As filed with the Securities and Exchange Commission on April 29, 2019

File No. 001-         

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934

PARTX, INC.
(Exact name of registrant as specified in its charter)

(760) 444-0029
(Registrant’s telephone number, including area code)

Securities to be registered pursuant to Section 12(b) of the Act: None.

Securities to be registered pursuant to Section 12(g) of the Act:

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

INFORMATION REQUIRED IN REGISTRATION STATEMENT

CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10

Our information statement is filed as Exhibit 99.1 of this Registration Statement on Form 10 (the “Information Statement”) and is incorporated by reference herein. For your convenience, we provide below a cross-reference sheet identifying where the items required by this Registration Statement on Form 10 can be found in the Information Statement.

Item 1. Business

The information required by this item is contained under the sections of the Information Statement entitled “Summary,” “Risk Factors,” “Special Note About Forward-Looking Statements,” “The Spin-Off,” “Capitalization,” “Unaudited Pro Forma Combined Financial Statements” and the financial statements referenced therein, “Our Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Management,” “Executive and Director Compensation,” “Certain Relationships and Related Party Transactions,” “Where You Can Find More Information” and “Index to Financial Statements” and the financial statements referenced therein.

Item 1A. Risk Factors

The information required by this item is contained under the sections of the Information Statement entitled “Risk Factors” and “Special Note About Forward-Looking Statements.”

Item 2. Financial Information

The information required by this item is contained under the section of the Information Statement entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 3. Properties

The information required by this item is contained under the section of the Information Statement entitled “Our Business—Properties.”

Item 4. Security Ownership of Certain Beneficial Owners and Management

The information required by this item is contained under the section of the Information Statement entitled “Security Ownership of Certain Beneficial Owners and Management.”

Item 5. Directors and Executive Officers

The information required by this item is contained under the section of the Information Statement entitled “Management.”

Item 6. Executive Compensation

The information required by this item is contained under the section of the Information Statement entitled “Executive and Director Compensation.”

Item 7. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is contained under the sections of the Information Statement entitled “Management” and “Certain Relationships and Related Party Transactions.”

Item 8. Legal Proceedings

The information required by this item is contained under the section of the Information Statement entitled “Our Business—Legal Proceedings.”

Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

The information required by this item is contained under the sections of the Information Statement entitled “Risk Factors,” “The Spin-Off,” “Trading Market,” “Dividend Policy,” “Executive and Director Compensation” and “Security Ownership of Certain Beneficial Owners and Management.”

Item 10. Recent Sales of Unregistered Securities

None.

Item 11. Description of Registrant’s Securities to be Registered

The information required by this item is contained under the sections of the Information Statement entitled “Risk Factors—Risks Relating to Our Common Stock,” “Dividend Policy” and “Description of Capital Stock.”

Item 12. Indemnification of Directors and Officers

The information required by this item is contained under the section of the Information Statement entitled “Description of Capital Stock—Limitations on Liability of Directors and Indemnification of Directors and Officers.”

Item 13. Financial Statements and Supplementary Data

The information required by this item is contained under the sections of the Information Statement entitled “Unaudited Pro Forma Combined Financial Statements” and the financial statements referenced therein, and “Index to Financial Statements” and the financial statements referenced therein.

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 15. Financial Statements and Exhibits

The information required by this item is contained under the sections of the Information Statement entitled “Unaudited Pro Forma Combined Financial Statements,” and the financial statements referenced therein, and “Index to Financial Statements” and the financial statements referenced therein.

The following documents are filed as exhibits hereto:

* To be filed by amendment.

† Management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: April 29, 2019

4

Exhibit 3.1(i)

I, JEFEREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF “PARTX, INC.”, FILED IN THIS OFFICE ON THE ELEVENTH DAY OF OCTOBER, A.D. 2018, AT 4:57 O’CLOCK P.M.

A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY RECORDER OF DEEDS.

		/s/ Jeffrey W. Bullock
		Jeffrey W. Bullock, Secretary of State
7098081 8100 SR# 20187103587		Authentication: 203598150 Date: 10-12-18
You may verify this certificate online at corp.delaware.gov/authver.shtml

CERTIFICATE OF INCORPORATION

A STOCK CORPORATION

OF

PARTX, INC.

FIRST: The name of the Corporation is PartX, Inc.

SECOND: Its registered office in the State of Delaware is to be located at 341 Raven Circle, in the City of Wyoming, DE, County of Kent, 19934. The registered agent in charge at this address is Corporations USA, LLC.

THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

FOURTH: The amount of the total stock this Corporation is authorized to issue is 200,000,000 shares of common stock, and 20,000,000 shares of blank check preferred stock, both with a par value of $0.0001 per share.

FIFTH: The name and mailing address of the incorporator is as follows:

Gino Pereira

1627 U.S. Highway 1

Unit 206

Sebastian, FL 32958

I, the Undersigned, for the purpose of forming a corporation under the laws of the State of Delaware, do make, file and record this Certificate, and do certify that the facts herein stated are true, and I have accordingly hereunto set my hand this 11^th day of October, 2018.

Exhibit 3.2

PARTX, INC.
a Delaware corporation

BYLAWS

As Adopted _____ ___, 2019

TABLE OF CONTENTS

ARTICLE I: STOCKHOLDERS

Section 1.1:  Annual Meetings. If required by applicable law, an annual meeting of stockholders shall be held for the election of directors at such date and time as may be determined from time to time by the Board of Directors of the Corporation (the “Board”). The meeting may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board in its sole discretion may determine. Any other proper business may be transacted at the annual meeting.

Section 1.2:  Special Meetings. Unless otherwise provided by the Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), special meetings of stockholders for any purpose or purposes may be called at any time by the Chairperson of the Board, the President, the Chief Executive Officer, or by a majority of the total number of authorized directors, whether or not there exist any vacancies in previously authorized directorships (the “Whole Board”), and may not be called by any other person or persons. Any special meeting may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board in its sole discretion may determine.

Section 1.3:  Notice of Meetings. Notice of all meetings of stockholders shall be given in writing or by electronic transmission in the manner provided by applicable law (including, without limitation, as set forth in Section 7.1.1 of these Bylaws) stating the place, if any, date and time of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by applicable law or the Certificate of Incorporation, such notice shall be given not less than ten (10), nor more than sixty (60), days before the date of the meeting to each stockholder of record entitled to vote at such meeting as of the record date for determining stockholders entitled to notice of the meeting.

Section 1.4:  Adjournments. Any meeting of stockholders, annual or special, may adjourn from time to time, and notice need not be given of any such adjourned meeting if the time, date and place (if any) thereof and the means of remote communications (if any) by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting; provided, further, that if after the adjournment a new record date for stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix a new record date for notice of such adjourned meeting (which record date for determining stockholders entitled to notice of such adjourned meeting shall be the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting), and shall give notice of the adjourned meeting to each stockholder of record as of the record date so fixed for notice of such adjourned meeting. At the adjourned meeting the Corporation may transact any business that might have been transacted at the original meeting. To the fullest extent permitted by law, the Board may postpone, reschedule or cancel any previously scheduled annual or special meeting of stockholders.

Section 1.5:  Quorum. Except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, at each meeting of stockholders the holders of a majority of the voting power of the shares of stock entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business. If such quorum shall not be present or represented at any meeting of stockholders, the chairperson of the meeting may adjourn the meeting without notice other than announcement at the meeting, until such quorum shall be present or represented by proxy. Shares of the Corporation’s stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation), shall neither be entitled to vote nor counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any other corporation to vote any shares of the Corporation’s stock held by it in a fiduciary capacity and to count such shares for purposes of determining a quorum.

Section 1.6:   Organization; Conduct of Meetings. Meetings of stockholders shall be presided over by such person as the Board may designate or, in the absence of such a person, the Chairperson of the Board, or, in the absence of such person, the Chief Executive Officer of the Corporation, or, in the absence of such person, the President of the Corporation, or, in the absence of such person, such person as may be chosen by the holders of a majority of the voting power of the shares entitled to vote who are present, in person or by proxy, at the meeting. Such person shall be chairperson of the meeting. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the chairperson of the meeting shall have the right and authority to convene and, for any or no reason, to recess and/or to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as in his or her judgment are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chairperson, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairperson of the meeting shall determine; restrictions on entry to the meeting after the time fixed for the commencement thereof; and limitations on the time allotted to questions or comments by participants. The chairperson of the meeting, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and, if such chairperson should so determine, such chairperson shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. The Secretary of the Corporation shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

Section 1.7:  Voting; Proxies. Each stockholder entitled to vote at a meeting of stockholders, or to take corporate action by written consent without a meeting, may authorize another person or persons to act for such stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Except as otherwise provided by the Certificate of Incorporation, directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, or any other applicable rules or regulations, including the applicable rules or regulations of any stock exchange, every matter other than the election of directors shall be decided by the affirmative vote of a majority of the votes properly cast for or against such matter, and, for the avoidance of doubt, neither abstentions nor broker non-votes shall be counted as votes cast for or against such matter.

Section 1.8:  Fixing Date for Determination of Stockholders of Record.

1.8.1 Meetings. In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which record date shall not be more than sixty (60), nor less than ten (10), days before the date of such meeting. If the Board so fixes such record date for notice of such meeting, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date for notice of such meeting, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, then the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and, in such case, shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.

1.8.2 Stockholder Action by Written Consent. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board. If no record date has been fixed by the Board pursuant to the first sentence of this Section 1.8.2, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or to any officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. If no record date has been fixed by the Board pursuant to the first sentence of this Section 1.8.2, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting if prior action by the Board is required by applicable law shall be at the close of business on the date on which the Board adopts the resolution taking such prior action.

1.8.3 Other Matters. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than sixty (60) days prior to such action. If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

Section 1.9:  List of Stockholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before the date of every meeting of stockholders, a complete list of stockholders entitled to vote at the meeting; provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth (10th) day before the meeting date, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten (10) days prior to the meeting, (i) on a reasonably accessible electronic network (provided that the information required to gain access to the list is provided with the notice of the meeting), or (ii) during ordinary business hours at the principal place of business of the Corporation. If the meeting is to be held at a place, the list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present at the meeting. If the meeting is held solely by means of remote communication, then the list shall be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access the list shall be provided with the notice of the meeting.

Section 1.10:  Action by Written Consent of Stockholders.

1.10.1 General. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which minutes of proceedings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall, to the extent required by law, be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation.

1.10.2 Procedures. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days after the earliest dated written consent received in accordance with this Section 1.10, a valid written consent or valid written consents signed by a sufficient number of stockholders to take such action are delivered to the Corporation in the manner prescribed in this Section 1.10 and applicable law, and not revoked.

Section 1.11:  Inspectors of Elections.

1.11.1 Applicability. Unless otherwise required by the Certificate of Incorporation or by the General Corporation Law of the State of Delaware (the “DGCL”), the following provisions of this Section 1.11 shall apply only if and when the Corporation has a class of voting stock that is: (a) listed on a national securities exchange; (b) authorized for quotation on an interdealer quotation system of a registered national securities association; or (c) held of record by more than two thousand (2,000) stockholders. In all other cases, observance of the provisions of this Section 1.11 shall be optional, and at the discretion of the Board.

1.11.2 Appointment. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the chairperson of the meeting shall appoint one or more inspectors to act at the meeting.

1.11.3 Inspector’s Oath. Each inspector of election, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability.

1.11.4 Duties of Inspectors. At a meeting of stockholders, the inspectors of election shall (a) ascertain the number of shares outstanding and the voting power of each share, (b) determine the shares represented at a meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by the inspectors, and (e) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.

1.11.5 Opening and Closing of Polls. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced by the chairperson of the meeting at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery of the State of Delaware upon application by a stockholder shall determine otherwise.

1.11.6 Determinations. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Section 211(e) or Section 212(c)(2) of the DGCL, or any information provided pursuant to Section 211(a)(2)b.(i) or (iii) of the DGCL, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted under the DGCL and set forth herein, the inspectors at the time they make their certification of their determinations pursuant to the relevant provisions of the DGCL set forth herein shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.

Section 1.12:  Notice of Stockholder Business; Nominations.

1.12.1 Annual Meeting of Stockholders.

(a) Nominations of persons for election to the Board and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders (i) pursuant to the Corporation’s notice of such meeting (or any supplement thereto), (ii) by or at the direction of the Board or any committee thereof or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of the notice provided for in this Section 1.12, who is entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 1.12.

(b) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to Section 1.12.1(a):

(i) the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation;

(ii) any such proposed business (other than the nomination of persons for election to the Board) must constitute a proper matter for stockholder action;

(iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the Corporation with a Solicitation Notice, as that term is defined in this Section, such stockholder or beneficial owner must, in the case of a proposal other than the nomination of persons for election to the Board, have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the Corporation’s voting shares reasonably believed by such stockholder or beneficial holder to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice; and

(iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this Section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section.

To be timely, a stockholder’s notice must be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by the stockholder to be timely must be so delivered (A) no earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and (B) no later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the close of business on the tenth (10th) day following the day on which Public Announcement of the date of such meeting is first made by the Corporation. In no event shall the Public Announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth:

(x) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (i) all information relating to such person that would be required to be disclosed in solicitations of proxies for election of directors, or would be otherwise required, in each case pursuant to and in accordance with Section 14(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder, and (ii) such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected;

(y) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made;

(z) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (ii) the class or series and number of shares of capital stock of the Corporation that are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among such stockholder and/or such beneficial owner, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing, including, in the case of a nomination, the nominee, (iv) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the stockholder’s notice by, or on behalf of, such stockholder and any such beneficial owner, whether or not such instrument or right shall be subject to settlement in underlying shares of capital stock of the Corporation, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner, with respect to securities of the Corporation, (v) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, (vi) a representation whether such stockholder or beneficial owner intends (or is part of a group that intends) to deliver a proxy statement and/or form of proxy to holders of, in the case of a proposal, at least the percentage of the Corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent being a “Solicitation Notice”), and (vii) any other information relating to such stockholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder.

The foregoing notice requirements of this Section 1.12.1(b) shall be deemed satisfied by a stockholder with respect to business other than a nomination if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with applicable rules and regulations promulgated under the Exchange Act and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require any proposed nominee to furnish such other information as the Corporation may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation.

(c) Notwithstanding anything in the second sentence of Section 1.12.1(b) to the contrary, in the event that the number of directors to be elected to the Board is increased effective after the time period for which nominations would otherwise be due under Section 1.12.1(b) and there is no Public Announcement by the Corporation naming the nominees for the additional directorships at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 1.12 shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the Secretary of the Corporation at the principal executive office of the Corporation no later than the close of business on the tenth (10th) day following the day on which such Public Announcement is first made by the Corporation.

1.12.2 Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of such meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of such meeting (a) by or at the direction of the Board or any committee thereof or (b) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice of the special meeting, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 1.12. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder entitled to vote in the election of such directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by Section 1.12.1(b) is delivered to the Secretary of the Corporation at the principal executive offices of the Corporation (i) no earlier than the close of business on the one hundred twentieth (120th) day prior to such special meeting and (ii) no later than the close of business on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall the Public Announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

1.12.3 General.

(a) Only such persons who are nominated in accordance with the procedures set forth in this Section 1.12 shall be eligible to be elected at a meeting of stockholders and to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.12. Except as otherwise provided by law, the chairperson of the meeting shall have the power and duty to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.12 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made or solicited (or is part of a group that solicited) or did not so solicit, as the case may be, proxies or votes in support of such stockholder’s nominee or proposal in compliance with such stockholder’s representation as required by Section 1.12.1(b)(z)(vi) and, if any proposed nomination or business was not made or proposed in compliance with this Section 1.12, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 1.12, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 1.12.3, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.

(b) For purposes of this Section 1.12, the term “Public Announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to section 13, 14 or 15(d) of the Exchange Act.

(c) Notwithstanding the foregoing provisions of this Section 1.12, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein; provided however, that any references in these Bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 1.12, and compliance with the requirements under this Section 1.12 shall be the exclusive means for a stockholder to make nominations or submit other business (other than, as provided in the penultimate sentence of Section 1.12.1(b), business other than nominations brought properly under and in compliance with Rule 14a-8 of the Exchange Act, as may be amended from time to time). Nothing in this Section 1.12 shall be deemed to affect any rights of (a) stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (b) the holders of any series of Preferred Stock to elect directors elected by one or more series of Preferred Stock pursuant to any applicable provisions of the Certificate of Incorporation.

ARTICLE II: BOARD OF DIRECTORS

Section 2.1:  Number; Qualifications. The number of directors constituting the Whole Board shall be the number fixed by, or determined in the manner provided in, the Certificate of Incorporation. No decrease in the authorized number of directors constituting the Whole Board shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.

Section 2.2:  Election; Resignation; Vacancies. Directors shall be elected for such terms and in the manner provided by the Certificate of Incorporation and applicable law. Each director shall hold office until such director’s successor is duly elected and qualified, or until such director’s earlier death, resignation or removal. Any director may resign at any time upon written notice to the Corporation. Except as otherwise provided by the Certificate of Incorporation or by applicable law, any vacancy in the Board resulting from the death, resignation, removal or disqualification of any director or for any other reason, and any newly created directorship resulting from any increase in the authorized number of directors to be elected by all stockholders entitled to vote generally in the election of directors, may be filled by the stockholders, by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director.

Section 2.3:  Regular Meetings. Regular meetings of the Board may be held at such place, within or without the State of Delaware, and at such times as the Board may from time to time determine. Notice of regular meetings need not be given if the date, times and places thereof are fixed by resolution of the Board.

Section 2.4:  Special Meetings. Special meetings of the Board may be called by the Chairperson of the Board, the President or a majority of the members of the Board then in office and may be held at any time, date or place, within or without the State of Delaware, as the person or persons calling the meeting shall fix. Notice of the time, date and place of such meeting shall be given orally (in person, by telephone or otherwise), in writing or by electronic transmission (including electronic mail), by the person or persons calling the meeting to all directors at least four (4) days before the meeting (if the notice is mailed) or at least twenty-four (24) hours before the meeting (if such notice is given orally, in person, by telephone or otherwise, or by hand delivery, facsimile, or other means of electronic transmission, including electronic mail). Unless otherwise indicated in the notice, any and all business may be transacted at a special meeting.

Section 2.5:  Remote Meetings Permitted. Members of the Board, or any committee of the Board, may participate in a meeting of the Board or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to conference telephone or other communications equipment shall constitute presence in person at such meeting.

Section 2.6:  Quorum; Vote Required for Action. Subject to Section 2.2 above, a majority of the Whole Board shall constitute a quorum for the transaction of business at any meeting of the Board. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date or time without further notice thereof. Except as otherwise provided herein or in the Certificate of Incorporation, or required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board.

Section 2.7:  Organization. Meetings of the Board shall be presided over by the Chairperson of the Board or, in such person’s absence, by the Chief Executive Officer or, in such person’s absence, by the President or, in such person’s absence, by a chairperson chosen by the Board at the meeting. The Secretary shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

Section 2.8:  Action by Unanimous Consent of Directors. Any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee, respectively, in the minute books of the Corporation. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Section 2.9:  Fees and Compensation of Directors. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board shall have the authority to fix the compensation of directors, including without limitation compensation for services as members of committees of the Board. No such compensation shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.

