Item 5.02
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Departure of
Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
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Employment
Agreement with Theodore Farnsworth
On
December 11, 2017 (the “Effective Date”), Helios and Matheson Analytics Inc. (the “Company”) entered into
an employment agreement (the “Agreement”) with Theodore Farnsworth, its Chief Executive Officer and Chairman of the
Company’s Board of Directors (the “Board”). The Agreement has an initial term of five years and, following the
expiration of the initial term, will be automatically renewed for additional consecutive terms of one year, unless either the
Company or Mr. Farnsworth objects to the renewal upon at least ninety days prior to the commencement of the renewal term.
Compensation
Each
grant of common stock discussed below will be subject to approval by the Company’s shareholders to the extent required by
the Listing Rules of The Nasdaq Stock Market, including Listing Rule 5635(c). The Company anticipates seeking such shareholder
approval during the first half of 2018.
Base
Salary.
Pursuant to the Agreement, Mr. Farnsworth’s base salary will be $325,000 per year and will be increased on each
anniversary of the Effective Date in an amount to be determined by the Board, but in no event less than $15,000.
Annual
Bonus.
For 2017, Mr. Farnsworth will receive a year-end cash bonus in the amount of $350,000 and an award of 53,255 shares
of the Company’s common stock which shall vest on February 15, 2019, which have a value of $450,000, as determined by the
last closing price of the common stock preceding the grant date (December 10, 2017). For each subsequent year of the term, Mr.
Farnsworth will receive an annual bonus, made up of cash and shares of the Company’s common stock, as determined in the
sole discretion of the Board based on its assessment of Company and individual performance in relation to performance targets,
a subjective evaluation of Mr. Farnsworth’s performance or such other criteria as may be established by the Board. The annual
cash target bonus will be 25% of Mr. Farnsworth’s base salary and the annual award of shares of the Company’s common
stock will have a value equal to 200% of his base salary, also determined by the closing price of the common stock on the grant
date. Shares of common stock granted to Mr. Farnsworth in each subsequent year of the term will vest ratably at the end of each
of the six calendar quarters subsequent to the calendar quarter in which the grant is made.
Market
Capitalization Milestone Bonus.
Mr. Farnsworth will receive a stock bonus based upon the Company’s achievement of certain
market capitalization milestones during the term of the agreement, as set forth in the table below. Each award of common stock
pursuant to a market capitalization milestone will vest upon the later of February 15, 2019 and the end of the applicable three-month
period following the applicable date of the grant. The Company’s market capitalization for each applicable milestone and
measurement period will be determined based on the market capitalization reported by Bloomberg LP.
Company
Market
Capitalization Milestone
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Percentage
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$100,000,000
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3%
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$150,000,000
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3%
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$200,000,000
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4%
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$250,000,000
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4%
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$300,000,000
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5%
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$350,000,000
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5%
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$400,000,000
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7%
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$450,000,000
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7%
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$500,000,000
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9%
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every
additional $100,000,000 thereafter (cumulated with the applicable immediately preceding milestone)
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10%
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Each
milestone above is a separate milestone for which Mr. Farnsworth may earn the applicable percentage. Mr. Farnsworth will be entitled
to earn the applicable percentage for each milestone only once.
Capital Raise Bonus.
Mr. Farnsworth will receive a one-time bonus of
$1,000,000, payable no later than December 29, 2017, for his efforts in bringing capital sources that have been critical to the
Company’s needs during 2017. Mr. Farnsworth may, in his sole discretion, subject to the Company’s and Mr. Farnsworth’s
compliance with applicable legal and regulatory requirements, elect to accept unregistered shares of common stock of the Company
in lieu of the cash bonus described above, valued based on the last closing price of the common stock on Nasdaq preceding the
execution of the Agreement.
Grant
of Common Stock.
In approving the Agreement, the Board approved the issuance of 2,000,000 shares of common stock to Mr.
