Common Stock
upon exercise of any Rights if the issuance of such shares of Common Stock
(taken together with any shares of Common Stock issuable upon exercise of the
Warrants (as defined in the August Notes) (the “August Warrants”) or upon
conversion of the August Notes or otherwise pursuant to the terms of the August
Notes or upon conversion of the senior convertible note in the aggregate
principal amount of $697,000 issued to the Holder on October 1, 2017 (the
“October 2017 Note”) would exceed the aggregate number of shares of Common Stock
which the Company may issue upon exercise or conversion of the Rights, the
August Notes, the August Warrants, the October 2017 Note or otherwise pursuant
to the terms of the Rights, the August Notes, the August Warrants or the October
2017 Note 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 (with the aggregate number of
shares of Common Stock outstanding for the purposes of such calculation measured
as of August 14, 2017), including rules related to the aggregate of offerings
under NASDAQ Listing Rule 5635(d), as applicable, the “Pre-August Approval
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 exercise of the Rights in excess of the Pre-August Approval Exchange Cap 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. The Company represents and warrants to the Holder that the Pre-August
Approval Exchange Cap is 1,416,025 shares of Common Stock (or 1,183,691 shares
of Common Stock after giving effect to the issuance of 232,334 shares of Common
Stock upon conversion in full of the October 2017 Note), without giving effect
to the issuance of the Exchange Securities. At any time on or after the time the
Company shall have obtained the Stockholder Approval, the Company shall not
issue any shares of Common Stock upon exercise of any Rights if the issuance of
such shares of Common Stock would exceed the aggregate number of shares of
Common Stock which the Company may issue upon exercise or conversion of the
Rights or otherwise pursuant to the terms of the Rights 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 (with the aggregate number of shares of Common Stock outstanding
for the purposes of such calculation measured as of October 20, 2017), including
rules related to the aggregate of offerings under NASDAQ Listing Rule 5635(d),
as applicable, the “Post-August Approval 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 exercise of the
Rights 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. The Company represents and warrants to
the Holder that the Post-August Approval Exchange Cap is 1,925,087 (or 1,692,753
shares of Common Stock after giving effect to the issuance of 232,334 shares of
Common Stock upon conversion in full of the October 2017 Note), without giving
effect to the issuance of the Exchange Securities.

 

11.9    Closing of Books. The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of the Rights, pursuant
to the terms hereof.

 

11.10   Stock Dividends and Splits. If the Company, at any time while the Rights
exist: (i) pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock, (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, (iii)
combines (including by way of reverse stock split) outstanding shares of Common
Stock into a smaller number of shares, or (iv) issues by reclassification of
shares of the Common Stock any shares of capital stock of the Company, then in
each case the number of Reserved Shares issuable upon exercise of the Rights
shall be proportionately adjusted. Any adjustment made pursuant to this Section
11.10 shall become effective immediately upon the record date for the
determination of stockholders entitled to receive such dividend or distribution
(provided that if the declaration of such dividend or distribution is rescinded
or otherwise cancelled, then such adjustment shall be reversed upon notice to
the Holder of the termination of such proposed declaration or distribution as to
any unexercised portion of the Rights at the time of such rescission or
cancellation) and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.

 

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11.11   Compensation for Buy-In on Failure to Timely Deliver Reserved Shares. If
the Company shall fail, for any reason or for no reason, on or prior to the
applicable Share Delivery Deadline, either (x) 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) 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 exercise of a Right (a “Delivery 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 Exercise Date and ending on the applicable Share Delivery
Deadline and (2) the Holder, upon written notice to the Company, may void its
Notice of Issuance with respect to, and retain or have returned (as the case may
be) any portion of the rights that has not been exercised pursuant to such
Notice of Issuance, provided that the voiding of a Notice of Issuance 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 11.11 or otherwise. In
addition to the foregoing, if on or prior to the Share Delivery Deadline 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, (B) 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 of Rights hereunder or pursuant to the Company’s
obligation pursuant to clause (II) below, 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 exercise that the Holder is entitled
to receive from the Company and has not received from the Company in connection
with such Delivery Failure (a “Buy-In”), then, in addition to all other remedies
available to the Holder, the Company shall, within two (2) 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
exercise of Rights 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 exercise of Rights 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 (as defined in the
February Note) of the Common Stock on any Trading Day during the period
commencing on the date of the applicable Notice of Issuance 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 the Rights as required pursuant to the terms hereof. Notwithstanding
anything herein to the contrary, with respect to any given Delivery Failure,
this Section 11.11 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 Delivery
Failure, as applicable, pursuant to the analogous sections of the February
Securities Purchase Agreement.