Section 2.10:  Chairperson of the Board. The Corporation may also have, at the discretion of the Board, a Chairperson of the Board who shall be elected from among its ranks and who shall have the power to preside at all meetings of the Board and have such other powers and duties as provided in these Bylaws and as the Board may from time to time prescribe. The Chairperson of the Board, as such, shall not be deemed to be an officer of the Corporation.

ARTICLE III: COMMITTEES

Section 3.1:  Committees. The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting of such committee who are not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to the following matters: (a) approving, adopting, or recommending to the stockholders any action or matter (other than the election or removal of members of the Board) expressly required by the DGCL to be submitted to stockholders for approval or (b) adopting, amending or repealing any bylaw of the Corporation.

Section 3.2:  Committee Minutes; Committee Rules. Each committee shall keep regular minutes of its meetings and, except as otherwise provided in the resolutions of the Board establishing such committee, shall report the same to the Board as requested by the Board or as otherwise required. Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these Bylaws.

ARTICLE IV: OFFICERS

Section 4.1:  Generally. The officers of the Corporation shall consist of a Chief Executive Officer, a President, a Secretary and a Treasurer and may consist of such other officers, including a Chief Financial Officer, and one or more Vice Presidents, as may from time to time be appointed by the Board (subject to the rights, if any, of an officer under any contract of employment). All officers shall be elected by the Board; provided, however, that the Board may empower the Chief Executive Officer of the Corporation to appoint any officer other than the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer. Each officer shall hold office until such person’s successor is appointed or until such person’s earlier resignation, death or removal. Any number of offices may be held by the same person. Any officer may resign at any time upon written notice to the Corporation. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board or, if the vacancy is of an office that the Chief Executive Officer has been empowered to appoint, the Chief Executive Officer.

Section 4.2:  Chief Executive Officer. Subject to the control of the Board and such supervisory powers, if any, as may be given by the Board, the powers and duties of the Chief Executive Officer of the Corporation are:

(a) To act as the general manager and, subject to the control of the Board, to have general supervision, direction and control of the business and affairs of the Corporation;

(b) Subject to Article I, Section 1.6 of these Bylaws, to preside at all meetings of the stockholders;

(c) Subject to the Certificate of Incorporation and Article I, Section 1.2 of these Bylaws, to call special meetings of the stockholders to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper; and

(d) To affix the signature of the Corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; and, subject to the direction of the Board, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.

The person holding the office of President shall be the Chief Executive Officer of the Corporation unless the Board shall have designated another person to be the Chief Executive Officer. If there is no President, and the Board has not designated any other person to be the Chief Executive Officer, then the Chairperson of the Board shall be the Chief Executive Officer until such time as a Chief Executive Officer or President shall have been appointed.

Section 4.3:  President. The person holding the office of Chief Executive Officer shall be the President of the Corporation unless the Board shall have designated one person as the President and a different person as the Chief Executive Officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board, and subject to the supervisory powers of the Chief Executive Officer (if the offices of Chief Executive Officer and President are not then held by the same person), the President shall have the responsibility for the general management and control of the business and affairs of the Corporation and the general supervision and direction of all of the officers, employees and agents of the Corporation (other than the Chief Executive Officer, if the offices of Chief Executive Officer and President are not then held by the same person) and shall perform all duties and have all powers that are commonly incident to the office of President, including the power to sign certificates representing shares of capital stock of the Corporation, or that are delegated to the President by the Board or the Chief Executive Officer (if such office is then held by a person other than the person holding the office of President).

Section 4.4:  Chief Operating Officer. The Chief Operating Officer shall have all such powers and duties as are commonly incident to the office of Chief Operating Officer or that are delegated to him or her by the Board or the Chief Executive Officer. The Chief Operating Officer may be designated by the Board to perform the duties and exercise the powers of the Chief Executive Officer or President in the event of the Chief Executive Officer’s and President’s absence or disability.

Section 4.5:   Vice President. Each Vice President shall have all such powers and duties as are commonly incident to the office of Vice President, including the power to sign certificates representing shares of capital stock of the Corporation, or that are delegated to him or her by the Board or the Chief Executive Officer. A Vice President may be designated by the Board to perform the duties and exercise the powers of the Chief Executive Officer or President in the event of the Chief Executive Officer’s and President’s absence or disability.

Section 4.6:   Chief Financial Officer. The person holding the office of Chief Financial Officer shall be the Treasurer of the Corporation unless the Board shall have designated another officer as the Treasurer of the Corporation. Subject to the direction of the Board and the Chief Executive Officer, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of Chief Financial Officer.

Section 4.7:   Treasurer. The Treasurer shall have custody of all moneys and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall also perform such other duties and have such other powers as are commonly incident to the office of Treasurer, including the power to sign certificates representing shares of capital stock of the Corporation, or as the Board or the Chief Executive Officer may from time to time prescribe.

Section 4.8:   Secretary. The Secretary shall issue or cause to be issued all authorized notices for, and shall keep, or cause to be kept, minutes of all meetings of the stockholders and the Board. The Secretary shall have charge of the corporate minute books and similar records and shall perform such other duties and have such other powers as are commonly incident to the office of Secretary, including the power to sign certificates representing shares of capital stock of the Corporation, or as the Board or the Chief Executive Officer may from time to time prescribe.

Section 4.9:  Delegation of Authority. The Board may from time to time delegate the powers or duties of any officer of the Corporation to any other officers or agents of the Corporation, notwithstanding any provision hereof.

Section 4.10:  Removal. Any officer of the Corporation shall serve at the pleasure of the Board and may be removed at any time, with or without cause, by the Board; provided that if the Board has empowered the Chief Executive Officer to appoint any officer of the Corporation, then any such officer may be removed by the Chief Executive Officer. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation.

Section 4.11:  Representation of Shares of Other Corporations. Except as otherwise provided by the Board, and subject to the direction and control thereof, the Chief Executive Officer, the President, the Chief Operating Officer, any Vice President, the Chief Financial Officer, the Treasurer, the Secretary or any assistant secretary of this Corporation, or any other person authorized by the Board or the Chief Executive Officer, the Chief Operating Officer or the President or a Vice President, is authorized to vote, represent, and exercise on behalf of this Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this Corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by the person having such authority.

ARTICLE V: STOCK

Section 5.1:  Certificates. The shares of capital stock of the Corporation shall be represented by certificates; provided, however, that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its capital stock may be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairperson or Vice-Chairperson of the Board, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.

Section 5.2:  Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates or Uncertificated Shares. The Corporation may issue a new certificate of stock, or uncertificated shares, in the place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

Section 5.3:  Other Regulations. The issue, transfer, conversion and registration of stock certificates and uncertificated shares shall be governed by such other regulations as the Board may establish.

ARTICLE VI: INDEMNIFICATION

Section 6.1:  Indemnification of Officers and Directors. Except to the extent that the General Corporation Law of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty, no director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such amendment. Each person who was or is made a party to, or is threatened to be made a party to, or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that such person is or was a director or officer of the Corporation, or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (for purposes of this Article VI, an “Indemnitee”), shall be indemnified and held harmless by the Corporation to the fullest extent permitted by applicable law, against all expenses, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith, provided such Indemnitee acted in good faith and in a manner that the Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful. Such indemnification shall continue as to an Indemnitee who has ceased to be a director or officer of the Corporation and shall inure to the benefit of such Indemnitees’ heirs, executors and administrators. Notwithstanding the foregoing, except as provided in Section 6.5, the Corporation shall not be obligated under this Article VI to indemnify any Indemnitee seeking indemnification in connection with a Proceeding (or part thereof) initiated by such Indemnitee unless such Proceeding (or part thereof) was authorized in the first instance by the Board.

Section 6.2:  Advance of Expenses. The Corporation shall pay all expenses (including attorneys’ fees) incurred by such an Indemnitee in defending any such Proceeding in advance of its final disposition; provided, however, that (a) the payment of such expenses incurred by such an Indemnitee in advance of the final disposition of such Proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined that such Indemnitee is not entitled to be indemnified under this Article VI or otherwise; and (b) the Corporation shall not be required to advance any expenses to a person against whom the Corporation directly brings a claim alleging that such person has breached such person’s duty of loyalty to the Corporation, committed an act or omission not in good faith or that involves intentional misconduct or a knowing violation of law, or derived an improper personal benefit from a transaction.

Section 6.3:  Non-Exclusivity of Rights. The rights conferred on any person in this Article VI shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaw, agreement, vote or consent of stockholders or disinterested directors, or otherwise. Additionally, nothing in this Article VI shall limit the ability of the Corporation, in its discretion but subject to applicable law, to provide rights to indemnification or advancement of expenses to any person other than an Indemnified Person or to provide greater rights to indemnification and advancement of expenses than those provided in this Article VI to any Indemnified Person.

Section 6.4:  Indemnification Agreements. The Board is authorized to cause the Corporation to enter into agreements with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing indemnification or advancement rights to such person. Such rights may be greater than those provided in this Article VI.

Section 6.5:  Claims.

6.5.1 Right to Bring Suit. If a claim for indemnification (following the final disposition of such proceeding) under Section 6.1 of this Article VI is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, or a claim for advancement of expenses is not paid in full within thirty (30) days after the Corporation has received a statement or statements therefor, the Indemnitee shall be entitled at any time thereafter (but not before) to bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Indemnitee shall be entitled, to the fullest extent permitted by law, to be paid also the expense of prosecuting or defending such suit. In (a) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (b) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the Indemnitee has not met any applicable standard of conduct for entitlement to indemnification under applicable law.

6.5.2 Effect of Determination. Neither the failure of the Corporation (whether by its directors who are not parties to such action, a committee of such directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the standard of conduct for entitled to indemnification under applicable law, nor an actual determination by the Corporation (whether by its directors who are not parties to such action, a committee of such directors, independent legal counsel or its stockholders) that the Indemnitee has not met such standard of conduct, shall create a presumption that the Indemnitee has not met such standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit.

6.5.3 Burden of Proof. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking provided hereunder, the burden of proving that the Indemnitee is not entitled to be indemnified, or is required to repay any amounts advanced pursuant to the terms of such undertaking, under this Article VI shall be on the Corporation.

Section 6.6:  Nature of Rights. The rights conferred upon Indemnitees in this Article VI shall be contract rights and such rights shall continue as to an Indemnitee who has ceased to be a director or officer of the Corporation and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators. Any right to indemnification or to advancement of expenses arising under this Article VI shall not be eliminated or impaired by an amendment to these Bylaws after the occurrence of the act or omission that is the subject of the Proceeding for which indemnification or advancement of expenses is sought.

Section 6.7:  Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of the DGCL.

ARTICLE VII: NOTICES

Section 7.1:  Notice.

7.1.1 Form and Delivery. Except as otherwise specifically required in these Bylaws (including, without limitation, Section 2.4 above or Section 7.1.2 below) or by applicable law, all notices required to be given pursuant to these Bylaws shall be in writing and may (a) in every instance in connection with any delivery to a member of the Board, be effectively given by hand delivery (including use of a delivery service), by depositing such notice in the mail, postage prepaid, or by sending such notice by prepaid overnight express courier, facsimile, electronic mail or other form of electronic transmission and (b) be effectively be delivered to a stockholder when given by hand delivery, by depositing such notice in the mail, postage prepaid or, if specifically consented to by the stockholder as described in Section 7.1.2 of this Article VII, by sending such notice by electronic transmission. Any such notice shall be addressed to the person to whom notice is to be given at such person’s address as it appears on the records of the Corporation. Except as otherwise provided by law, the notice shall be deemed given (a) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person, (b) in the case of delivery by mail, upon deposit in the mail, postage prepaid, (c) in the case of delivery by overnight express courier, when dispatched, and (d) in the case of delivery via electronic mail or other form of electronic transmission, when dispatched.

7.1.2 Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation, or these Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given in accordance with Section 232 of the DGCL. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (a) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (b) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given pursuant to this Section 7.1.2 shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of such posting and the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the stockholder.

7.1.3 Affidavit of Giving Notice. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given in writing or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

Section 7.2:  Waiver of Notice. Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these Bylaws, a written waiver of notice, signed by the person entitled to notice, or waiver by electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any waiver of notice.

ARTICLE VIII: MISCELLANEOUS

Section 8.1:  Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board.

Section 8.2:  Seal. The Board may provide for a corporate seal, which may have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board.

Section 8.3:  Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the DGCL.

Section 8.4:  Severability. If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Certificate of Incorporation, then such provision shall, to the fullest extent permitted by law, be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) shall remain in full force and effect.

ARTICLE IX: MARKET STANDOFF RESTRICTION

Each stockholder of the Corporation shall not, to the extent requested by the Corporation or an underwriter of securities of the Corporation, sell or otherwise transfer or dispose of any shares of capital stock of the Corporation (other than (1) to donees pursuant to bona fide gifts or (2) distributions to partners, members or stockholders of the stockholder of the Corporation, provided that in each of case (1) and (2) the recipient agrees to be similarly bound, and other than sales of shares acquired in open market transactions or purchased in the initial public offering) for a period ending up to one hundred eighty (180) days following the effective date of any registration statement of the Corporation filed under the Securities Act of 1933, as amended, plus such additional period to accommodate regulatory restrictions on (a) the publication or other distribution of research reports or (b) analyst recommendations and opinions, including (without limitation) the restrictions set forth in Rule 2711(f)(4) of the National Association of Securities Dealers and Rule 472(f)(4) of the New York Stock Exchange, as amended, or any similar successor rules in order to permit publication, recommendations and opinions without such restrictions in the event the Corporation issues an earnings release or material news or a material event relating to the Corporation occurs during the period; provided, however, that such agreement shall be applicable only to the first such registration statement of the Corporation which covers securities sold on its behalf to the public in an underwritten offering. For purposes of this ARTICLE IX, the term “Corporation” shall include any wholly owned subsidiary of the Corporation into which the Corporation merges or consolidates. In order to enforce the foregoing covenant, the Corporation shall have the right to place restrictive legends on the certificates representing the shares of capital stock of the Corporation subject to this ARTICLE IX and to impose stop transfer instructions with respect to such shares until the end of such period.

ARTICLE X: AMENDMENT

Notwithstanding any other provision of these Bylaws, any alteration, amendment or repeal of these Bylaws, or the adoption of new Bylaws, shall require the approval of the Board or the stockholders of the Corporation as provided by the Certificate of Incorporation and applicable law.

CERTIFICATION OF BYLAWS

OF

PARTX, INC.
a Delaware corporation

I, ___________, certify that I am Secretary of PartX, Inc., a Delaware corporation (the “Corporation”), that I am duly authorized to make and deliver this certification, that the attached Bylaws are a true and complete copy of the Bylaws of the Corporation in effect as of the date of this certificate.

Dated: ___, 2019

________________________________________

___________________, Secretary

19

Exhibit 10.1

TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT (this “Agreement”), dated as of _____, 2019 is by and among Nxt-ID, Inc., a Delaware corporation (“Nxt-ID”), and PartX, Inc., a Delaware corporation (“SpinCo”). Each of Nxt-ID and SpinCo is sometimes referred to herein as a “Party” and, collectively, as the “Parties.”

WHEREAS, Nxt-ID and SpinCo have entered into a Separation and Distribution Agreement (the “Separation Agreement”) which contemplates (i) the separation of SpinCo (the “Separation”) and (ii) the distribution to Nxt-ID’s stockholders of all of the outstanding shares of SpinCo’s common stock (the “Distribution”); and

WHEREAS, in order to ensure an orderly transition under the Separation Agreement it will be necessary for Nxt-ID to provide to SpinCo, and for SpinCo to provide to Nxt-ID, the services described herein during the term of this Agreement.

NOW, THEREFORE, in consideration of the above premises and the mutual covenants contained herein, it is agreed by and between the parties as follows:

ARTICLE I

FEES AND TERM

1.1    SpinCo Price/Payment. As consideration for the services to be provided to SpinCo by Nxt-ID pursuant to Section 2.1 of this Agreement, SpinCo shall pay to Nxt-ID a fee (the “SpinCo Services Fee”) in accordance with Schedule 2.1. The SpinCo Services Fee shall be payable by SpinCo to Nxt-ID in arrears 15 days after the close of each month (prorated for any partial month) during the term of this Agreement. Any services provided by Nxt-ID to SpinCo beyond the services covered by the SpinCo Services Fee shall be billed to SpinCo at negotiated rates, no less favorable to SpinCo than if SpinCo had received the uncovered service from a third party, or on such other basis as the parties may agree from time to time. The SpinCo Services Fee shall be reviewed and reduced from time to time in accordance with Section 2.3.

1.2    Nxt-ID Price/Payment. As consideration for the services to be provided to Nxt-ID by SpinCo pursuant to Section 3.1 of this Agreement, Nxt-ID shall pay to SpinCo a fee (the “Nxt-ID Services Fee”) in accordance with Schedule 3.1. The Nxt-ID Services Fee shall be payable by Nxt-ID to SpinCo in arrears 15 days after the close of each month (prorated for any partial month) during the term of this Agreement. Any services provided by SpinCo to Nxt-ID beyond the services covered by the Nxt-ID Services Fee shall be billed to Nxt-ID at negotiated rates, no less favorable to the Nxt-ID than if Nxt-ID had received the uncovered service from a third party, or on such other basis as the parties may agree from time to time. The Nxt-ID Services Fee shall be reviewed and reduced from time to time in accordance with Section 3.3.

1.3    Term. The term of this Agreement (the “Term”) shall commence on the date hereof and shall expire one year after the effective date of the Distribution (the “Distribution Date”); provided, however, that either Party shall have the right to terminate any or all of the services such Party is to receive hereunder and cease paying the services fee associated with the terminated services which such Party would otherwise be required to pay therefor upon 30 days written notice to the other Party.

1.4    Additional Services. At any time during the Term, if either Party identifies any service that is needed to assure a smooth and orderly transition of the businesses and operations in connection with the Separation and the Distribution, and that is not otherwise governed by the provisions of this Agreement, the Separation Agreement or any other agreement between the parties, then the parties shall cooperate in determining whether there is a mutually acceptable arm’s-length basis on which one of the parties will provide such service to the other Party in exchange for a fee.

ARTICLE II

SERVICES TO BE PROVIDED BY NXT-ID TO SPINCO

2.1    Services. Nxt-ID agrees to provide the services set forth on Schedule 2.1 (subject to such modification or adjustment as may be mutually agreed upon by the parties) to SpinCo during the Term.

2.2    Details of Performance. Reasonable details of Nxt-ID’s performance of services hereunder may be specified in one or more memoranda signed by the parties and such memoranda shall be deemed incorporated in this Agreement by reference as if recited herein in their entirety.

2.3    Phase Out of Services; Reduction of SpinCo Services Fee. The parties hereby acknowledge that SpinCo will promptly take all steps to internalize the services to be provided herein by acquiring its own staff or outsourcing to third parties. The parties agree to periodically review the level of services being utilized by SpinCo, and from time to time to reduce the SpinCo Services Fee proportionately to account for reductions in the level of services being provided hereunder.

ARTICLE III

SERVICES TO BE PROVIDED BY SPINCO TO NXT-ID

3.1    Services. SpinCo agrees to provide the services set forth on Schedule 3.1 (subject to such modification or adjustment as may be mutually agreed upon by the parties) to Nxt-ID during the Term.

