Item 1.01 Entry into a Material
Definitive Agreement
On May 23,
2017, Nxt-ID, Inc. (the “Company”), completed a merger (the “Merger”) pursuant to an executed
Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Fit Merger Sub, Inc., a
wholly-owned subsidiary of the Company (the “Merger Sub”), Fit Pay, Inc. (“Fit Pay”), Michael Orlando
(“Orlando”), Giesecke & Devrient Mobile Security America, Inc. (“G&D”), the other
stockholders of Fit Pay (the “Other Holders”) and Michael Orlando in his capacity as stockholder representative
representing the Other Holders (the “Stockholder Representative”, and together with Orlando and G&D, the
“Sellers”). Pursuant to the Merger, Fit Pay
merged with and into the Merger Sub, with the Merger Sub continuing as the surviving entity and a wholly owned subsidiary of
the Company.
Merger Agreement
Pursuant to the
terms of the Merger Agreement, the aggregate purchase price paid for Fit Pay was: (i) 19.96% of the outstanding shares of common
stock of the Company (the “Common Stock”); (ii) 2,000 shares of the Series C Non- Convertible Preferred Stock of the
Company (the “Series C Preferred Stock”); (iii) the payment of certain debts by the Company; and (iv) the payment of
certain unpaid transaction expenses by the Company. In addition, the Company will be required to pay the Sellers an earnout payment
equal to 12.5% of the gross revenue derived from Fit Pay’s technology for sixteen (16) fiscal quarters commencing on October
1, 2017 and ending on December 31, 2021. The Company also assumed various promissory notes issued by Fit Pay to Orlando. Following
the Merger, all of the preferred and common stock of Fit Pay was transferred to the Company.
The Merger Agreement
contains customary representations, warranties, covenants and indemnification obligations of the parties to the Merger. The Merger
Agreement is also subject to customary closing conditions. Following the Merger, Orlando, Fit Pay’s President, became
Chief Operating Officer of the Company, and President of the Merger Sub.
The foregoing
description of the Merger Agreement is not complete, and is qualified in its entirety by reference to the full text of the Merger
Agreement, the form of which is filed as Exhibit 10.1 hereto, and is incorporated herein by reference.
Series C Non-Convertible Preferred
Stock
Ranking
The Series C Preferred Stock will rank
junior to our Series A Convertible Preferred Stock, $0.0001 par value per share, and our Series B Convertible Preferred, $0.0001
par value per share with respect to dividend rights and/or rights upon distributions, liquidation, dissolution or winding up of
the Company.
Dividends on Series C Non-Convertible
Preferred Stock
Holders of Series C Preferred Stock shall
be entitled to receive from, from and after the first date of issuance of the Series C Preferred Stock, cumulative dividends at
a rate of 5% per annum on a compounded basis, which dividend amount shall be guaranteed. Accrued and unpaid dividends shall
be payable in cash.
Redemption of Series C Non-Convertible
Preferred Stock
The Series C Preferred Stock may be redeemed
by the Company in cash at any time, in whole or in part, upon payment of the stated value of the Series C Preferred Stock, and
all related accrued but unpaid dividends.
Fundamental Change
If a “fundamental change” occurs
at any time while the Series C Preferred Stock is outstanding, the holders of shares of Series C Preferred Stock then outstanding
shall be immediately paid, out of the assets of the Company or the proceeds of such fundamental change, as applicable, and legally
available for distribution to its stockholders, an amount in cash equal to the stated value of the Series C Preferred Stock, and
all related accrued but unpaid dividends.
If the legally available assets of the
Company and the proceeds of such “fundamental change” are insufficient to pay the all of the Holders of the Series
C Preferred Stock, then the Holders of the Series C Preferred Stock shall share ratably in any such distribution in proportion
to the amount that they would have been entitled to. A fundamental change includes but is not limited to any change in the ownership
of at least 50% of the voting stock; liquidation or dissolution; or the Common Stock ceases to be listed on the market upon which
it currently trades.
Voting Rights
The holders of the Series C Preferred
Stock shall be entitled to vote on any matter submitted to the stockholders of the Company for a vote. One (1) share of Series
C Preferred Stock shall carry the same voting rights as one (1) share of Common Stock.