Farnsworth, which have a market value of $16,900,000 based on the last closing price of the common stock preceding the grant
date (December 10, 2017). The shares will vest in their entirety on February 15, 2019, which is 18 months following August
15, 2017, the date on which the Company entered into a Securities Purchase Agreement with MoviePass Inc. (the “MoviePass SPA”). Pursuant to the terms of the MoviePass SPA, the Company was required to enter into a 5-year employment
agreement with Mr. Farnsworth prior to the closing of the acquisition transaction contemplated by the MoviePass SPA, which occurred on December 11, 2017.
Other
Benefits
Life
Insurance.
The Company will pay the premiums of an insurance policy insuring Mr. Farnsworth’s life, providing coverage
in the amount of $3,000,000, payable to a beneficiary chosen by Mr. Farnsworth.
Automobile
Allowance.
Mr. Farnsworth will receive an automobile allowance of $750 per month.
Company
Benefits.
Mr. Farnsworth will be entitled to participate in all pension, savings and retirement plans, welfare and insurance
plans, practices, policies, programs and perquisites of employment applicable generally to other senior executives of the Company.
Termination
Provisions
The
Company may terminate the Agreement as a result of the death or disability of Mr. Farnsworth or for “cause” as defined
in the Agreement. Mr. Farnsworth may terminate the Agreement upon 30 days’ notice to the Company or for “good reason,”
as defined in the Agreement. If the Agreement is terminated by Mr. Farnsworth for any reason other than good reason, terminated
by the Company for cause, or expires by its terms, Mr. Farnsworth will receive earned but unpaid base salary, unpaid expense reimbursements,
any earned but unpaid annual bonus, and the value of any accrued and unused vacation days (collectively, the “Accrued Obligations”).
If
the Agreement is terminated due to his death or disability, Mr. Farnsworth will receive the Accrued Obligations; a pro-rata portion
of the annual bonus, if any, for the fiscal year in which the termination occurs; accelerated vesting of any equity-incentive
awards; reimbursement of health insurance premiums, for himself or his dependents in the event of his death, for a period of 18
months; and, in the event of his disability, continuation of the base salary until the earlier of (A) the 12 month anniversary
of the termination date of his employment and (B) the date Mr. Farnsworth is eligible to commence receiving payments under the
Company’s long-term disability policy.
If
Mr. Farnsworth’s employment is terminated due to a Change in Control, as defined in the Agreement, without cause by the
Company or for good reason by Mr. Farnsworth, he will receive the Accrued Obligations; severance in a single lump sum installment
in an amount equal to 2 times the sum of (A) the base salary plus (B) an amount equal to 2 times the maximum annual bonus for
which he is eligible in the fiscal year in which the termination of his employment occurs, or if there is no annual bonus for
which he is eligible in that year, then 2 times the annual bonus most recently paid to him; a pro-rata portion of the annual bonus,
if any, for the fiscal year in which the termination occurs; accelerated vesting of any equity-incentive awards; and reimbursement
of health insurance premiums for a period of 18 months.
If, as of the date of a
Change in Control, Mr. Farnsworth holds equity awards that are not vested and, if applicable, exercisable, such equity awards will
become fully vested and, if applicable, exercisable, as of the date of the Change in Control if the acquirer does not agree to
assume the awards or substitute equivalent equity awards.
In conjunction with the
execution of the Agreement, the Board renounced on behalf of the Company and its shareholders all interest and expectancy to (or
being offered any opportunity to participate in) any opportunity presented to Mr. Farnsworth that may be considered a corporate
opportunity of the Company, except with respect to opportunities in which the Company would be interested in the ordinary course
of its business and which are presented to Mr. Farnsworth in his capacity as a director or executive officer of the Company.
The Agreement includes
standard provisions relating to maintaining the confidentiality of the Company’s confidential information, non-solicitation
of the Company’s employees and indemnification.
The above discussion does
not purport to be a complete description of the Agreement and is qualified in its entirety by reference to the full text of such
document, which is attached as an exhibit to this Current Report and incorporated herein by reference.