3.2    Details of Performance. Reasonable details of SpinCo’s performance of services hereunder may be specified in one or more memoranda signed by the parties and such memoranda shall be deemed incorporated in this Agreement by reference as if recited herein in their entirety.

3.3    Phase Out of Services; Reduction of Nxt-ID Services Fees. The parties hereby acknowledge that Nxt-ID will promptly take all steps to internalize the services to be provided herein by acquiring its own staff or outsourcing to third parties. The parties agree to periodically review the level of services being utilized by Nxt-ID, and from time to time to reduce the Nxt-ID Services Fee proportionately to account for reductions in the level of services being provided hereunder.

ARTICLE IV

MISCELLANEOUS

4.1    Confidentiality. Neither Party hereto shall use or disclose to any other person at any time, any confidential or proprietary information or trade secrets of the other Party, including, without limitation, its customer lists, programs, pricing and strategies except to those of its employees and those other persons who need to know such information to fulfill such Party’s obligations hereunder, provided that such Party shall require that such other persons agree to keep confidential such confidential or proprietary information or trade secrets. Both parties shall provide to the other Party semi-annually upon such other Party’s written request, a list of all employees whose duties have required access to confidential or proprietary information or trade secrets, and any other employees or other persons who to the actual knowledge of that Party’s officers have had access to such information during the preceding six (6) month period, in each case, designating whether such persons are in the employ of such Party as of the date such list is provided. Both parties agree that all drawings, specifications, data, memoranda, calculations, notes and other materials, including, without limitation, any materials containing confidential or proprietary information or trade secrets of the other Party, furnished in connection with this Agreement and any copies thereof are and shall remain the sole and exclusive property of that other Party and shall be delivered to that Party upon its request.

4.2    No Agency. Both parties shall perform their respective services under this Agreement as an independent contractor. Each Party acknowledges and agrees that it is not granted any express or implied authority to assume or create any obligation or responsibility on behalf of the other Party, or to bind the other Party with regard to third parties in any manner.

4.3    Notices. Any notices required or permitted to be provided pursuant to this Agreement shall be provided in writing via e-mail, certified mail, hand-delivery, telecopier with confirmation or normal mail service, addressed to the recipient Party at its e-mail or standard mailing address set forth on the signature page.

4.4    Force Majeure. In the event that either Party is prevented from performing, or is unable to perform, any of its obligations under this Agreement due to any act of God, fire, casualty, flood, war, strike, lock out, failure of public utilities, injunction or any act, exercise, assertion or requirement of governmental authority, epidemic, destruction of production facilities, insurrection, inability to procure materials, labor, equipment, transportation or energy sufficient to meet manufacturing needs, or any other cause beyond the reasonable control of the Party invoking this provision, and if such Party shall have used its best efforts to avoid such occurrence and minimize its duration and has given prompt written notice to the other Party, then the affected Party’s performance for the period of delay or inability to perform due to such occurrence shall be suspended. Should either Party fail to perform hereunder and shall have provided proper notice to the other Party that it is unable to perform on account of one or more reasons set forth in this section, such Party may obtain replacement services from a third party for the duration of such delay or inability to perform, or for such longer period as such Party shall be reasonably required to commit to in order to obtain such replacement services and the services fee payable by such Party shall be reduced accordingly.

ARTICLE V

GENERAL PROVISIONS

5.1    Entire Agreement. Except as contemplated in Sections 2.3 and 3.3, this Agreement embodies the entire agreement and understanding of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings relative to said subject matter.

5.2    Binding Effect. This Agreement shall be binding upon, and shall inure to the benefit of Nxt-ID, SpinCo and their respective successors and assigns.

5.3    Assignment. Neither this Agreement nor any rights or obligations hereunder shall be assignable by either Party without the prior written consent of the other Party hereto, which consent shall not be unreasonably withheld.

5.4    Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Delaware applicable to contracts to be performed entirely in that State.

5.5    Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument.

5.6    Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

(Signatures Appear On Next Page)

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the date first above written.

Schedule 2.1

Nxt-ID Services

To be mutually agreed upon by Nxt-ID and SpinCo prior to the Spin-Off. This Schedule may be amended by the parties from time to time by mutual consent. 

Schedule 3.1

SpinCo Services

To be mutually agreed upon by Nxt-ID and SpinCo prior to the Spin-Off. This Schedule may be amended by the parties from time to time by mutual consent. 

7

Exhibit 10.2

TAX MATTERS AGREEMENT

by and among

Nxt-ID, Inc.

and

PartX, Inc.

Dated as of ___________, 2019

TAX MATTERS AGREEMENT

THIS TAX MATTERS AGREEMENT (this “Agreement”), dated as of _______, 2019 is by and among Nxt-ID, Inc., a Delaware corporation (“Nxt-ID”), and PartX, Inc., a Delaware corporation (“PartX”). Each of Nxt-ID and PartX is sometimes referred to herein as a “Party” and, collectively, as the “Parties.”

WHEREAS, Nxt-ID and PartX have entered into the Separation Agreement pursuant to which (a) (i) Nxt-ID will transfer all of the shares of Fit-Pay to PartX and (ii) Nxt-ID will, and will cause its Subsidiaries to, transfer certain assets, liabilities and subsidiaries of the Payments Business to PartX, as a result of which PartX will own, directly and indirectly through its Subsidiaries, the Payments Business and will not own any of the Security Technology Business (collectively, the “Internal Reorganization”), (b) the Share Exchange (as defined in the Separation Agreement) and (c) Nxt-ID will distribute, on a pro rata basis, all of the issued and outstanding shares of PartX Common Stock owned by Nxt-ID to the holders of Nxt-ID Common Stock¹ (the “Distribution”) as described therein;

WHEREAS, the Parties wish to provide for the payment of Tax liabilities and entitlement to refunds thereof, allocate responsibility for, and cooperation in, the filing of Tax Returns, and provide for certain other matters relating to Taxes;

WHEREAS, it is the intention of the Parties that the Internal Reorganization together with the distribution by Nxt-ID of all of the PartX Common Stock owned by Nxt-ID in the Distribution, qualify as a reorganization and tax-free distribution within the meaning of Sections 368(a)(1)(D) and 355 of the Code (the “Intended Tax Treatment”);

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, the Parties agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 General. As used in this Agreement, the following terms shall have the following meanings:

“Accounting Firm” has the meaning set forth in Section 8.01.

“Adjustment” means an adjustment of any item of income, gain, loss, deduction, credit or any other item affecting Taxes of a taxpayer pursuant to a Final Determination.

“Agreement” has the meaning set forth in the preamble to this Agreement.

“Ancillary Agreement” has the meaning set forth in the Separation Agreement.

“Carryback” has the meaning set forth in Section 5.02.

“Code” means the Internal Revenue Code of 1986, as amended.

“Common Parent” means the “common parent corporation” of an “affiliated group” (in each case, within the meaning of Section 1504 of the Code) filing a U.S. federal consolidated Income Tax Return.

“Distribution” has the meaning set forth in the recitals to this Agreement.

“Distribution Date” means the date on which the Distribution is paid.

“Distribution Taxes” mean, without duplication, (i) any and all U.S. federal, state and local Income Taxes required to be paid by or imposed on a Party or any of its Affiliates resulting from, or directly arising in connection with, the failure of any of the Internal Reorganization or the Distribution to qualify for the Intended Tax Treatment (or the failure to qualify under or the application of corresponding provisions of the Laws of any U.S. state or local jurisdiction), and (ii) [reserved].

“Due Date” means (a) with respect to a Tax Return, the date (taking into account all valid extensions) on which such Tax Return is required to be filed under applicable Law and (b) with respect to a payment of Taxes, the date on which such payment is required to be made to the applicable Taxing Authority to avoid the incurrence of interest, penalties and/or additions to Tax.

“Employee Matters Agreement” means the Employee Matters Agreement by and between the Parties dated as of the date hereof.

“Extraordinary Transaction” means any action that is not in the Ordinary Course of Business, but shall not include (a) any action described in or contemplated by the Separation Agreement or any Ancillary Agreement, (b) any action that is undertaken pursuant to the Internal Reorganization or the Distribution, or (c) any compensatory payment or compensatory transfer in respect of services made as a result of, or in connection with, the Internal Reorganization or the Distribution (which shall be treated as paid immediately before the Distribution on the Distribution Date).

“Final Determination” means the final resolution of liability for any Tax for any taxable period, by or as a result of (a) a final decision, judgment, decree or other order by any court of competent jurisdiction that can no longer be appealed to a court other than the Supreme Court of the United States, (b) a final settlement with the IRS, a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the Laws of other jurisdictions, which resolves the entire Tax liability for any taxable period, (c) any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund or credit may be recovered by the jurisdiction imposing the Tax, or (d) any other final resolution, including by reason of the expiration of the applicable statute of limitations or the execution of a pre-filing agreement with the IRS or other Taxing Authority.

“Governmental Authority” means any government, governmental or quasi-governmental authority, or any regulatory entity or body, department, commission, board, agency, instrumentality, taxing authority, political subdivision, bureau, and any court, tribunal, or judicial body, in each case whether supranational, national, federal, state, municipal, county or provincial, and whether local or foreign.

“Group” of which a Person is a member means (i) the Nxt-ID Group if the Person is a member of the Nxt-ID Group, and (ii) the PartX Group if the Person is a member of the PartX Group.

“Income Tax Return” means any Tax Return on which Income Taxes are reflected or reported.

“Income Taxes” means any net income, net receipts, net profits, excess net profits or similar Taxes based upon, measured by, or calculated with respect to net income.

“Indemnified Party” means the Party which is entitled to seek indemnification from the other Party pursuant to the provisions of Article IV.

“Indemnifying Party” means the Party from which the other Party is entitled to seek indemnification pursuant to the provisions of Article IV.

“Information” has the meaning set forth in Section 7.01(a).

“Internal Reorganization” has the meaning set forth in the recitals to this Agreement.

“IRS” means the U.S. Internal Revenue Service.

“Law” means any U.S. or non-U.S. federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, administrative pronouncement, order, requirement or rule of law (including common law).

“Legal Proceeding” means any claim, action, charge, lawsuit, litigation, arbitration, hearing or proceeding that has been made public or of which written notice has been received, administrative enforcement proceeding or other similarly formal legal proceeding (including civil, criminal, administrative or appellate proceeding) commenced, brought, conducted or heard by or pending before any Governmental Authority, arbitrator, mediator or other tribunal.

“Mixed Business Income Tax Return” means any Mixed Business Tax Return on which Income Taxes are reflected or reported.

“Mixed Business Tax Return” means any Tax Return (other than a Nxt-ID Consolidated Return), including any consolidated, combined or unitary Tax Return, that reflects or reports Taxes that relate to at least one asset or activity that is part of the Security Technology Business, on the one hand, and at least one asset or activity that is part of the Payments Business, on the other hand.

“Nxt-ID” has the meaning set forth in the preamble to this Agreement.

“Nxt-ID Consolidated Return” means the U.S. federal Income Tax Return required to be filed by Nxt-ID as the Common Parent.

“Nxt-ID Consolidated Taxes” means any U.S. federal Income Taxes attributable to any Nxt-ID Consolidated Return.

“Nxt-ID Entity” means any Subsidiary of Nxt-ID immediately after the Distribution.

“Nxt-ID Group” means, individually or collectively, as the case may be, Nxt-ID and any Nxt-ID Entity, excluding any member of the PartX Group.

“Nxt-ID Taxes” means, without duplication, (a) any Nxt-ID Consolidated Taxes, (b) any Taxes imposed on PartX or any member of the PartX Group under Treasury Regulations Section 1.1502-6 (or any similar provision of other Law) as a result of PartX or any such member being or having been included as part of a Nxt-ID Consolidated Return (or similar consolidated or combined Tax Return under any other provision of Law), (c) any Taxes of the Nxt-ID Group and any former Subsidiary of Nxt-ID (excluding any member of the PartX Group) for any Pre-Closing Period, (d) any Nxt-ID Transaction Taxes, (e) any Transfer Taxes and (f) any Taxes attributable to an Extraordinary Transaction occurring after the Distribution on the Distribution Date by Nxt-ID or a Nxt-ID Entity, in each case (x) other than PartX Taxes and (y) including any Taxes resulting from an Adjustment.

“Nxt-ID Transaction Taxes” means any Taxes (a) imposed on or by reason of the Internal Reorganization or the Distribution and (b) payable by reason of the distribution of cash or other property from PartX to Nxt-ID (in each case including Transfer Taxes imposed on such transactions described in (a) and (b)). For the avoidance of doubt, Nxt-ID Transaction Taxes include, without limitation, Taxes payable by reason of deferred intercompany transactions or excess loss accounts triggered by the Internal Reorganization or the Distribution.

“Ordinary Course of Business” means an action taken by a Person only if such action is taken in the ordinary course of the normal operations of such Person.

“PartX” has the meaning set forth in the preamble to this Agreement.

“PartX Common Stock” has the meaning set forth in the Separation Agreement.

“PartX Entity” means any Subsidiary of PartX immediately after the Distribution.

“PartX Group” means, individually or collectively, as the case may be, PartX and any PartX Entity.

“PartX Taxes” means, without duplication, (a) any Taxes of (i) Nxt-ID or any Subsidiary or former Subsidiary of Nxt-ID attributable to assets or activities of the Payments Business, as determined pursuant to Section 2.09 [with respect to activities during the Pre-Closing Period] or (ii) PartX or any Subsidiary of PartX and (b) any Taxes attributable to an Extraordinary Transaction occurring after the Distribution on the Distribution Date by PartX or a PartX Entity.

“Party” and “Parties” have the meaning set forth in the preamble to this Agreement.

“Past Practice” means past practices, accounting methods, elections and conventions.

“Payments Business” has the meaning set forth in the Separation Agreement.

“Person” has the meaning set forth in the Separation Agreement.

“Post-Closing Period” means any taxable period (or portion thereof) beginning after the Distribution Date, including for the avoidance of doubt, the portion of any Straddle Period beginning on the day after the Distribution Date.

“Pre-Closing Period” means any taxable period (or portion thereof) ending on or before the Distribution Date, including for the avoidance of doubt, the portion of any Straddle Period ending at the end of the day on the Distribution Date.

“Preparing Party” has the meaning set forth in Section 2.04(a)(ii).

“Privilege” means any privilege that may be asserted under applicable Law, including any privilege arising under or relating to the attorney-client relationship (including the attorney-client and work product privileges), the accountant-client privilege and any privilege relating to internal evaluation processes.

“Proposed Acquisition Transaction” means a transaction or series of transactions (i) as a result of which any of the Parties would merge or consolidate with any other Person, or (ii) as a result of which any Person or any group of Persons would (directly or indirectly) acquire, or have the right to acquire (through an option or otherwise), from any of the Parties or any of their Affiliates and/or one or more holders of their stock, respectively, any amount of stock of any of the Parties that would, when combined with any other changes in ownership of the stock of such Party, result in a shift of more than forty-nine percent (49%) of (a) the value of all outstanding shares of stock of such Party as of the Distribution Date, or (b) the total combined voting power of all outstanding shares of voting stock of such Party as of the Distribution Date. Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (i) the adoption by a Party of, or the issuance of stock pursuant to, a stockholder rights plan or (ii) transactions that satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulations Section 1.355-7(d). For purposes of determining whether and to what extent a transaction constitutes an indirect acquisition for purposes of the first sentence of this definition, any recapitalization or other action resulting in a shift of voting power or any redemption or repurchase of shares of stock shall be treated as an indirect acquisition of shares of stock by the benefitted or non-exchanging stockholders. Notwithstanding the previous sentence, the effect of any such recapitalization, other action, or redemption or repurchase (directly or indirectly) of shares shall take into account any applicable IRS private letter ruling received by one or more of the Parties with respect thereto. This definition and the application thereof is intended to monitor compliance with Section 355(e) of the Code and the Treasury Regulations promulgated thereunder and shall be interpreted accordingly by the Parties in good faith.

“Refund” means any refund (or credit in lieu thereof) of Taxes (including any overpayment of Taxes that can be refunded or, alternatively, applied to other Taxes payable), including any interest paid on or with respect to such refund of Taxes; provided, however, that for purposes of this Agreement, the amount of any Refund required to be paid to another Party shall be reduced by the net amount of any Income Taxes imposed on, related to, or attributable to, the receipt or accrual of such Refund.

“Restricted Period” means the period beginning at the Distribution Date and ending on the two-year anniversary of the day after the Distribution Date.

“Reviewing Party” has the meaning set forth in Section 2.04(a)(ii).

“Security Technology Business” has the meaning set forth in the Separation Agreement.

“Separation Agreement” means the Separation and Distribution Agreement by and between Nxt-ID and PartX dated as of the date hereof.

“Single Business Return” means any Tax Return including any consolidated, combined or unitary Tax Return, that reflects or reports Tax Items relating only to the Security Technology Business, on the one hand, or the Payments Business, on the other (but not both).

“Single Business Return Preparing Party” has the meaning set forth in Section 2.04(b).

“Single Business Return Reviewing Party” has the meaning set forth in Section 2.04(b).

“Straddle Period” means any taxable period that begins on or before and ends after the Distribution Date.

“Subsidiary” means, with respect to any Person (a) a corporation more than fifty percent (50%) of the voting or capital stock of which is owned, directly or indirectly, by such Person or (b) a limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization or other entity in which such Person, directly or indirectly, owns more than fifty percent (50%) of the equity economic interests thereof or for which such Person, directly or indirectly, has the power to elect or direct the election of more than fifty percent (50%) of the members of the governing body or which such Person otherwise has control (e.g., as the managing partner or managing member of a partnership or limited liability company, as the case may be).

“Tax” means (a) all taxes, charges, fees, duties, levies, imposts, or other similar assessments, imposed by any Governmental Authority, including net income, gross income, gross receipts, excise, real property, personal property, sales, use, service, service use, license, lease, capital stock, transfer, recording, franchise, business organization, occupation, premium, environmental, windfall profits, profits, customs, duties, payroll, wage, withholding, social security, employment, unemployment, insurance, severance, workers compensation, excise, stamp, alternative minimum, estimated, value added, ad valorem, hospitality, accommodations, transient accommodations, unclaimed property, escheat and other taxes, charges, fees, duties, levies, imposts, or other similar assessments, (b) any interest, penalties or additions attributable thereto and (c) all liabilities in respect of any items described in clauses (a) or (b) payable by reason of assumption, transferee or successor liability, operation of Law or Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof or any analogous or similar provision under Law).

“Tax Attributes” means net operating losses, capital losses, tax credit carryovers, earnings and profits, foreign tax credit carryovers, overall foreign losses, previously taxed income, tax bases, separate limitation losses and any other losses, deductions, credits or other comparable items that could affect a Tax liability for a past or future taxable period.

“Tax Benefit” means any refund, credit, or other reduction in Tax payments otherwise required to be made to a Taxing Authority, including for the avoidance of doubt, any actual Tax savings if, as and when realized arising from a step-up in Tax basis or an increase in a Tax Attribute.

“Tax Cost” means any increase in Tax payments otherwise required to be made to a Taxing Authority (or any reduction in any refund otherwise receivable from any Taxing Authority).