 

 20 

 

11.12   Subsequent Rights Offerings. If Section 11.10 above does not apply, if
at any time the Company grants, issues or sells any Convertible Securities,
Options or rights to purchase stock, warrants, securities or other property pro
rata to the record Holders of any class of shares 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 the Rights (without regard to any
limitations on exercise hereof, including without limitation, the Beneficial
Ownership Limitation) 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, issue or sale of such Purchase Rights (provided,
however, to the extent that the Holder’s right to participate in any such
Purchase Right would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in such
Purchase Right to such extent (or beneficial ownership of such shares of Common
Stock as a result of such Purchase Right to such extent) and such Purchase Right
to such extent shall be held in abeyance for the Holder until such time, if
ever, as its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).

 

11.13   Fundamental Transaction. If, at any time while the Rights remain
outstanding, a Fundamental Transaction (as defined in the February Note) occurs,
then, upon any subsequent exercise of the Rights, the Holder shall have the
right to receive, for each Reserved Share that would have been issuable upon
such exercise immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any limitation in
Section 11.8 on the exercise of the Right), the number of shares of Common Stock
of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and any additional consideration receivable as a result
of such Fundamental Transaction by a Holder of one share of Common Stock. Upon
the occurrence of any such Fundamental Transaction, the any successor entity in
a Fundamental Transaction in which the Company is not the survivor (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 Agreement
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
Agreement and the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein.

 

11.14   Notice to Allow Exercise of Right. If at any time while the Rights
remain outstanding, (A) the Company shall declare a dividend (or any other
distribution in whatever form) on the Common Stock, (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Company shall authorize the granting to all Holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property, or (E) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company, then, in each case, the Company shall cause to be mailed to the Holder
at least 10 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the Holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that Holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. To the extent that any notice
provided hereunder constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K. The Holder shall remain entitled to exercise the Rights during the
period commencing on the date of such notice to the effective date of the event
triggering such notice except as may otherwise be expressly set forth herein.

 

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11.15   No Rights as Stockholder Until Exercise. Each Right does not entitle the
Holder to any voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof.

 

11.16   Transferability. Subject to compliance with any applicable securities
laws, the Rights and all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, upon written
assignment substantially in the form attached hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer taxes payable
upon the making of such transfer of this Agreement delivered to the principal
office of the Company or its designated agent. Upon such assignment and, if
required, such payment, the Company shall enter into a new agreement with the
assignee or assignees, as applicable, and this Agreement shall promptly be
cancelled. Any Right, if properly assigned in accordance herewith, may be
exercised by a new Holder for the issue of Reserved Shares without having a new
agreement executed.

 

12.   Miscellaneous Provisions. Section 9 of the August Securities Purchase
Agreements (as amended hereby) is hereby incorporated by reference herein,
mutatis mutandis.

 

[The remainder of the page is intentionally left blank]

 

 22 

 

IN WITNESS WHEREOF, Holders and the Company have executed this Agreement as of
the date set forth on the first page of this Agreement.

 

  COMPANY:       HELIOS AND MATHESON ANALYTICS INC.         By: /s/ Theodore
Farnsworth     Name: Theodore Farnsworth     Title:   Chief Executive Officer

 

 23 

 

IN WITNESS WHEREOF, Holders and the Company have executed this Agreement as of
the date set forth on the first page of this Agreement.

 

  HOLDER:       HUDSON BAY MASTER FUND LTD   By: Hudson Bay Capital Management
LP, its investment manager         By: /s/ George Antonopoulos     Name: George
Antonopoulos     Title:   Authorized Signatory

 

 24 

 

EXHIBIT A

 

NOTICE OF ISSUANCE

 

The undersigned holder hereby exercises the rights (the “Rights”) to receive
_________________ of the shares of Common Stock (the “Reserved Shares”) of
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”), established pursuant to that certain Third Amendment and Exchange
Agreement, dated October 23, 2017, by and between the Company and the investor
signatory thereto (the “Exchange Agreement”). Capitalized terms used herein and
not otherwise defined shall have the respective meanings set forth in the
Exchange Agreement.

 

The Company shall deliver to Holder, or its designee or agent as specified
below, __________ Reserved Shares in accordance with the terms of the Rights.
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: