Item
1.01 Entry into a Definitive Material Agreement.
On
February 26, 2018, Next Group Holdings Inc. (“NXGH” or “NextGroup” or the “Company”) signed
a non-binding LOI with Cima Telecom, Inc. (“Cima”) agreeing that both parties will confirm the basic terms upon which
NextGroup shall move forward in the negotiation of definitive agreements to license the Knetic and Auris technology platforms
(collectively, the “
Platform
”) owned by Cima, in exchange for equity securities in NextGroup.
Cima
intends to grant NextGroup a fully paid, royalty-free, world-wide, perpetual, non-sublicensable license (the “License”)
to utilize the Auris and Knetic platforms and intellectual properties included in such platforms for the Financial Technology
(“FINTECH”) worldwide vertical markets. (the “Platforms”).The License to be granted shall be exclusive
for use within the FINTECH space, which for purposes of the License shall be defined as “connecting banking and prepaid
card usage. Cima will agree to not license the Platforms to any other person or entity for use within the FINTECH space. Rather,
NextGroup shall have the right to grant its customers, and its customers’ end-users, access to the services provided by
the Platforms. NextGroup may transfer the License to any subsidiaries or affiliates provided that NextGroup shall not have the
right to sell, assign, sub-license, or convey the License or Platforms to any third-parties.
As
consideration for the License, NextGroup intends to convey to Cima shares of capital stock of NextGroup (the “Shares”)
comprising an ownership interest of twenty-five percent (25%) of the issued and outstanding equity securities of NextGroup (the
“Purchase Price”), based upon NextGroup’s valuation of Fifty Million Dollars ($50,000,000.00). Cima and NextGroup
anticipate that the closing of the Transaction (the “Closing”) will take place as soon as reasonably practicable,
and will work towards a Closing to occur within sixty (60) days of the execution and delivery of this Letter by the Parties. Simultaneously
with the Closing, Cima will deliver the source code for the Platform to an escrow agent, to hold in escrow subject to the terms
and conditions of an escrow agreement in a form acceptable to Cima (the “Escrow Agreement”).
NextGroup
and Cima intend to enter into a definitive purchase agreement (“Purchase Agreement”) incorporating the terms and conditions
of this Letter relating to the acquisition of the Shares, and such customary representations, warranties, covenants and conditions,
including indemnification provisions, confidentiality provisions, and other customary provisions for Purchase Agreements of this
type which are reasonably acceptable to the parties.
Cima
and NextGroup intend to execute certain instruments and documents ancillary to the Purchase Agreement (the “Ancillary Documents”),
which set forth and govern the rights, preferences, and restrictions relating to Cima’s ownership interest in, and the operation
of, NextGroup, including, without limitation: (i) standard financial reporting and information rights; (ii) voting rights; and
(iii) the right to request that the shareholders of NextGroup elect one (1) director selected by Cima to NextGroup’s board
of directors (the “Board”), and if the shareholders do not elect such individual to the Board, then the right to require
NextGroup’s management to present a proxy to its shareholders recommending that the director selected by Cima be elected
to the Board. The Ancillary Documents may include, without limitation, an amended and restated certificate of incorporation, amended
and restated by-laws, voting agreement, investors’ rights agreement, and such other documents and instruments reasonable
necessary to effectuate the Transaction.
NextGroup
and Cima further intend to execute an exclusive license agreement (“License Agreement”), memorializing the worldwide
License of the Platforms, and an agreement governing the administration of the Platforms (the “Administration Agreement”).
Additionally, NextGroup and Cima intend to execute a software maintenance and support agreement (“Maintenance Agreement”,
collectively, with the Escrow Agreement, License Agreement, and Administration Agreement, the “Platform Agreements”),
commencing as of the Closing of the Transaction and continuing for a period of four (4) years thereafter, pursuant to which Cima
will provide certain maintenance and support services to NextGroup in connection with the Platform, and NextGroup will pay Cima
Three Million Five Hundred Thousand Dollars ($3,500,000.00), as follows: (a) year-one: Five Hundred Thousand Dollars ($500,000.00),
paid over the second (2nd) six-month period of the year; (b) year-two: Five Hundred Thousand Dollars ($500,000.00); (c) year-three:
One Million Dollars ($1,000,000.00); and (d) year-four: One Million Five Hundred Thousand Dollars ($1,500,000.00). The agreed
upon maintenance and support services costs set forth above will not be increased by Cima during the term of the Maintenance Agreement.
The
execution and delivery of the Purchase Agreement, Ancillary Documents, and Platform Agreements are material conditions of the
Transactions, and shall be delivered at Closing.
The
terms and conditions of the Transactions will be subject to and conditioned upon: (i) Cima’s complete and reasonable investigation
and analysis of NextGroup and its businesses (the “Due Diligence Investigation”); (ii) the Parties negotiating and
signing a definitive Purchase Agreement, Ancillary Documents, and Platform Documents(including any conditions set forth therein);
and (iii) the Parties obtaining all third party consents and approvals, if any, necessary for Cima’s acquisition or receipt
of the Shares (“Third Party Consents”).
Each
party hereto will bear its own costs and expenses in connection with the transactions contemplated by this Letter, including the
costs and expenses of accountants, lawyers and advisors.
NextGroup
acknowledges that following the execution of this Letter, Cima anticipates the expenditure of substantial efforts and resources
in the conduct of its Due Diligence Investigation of NextGroup and its businesses, and the preparation and negotiation of the
Purchase Agreement and Ancillary Documents. Accordingly, NextGroup agrees that it and its officers, members, managers, directors,
employees, representatives and agents will not, directly or indirectly, from the date this Letter is executed and delivered by
both Parties, and for one hundred eighty (180) days thereafter (such period, the “Exclusivity Period”) (a) license,
develop, create, or purchase a platform for the purpose or purposes that NextGroup intends to use the Platforms; or (b) solicit,
initiate, encourage or facilitate the invitation of inquiries or proposals or offers from any person or entity (other than Cima
or any of its Affiliates, or any of their respective members, managers, directors, officers, shareholders, employees, representatives
and agents) concerning the licensing or development of a platform for the purpose or purposes that NextGroup intends to use the
Platforms.
Each
party hereto shall be responsible for all fees, costs and expenses that may become due and owing to any broker or finder retained
by such party, and each such party shall indemnify and hold harmless the other party in connection therewith.