“Tax Group” means the members of a consolidated, combined, unitary or other tax group (determined under applicable U.S., State or foreign Income Tax law) which includes Nxt-ID or PartX, as the context requires, but for the avoidance of doubt, (i) Nxt-ID’s Tax Group does not include any members of the PartX Group and (ii) PartX’s Tax Group does not include any members of the Nxt-ID Group.

“Tax Item” means any item of income, gain, loss, deduction, credit, recapture of credit or any other item which increases or decreases Taxes paid or payable.

“Tax Matter” has the meaning set forth in Section 7.01(a).

“Tax Opinions” mean certain Tax opinions and supporting memoranda rendered by CohnReznick to Nxt-ID or any of its Affiliates in connection with the Separation Agreement.

“Tax Proceeding” means any audit, assessment of Taxes, pre-filing agreement, other examination by any Taxing Authority, proceeding, appeal of a proceeding or litigation relating to Taxes, whether administrative or judicial, including proceedings relating to competent authority determinations.

“Tax Representation Letter” means any letter containing certain representations and covenants issued by Nxt-ID or any of its Affiliates to CohnReznick in connection with the Tax Opinions.

“Tax Return” means any return, report, certificate, form or similar statement or document (including any related or supporting information or schedule attached thereto and any information return, or declaration of estimated Tax) required to be supplied to, or filed with, a Taxing Authority in connection with the payment, determination, assessment or collection of any Tax or the administration of any Laws relating to any Tax and any amended Tax return or claim for refund.

“Taxing Authority” means any Governmental Authority or any subdivision, agency, commission or entity thereof or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection or imposition of any Tax (including the IRS).

“Transfer Taxes” means all sales, use, transfer, real property transfer, intangible, recordation, registration, documentary, stamp or similar Taxes imposed on the Internal Reorganization, the Share Exchange or the Distribution.

“Treasury Regulations” means the final and temporary (but not proposed) Income Tax regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

“U.S.” means the United States of America.

Section 1.02 Additional Definitions. Capitalized terms not defined in this Agreement shall have the meaning ascribed to them in the Separation Agreement.

ARTICLE II

PREPARATION, FILING AND PAYMENT OF TAXES SHOWN DUE ON TAX RETURNS

Section 2.01 Nxt-ID Consolidated Returns.

(a) Nxt-ID Consolidated Returns. Nxt-ID shall prepare and file all Nxt-ID Consolidated Returns for a Pre-Closing Period or a Straddle Period, and shall pay all Taxes shown to be due and payable on such Tax Returns; provided that PartX shall reimburse Nxt-ID for any such Taxes that are PartX Taxes.

(b) Extraordinary Transactions. Notwithstanding anything to the contrary in this Agreement, for all Tax purposes, the Parties shall report any Extraordinary Transactions that are caused or permitted by PartX or any PartX Entity on the Distribution Date after the Distribution as occurring on the day after the Distribution Date pursuant to Treasury Regulation Section 1.1502-76(b)(1)(ii)(B) or any similar or analogous provision of state, local or foreign Law.

Section 2.02 Mixed Business Tax Returns.

(a) Subject to Section 2.02(b), Nxt-ID shall prepare (or cause a Nxt-ID Entity to prepare) and Nxt-ID, a Nxt-ID Entity or PartX shall file (or cause to be filed) any Mixed Business Tax Returns for a Pre-Closing Period or a Straddle Period and shall pay, or cause such Nxt-ID Entity to pay, all Taxes shown to be due and payable on such Tax Returns; provided that PartX shall reimburse Nxt-ID for any such Taxes that are PartX Taxes.

(b) PartX shall prepare and file (or cause a PartX Entity to prepare and file) any Mixed Business Tax Returns for a Pre-ClosingPeriod or a Straddle Period required to be filed by PartX or a PartX Entity after the Distribution Date, and PartX shall pay, or cause such PartX Entity to pay, all Taxes shown to be due and payable on such Tax Returns; provided that Nxt-ID shall reimburse PartX for any such Taxes that are Nxt-ID Taxes.

Section 2.03 Single Business Returns.

(a) Nxt-ID shall prepare and file (or cause a Nxt-ID Entity to prepare and file) any Single Business Returns for a Pre-Closing Period or a Straddle Period required to be filed by Nxt-ID or a Nxt-ID Entity and shall pay, or cause such Nxt-ID Entity to pay, all Taxes shown to be due and payable on such Tax Returns; provided that PartX shall reimburse Nxt-ID for any such Taxes that are PartX Taxes.

(b) PartX shall prepare and file (or cause a PartX Entity to prepare and file) any Single Business Returns for a Pre-Closing Period or a Straddle Period required to be filed by PartX or a PartX Entity and shall pay, or cause such PartX Entity to pay, all Taxes shown to be due and payable on such Tax Returns; provided that Nxt-ID shall reimburse PartX for any such Taxes that are Nxt-ID Taxes.

Section 2.04 Tax Return Procedures.

(a) Procedures relating to Tax Returns other than Single Business Returns.

(i) Nxt-ID Consolidated Returns. With respect to all Nxt-ID Consolidated Returns for the taxable year which includes the Distribution Date, Nxt-ID shall use the closing of the books method under (A) Treasury Regulation Section 1.1502-76 (including adopting the “end of the day rule” described therein) and (B) Section 382 of the Code and any applicable Treasury Regulations promulgated thereunder. To the extent that the positions taken on any Nxt-ID Consolidated Tax Return would reasonably be expected to materially adversely affect the Tax position of PartX or a PartX Entity for any period after the Distribution Date, Nxt-ID shall prepare the portions of such Tax Return that relates to the Payments Business in a manner that is consistent with Past Practice unless otherwise required by applicable Law or agreed to in writing by the Parties, and shall provide a draft of such portion of such Tax Return to PartX for its review and comment at least thirty (30) days prior to the Due Date for such Tax Return, provided, however, that nothing herein shall prevent Nxt-ID from timely filing any such Tax Return. In the event that Past Practice is not applicable to a particular item or matter, Nxt-ID shall determine the reporting of such item or matter in good faith. The Parties shall negotiate in good faith to resolve all disputed issues. Any disputes that the Parties are unable to resolve shall be resolved by the Accounting Firm pursuant to Section 8.01. In the event that any dispute is not resolved (whether pursuant to good faith negotiations among the Parties or by the Accounting Firm) prior to the Due Date for the filing of any such Tax Return, such Tax Return shall be timely filed by Nxt-ID and Nxt-ID agrees to amend such Tax Return as necessary to reflect the resolution of such dispute in a manner consistent with such resolution.

(ii) Mixed Business Tax Returns. To the extent that the positions taken on any Mixed Business Tax Return would reasonably be expected to materially adversely affect the Tax position of the Party other than the Party that is required to prepare and file any such Tax Return pursuant to Section 2.02 (the “Reviewing Party”) in any Post-Closing Period, the Party required to prepare and file such Tax Return (the “Preparing Party”) shall prepare the portions of such Tax Return that relates to the business of the Reviewing Party (the Payments Business or the Security Technology Business, as the case may be) in a manner that is consistent with Past Practice unless otherwise required by applicable Law or agreed to in writing by the Parties, and shall provide a draft of such portion of such Tax Return to the Reviewing Party for its review and comment at least thirty (30) days prior to the Due Date for such Tax Return, provided, however, that nothing herein shall prevent the Preparing Party from timely filing any such Tax Return. In the event that Past Practice is not applicable to a particular item or matter, the Preparing Party shall determine the reporting of such item or matter in good faith. The Parties shall negotiate in good faith to resolve all disputed issues. Any disputes that the Parties are unable to resolve shall be resolved by the Accounting Firm pursuant to Section 8.01. In the event that any dispute is not resolved (whether pursuant to good faith negotiations among the Parties or by the Accounting Firm) prior to the Due Date for the filing of any such Tax Return, such Tax Return shall be timely filed by the Preparing Party and the Parties agree to amend such Tax Return as necessary to reflect the resolution of such dispute in a manner consistent with such resolution.

(b) Procedures relating to Single Business Returns. The Party that is required to prepare and file any Single Business Return pursuant to Section 2.03 (the “Single Business Return Preparing Party”) which reflects Taxes which are reimbursable by the other Party (the “Single Business Return Reviewing Party”), in whole or in part, shall (x) unless otherwise required by Law or agreed to in writing by the Single Business Return Reviewing Party, prepare such Tax Return in a manner consistent with Past Practice to the extent such items affect the Taxes for which the Single Business Return Reviewing Party is responsible pursuant to this Agreement, and (y) submit to the Single Business Return Reviewing Party a draft of any such Tax Return (or to the extent practicable the portion of such Tax Return that relates to Taxes for which the Single Business Return Reviewing Party is responsible pursuant to this Agreement) along with a statement setting forth the calculation of the Tax shown due and payable on such Tax Return reimbursable by the Single Business Return Reviewing Party under Section 2.03 at least thirty (30) days prior to the Due Date for such Tax Return provided, however, that nothing herein shall prevent the Single Business Return Preparing Party from timely filing any such Single Business Return. The Parties shall negotiate in good faith to resolve all disputed issues provided, however, that the Single Business Return Preparing Party shall not be required to reflect or cause to be reflected comments to the extent such comments are inconsistent with the U.S. Preparation Standard. Any disputes that the Parties are unable to resolve shall be resolved by the Accounting Firm pursuant to Section 8.01. In the event that any dispute is not resolved (whether pursuant to good faith negotiations among the Parties or by the Accounting Firm) prior to the Due Date for the filing of any Single Business Return, such Single Business Return shall be timely filed by the Single Business Return Preparing Party and the Parties agree to amend such Single Business Return as necessary to reflect the resolution of such dispute in a manner consistent with such resolution.

(c) General. All such Tax Returns shall be prepared in a manner consistent with the Intended Tax Treatment, the Tax Representation Letters, the Tax Opinions, and otherwise in a manner consistent with this Agreement (the “U.S. Preparation Standard”),

Section 2.05 Amended Returns. Except as provided in Section 2.04 to reflect the resolution of any dispute by the Accounting Firm pursuant to Section 8.01, (a) except with the prior written consent of Nxt-ID (such consent not to be unreasonably withheld, delayed or conditioned), PartX shall not, and shall not permit any PartX Entity to, amend any Tax Return of PartX or any PartX Entity for any Pre-Closing Period or Straddle Period to the extent such amendment could reasonably be expected to result in an indemnification obligation on the part of Nxt-ID pursuant to Article IV or otherwise increase the Taxes of any member of the Nxt-ID Group and (b) except with the prior written consent of PartX (such consent not to be unreasonably withheld, delayed or conditioned), Nxt-ID shall not, and shall not permit any Nxt-ID Entity to, amend any Tax Return for any Pre-Closing Period or Straddle Period to the extent such amendment could reasonably be expected to result in an indemnification obligation on the part of PartX pursuant to Article IV or otherwise increase the Taxes of any member of the PartX Group. Notwithstanding the forgoing, any amended Tax Return shall be prepared in a manner: consistent with the U.S. Preparation Standard.

Section 2.06 Straddle Period Tax Allocation. Nxt-ID and PartX shall take all actions necessary or appropriate to close the taxable year of PartX and each PartX Entity for all Tax purposes as of the close of the Distribution Date to the extent permissible or required under applicable Law. If applicable Law does not require or permit PartX or a PartX Entity, as the case may be, to close its taxable year on the Distribution Date, then the allocation of income or deductions required to determine any Taxes or other amounts attributable to the portion of the Straddle Period ending on, or beginning after, the Distribution Date shall be made by means of a closing of the books and records of PartX or such PartX Entity as of the close of the Distribution Date; provided that exemptions, allowances or deductions that are calculated on an annual or periodic basis shall be allocated between such portions in proportion to the number of days in each such portion; provided, further, that real property and other property or similar periodic Taxes shall be apportioned on a per diem basis.

Section 2.07 Timing of Payments. All Taxes required to be paid or caused to be paid pursuant to this Article II by either Nxt-ID or a Nxt-ID Entity or PartX or a PartX Entity, as the case may be, to an applicable Taxing Authority or reimbursed by Nxt-ID or PartX to the other Party pursuant to this Agreement, shall, in the case of a payment to a Taxing Authority, be paid on or before the Due Date for the payment of such Taxes and, in the case of a reimbursement to the other Party, be paid at least two (2) business days before the Due Date for the payment of such Taxes by the other Party; provided that the Party seeking reimbursement shall furnish such other Party reasonably satisfactory documentation setting forth the basis for, and calculation of, the amount of such reimbursement obligation at least twenty (20) days before such Due Date.

Section 2.08 Expenses. Except as provided in Section 8.01 in respect of the expenses relating to the Accounting Firm, each Party shall bear its own expenses incurred in connection with this Article II.

Section 2.09 Apportionment of PartX Taxes. For all purposes of this Agreement, but subject to Section 5.03, Nxt-ID and PartX shall jointly determine in good faith which Tax Items are properly attributable to assets or activities of the Payments Business (and in the case of a Tax Item that is properly attributable to both the Payments Business and the Security Technology Business, the allocation of such Tax Item between the Payments Business and the Security Technology Business) in a manner consistent with the Past Practices of the Parties and the provisions of this Agreement and any disputes shall be resolved by the Accounting Firm in accordance with Section 8.01.

Section 2.10 Distribution Tax Reporting. The Parties shall cause the Distribution to be reported to the IRS in accordance with the Code, including, without limitation, the preparation and due filing of Form 8806 and Form 1099-Cap.

ARTICLE III

DISTRIBUTION TAXES

Section 3.01 Liability for Distribution Taxes. In the event that Distribution Taxes become due and payable to a Taxing Authority pursuant to a Final Determination, then, notwithstanding anything to the contrary in this Agreement:

(a) No Fault. If such Distribution Taxes are not attributable to the Fault for Distribution Purposes of any Party or any of its Affiliates, the responsibility for such Distribution Taxes shall be allocated equally between the Parties.

(b) Fault. If such Distribution Taxes are attributable to the Fault for Distribution Purposes of one or more Parties or any of their Affiliates, the responsibility for such Distribution Taxes shall reside with the Party or Parties at Fault for Distribution Purposes. If more than one Party is at Fault for Distribution Purposes, the responsibility for the Distribution Taxes shall be allocated equally between the Parties at Fault for Distribution Purposes. Notwithstanding anything to the contrary in this Agreement, such Distribution Taxes shall not be subject to Article II of this Agreement.

Section 3.02 Definition of Fault for Distribution Purposes.

(a) For purposes of this Agreement, Distribution Taxes shall be deemed to result from the fault (“Fault for Distribution Purposes”) of a Party if such Distribution Taxes are attributable to, or result from:

(i) any act, or failure or omission to act, by such Party or any of such Party’s Affiliates that results in one or more Parties (or any of their Affiliates) being responsible for such Distribution Taxes pursuant to a Final Determination,

(ii) the direct or indirect acquisition of all or a portion of the stock of such Party (or any transaction or series of related transactions that is deemed to be such an acquisition for purposes of Section 355(e) of the Code and the Treasury Regulations promulgated thereunder) by any means whatsoever by any person including pursuant to an issuance or repurchase of stock by such Party or any of its Affiliates, as determined pursuant to a Final Determination.

(b) In order to monitor compliance with Section 355(e) of the Code and the Treasury Regulations promulgated thereunder during the Restricted Period, neither PartX nor Nxt-ID shall (or allow any of its Subsidiaries to take any such action with respect to PartX or Nxt-ID) without the consent of the other Party take any steps in connection with a Proposed Acquisition Transaction or allow any Proposed Acquisition Transaction to occur.

Provided, however, that a Party (the “Requesting Party”) shall be permitted to take such action or one or more actions set forth in the foregoing paragraph, if such action is described in the Separation Agreement or if, prior to taking any such actions: (i) such Requesting Party shall have received a favorable private letter ruling from the IRS, or a ruling from another Taxing Authority (a “Post-Distribution Ruling”), in form and substance reasonably satisfactory to the other Party and upon which Nxt-ID and PartX are entitled to rely that confirms that such action or actions will not result in Distribution Taxes, taking into account such actions and any other relevant transactions in the aggregate; (ii) such Requesting Party shall have received an unqualified tax opinion that confirms that such action or actions will not result in Distribution Taxes, taking into account such actions and any other relevant transactions in the aggregate; or (3) such Requesting Party shall have received a written statement from the other Party that provides that such other Party waives the requirement to obtain a Post-Distribution Ruling or unqualified tax opinion described in this paragraph. The Requesting Party shall bear all costs and expenses of securing any such Post-Distribution Ruling or unqualified tax opinion.

Section 3.03 Tax Representation Letters, and Tax Opinions; Consistency. Each Party represents that the information and representations furnished with respect to such Party or its Subsidiaries in or in connection with the Tax Representation Letters, and the Tax Opinions are accurate and complete as of the Spin-Off Date. Each Party covenants that if, after the Spin-Off Date, it or any of its Affiliates obtains information indicating, or otherwise becomes aware, that any such information or representations is or may be inaccurate or incomplete, to promptly inform the other Party.

Section 3.04 Timing of Payment of Taxes. All Distribution Taxes required to be paid or caused to be paid by a Party to a Taxing Authority under applicable Law shall be paid or caused to be paid by such Party on or prior to the date on which such Distribution Taxes are due. All amounts required to be paid by one Party to another Party (including obligations arising under Article IV) pursuant to this Article shall be paid or caused to be paid by such first Party to such other Party in accordance with this Agreement.

Section 3.05 Protective Section 336(e) Elections.

(a) Nxt-ID and PartX shall make a protective election with respect to PartX under Section 336(e) of the Code (and any similar election under state or local law) with respect to the Distribution in accordance with Treasury Regulations Section 1.336-2(h) and (j) (and any applicable provisions under state and local law) and shall cooperate in the timely completion and/or filings of such elections and any related filings or procedures (including filing or amending any Tax Returns to implement an election that becomes effective). This Section 3.05(a) is intended to constitute a binding, written agreement to make an election under Section 336(e) of the Code with respect to the Distribution.

(b) Notwithstanding anything to the contrary herein, in the event that the election contemplated in Section 3.05(a) is made and becomes effective, then the Parties shall share in the Tax Benefit actually realized as a result of such election in accordance with the Parties’ relative responsibility for such Taxes under this Article III, and payments shall be made between the Parties, if necessary.

(c) Nxt-ID and PartX shall cooperate in order to determine whether to make a protective election under Section 336(e) of the Code (any similar election under state or local law) with respect to any PartX Subsidiary or with respect to the Internal Reorganization in accordance with Treasury Regulations Section 1.336-2(h) and (j) (and any applicable provisions under state and local law).

ARTICLE IV

INDEMNIFICATION

Section 4.01 Indemnification by Nxt-ID. Subject to Section 4.03, Nxt-ID shall pay, and shall indemnify and hold the PartX Group harmless from and against, without duplication, (a) all Nxt-ID Taxes, (b) all Taxes incurred by PartX or any PartX Entity arising out of, attributable to, or resulting from the breach by Nxt-ID of any of its covenants hereunder, and (c) any out-of-pocket costs and expenses related to the foregoing (including reasonable attorneys’ fees and expenses).

Section 4.02 Indemnification by PartX. Subject to Section 4.03, PartX shall pay, and shall indemnify and hold the Nxt-ID Group harmless from and against, without duplication, (a) all PartX Taxes, (b) all Taxes incurred by Nxt-ID or any Nxt-ID Entity arising out of, attributable to, or resulting from the breach by PartX of any of its covenants hereunder, and (c) any out-of-pocket costs and expenses related to the foregoing (including reasonable attorneys’ fees and expenses).

