Item 1.01 Entry into a Material Definitive Agreement
As previously disclosed
in that certain Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on June 29, 2022
(the “Prior 8-K”), on June 28, 2022, NextPlay Technologies, Inc., a Nevada corporation (the “Company”), entered
into a series of agreements whereby it agreed to sell its travel (NextTrip) and media (Reinhart/Zappware) businesses to TGS Esports Inc.
(“TGS”), a British Columbia corporation listed for trading on the Canadian TSX Venture Exchange (the “TSXV”),
in exchange for securities of TGS (the “Transaction”). To effectuate the Transaction, the parties thereto entered into a series
of agreements including (i) a Securities Exchange Agreement to effectuate the sale of NextTrip and Reinhart/Zappware and (ii) a Separation
Agreement to further document the separation of NextTrip and Reinhart/Zappware from the Company.
On January 25, 2023,
the Company, TGS and Messrs. William Kerby and Donald Monaco (as parties to the Securities Exchange Agreement) mutually agreed to terminate
the Securities Exchange Agreement and the Transaction as a result thereof (the “Termination”). Due to the Termination, the
Separation Agreement also terminated on its own terms.
Following the Termination,
also on January 25, 2023, the Company and its travel business, NextTrip Group, LLC and its subsidiaries (“NextTrip”) agreed
to formally complete the separation of NextTrip from the Company (the “Separation”) whereby NextTrip agreed to issue its nonvoting
preferred LLC units (the “Preferred Units”) to the Company in exchange for the Company’s existing majority-owned Common
Units in NextTrip thereby effectuating the separation of NextTrip from the Company.
Following the Separation,
the Company will continue to operate its remaining business units, including its HotPlay, NextFintech and NextBank lines of business and
has retained its Media (Reinhart/Zappware) business.
In order to effectuate
the Separation, the Company and NextTrip entered into a series of agreements which are described below.
Amended and Restated
Separation Agreement
Concurrently with the
execution of the Securities Exchange Agreement, the Company, NextTrip, Reinhart and TGS entered into a separation agreement to further
document the separation of NextTrip and Reinhart from the Company and to assign, transfer and convey certain assets and liabilities held
in NextTrip or the Company’s name, respectively, to NextTrip or the Company, respectively, to allow for the separation of the businesses
in the Securities Exchange Agreement at closing of the Transaction.
As a result of the Termination,
the Separation Agreement by and among the above parties was terminated. On January 25, 2023, however, the Company and NextTrip, mutually
determined to complete the Separation contemplated in the Separation Agreement by entering into an amended and restated separation agreement
(the “Amended and Restated Separation Agreement”).
The Amended and Restated
Separation Agreement terminates certain intercompany agreements and accounts by and between NextTrip and the Company, sets rights related
to confidentiality, non-disclosure and maintenance of attorney-client privilege matters by and between NextTrip and the Company and also
provides for a mutual release by and among the Company and NextTrip for all pre-closing claims between themselves and related officers,
directors, affiliates, successors and assigns.
In addition, the Amended
and Restated Separation Agreement provides for the contribution by the Company of (i) $1.5 million to NextTrip and (ii) an additional
$1.5 million in ten (10) equal monthly installments beginning July 1, 2022, in exchange for NextTrip, as of May 1, agreeing to assume
the ongoing operating expenses of NextTrip and, with respect to Reinhart/Zappware, until February 1, 2023.
Amended and Restated
Operating Agreement
In connection with the
Separation, NextTrip amended and restated its operating agreement (the “Amended and Restated Operating Agreement”) to, among
other things, designate and establish the rights, obligations and privileges of the Preferred Units, as more particularly described below,
which Preferred Units were issued to the Company.
Voting
The Preferred Units are
non-voting and no holder of Preferred Units, unless otherwise provided by law, is entitled to receive notice of and to attend meetings
of members of NextTrip.
Dividends
No dividend or other
distribution will be paid, declared or set apart for payment in respect of any NextTrip common units or units of any other class ranking
junior to the Preferred Units in respect of dividends unless a dividend is paid or declared and set apart for payment in respect of each
outstanding Preferred Unit in an amount at least equal to the product of (i) the amount of dividends paid, declared or set apart for each
share of such other class (calculated on an as-converted to common units basis) and (ii) the number of shares into which each Preferred
Unit is then convertible, prior to any such dividend being paid to common holders.