Section 4.03 Characterization of and Adjustments to Payments.

(a) Except for payments under Section 2.07, for all Tax purposes, Nxt-ID and PartX shall treat any payment by Nxt-ID to a member of the PartX Group or by PartX to a member of the Nxt-ID Group required by this Agreement (other than payments with respect to interest accruing after the Distribution Date) as either a contribution by Nxt-ID to PartX or a distribution by PartX to Nxt-ID, as the case may be, occurring immediately prior to the Distribution.

(b) Notwithstanding the foregoing, the amount that any Indemnifying Party is or may be required to provide indemnification to or on behalf of any Indemnified Party pursuant to Article IV of this Agreement shall be (i) decreased to take into account any Tax Benefit to the Indemnified Party (or any of its affiliates) arising from the incurrence or payment of the relevant indemnified item and actually realized in or prior to the taxable year succeeding the taxable year in which the indemnified item is incurred (which Tax Benefit would not have arisen or been allowable but for such indemnified item), and (ii) increased to take into account any actual Tax Cost of the Indemnified Party (or any of its affiliates) arising from the receipt of the relevant indemnity payment.

Section 4.04 Timing of Indemnification Payments. Indemnification payments in respect of any liabilities for which an Indemnified Party is entitled to indemnification pursuant to this Article IV shall be paid by the Indemnifying Party to the Indemnified Party within ten (10) days after written notification thereof by the Indemnified Party, including reasonably satisfactory documentation setting forth the basis for, and calculation of, the amount of such indemnification payment, or within ten (10) days after resolution pursuant to Section 8.01.

Section 4.05 Indemnification Payments under Ancillary Agreements. To the extent that an indemnification payment is made under any other Ancillary Agreement, such indemnification payment shall be decreased to take into account the Tax Benefit actually realized (whether directly or indirectly) by the indemnified party and increased to take into account any Tax Cost actually incurred (whether directly or indirectly) by the indemnified party under principles analogous to the principles described in Section 4.03 hereof.

ARTICLE V

REFUNDS, CARRYBACKS, TIMING DIFFERENCE AND TAX ATTRIBUTES

Section 5.01 Refunds and Credits.

(a) Except as provided in Section 5.02, Nxt-ID shall be entitled to all Refunds of Taxes for which Nxt-ID is responsible pursuant to Article IV, and PartX shall be entitled to all Refunds of Taxes for which PartX is responsible pursuant to Article IV. For the avoidance of doubt, to the extent that a particular Refund of Taxes may be allocable to a Straddle Period with respect to which the Parties may share responsibility pursuant to Article IV, the portion of such Refund to which each Party will be entitled shall be determined by comparing the amount of payments made by a Party (or any of member of such Party’s Group) to a Taxing Authority or to the other Party (and reduced by the amount of payments received from the other Party) pursuant to Articles II and IV hereof with the Tax liability of such Party as determined under Section 2.06, taking into account the facts as utilized for purposes of claiming such Refund. If a Party (or any member of its Tax Group) receives a Refund to which the other Party is entitled pursuant to this Agreement, such Party shall pay the amount to which such other Party is entitled (net of any Taxes imposed with respect to such refund and any other reasonable out-of-pocket costs incurred by such Party) within ten (10) days after the receipt of the Refund.

(b) Notwithstanding Section 5.01(a), to the extent that a Party (or any member of its Tax Group) applies or causes to be applied an overpayment of Taxes as a credit toward or a reduction in Taxes otherwise payable (or a Taxing Authority requires such application in lieu of a Refund) and such overpayment of Taxes, if received as a Refund, would have been payable by such Party to the other Party pursuant to this Section 5.01, such Party shall pay such amount to the other Party no later than ten (10) days following the date on which the overpayment is reflected on a filed Tax Return.

(c) To the extent that the amount of any Refund under this Section 5.01 is later reduced by a Taxing Authority or in a Tax Proceeding, such reduction shall be allocated to the Party to which such Refund was allocated pursuant to this Section 5.01 and an appropriate adjusting payment shall be made.

Section 5.02 Carrybacks. Except to the extent otherwise consented to by Nxt-ID or prohibited by applicable Law, PartX (or the appropriate member of its Tax Group) shall elect to relinquish, waive or otherwise forgo the carryback of any loss, credit or other Tax Attribute from any Post-Closing Period to any Pre-Closing Period or Straddle Period with respect to members of the PartX Group (a “Carryback”). In the event that PartX (or the appropriate member of its Tax Group) is prohibited by applicable Law from relinquishing, waiving or otherwise forgoing a Carryback (or Nxt-ID consents to a Carryback), Nxt-ID shall cooperate with PartX, at PartX’s expense, in seeking from the appropriate Taxing Authority such Refund as reasonably would result from such Carryback, to the extent that such Refund is directly attributable to such Carryback, and shall pay over to PartX the amount of such Refund, net of any Taxes imposed on the receipt of such Refund and any other reasonable out-of-pocket costs, within ten (10) days after such Refund is received.

Section 5.03 Tax Attributes.

(a) As soon as reasonably practicable after the Distribution Date, Nxt-ID shall reasonably determine in good faith the allocation of Tax Attributes, as well as any limitations on the use thereof, arising in a Pre-Closing Period to the Nxt-ID Group and the PartX Group in accordance with the Code and Treasury Regulations including Treasury Regulations Sections 1.1502-9T, 1.1502-21,1.1502-22, 1.1502-79 and, if applicable, 1502-95 (and any applicable state, local and foreign Tax Laws). Subject to the preceding sentence, Nxt-ID shall be entitled to make any determination as to (A) basis, and (B) valuation, and shall make such determinations reasonably and in good faith and consistent with Past Practice, where applicable. Nxt-ID shall consult in good faith with PartX regarding such allocation of Tax Attributes and determinations as to basis and valuation, and shall consider in good faith any comments received in writing from PartX regarding such allocation and determinations. Nxt-ID and PartX hereby agree to compute all Taxes for Post-Closing Periods consistently with the determination of the allocation of Tax Attributes pursuant to this Section 5.03(a) unless otherwise required by a Final Determination.

(b) To the extent that the amount of any Tax Attribute is later reduced or increased by a Taxing Authority or Tax Proceeding, such reduction or increase shall be allocated to the Party to which such Tax Attribute was allocated pursuant to Section 5.03(a).

Section 5.04 Timing Differences. If pursuant to a Final Determination an Adjustment (i) increases the amount of liability for any Taxes for which a member of the Nxt-ID Group is responsible hereunder and a Tax Benefit is made allowable to PartX or a member of its Tax Group for any Tax period after the Distribution Date, which Tax Benefit would not have arisen or been allowable but for such Adjustment, and which Tax Benefit reduces Taxes in respect of a Tax period for which PartX or a member of its Tax Group is liable (and for which no member of the Nxt-ID Group is liable) or (ii) increases the amount of liability for any Taxes for which a member of the PartX Group is responsible hereunder and a Tax Benefit is made allowable to Nxt-ID or a member of its Tax Group for any Tax period prior to the Distribution Date, which Tax Benefit would not have arisen or been allowable but for such Adjustment, and which Tax Benefit reduces Taxes in respect of a Tax period which Nxt-ID or a member of its Tax Group is liable (and for which no member of the PartX Group is liable), then PartX or Nxt-ID, as the case may be, shall make a payment to either Nxt-ID or PartX, as appropriate, within thirty (30) days of the date that such paying Party (or any of its Tax Group members) actually receives such Tax Benefit (determined by comparing its (and its Tax Group members’) Tax liability with and without the Tax consequences of the Adjustment), which payment shall not exceed the increase in the amount of liability for any Taxes resulting from such Adjustment, for which a member of the Nxt-ID Group or PartX Group, as the case may be, is responsible hereunder. Notwithstanding anything to the contrary in this Section 5.04, if the additional Taxes described in this Section 5.04 constitute Distribution Taxes and/or a Section 336(e) election becomes effective, the provisions in Article III shall apply to such Taxes and Tax Benefits and not this Section 5.04. 

Section 5.05 Tax Benefit Determinations. Notwithstanding anything herein to the contrary, if and to the extent a Party owns, directly or indirectly, less than 100% of the equity of any entity and as a result of such less-than-100% ownership interest in the entity such entity is not a member of the Party’s Tax Group, then the amount of the Tax Benefit payment under Article V shall be appropriately adjusted to take into account the percentage ownership (based on value) of any such entity, and shall be determined and due and owing even if such entity is not a member of the Tax Group of a Party.

Section 5.06 Supporting Documentation. If a Party seeks any payment from the other Party pursuant to Article V, the requesting Party shall furnish such other Party reasonably satisfactory documentation setting forth the basis for, and the calculation of, the amount of such payment obligation. If such other Party disagrees with the determination of the amount of the payment obligation set forth therein, any disputes shall be resolved by the Accounting Firm in accordance with Section 8.01

ARTICLE VI

TAX PROCEEDINGS

Section 6.01 Notification of Tax Proceedings. Within ten (10) days after an Indemnified Party becomes aware of the commencement of a Tax Proceeding that may give rise to Taxes for which an Indemnifying Party is responsible pursuant to Article IV, such Indemnified Party shall notify the Indemnifying Party of such Tax Proceeding, and thereafter shall promptly forward or make available to the Indemnifying Party copies of notices and communications relating to such Tax Proceeding. The failure of the Indemnified Party to notify the Indemnifying Party of the commencement of any such Tax Proceeding within such ten (10) day period or promptly forward any further notices or communications shall not relieve the Indemnifying Party of any obligation which it may have to the Indemnified Party under this Agreement except to the extent that the Indemnifying Party is prejudiced by such failure.

Section 6.02 Tax Proceeding Procedures Generally.

(a) Tax Proceedings relating to Nxt-ID Consolidated Returns. Nxt-ID shall be entitled to contest, compromise, control and settle any adjustment or deficiency proposed, asserted or assessed pursuant to any Tax Proceeding with respect to any Nxt-ID Consolidated Return; provided that to the extent such Tax Proceeding could reasonably be expected to adversely affect the amount of Taxes for which PartX is responsible pursuant to Article IV less the amount payable to PartX pursuant to Section 5.04, Nxt-ID shall (i) defend such Tax Proceeding diligently and in good faith, (ii) shall keep PartX informed in a timely manner of all actions proposed to be taken by Nxt-ID with respect to such Tax Proceeding (or to the extent practicable the portion of such Tax Proceeding that relates to Taxes for which PartX is responsible pursuant to Article IV), (iii) shall permit PartX to participate (at PartX’s sole expense) in all proceedings with respect to such tax Proceeding (or to the extent practicable the portion of such Tax Proceeding that relates to Taxes for which PartX is responsible pursuant to Article IV), and (iv) shall not settle any such Tax Proceeding without the prior written consent of PartX, which shall not be unreasonably withheld, conditioned or delayed.

(b) Tax Proceedings relating to Other Returns. The Preparing Party (in the case of a Mixed Business Tax Return) or the Single Business Return Preparing Party (in the case of a Single Business Return) shall be entitled to contest, compromise, control and settle any adjustment or deficiency proposed, asserted or assessed pursuant to any Tax Proceeding with respect to any Mixed Business Tax Return or Single Business Return; provided that to the extent such Tax Proceeding could reasonably be expected to adversely affect the amount of Taxes for which the Reviewing Party or Single Business Return Reviewing Party (as applicable) is responsible pursuant to Article IV, the controlling party shall (A) defend such Tax Proceeding diligently and in good faith, (B) shall keep the non-controlling party informed in a timely manner of all actions proposed to be taken by the controlling party with respect to such Tax Proceeding (or to the extent practicable the portion of such Tax Proceeding that relates to Taxes for which thenon-controlling party is responsible pursuant to Article IV), (C) shall permit the non-controlling party to participate (at the non-controlling party’s sole expense) in all proceedings with respect to such Tax Proceeding (or to the extent practicable the portion of such Tax Proceeding that relates to Taxes for which the non-controlling party is responsible pursuant to Article IV), and (D) shall not settle any such Tax Proceeding without the prior written consent of the non-controlling party, which shall not be unreasonably withheld, conditioned or delayed.

ARTICLE VII

COOPERATION

Section 7.01 General Cooperation.

(a) Each Party shall each cooperate fully (and each shall cause its respective Subsidiaries to cooperate fully) with all reasonable requests in writing from the other Party hereto, or from an agent, representative or advisor to such Party, in connection with the preparation and filing of Tax Returns, claims for Refunds, Tax Proceedings, and calculations of amounts required to be paid pursuant to this Agreement, in each case, related or attributable to or arising in connection with Taxes of either of the Parties or their respective Subsidiaries covered by this Agreement and in connection with any financial reporting matter relating to Taxes (a “Tax Matter”). Such cooperation shall include the provision of any information reasonably necessary or helpful in connection with a Tax Matter (“Information”) and shall include, without limitation:

(i) the provision of any Tax Returns, other than any Nxt-ID Consolidated Return², of the Parties and their respective Subsidiaries, books, records (including information regarding ownership and Tax basis of property), documentation and other information relating to such Tax Returns, including accompanying schedules, related work papers, and documents relating to rulings or other determinations by Taxing Authorities (or, in the case of any Mixed Business Income Tax Return, to the extent practicable, the portion of such Tax Return that relates to Taxes for which PartX is responsible pursuant to this Agreement);

(ii) the execution of any document (including any power of attorney) in connection with any Tax Proceedings of either of the Parties or their respective Subsidiaries, or the filing of a Tax Return or a Refund claim of the Parties or any of their respective Subsidiaries;

(iii) the use of the Party’s reasonable best efforts to obtain any documentation in connection with a Tax Matter;

(iv) the use of the Party’s reasonable best efforts to obtain any Tax Returns (including accompanying schedules, related work papers, and documents) (other than any Nxt-ID Consolidated Return), documents, books, records or other information in connection with the filing of any Tax Returns of either of the Parties or their Subsidiaries (or, in the case of any Mixed Business Income Tax Return, to the extent practicable, the portion of such Tax Return, documents, books, records or other information that relates to Taxes for which PartX is responsible pursuant to this Agreement); and

(v) the making of each Party’s employees, advisors, and facilities available on a reasonable and mutually convenient basis in connection with the foregoing matters.

(b) Notwithstanding anything in this Agreement to the contrary, neither Party shall be required to provide the other Party or any of such other Party’s Subsidiaries access to or copies of information, documents or personnel if such action could reasonably be expected to result in the waiver of any Privilege. In the event that either Party determines that the provision of any information or documents to the other Party or any of such other Party’s Subsidiaries could be commercially detrimental, violate any law or agreement or waive any Privilege, the Parties shall use commercially reasonable efforts to permit compliance with its obligations hereunder in a manner that avoids any such harm or consequence.

(c) The Parties shall perform all actions required or permitted under this Agreement in good faith. If one Party requests the cooperation of the other Party pursuant to this Section 7.01 or any other provision of this Agreement, except as otherwise expressly provided in this Agreement, the requesting Party shall reimburse such other Party for all reasonable out-of-pocket costs and expenses incurred by such other Party in complying with the requesting Party’s request.

Section 7.02 Retention of Records. Nxt-ID and PartX shall retain or cause to be retained all Tax Returns, schedules and work papers, and all material records or other documents relating thereto in their possession, in each case that relate to a Pre-Closing Period, until the later of the six-year anniversary of the filing of the relevant Tax Return or, upon the written request of the other Party, for a reasonable time thereafter (the “Retention Period”). Upon the expiration of the Retention Period, the foregoing information may be destroyed or disposed of by the Party retaining such documentation or other information unless the other Party otherwise requests in writing before the expiration of the Retention Period. In such case, the Party retaining such documentation or other information shall deliver such materials to the other Party or continue to retain such materials, in either case at the expense of such other Party.

ARTICLE VIII

MISCELLANEOUS

Section 8.01 Dispute Resolution. In the event of any dispute between the Parties as to any matter covered by this Agreement, the Parties shall appoint a nationally recognized public accounting firm reasonably acceptable to both of the Parties (the “Accounting Firm”) to resolve such dispute. In this regard, the Accounting Firm shall make determinations with respect to the disputed items based solely on representations made by Nxt-ID and PartX and their respective representatives, and not by independent review, and shall function only as an expert and not as an arbitrator and shall be required to make a determination within the ranges submitted by the Parties. The Parties shall require the Accounting Firm to resolve all disputes no later than thirty (30) days after the submission of such dispute to the Accounting Firm, and agree that all decisions by the Accounting Firm with respect thereto shall be final and conclusive and binding on the Parties. The Accounting Firm shall resolve all disputes in a manner consistent with this Agreement and, to the extent not inconsistent with this Agreement, in a manner consistent with the Past Practices of Nxt-ID and its Subsidiaries, except as otherwise required by applicable Law. The Parties shall require the Accounting Firm to render all determinations in writing and to set forth, in reasonable detail, the basis for such determination. The total costs and expenses of the Accounting Firm will be allocated and borne between Nxt-ID and PartX based upon that percentage of such fees and expenses equal to the percentage of the dollar value of the proposed determinations submitted to the Accounting Firm determined in favor of the other Party; provided, that if in light of the nature of the dispute the foregoing is not feasible, such costs and expenses shall be borne equally by the Parties. Any initial retainer required by the Accounting Firm shall be funded equally by the Parties (and, following the Accounting Firm’s determination, the Parties shall make appropriate payments between themselves as are necessary to give effect to the preceding sentence).

Section 8.02 Interest on Late Payments. With respect to any payment between the Parties pursuant to this Agreement not made by the due date set forth in this Agreement for such payment, the outstanding amount will accrue interest at a rate per annum equal to the prime rate published in the Wall Street Journal for the relevant period.

Section 8.03 Survival of Covenants. Except as otherwise contemplated by this Agreement, all covenants and agreements of the Parties contained in this Agreement shall survive the Distribution and remain in full force and effect in accordance with their applicable terms.

Section 8.04 Successors. This Agreement shall be binding on and inure to the benefit of any successor by merger, acquisition of assets, or otherwise, to either of the Parties hereto (including without limitation any successor of Nxt-ID or PartX succeeding to the Tax Attributes of either under Section 381 of the Code), to the same extent as if such successor had been an original party to this Agreement.

Section 8.05 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced under any Law or as a matter of public policy, all other conditions and provisions of this Agreement shall remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties to this Agreement shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner.

Section 8.06 Entire Agreement. Except as otherwise expressly provided in this Agreement, this Agreement, the Separation Agreement and the other Ancillary Agreements constitute the entire agreement of the Parties hereto with respect to the subject matter of this Agreement and supersede all prior agreements and undertakings, both written and oral, between or on behalf of the Parties hereto with respect to the subject matter of this Agreement.

Section 8.07 Assignment; No Third-Party Beneficiaries. This Agreement shall not be assigned by any Party without the prior written consent of the other Party, except that each Party may assign (a) any or all of its rights and obligations under this Agreement to any of its Subsidiaries and (b) any or all of its rights and obligations under this Agreement in connection with a sale or disposition of any of its assets or entities or lines of business; provided, however, that, in each case, no such assignment shall release such Party from any liability or obligation under this Agreement. Except as provided in Article IV with respect to Indemnified Parties, this Agreement is for the sole benefit of the Parties to this Agreement and their respective Subsidiaries and their permitted successors and assigns and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 8.08 Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party who is or is to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief of its rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, may be inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by the Parties to this Agreement.

Section 8.09 Amendment. No provision of this Agreement may be amended or modified except by a written instrument signed by the Parties to this Agreement. No waiver by any Party of any provision of this Agreement shall be effective unless explicitly set forth in writing and executed by the Party so waiving. The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other subsequent breach.

Section 8.10 Rules of Construction. Interpretation of this Agreement shall be governed by the following rules of construction: (a) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires; (b) references to the terms Article, Section, paragraph, clause, Exhibit and Schedule are references to the Articles, Sections, paragraphs, clauses, exhibits and schedules of this Agreement unless otherwise specified; (c) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words refer to this entire Agreement, including the Schedules and Exhibits hereto; (d) references to “$” shall mean U.S. dollars; (e) the word “including” and words of similar import when used in this Agreement shall mean “including without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) references to “written” or “in writing” include in electronic form; (h) provisions shall apply, when appropriate, to successive events and transactions; (i) the headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (j) Nxt-ID and PartX have each participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or burdening either Party by virtue of the authorship of any of the provisions in this Agreement or any interim drafts of this Agreement; and (k) a reference to any Person includes such Person’s successors and permitted assigns.

Section 8.11 Counterparts. This Agreement may be executed in one or more counterparts each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or portable document format (PDF) shall be as effective as delivery of a manually executed counterpart of any such Agreement.

Section 8.12 Coordination with the Employee Matters Agreements. To the extent any covenants or agreements between the Parties with respect to employee withholding Taxes are set forth in the Employee Matters Agreement, such Taxes shall be governed exclusively by the Employee Matters Agreement and not by this Agreement.

Section 8.13 Expenses. Except as otherwise provided in this Agreement, whether or not the Distribution or the other transactions contemplated by this Agreement are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such costs or expenses.

Section 8.14 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

Section 8.15 Jurisdiction; Consent to Jurisdiction.

(a) Exclusive Jurisdiction. Except as otherwise expressly provided in the Separation Agreement or any other Ancillary Agreement, each of the Parties hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Court of Chancery of the State of Delaware or, if such court shall not have jurisdiction, any state or federal court of the United States of America sitting in Delaware, and any appellate court from any appeal thereof, in any Legal Proceeding arising out of or relating to this Agreement, the Separation Agreement or any other Ancillary Agreement, the documents referred to in this Agreement, or any of the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (i) agrees not to commence any such Legal Proceeding except in such courts, (ii) agrees that any claim in respect of any such Legal Proceeding may be heard and determined in the Court of Chancery of the State of Delaware or, to the extent permitted by Law, in such state or federal court, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such Legal Proceeding in the Court of Chancery of the State of Delaware or such state or federal court and (iv) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such Legal Proceeding in the Court of Chancery of the State of Delaware or such state or federal court. Each of the Parties agrees that a final judgment in any such Legal Proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. To the fullest extent permitted by Law, each Party irrevocably consents to service of process in the manner provided for notices in Section 8.16. Nothing in this Agreement shall affect the right of any party to this Agreement to serve process in any other manner permitted by Law.

(b) Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT, THE SEPARATION AGREEMENT OR THE OTHER ANCILLARY AGREEMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE SEPARATION AGREEMENT, THE OTHER ANCILLARY AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE SEPARATION AGREEMENT AND THE OTHER ANCILLARY AGREEMENTS. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY LITIGATION, SEEK TO ENFORCE SUCH WAIVERS, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (iii) EACH PARTY MAKES SUCH WAIVERS VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.15(b).

Section 8.16 Notices. All notices and other communications among the parties hereto shall be in writing and shall be deemed to have been duly given (a) when delivered in person, (b) when delivered after posting in the United States mail having been sent registered or certified mail return receipt requested, postage prepaid, (c) when delivered by FedEx or other nationally recognized overnight delivery service or (d) when delivered by facsimile (solely if receipt is confirmed) or email (so long as the sender of such email does not receive an automatic reply from the recipient’s email server indicating that the recipient did not receive such email), addressed as follows:

If to: PartX:

5650 El Camino Real

Carlsbad, CA 92008

Attn: Chief Executive Officer

Email:

Fax:

If to: Nxt-ID: 

Nxt-ID, Inc.

1627 U.S. Highway 1

Unit 206

Sebastian, FL 32958

Attn: Gino M. Pereira, Chief Executive Officer

or to such other address addresses as the Parties hereto may from time to time designate in writing. Any notice to Nxt-ID will be deemed notice to all members of the Nxt-ID Group, and any notice to PartX will be deemed notice to all members of the PartX Group.

Section 8.17 Coordination with Ancillary Agreements. Except as explicitly set forth in the Separation Agreement or any other Ancillary Agreement, this Agreement shall be the exclusive agreement among the Parties with respect to all Tax Matters, including indemnification in respect of Tax Matters. The Parties agree that this Agreement shall take precedence over any and all agreements among the Parties with respect to Tax matters.

Section 8.18 Effective Date. This Agreement shall become effective only upon the occurrence of the Distribution.

[The remainder of this page is intentionally left blank.]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written.

26

Exhibit 10.4

LICENSE AGREEMENT

THIS LICENSE ETITION] AGREEMENT (this “Agreement”), dated as of [●], 2019 (the “Effective Date”), by and among PartX, Inc., a Delaware corporation (“PartX”) and Fit-Pay, Inc., a Delaware corporation (“Fit-Pay”), on the one hand, and Nxt-ID, Inc., a Delaware corporation (“Nxt-ID”), on the other hand.  Each of PartX, Fit Pay, and Nxt-ID, is sometimes referred to herein as a “Party” and collectively, as the “Parties”. Capitalized terms used herein shall have the meanings assigned to them in Schedule A or the Separation Agreement (as defined below), as applicable.

W I T N E S S E T H:

WHEREAS, PartX and Nxt-ID have entered into a Separation and Distribution Agreement, dated as of [●], 2019 (the “Separation Agreement”), pursuant to which, among other things, (i) Nxt-ID will be transferring to PartX the SpinCo Transferred Assets (as defined in the Separation Agreement), including the Licensed PartX IP and (ii) Nxt-ID and PartX will consummate the Spin-Off (as defined in the Separation Agreement) so that on and after the Spin-Off Date (as defined in the Separation Agreement), PartX and Fit-Pay will no longer be owned by Nxt-ID; and

WHEREAS, after the consummation of the transactions described in the Separation Agreement, including the Spin-Off, (i) Nxt-ID will require the use of the Licensed PartX IP and (ii) PartX will require the use of the License Nxt-ID IP; and

WHEREAS, this Agreement is the “License Agreement” referred to in the Separation Agreement, which provides for (i) the license of the Licensed PartX IP to Nxt-ID and (ii) the license of the Licensed Nxt-ID IP to PartX, and the Parties have agreed to enter into this Agreement pursuant to the Separation Agreement for the purpose of providing for such licenses required.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements, provisions and covenants contained in this Agreement, the Parties hereby agree as follows:

ARTICLE I.
LICENSE GRANTS

Section 1.1 License Grants.

(a) Licensed PartX IP.  Subject to the terms of this Agreement, during the Term, the PartX or Fit-Pay, as applicable, hereby grants to Nxt-ID a royalty free, worldwide, non-exclusive, irrevocable and non-terminable (except as set forth in Section 9.1 or Section 9.2), non-transferrable (except as set forth in Section 12.8), non-sublicensable (except as set forth in Section 1.2(a)) right and license to use the Licensed PartX IP.

(b) Licensed Nxt-ID IP.  Subject to the terms of this Agreement, during the Term, Nxt-ID hereby grants to PartX a royalty free, worldwide, non-exclusive, irrevocable and non-terminable (except as set forth in Section 9.1 or Section 9.2), non-transferrable (except as set forth in Section 12.8), non-sublicensable (except as set forth in Section 1.2(b)) right and license to use the Licensed Nxt-ID IP.

Section 1.2 Right to Grant Sublicenses.

(a) Licensed PartX IP. During the Term, Nxt-ID shall have the right, without the consent or approval of PartX, to grant to any member of the Nxt-ID Group (as defined in the Separation Agreement), a sublicense to use any of the Licensed PartX IP, provided that any such sublicensee shall comply with all of the provisions applicable to Nxt-ID in this Agreement, with respect to its use of such Licensed PartX IP.

(b) Licensed Nxt-ID IP. During the Term, PartX shall have the right, without the consent or approval of Nxt-ID, to grant to Fit-Pay, a sublicense to use any of the Licensed Nxt-ID IP, provided that Fit-Pay shall comply with all of the provisions applicable to PartX in this Agreement, with respect to its use of such Licensed Nxt-ID IP.

Section 1.3 Reservation of Rights.  Except for the rights and licenses expressly granted under this Agreement, the applicable Licensor owns and shall retain all worldwide rights, title and interests in, to and under the Licensed IP being licensed by such Licensor.

Section 1.4 Expansion of License Rights.  For clarity, any expansion to the rights and licenses granted under Section 1.1 shall be subject to the applicable Licensor’s prior written consent.

ARTICLE II.
NONCOMPETITION

Section 2.1 PartX Noncompetition Covenants.

(a) Restrictions.  Except as set forth in this Article II or otherwise in this Agreement, each of PartX and Fit-Pay agrees that during the Term, neither of them will Compete with Nxt-ID, or any other member of the Nxt-ID Group, in the Security Technology Business (as defined in the Separation Agreement) anywhere in the world.

(b) PartX Exception. Notwithstanding anything to the contrary in Section 2.1(a), PartX and/or Fit-Pay may Compete with Nxt-ID, and/or any other member of the Nxt-ID Group, in the Security Technology Business if they can demonstrate to the reasonable satisfaction of Nxt-ID that no Licensed Nxt-ID IP is being utilized in its developing or operating their business which Competes in the Security Technology Business (the “Competing PartX Business”) and if the definition of Licensed Nxt-ID IP is amended to exclude any IP which Nxt-ID reasonably concludes Nxt-ID utilized in its developing or operating its business with which the Competing PartX Business Competes.

Section 2.2 Nxt-ID Noncompetition Covenants.

(a) Restrictions.  Except as set forth in this Article II or otherwise in this Agreement, Nxt-ID agrees that during the Term, Nxt-ID will not Compete (and shall cause all of the other members of the Nxt-ID Group not to Compete) with PartX and/or Fit-Pay, in the Payments Business (as defined in the Separation Agreement) anywhere in the world.

(b) Nxt-ID Exception. Notwithstanding anything to the contrary in Section 2.2(a), Nxt-ID and the other members of the Nxt-Id Group may Compete with PartX and/or Fit-Pay in the Payments Business if they can demonstrate to the reasonable satisfaction of PartX that no Licensed PartX IP is being utilized in its developing or operating their business which Competes in the Payments Business (the “Competing Nxt-ID Business”) and if the definition of Licensed PartX IP is amended to exclude any IP which PartX reasonably concludes PartX utilized in its developing or operating its business with which the competing PartX Business Competes.

Section 2.3 Reasonableness of Covenants.  Each of the Parties agrees that the covenants set forth in Sections 2.1 and 2.2 are necessary for the reasonable and proper protection of each Party and that each and every one of the restraints herein is reasonable in respect of subject matter, length of time and geographic area.  Each Party acknowledges that each of these covenants has a unique, very substantial and immeasurable value to the other Party.  Each of PartX and Fit-Pay, on the one hand, and Nxt-ID, on the other hand, further covenant that PartX and Fit-Pay, on the one hand, and Nxt-ID, on the other hand, will not challenge the reasonableness or enforceability of any of the covenants set forth in this Article II, and that such Party will reimburse the other Party for all costs (including reasonable attorneys’ fees) incurred in connection with any action to enforce any of the provisions of this Article II if such other Party prevails on any issue involved in such dispute or if such Party challenges the reasonableness or enforceability of any of the provisions of this Article II.

Section 2.4 Reformation.  If, at the time of enforcement of any of the covenants and agreements set forth in this Article II, it is determined by a court of competent jurisdiction in any jurisdiction or any arbitration or mediation tribunal that any restriction in this Article II is excessive in duration or scope or is unreasonable or unenforceable under applicable Law under circumstances then existing, then it is the intention of the Parties that the maximum duration or scope under such circumstances shall be substituted for the stated duration or scope and that such court or tribunal shall be allowed to revise the restrictions contained herein to cover the maximum period and scope permitted by Law; provided, however, that in no event shall the duration or scope be expanded from those then currently provided for by this Article II.  In furtherance and not in limitation of the foregoing, whenever possible, each provision of this Article II will be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Article II is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Article II will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

Section 2.5 Equitable Relief and Other Remedies.  Each Party agrees that irreparable damage would occur in the event that the provisions of this Article II were not performed in accordance with their specific terms.  Accordingly, it is hereby agreed that each Party shall be entitled to an injunction or injunctions or other equitable relief to enforce specifically the terms and provisions of this Article II in any court of the U.S. or any state having jurisdiction, this being in addition to any other remedy to which such Party is entitled at Law or in equity, and all such rights and remedies shall be cumulative.  Each Party agree that the remedies at Law for any breach or threatened breach of this Article II, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at Law would be adequate is waived.  Any requirements for the securing or posting of any bond with such remedy are waived by each Party.

ARTICLE III.
ADDITIONAL COVENANTS

Section 3.1 Non-Disparagement.  During the Term, each Party shall not, directly or indirectly, make any statement or representation, or engage in any activity, that materially injures, disparages or dilutes the reputation of any other Party or its businesses, other than statements contained in and relevant to any claim or defense contained in a pleading filed in connection with a court proceeding between the Parties to enforce or judicially construe this Agreement.

ARTICLE IV.
USAGE

Section 4.1 Uses of Licensed IP. Each Party covenants that it will only use the Licensed IP in accordance with the terms and conditions of this Agreement, unless otherwise permitted by the applicable Licensor.

ARTICLE V.
OWNERSHIP, MAINTENANCE AND ENFORCEMENT OF LICENSED IP

Section 5.1 Ownership of the Licensed PartX IP.

(a) Nxt-ID acknowledges that, as between PartX and the members of the Nxt-ID Group, the Licensed PartX IP is and shall be solely owned by PartX or Fit-Pay, and that all use of the Licensed PartX IP by the members of the Nxt-ID Group (including all goodwill arising therefrom) shall inure to the benefit of PartX and Fit-Pay, as the case may be.

(b) During the Term, no member of the Nxt-ID Group shall challenge or assist any other Person in challenging the validity or enforceability of, or the ownership by PartX or Fit-Pay of or other rights in, the Licensed PartX IP in any manner.

(c) Nxt-ID, on behalf of itself and the other members of the Nxt-ID Group, hereby assigns, transfers and conveys to PartX and Fit-Pay any and all rights in, to and under the Licensed PartX IP that may have been or will be obtained by Nxt-ID, any other members of the Nxt-ID Group, or any of their respective authorized assigns or which may have vested or may vest in Nxt-ID, any other members of the Nxt-ID Group, or any of their respective authorized assigns as a result of its use of the Licensed PartX IP or other activities under this Agreement, and Nxt-ID will, and shall cause its Affiliates to, at PartX’s cost and expense, execute any instruments reasonably requested by PartX to confirm the foregoing.  No consideration other than the mutual covenants and consideration of this Agreement shall be necessary for any such assignment, transfer or conveyance.

Section 5.2 Ownership of the Licensed Nxt-ID IP.

(c) Each of PartX and Fit-Pay acknowledges that, as between Nxt-ID and each of PartX and Fit-Pay, the Licensed Nxt-ID IP is and shall be solely owned by the members of the Nxt-ID Group, as applicable, and that all use of the Licensed Nxt-ID IP by PartX and Fit-Pay (including all goodwill arising therefrom) shall inure to the benefit of the members of the Nxt-ID Group, as applicable.

(d) During the Term, neither PartX nor Fit-Pay shall challenge or assist any other Person in challenging the validity or enforceability of, or the ownership by Nxt-ID or any other members of the Nxt-ID Group of or other rights in, the Licensed Nxt-ID IP in any manner.

(e) Each of PartX and Fit-Pay hereby assigns, transfers and conveys to Nxt-ID and the other members of the Nxt-ID Group any and all rights in, to and under the Licensed Nxt-ID IP that may have been or will be obtained by either PartX , Fit-Pay or any of their respective authorized assigns or which may have vested or may vest in PartX, Fit-Pay or any of their respective authorized assigns as a result of its use of the Licensed Nxt-ID IP or other activities under this Agreement, and each of PartX Fit-Pay will, and shall cause its Affiliates to, at Nxt-ID’s cost and expense, execute any instruments reasonably requested by Nxt-ID to confirm the foregoing.  No consideration other than the mutual covenants and consideration of this Agreement shall be necessary for any such assignment, transfer or conveyance.

Section 5.3 Maintenance of Licensed PartX IP.  PartX shall maintain all registrations for the Licensed PartX IP (except where any Licensed PartX IP is unable to be maintained under applicable Law), at PartX’s cost and expense.  Notwithstanding the foregoing, PartX shall not be required to maintain any registration of any particular Licensed PartX IP if PartX reasonably determines such maintenance is not economically practicable; provided that any determination by PartX that maintenance of such particular Licensed PartX IP is not economically practicable shall be solely with regard to the use of such Licensed PartX IP by either PartX or Fit-Pay.  If PartX intends to abandon or permit to lapse any registration for any particular Licensed PartX IP, PartX shall give Nxt-ID reasonable advance notice thereof, and Nxt-ID shall have the right, at its sole cost and expense and subject to good faith consultation with PartX, to maintain such Licensed PartX IP, and PartX shall, at Nxt-ID’s cost and expense, provide all reasonable cooperation and assistance requested by Nxt-ID in connection therewith.Section 5.4 Maintenance of Licensed Nxt-ID IP.  Nxt-ID shall maintain all registrations for the Licensed Nxt-ID IP (except where any Licensed Nxt-ID IP is unable to be maintained under applicable Law), at Nxt-ID’s cost and expense.  Notwithstanding the foregoing, Nxt-ID shall not be required to maintain any registration of any particular Licensed Nxt-ID IP if Nxt-ID reasonably determines such maintenance is not economically practicable; provided that any determination by Nxt-ID that maintenance of such particular Licensed Nxt-ID IP is not economically practicable shall be solely with regard to the use of such Licensed Nxt-ID IP by Nxt-Id or any other member of the Nxt-ID Group.  If Nxt-ID intends to abandon or permit to lapse any registration for any particular Licensed Nxt-ID IP, Nxt-ID shall give PartX reasonable advance notice thereof, and PartX shall have the right, at its sole cost and expense and subject to good faith consultation with Nxt-ID, to maintain such Licensed Nxt-ID IP, and Nxt-ID shall, at PartX’s cost and expense, provide all reasonable cooperation and assistance requested by PartX in connection therewith.