Liquidation
Upon the occurrence of
a NextTrip liquidation event (dissolution, merger/acquisition or sale or related transactions), the holders of Preferred Units are entitled,
in preference to the rights of holders of the common shares, for Preferred Unit, an amount equal to the initial price of $10.00 per Unit
based on based on a Fair Market Value of the Preferred Units outstanding of four million dollars ($4,000,000), provided, however, that,
in the event that the conversion price in such newly publicly traded company is not $10.00 per Unit, then the Initial Price shall adjust
to such applicable conversion price (the “Initial Price”), plus any declared but unpaid dividends or distributions on such
Preferred Units.
Redemption
The Preferred Units:
(i) may be redeemed by NextTrip upon the mutual consent of NextTrip and the Company, (ii) up to 50% of the Preferred Units may be redeemed
at any time after the date of NextTrip becoming listed on a U.S. senior exchange (a “Qualified Listing”) but prior to a Distribution
(as defined below) upon NextTrip’s election (with a redemption of more than 50% of the Preferred Units subject to the Company’s
consent), or (iii) at the end of four (4) years from the closing date at the election of the Company. The redemption price per share is
equal to the Initial Price.
Conversion and Mandatory
Distribution
The Preferred Units are
only convertible into NextTrip common shares by the Company if immediately distributed as a stock dividend to the Company’s stockholders.
The Preferred Units are
convertible at a rate of one NextTrip common share for each Preferred Unit: (i) upon the mutual consent of the Preferred Units holder
(initially, the Company) and NextTrip or (ii) if, after 12 months from the initial issuance of the Preferred Units, the Company is required
to convert any Preferred Units in order to be compliant under the US Investment Company Act of 1940.
The Preferred Units are
automatically convertible and distributable (i) upon the completion of a Qualified Listing or (ii) forty-eight (48) months from the closing
date; provided, however, that the Company has the option to first require redemption of such Preferred Units as described above.
The mandatory distribution
by a holder of Preferred Units (initially, the Company) shall be governed by Section 2.2 of that certain Right of First Refusal and Distribution
Agreement which is effective concurrently herewith, the form of which is attached as an exhibit hereto and incorporated by reference herein.
Restrictions on Transfer
The Company may sell
the Preferred Units at any time, provided (i) NextTrip has a right of first refusal and (ii) NextTrip must consent to the sale, provided,
however, that, in the event that holding the Preferred Units presents U.S. Investment Company Act of 1940 issues for the Company at any
time after the 1-year anniversary of the closing of the Separation, the Company can (i) sell the Preferred Units subject to NextTrip’s
right of first refusal, or (ii) if the buyer and/or affiliates of said buyer is greater than a 10% owner of NextTrip, then NextTrip must
also consent to the sale. An additional description of the right of first refusal is set forth in “Right of First Refusal and
Distribution Agreement” described below.
Right of First
Refusal and Distribution Agreement
In connection with the
Separation, the Company entered into a right of first refusal and distribution agreement (the “Right of First Refusal Agreement”),
a copy of which is attached hereto and incorporated by reference herein, that governs certain rights between the Company and NextTrip
with respect to the subsequent disposition of the Preferred Units. Specifically, as provided in the Amended and Restated Operating Agreement
of NextTrip, (i) NextTrip has a right of first refusal to purchase the Preferred Units prior to a proposed sale of the Preferred Units
by the Company in the situations described in “Amended and Restated Operating Agreement - Restrictions on Transfer”
set forth above and (ii) in the event of a conversion of Preferred Units by the Company into common stock of NextTrip (following a going
public transaction, the Company is obligated to distributed such NextTrip common stock in a stock dividend to its stockholders as described
in “Amended and Restated Operating Agreement – Conversion and Distribution”. Both the right of first refusal
and distribution rights and obligations are set forth in this Right of First Refusal Agreement.
Exchange Agreement
As further described
above, in consideration for the Preferred Units, the Company exchanged its majority-ownership in NextTrip in the form of 100% of its Common
Units in NextTrip. The Company and NextTrip entered into that certain Exchange Agreement, dated as of January 25, 2023, documenting such
exchange.
The preceding summaries
do not purport to be complete and are qualified in their entirety by reference to the Amended and Restated Separation Agreement, the Amended
and Restated Operating Agreement, the Right of First Refusal Agreement and Exchange Agreement are subject to, and qualified in their entirety
by, the terms of said documents attached as Exhibits 10.1, 10.2, 10.3 and 10.4 hereto, respectively, which are incorporated by reference
herein.