Section 5.5 Enforcement of Licensed PartX IP.  Each Party shall promptly notify the other Party of any known, actual, suspected, or threatened infringement or other violation of the Licensed PartX IP that could reasonably be expected to be material; provided, however, that, with respect to PartX or Fit-Pay, this obligation shall be limited to any such known, actual, suspected or threatened infringement or other violation of the Licensed PartX IP in the Security Technology Business.  PartX shall have the initial right, but not the obligation, to enforce or threaten to enforce the Licensed PartX IP against any party, and to assert or threaten to assert any of the Licensed PartX IP as a counterclaim against any Third Party in any Action brought or threatened by such Third Party, in each case, at PartX’s cost and expense, and Nxt-ID shall, at PartX’s cost and expense, provide all reasonable cooperation and assistance requested by PartX in connection therewith.  PartX shall retain all recoveries in an enforcement proceeding it initiates.  If PartX intends not to enforce any Licensed PartX IP, PartX shall give Nxt-ID reasonable advance notice thereof, and Nxt-ID shall have the right, in its own name and at its sole cost and expense, and subject to good faith consultation with PartX, to enforce such Licensed PartX IP, and PartX shall, at Nxt-ID’s cost and expense, provide all reasonable cooperation and assistance requested by Nxt-ID in connection therewith.  Nxt-ID shall retain all recoveries in an enforcement proceeding it initiates.  Notwithstanding the foregoing, PartX shall not be required to enforce or threaten to enforce, and Nxt-ID shall have no right to enforce, any Licensed PartX IP if PartX reasonably determines such enforcement could reasonably be expected to result, directly or indirectly, in (i) the invalidity, unenforceability or voiding of, or other material impairment to PartX’s rights in any such Licensed PartX IP or any other Licensed PartX IP owned or controlled by PartX (including any injury to the goodwill associated therewith) or (ii) the loss or other material impairment of PartX’s ability to apply for or obtain any registration for any such Licensed PartX IP or any other Licensed PartX IP owned or controlled by PartX.

Section 5.6 Enforcement of Licensed Nxt-ID IP.  Each Party shall promptly notify the other Party of any known, actual, suspected, or threatened infringement or other violation of the Licensed Nxt-ID IP that could reasonably be expected to be material; provided, however, that, with respect to Nxt-ID, this obligation shall be limited to any such known, actual, suspected or threatened infringement or other violation of the Licensed Nxt-ID IP in the Payments Business.  Nxt-ID shall have the initial right, but not the obligation, to enforce or threaten to enforce the Licensed Nxt-ID IP against any party, and to assert or threaten to assert any of the Licensed Nxt-ID IP as a counterclaim against any Third Party in any Action brought or threatened by such Third Party, in each case, at Nxt-ID’s cost and expense, and PartX shall, at Nxt-ID’s cost and expense, provide all reasonable cooperation and assistance requested by Nxt-ID in connection therewith.  Nxt-ID shall retain all recoveries in an enforcement proceeding it initiates.  If Nxt-ID intends not to enforce any Licensed Nxt-ID IP, Nxt-ID shall give PartX reasonable advance notice thereof, and PartX shall have the right, in its own name and at its sole cost and expense, and subject to good faith consultation with Nxt-ID, to enforce such Licensed Nxt-ID IP, and Nxt-ID shall, at PartX’s cost and expense, provide all reasonable cooperation and assistance requested by PartX in connection therewith.  PartX shall retain all recoveries in an enforcement proceeding it initiates.  Notwithstanding the foregoing, Nxt-ID shall not be required to enforce or threaten to enforce, and PartX shall have no right to enforce, any Licensed Nxt-ID IP if Nxt-ID reasonably determines such enforcement could reasonably be expected to result, directly or indirectly, in (i) the invalidity, unenforceability or voiding of, or other material impairment to Nxt-ID’s rights in any such Licensed Nxt-ID IP or any other Licensed Nxt-ID IP owned or controlled by Nxt-ID (including any injury to the goodwill associated therewith) or (ii) the loss or other material impairment of Nxt-ID’s ability to apply for or obtain any registration for any such Licensed Nxt-ID IP or any other Licensed Nxt-ID IP owned or controlled by Nxt-ID.

ARTICLE VI.
REPRESENTATIONS AND WARRANTIES

Section 6.1 Disclaimer.  EXCEPT AS EXPRESSLY SET FORTH HEREIN, EACH PARTY MAKES NO, AND HEREBY EXPRESSLY DISCLAIMS ANY AND ALL, REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY, REGISTRABILITY, OR NON-INFRINGEMENT AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE) WITH RESPECT TO THIS AGREEMENT.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS EXPRESSLY SET FORTH HEREIN, EACH PARTY ACKNOWLEDGES THAT EACH LICENSE GRANTED IN THIS AGREEMENT AND THE RIGHTS UNDER THE LICENSED IP ARE PROVIDED “AS IS”.

Section 6.2 Representations and Warranties of Nxt-ID. Nxt-ID hereby represents and warrants that:

(a) it is a corporation duly organized, validly existing and in good standing under the Laws of Delaware;

(b) it has the requisite power and authority to enter into this Agreement and to carry out the transactions contemplated hereby;

(c) the execution and delivery by Nxt-ID of this Agreement have been duly authorized and approved by all requisite corporate action;

(d) this Agreement has been duly executed and delivered by Nxt-ID and constitutes the legal, valid and binding obligations of Nxt-ID, assuming due execution of this Agreement by the PartX Licensors, enforceable against Nxt-ID in accordance with its respective terms, except to the extent enforceability may be limited by bankruptcy, insolvency, moratorium or other similar Laws affecting creditors’ rights generally or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at Law);

(e) except for those licenses disclosed in its filings with the Securities and Exchange Commission, Nxt-ID owns all right, title, and interest in or to and to use of all the Licensed Nxt-ID IP; and

(f) to its knowledge, none of the Nxt-ID Licensed IP infringes or violates any third-party intellectual property assets or constitutes a misappropriation of any third-party intellectual property assets.

Section 6.3 Representations and Warranties of PartX.  Each PartX Licensor hereby represents and warrants that:

(a) it is a corporation organized, validly existing and in good standing under the Laws of Delaware;

(b) it has the requisite power and authority to enter into this Agreement and to carry out the transactions contemplated hereby;

(c) the execution and delivery by such PartX Licensor of this Agreement have been duly authorized and approved by all requisite corporate action;

(d) this Agreement has been duly executed and delivered by such PartX Licensor and constitutes the legal, valid and binding obligations of such PartX Licensor, assuming due execution of this Agreement by Nxt-ID, enforceable against such PartX Licensor in accordance with its respective terms, except to the extent enforceability may be limited by bankruptcy, insolvency, moratorium or other similar Laws affecting creditors’ rights generally or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at Law);

(e) except for those licenses disclosed in the Nxt-ID filings with the Securities and Exchange Commission, PartX owns all right, title, and interest in or to and to use of all the Licensed PartX IP; and

(f) to its knowledge, none of the PartX Licensed IP infringes or violates any third-party intellectual property assets or constitutes a misappropriation of any third-party intellectual property assets.

ARTICLE VII.
INDEMNIFICATION; LIMITATIONS OF LIABILITY

Section 7.1  Indemnification for Breach of Representations and Warranties and Third Party Claims.

(a) Nxt-ID agrees to indemnify, defend and hold harmless PartX and its Affiliates, and their respective Related Parties (the “PartX Indemnitees”) from and against any and all losses, costs, liabilities, damages, judgments, settlements, fees, claims, taxes, demands and expenses (including commercially reasonable attorneys’ fees and costs of suit) (“Losses”) arising from (i) any breach of any representation or warranty made by Nxt-ID herein or (ii) any Third Party claims based upon any use by Nxt-ID, or any of the other members of the Nxt-ID Group, of the Licensed PartX IP, to the extent that such Third Party claims arise as a result of any use by Nxt-ID, or any other member of the Nxt-ID Group, of the Licensed PartX IP in an unauthorized manner and/or in violation of the provisions of this Agreement.

(b) PartX and Fit-Pay jointly and severally agree to indemnify, defend and hold harmless Nxt-ID and its Affiliates, and their respective Related Parties (the “Nxt-ID Indemnitees”) from and against any and all Losses arising from (i) any breach of any representation or warranty made by PartX herein or (ii) any Third Party claims  based upon any use of the Licensed Nxt-ID IP by PartX or Fit-Pay, to the extent that such Third Party claims arise as a result of any use by PartX or Fit-Pay of the Licensed Nxt-ID IP in an unauthorized manner and/or in violation of the provisions of this Agreement..

(c) The indemnification procedures and other matters set forth in Sections 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, and 5.11 of the Separation Agreement are hereby incorporated into this Agreement.

Section 7.2 Disclaimer of Consequential Damages.  NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, UNDER NO CIRCUMSTANCES WHATSOEVER SHALL ANY PARTY (OR ANY OF ITS RELATED PARTIES) BE LIABLE TO ANY OTHER PARTY (OR ANY OF ITS RELATED PARTIES) IN CONTRACT, TORT, NEGLIGENCE, BREACH OF STATUTORY DUTY OR OTHERWISE FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTAL OR PUNITIVE DAMAGES OR ANY LOST PROFITS, LOSS OF USE, DAMAGE TO GOODWILL OR LOSS OF BUSINESS IN CONNECTION WITH THIS AGREEMENT, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND EACH PARTY HEREBY WAIVES, ON BEHALF OF ITSELF AND ITS RELATED PARTIES, ANY AND ALL CLAIMS FOR SUCH DAMAGES, INCLUDING ANY CLAIM FOR LOST PROFITS, LOSS OF USE, DAMAGE TO GOODWILL OR LOSS OF BUSINESS WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE; PROVIDED THAT THIS SECTION 7.2 SHALL NOT PREVENT A PARTY FROM RECOVERING IN RESPECT OF ANY DAMAGES AS MAY BE RECOVERABLE BY A THIRD PARTY PURSUANT TO A CLAIM BY SUCH THIRD PARTY.

Section 7.3 Successors and Assigns.  The provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective successors and permitted transferees.

ARTICLE VIII.
TERM

Section 8.1 Term.  Unless earlier terminated by mutual agreement of the Parties or as provided in Article IX, the initial term of this Agreement shall commence on the Effective Date and shall continue until and expire three (3) years from the Effective Date (the “Initial Term”). This Agreement shall automatically be renewed for successive three (3)-year renewal Terms (each, a “Renewal Term” and together with the Initial Term, hereinafter referred to as the “Term”) unless either Party cancels this Agreement on one hundred and eighty (180) days’ prior written notice delivered to the other Party

ARTICLE IX.
DEFAULT AND TERMINATION

Section 9.1 PartX Termination. In the event Nxt-ID, or any other member of the Nxt-ID Group, materially breaches its obligations hereunder, and such breach is not remedied in all material respects within thirty (30) days after written notice of such breach is received by Nxt-ID from PartX, PartX shall have the right to terminate this Agreement upon written notice to Nxt-ID with respect to any obligations PartX may have to perform hereunder.

Section 9.2 Nxt-ID Termination. In the event PartX or Fit-Pay materially breaches its obligations hereunder, and such breach is not remedied in all material respects within thirty (30) days after written notice of such breach is received by PartX from Nxt-ID, Nxt-ID shall have the right to terminate this Agreement upon written notice to PartX with respect to any obligations Nxt-ID may have to perform hereunder relative to the Nxt-ID Licensed IP.

Section 9.3 Other Rights to Terminate.  The Parties acknowledge and agree that, except as expressly set forth in Section 9.1 and Section 9.2,, or by the mutual agreement to terminate, as provided in Article VIII hereof, this Agreement may not be terminated by any Party.

Section 9.4 Effect of Termination.

(a) In the event of the expiration or earlier termination of this Agreement, except for the rights granted pursuant to Section 9.4(b), each Licensee shall promptly cease all use of the Licensed IP that was licensed to it, including by ceasing all use of PartX Confidential Information (as defined in the Separation Agreement) if it is a member of the Nxt-ID Group or Nxt-ID Confidential Information (as defined in the Separation Agreement) if it is a PartX or Fit-Pay.

(b) (i) In the event the Parties terminate this Agreement by mutual agreement, then, unless otherwise agreed in writing, each Party may use the other Party’s Licensed IP on a non-exclusive basis for a period of up to six (6) months and (ii) In the event this Agreement is terminated due to a Party’s uncured breach, then the nonbreaching Party may use the breaching Party’s Licensed IP for as long as the nonbreaching Party desires so long as the nonbreaching Party stays in compliance with the terms hereof.

(c) No termination right of, or the exercise of any such right by, the Parties hereunder shall limit the rights or remedies that any Party may have at Law or in equity.

Section 9.5 Survival.  Any provision of this Agreement that contemplates performance or observance subsequent to any termination or expiration of this Agreement shall survive expiration or termination of this Agreement for any reason.

ARTICLE X.
CONFIDENTIALITY

Section 10.1 Confidentiality.  The confidentiality provisions of Section 6.10 of the Separation Agreement are hereby incorporated in to this Agreement.

Section 10.2 Permitted Disclosures.

(a) Each Receiving Party may disclose Confidential Information between and among its Affiliates and Related Parties, to the extent necessary to exercise its rights and fulfill its obligations hereunder.

(b) Each Receiving Party may disclose Confidential Information (i) if such Receiving Party is required or compelled to disclose any such Confidential Information by judicial or administrative process or by other requirements of applicable Law or stock exchange rule, (ii) as required in connection with any legal or other proceeding by such Receiving Party against the applicable Disclosing Party (or vice versa), and (iii) as necessary in order to permit a Party to prepare and disclose its financial statements, Tax Returns (as defined in the Separation Agreement) or other required disclosures.  Notwithstanding the foregoing, in the event that any demand or request for disclosure of Confidential Information is made pursuant to clause (i) above, such Receiving Party shall promptly notify the applicable Disclosing Party of the existence of such request or demand and shall provide such Disclosing Party a reasonable opportunity to seek an appropriate protective order or other remedy, which such Receiving Party will cooperate in obtaining.  In the event that such appropriate protective order or other remedy is not obtained, such Receiving Party shall furnish only that portion of the Confidential Information that is legally required to be disclosed and shall use commercially reasonable steps to ensure that confidential treatment is accorded such information.

Section 10.3 Return of Confidential Information.  Upon the expiration or other termination of this Agreement, or at any other time upon the written request of a Disclosing Party, the applicable Receiving Party shall promptly return to such Disclosing Party or, at such Disclosing Party’s request, destroy all Confidential Information of such Disclosing Party in such Receiving Party’s possession or control, together with all copies, summaries and analyses thereof, regardless of the format in which such Confidential Information exists or is stored.  In the case of destruction, upon a Disclosing Party’s request, the applicable Receiving Party shall promptly send a written certification that destruction has been accomplished to such Disclosing Party.  Notwithstanding the foregoing, however, a Receiving Party is entitled to retain one copy of such Confidential Information for the sole purpose of complying with its obligations under applicable Law or this Agreement.  With regard to Confidential Information stored electronically on backup tapes, servers or other electronic media, except to the extent required by applicable Law, the Parties agree to use commercially reasonable efforts to destroy such Confidential Information without undue expense or business interruption; provided, however that Confidential Information so stored is subject to the obligations of confidentiality and non-use contained in this Agreement for as long as it is stored.

ARTICLE XI.
GOVERNING LAW AND DISPUTE RESOLUTION

Section 11.1 Dispute Resolution.

(a) In the event of any dispute, controversy or claim arising out of or in connection with this Agreement (including its formation, interpretation, breach or termination, and whether contractual or non-contractual in nature) (a “Dispute”), the principals of the Parties shall seek to amicably resolve such Dispute for a period of thirty (30) days. 

(b) In the event that the Parties are unable to resolve a Dispute in accordance with Section 11.1(a), a Party may commence a legal proceeding as provided in Section 11.2.

Section 11.2 Jurisdiction; Consent to Jurisdiction.

(a) Exclusive Jurisdiction. Each of the Parties hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Court of Chancery of the State of Delaware or, if such court shall not have jurisdiction, any state or federal court of the United States of America sitting in Delaware, and any appellate court from any appeal thereof, in any legal proceeding arising out of or relating to this Agreement or any of the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the Parties hereby irrevocably and unconditionally (i) agrees not to commence any such legal proceeding except in such courts, (ii) agrees that any claim in respect of any such legal proceeding may be heard and determined in the Court of Chancery of the State of Delaware or, to the extent permitted by Law, in such state or federal court, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such Legal Proceeding in the Court of Chancery of the State of Delaware or such state or federal court and (iv) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such legal proceeding in the Court of Chancery of the State of Delaware or such state or federal court. Each of the Parties agrees that a final judgment in any such legal proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. To the fullest extent permitted by Law, each Party irrevocably consents to service of process in the manner provided for notices in Section 11.4 of this Agreement. Nothing in this Agreement shall affect the right of any Party to this Agreement to serve process in any other manner permitted by law. The prevailing Party shall be entitled to seek from the court reimbursement from the non-prevailing Party/Parties for its reasonable attorneys’ fees and costs incurred in connection with commencing a legal proceeding.

(b) Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY LITIGATION, SEEK TO ENFORCE SUCH WAIVERS, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (iii) EACH PARTY MAKES SUCH WAIVERS VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.2(b).

Section 11.3 Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party who is, or is to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief in respect of its rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, subject to Section 5.8 of the Separation Agreement. The Parties agree that the remedies at Law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any legal proceeding for specific performance that a remedy at Law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties to this Agreement.

Section 11.4 Continuity of Service Performance.  Unless otherwise agreed in writing, the Parties will continue to provide service and honor all other commitments under this Agreement during the course of dispute resolution pursuant to the provisions of this Article XI with respect to all matters not subject to such dispute resolution.

ARTICLE XII.
MISCELLANEOUS

Section 12.1 Recordation.  Each Party acknowledges and agrees that each other Party may, with prior written notice to the other Parties, record a short form of this Agreement in the form mutually agreed by the Parties with any applicable Governmental Authority (as defined in the Separation Agreement) as may be necessary or desirable, including, to record and perfect its rights hereunder under any applicable Law.

Section 12.2 Complete Agreement; Construction.  This Agreement, including the Exhibits and Schedules, shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter.  In the event of any inconsistency between this Agreement and any Schedule or Exhibit hereto, this Agreement shall prevail.

Section 12.3 Counterparts.  This Agreement may be executed in two or more counterparts (including by electronic or .pdf transmission), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of any signature page by facsimile, electronic or pdf. transmission shall be binding to the same extent as an original signature page.

Section 12.4 Relationship of the Parties.  Each Party hereby acknowledges that the Parties are separate entities, each of which has entered into this Agreement for independent business reasons.  The relationships of the Parties hereunder are those of independent contractors and nothing in this Agreement is intended or shall be deemed to constitute a partnership, agency, employer-employee or joint venture relationship between the Parties.  The Parties’ obligations and rights in connection with the subject matter hereof are solely as specifically set forth in this Agreement (including in any Schedule or Exhibit hereto), and each Party acknowledges and agrees that the Parties owe no fiduciary or other duties or obligations to each other by virtue of any relationship created by this Agreement.

Section 12.5 Notices.  All notices and other communications among the parties hereto shall be in writing and shall be deemed to have been duly given (a) when delivered in person, (b) when delivered after posting in the United States mail having been sent registered or certified mail return receipt requested, postage prepaid, (c) when delivered by FedEx or other nationally recognized overnight delivery service or (d) when delivered by facsimile (solely if receipt is confirmed) or email (so long as the sender of such email does not receive an automatic reply from the recipient’s email server indicating that the recipient did not receive such email), addressed as follows:

If to Nxt-ID:

285 North Drive, Suite D

Melbourne, FL 32934

Attn: Chief Executive Officer

Email:

Fax:

If to the PartX:

5650 El Camino Real

Carlsbad, CA 92008

Attn: Michael Orlando, President

Email:

Fax:

or to such other address addresses as the Parties hereto may from time to time designate in writing.

Section 12.6 Waivers.  The failure of any Party to require strict performance by any other Party of any provision in this Agreement will not waive or diminish that Party’s right to demand strict performance thereafter of that or any other provision hereof.

Section 12.7 Amendments.  This Agreement may not be modified or amended except by an agreement in writing signed by each of the Parties.

Section 12.8 Assignment; Financing.

(a) Except as otherwise provided in this Agreement, Nxt-ID may not  assign (including by operation of Law), or mortgage, pledge, encumber or grant a security interest in or lien against its rights under, this Agreement, in whole or in part, without the prior written consent of PartX, except that Nxt-ID may assign this Agreement in its entirety, with written notice to PartX, to an Affiliate solely (A) as part of an internal reorganization or restructuring for tax, administrative or other similar purposes and (B) if such Affiliate is the ultimate parent entity of Nxt-ID or otherwise has the power to control the actions of all of Nxt-ID’s Affiliates receiving the benefit of this Agreement; provided, that such Affiliate shall agree in writing, reasonably satisfactory to PartX, to be bound by the terms of this Agreement as if named as a “Party” hereto.

(b) Except as otherwise provided in this Agreement, the PartX Licensors may not  assign (including by operation of Law), or mortgage, pledge, encumber or grant a security interest in or lien against their rights under, this Agreement, in whole or in part, without the prior written consent of Nxt-ID, except that the PartX Licensors may assign this Agreement in its entirety, with written notice to Nxt-ID, to an Affiliate solely (A) as part of an internal reorganization or restructuring for tax, administrative or other similar purposes and (B) if such Affiliate is the ultimate parent entity of the PartX Licensors or otherwise has the power to control the actions of all of the PartX Affiliates receiving the benefit of this Agreement; provided, that such Affiliate shall agree in writing, reasonably satisfactory to Nxt-ID, to be bound by the terms of this Agreement.

Section 12.9 Affiliates.  Each of the Parties shall cause its controlled Affiliates to perform, and hereby guarantees its controlled Affiliates’ performance of, all actions, agreements and obligations set forth herein.  All references to “Nxt-ID” and “PartX” shall include their respective Subsidiaries unless otherwise expressly set forth herein.

Section 12.10 Third Party Beneficiaries.  Except as set forth in Section 7.1, this Agreement is solely for the benefit of the Parties (and, where applicable, their Affiliates and the Nxt-ID Entities and the PartX Entities) and shall not confer upon Third Parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

Section 12.11 Title and Headings.  Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

Section 12.12 Exhibits and Schedules.  The Exhibits and Schedules shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein.

Section 12.13 Severability.  In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.  The Parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

Section 12.14 Force Majeure.  No Party (or any Person acting on its behalf) shall have any liability or responsibility for failure to fulfill any obligation (other than a payment obligation) under this Agreement, so long as and to the extent to which the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure.  A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event: (a) notify the other applicable Parties of the nature and extent of any such Force Majeure condition and (b) use due diligence to remove any such causes and resume performance under this Agreement as soon as feasible. “Force Majeure” means any cause beyond the control of the applicable Party which could not, with the exercise of due diligence, have been avoided, including acts of God, civil disorders or commotions, acts of aggression, fires, accidents, explosions, floods, drought, war, sabotage, embargo, earthquakes, storms, utility failures, material shortages, national labor disturbances, riots, delays or errors by shipping companies, changes in applicable Law, national health emergencies, destruction, damage or appropriations of property, government requirements, acts of civil or military authorities or terrorism or the threat of any of the foregoing.

Section 12.15 Interpretation.  The Parties have participated jointly in the negotiation and drafting of this Agreement.  This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.

Section 12.16 Bankruptcy.

(a) All rights and licenses granted to each Party under or pursuant to this Agreement are, and will otherwise be deemed to be, for purposes of the Title 11 of the U.S. Code, as amended from time to time (the “Bankruptcy Code”), a license of rights to “intellectual property” as defined under Section 101 of the Bankruptcy Code.  The Parties agree that each Party subject to a bankruptcy proceeding pursuant to the Bankruptcy Code (a “Debtor”) will retain and may fully exercise all of its respective rights and elections as a licensee of intellectual property under the Bankruptcy Code.  The Parties further agree and acknowledge that enforcement by any Debtor of any of its respective rights under Section 365(n) of the Bankruptcy Code in connection with this Agreement shall not violate the automatic stay of Section 362 of the Bankruptcy Code and waive any right to object on such basis. 

(b) To the extent any license of rights under or pursuant to this Agreement does not constitute a license to “intellectual property” as defined under Section 101 of the Bankruptcy Code, the Parties hereby acknowledges and agrees that: (i) this Agreement is a material inducement and each Party is relying on this Agreement in connection with its business; (ii) the transactions contemplated by the Separation Agreement and this Agreement have been substantially performed, this Agreement does not contain any material, on-going obligations on any Debtor relevant to the standard governing executor contracts, and therefore, this Agreement is not an executory contract; (iii) the Parties other than the Debtor (and any debtor-in-possession or trustee of the business of such Parties other than the Debtor) cannot and shall not attempt to reject this Agreement pursuant to Section 365 of the Bankruptcy Code or any foreign equivalent; and (iv) in the event any Party other than the Debtor (or any debtor-in-possession or trustee of the business of any Party other than the Debtor) does seek to reject this Agreement and in the event such relief is granted, (A) such rejection shall be treated merely as breach of the contract and not its avoidance, rescission, or termination, (B) such rejection does not terminate a Debtor’s right to use such license and has no effect upon the contract’s continued existence, (C) such Debtor may elect rights under Section 365(n) of the Bankruptcy Code or any foreign equivalent, and (D) such Debtor shall be entitled to seek other equitable treatment relating to such rejection.

Section 12.17 Non-Circumvention.  No Party shall structure or enter into any transaction, or take any other action, designed to avoid, or for the purpose of avoiding, the intent of the Parties in entering into this Agreement.  To the extent any Party desires to structure or enter into any transaction, or take any other action (in each case, for bona fide tax or other purposes, and which is not designed or intended to avoid the observance or performance of any of the terms of this Agreement), which would have a consequence under this Agreement that is contrary to the intent of the Parties in entering into this Agreement, then the Parties will reasonably cooperate and consider in good faith any amendments to or waivers of this Agreement to cause any such consequences to be consistent with the intended rights and obligations of the Parties under this Agreement (provided that no Party’s consent to any such amendment or waiver shall be unreasonably withheld).  By way of example only, in the event that a Party enters into a transaction where the economic effect of such transaction is that such Party is the Acquired Person, but the transaction structure is such that such Party legally under the terms of this Agreement would be deemed to be the Acquiring Person, then the preceding two sentences of this Section 12.17 would apply to such transaction.

[signature page follows]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written.

[Signature Page of License Agreement]

Schedule A

Definitions

As used in this Agreement, the following terms shall have the following meanings (and all other capitalized terms used but not defined herein shall have the meanings given to such terms in the Separation Agreement):

“Acquire”, including the correlative term “Acquisition”, shall mean, with respect to any Person, business or assets, to directly or indirectly acquire (whether in a single transaction or a series of related transactions) (a) all or substantially all of the assets or Equity Interests of such Person or business or (b) Control of such Person, business or assets.

“Affiliate” shall mean, when used with respect to a specified Person, a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such specified Person.  For the purposes of this definition, “control”, when used with respect to any specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by Contract or otherwise.  It is expressly agreed that no Party shall be deemed to be an Affiliate of the other Party by reason of having one or more directors in common or having the same Chairman of the board of directors.

“Compete”, including the correlative term “Competing,” shall mean: (a) to conduct or participate or engage in, or bid for or otherwise pursue a business (including by licensing Trademarks to a Person conducting or participating or engaging in such business), whether as a principal, sole proprietor, partner, stockholder or agent of, consultant to, licensor or franchisor to, or manager for, any Person or in any other capacity or (b) have any debt or equity ownership interest in or actively assist any Person or business that conducts or participates or engages in, or bids for or otherwise pursues a business (including by licensing Trademarks to a Person conducting or participating or engaging in such business), whether as a principal, sole proprietor, partner, stockholder or agent of, consultant to, licensor or franchisor to, or manager for, any Person or in any other capacity; provided, however, that holding solely as a passive investor no more than five percent (5%) of the issued and outstanding shares of, or any other interest in, any Person that is listed on any recognized stock exchange, the business of which Person would otherwise be Competing pursuant to clause (a) of this definition, shall not be deemed to be Competing.

“Confidential Information” means the Nxt-ID Confidential Information and the PartX Confidential Information.

“Control”, including the correlative terms “Controlling” and “Controlled by”, shall mean the possession, directly or indirectly (through one or more intermediaries), of the power to direct or cause the direction of the management and policies of a Person (whether through ownership of Equity Interests, by contract or otherwise).

“Disclosing Party” shall mean a Party or any of its Affiliates or any Person acting on any of their behalves that discloses Confidential Information to a Receiving Party under this Agreement.

“Equity Interests” of shall mean (a) capital stock, membership interests, partnership interests, or other equity interests, (b) any security or other interest convertible into or exchangeable or exercisable for any capital stock, membership interests, partnership interests, or other equity interests (whether at the time of issuance or upon the passage of time or the occurrence of some future event), or containing any profits participation features, (c) any warrant, option or other right (contingent or otherwise) to subscribe for or purchase any capital stock, membership interests, partnership interests, or other equity interests, or securities containing any profit participation features, or to subscribe for or purchase any securities directly or indirectly convertible into or exchangeable for any capital stock, membership interests, partnership interests, or other equity interests, or securities containing any profit participation features, or (d) any share or unit appreciation rights, phantom share or unit rights, contingent interest or other similar rights.

“Law” shall mean any and all applicable federal, state, local, municipal, foreign or other law, statute, constitution, ordinance, code, regulation, ruling or other legal requirement enacted, adopted, implemented or otherwise in effect by or under the authority of any Governmental Authority.

“Licensed IP” shall mean the Licensed PartX IP and the Licensed Nxt-ID IP.

“Licensed Nxt-ID IP” shall mean all of the intellectual property set forth on Schedule [1] annexed hereto including all rights relating thereto, which intellectual property rights are owned by Nxt-ID, or any other member of the Nxt-ID Group, or to which Nxt-ID or any other member of the Nxt-ID Group has licensed or otherwise acquired the right to license, pursuant to the provisions of this Agreement.

“Licensed PartX IP” shall mean all of the intellectual property set forth on Schedule [2] annexed hereto including all rights relating thereto, which intellectual property rights are owned by PartX or Fit-Pay, or to which PartX or Fit-Pay has licensed or otherwise acquired the right to license, pursuant to the provisions of this Agreement.

“Licensee” shall mean any Person who has been granted a license pursuant to Section 1.1(other than a license which is no longer in effect)

“Licensor” shall mean any Person who has granted a license pursuant to Section 1.1

“Prohibited Person” shall mean any Person listed on, or owned or Controlled by a Person listed on, any sanctions list of any Governmental Authority with jurisdiction over the Parties, or a Person acting on behalf of such listed, owned, or Controlled Person.

“Receiving Party” shall mean a Party or any of its Affiliates or any Person acting on any of their behalves that receives Confidential Information from a Disclosing Party under this Agreement.

“Related Parties” shall mean, with respect to a Party, its officers, directors, employees and any of its Affiliates, and their officers, directors or employees, shareholders, agents and other representatives, or any of the successors or assigns of any of the foregoing Persons.

“Third Party” shall mean a Person that is neither a Party nor an Affiliate of a Party.

“Transfer”, including the correlative term “Transferred”, shall mean to sell, convey, assign, exchange, pledge, encumber, grant a security interest in or lien against, or otherwise transfer or dispose of, directly or indirectly, voluntarily or involuntarily, absolutely or conditionally, in whole or in part, by operation of Law or otherwise; provided, that the grant of a license or similar use right shall not constitute a “Transfer” hereunder.

“U.S.” shall mean the United States.

References; Interpretation.

References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa.  Unless the context otherwise requires, the words “include”, “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation”.  Unless the context otherwise requires, references in this Agreement to Articles, Sections, Annexes, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement.  Unless the context otherwise requires, the words “hereof”, “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement.

Schedule [1]

Licensed Nxt-ID IP

[to be provided]

Schedule [2]

Licensed PartX IP

[to be provided]

24

Exhibit 10.5

ASSUMPTION AND ASSIGNMENT AGREEMENT

ASSUMPTION AND ASSIGNMENT AGREEMENT (this “Agreement”), dated as of [   ], 2019 (the “Effective Date”), by and among Nxt-ID, Inc., a Delaware corporation (the “Assignor”), and PartX, Inc., a Delaware corporation and a wholly owned subsidiary of the Assignor with offices located at 5650 El Camino Real, Carlsbad CA 92008 (the “Assignee”).

RECITALS

NOW, THEREFORE, in consideration of the premises contained herein, and in order to induce Assignor to assign its Payments Business to Assignee, and to induce the Former Fit Pay Stockholders to release the Assignor from the obligations and liabilities with respect to the Earnout pursuant to the terms hereof, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Recitals. The foregoing Recitals are accurate and are incorporated herein and made a part hereof.

2. Assignment. Subject to the terms and conditions of this Agreement and the Separation Agreement, the Assignor assigns all of Assignor’s rights and obligations with respect to (a) making the Earnout Payment, as provided in the Merger Agreement, and specifically Section 2.3 therein and (b) the Sellers as provided in the Merger Agreement (the “Obligations”). To be free from doubt, each Seller, the Assignor, and Assignee acknowledge and agree that as of the Effective Date:

3. Assumption. Subject to the terms and conditions of this Agreement and the Separation Agreement, the Assignee accepts, assumes, takes over and succeeds to all of the Obligations, and the Assignee hereby covenants and agrees to discharge, perform and comply with, and to be bound by, all of the terms, conditions, provisions, obligations, covenants and duties of the Assignor with respect to the Obligations, as if the Assignee was the original obligor thereunder.

Each of the Assignor and Assignee agree that upon reasonable notice, it will provide reasonable access to its books and records during normal business hours to the other of them to substantiate the determination of Gross Revenues for any quarter during the Earnout Period.

4. Effect of Agreement. Except as specifically amended or contemplated hereby, the terms and provisions of the Merger Agreement are in all other respects ratified and confirmed and remain in full force and effect.

5. Successors. This Agreement shall be binding upon and inure to the benefit of parties hereto and their respective successors and assigns.

6. Notices. Any notice, request, instruction or other document to be given hereunder by a party hereto shall be given pursuant to and in accordance with Section 12.3 of the Merger Agreement to the addresses provided therein or in connection therewith (or as set forth at the head of this Agreement).

7. Amendment. This Agreement may not be amended, waived or modified in any manner without the written consent of the parties.

8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED IN ACCORDANCE WITH, AND ENFORCED UNDER, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS OR INSTRUMENTS ENTERED INTO AND PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

10. JURISDICTION; WAIVER OF JURY TRIAL. (a) ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY HEREIN, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE FEDERAL OR STATE COURTS OF THE STATE OF NEW YORK THAT ARE LOCATED IN THE COUNTY OF NEW YORK. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY’S LAST KNOWN ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.

(b) EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES TO THE EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF UNDER, OR IN CONNECTION WITH, THIS AGREEMENT.

11. Counterparts, Facsimile Signature. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Execution and delivery of this Agreement by delivery of a facsimile or electronically recorded copy in .pdf file or similar format bearing a copy of the signature of a party shall constitute a valid and binding execution and delivery of this Agreement by such party. Such copies shall constitute enforceable original documents. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by the other party hereto.

12. Headings. The headings in the sections of this Agreement are inserted for convenience only and shall not constitute a part hereof or affect the meaning or interpretation hereof.

[Signature pages follows]

IN WITNESS WHEREOF, the parties have caused this Assumption and Assignment Agreement to be executed as of the day and year first above written.

The undersigned, representing all of the former Fit Pay Stockholders, hereby (i) consent to the assumption and assignment set forth in this Agreement and (ii) except for the obligation of Assignor to make payments in certain circumstances under the Assumption and Assignment Agreement of even date among Assignor, Assignee, and Michael Orlando and as provided in the Separation Agreement with respect to certain indemnification obligations of Assignor, release and discharge the Assignor from all of Assignor’s obligations and liability, with respect to the Obligations, on and after the Effective Date.

Exhibit 10.7

PartX, Inc.

2019 STOCK INCENTIVE PLAN

1. Purpose

The purpose of this 2019 Stock Incentive Plan (the “Plan”) of PartX, Inc., a Delaware corporation (the “Company”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to better align the interests of such persons with those of the Company’s stockholders. Except where the context otherwise requires, the term “Company” shall include any of the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations thereunder (the “Code”) and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the “Board”).

2. Eligibility

All of the Company’s employees, officers and directors, as well as consultants and advisors to the Company (as such terms consultants and advisors are defined and interpreted for purposes of Form S-8 under the Securities Act of 1933, as amended (the “Securities Act”), or any successor form) are eligible to be granted Awards under the Plan. Each person who is granted an Award under the Plan is deemed a “Participant.” “Award” means Options (as defined in Section 5), SARs (as defined in Section 6), Restricted Stock (as defined in Section 7), Restricted Stock Units (as defined in Section 7) and Other Stock-Based Awards (as defined in Section 8).

3. Administration and Delegation

(a) Administration by Board of Directors. The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may construe and interpret the terms of the Plan and any Award agreements entered into under the Plan. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award.

(b) Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). All references in the Plan to the “Board” shall mean the Board or a Committee of the Board or the officers referred to in Section 3(c) to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee or officers.

(c) Delegation to Officers. Subject to any requirements of applicable law (including as applicable Sections 152 and 157(c) of the General Corporation Law of the State of Delaware), the Board may delegate to one or more officers of the Company the power to grant Awards (subject to any limitations under the Plan) to employees or officers of the Company and to exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix the terms of Awards to be granted by such officers, the maximum number of shares subject to Awards that the officers may grant, and the time period in which such Awards may be granted; and provided further, that no officer shall be authorized to grant Awards to any “executive officer” of the Company (as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or to any “officer” of the Company (as defined by Rule 16a-1(f) under the Exchange Act).

4. Stock Available for Awards

(a) Number of Shares; Share Counting.

(1) Authorized Number of Shares. Subject to adjustment under Section 9, Awards may be made under the Plan (any or all of which Awards may be in the form of Incentive Stock Options, as defined in Section 5(b)) for up to such number of shares of common stock, $0.0001 par value per share, of the Company (the “Common Stock”) as is equal to the sum of:

(A) [_____________] shares of Common Stock; plus

(B) an annual increase to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2020 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2029, equal to 10% of the outstanding shares on such date and (iii) an amount determined by the Board.

Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.

(2) Share Counting. For purposes of counting the number of shares available for the grant of Awards under the Plan:

(A) all shares of Common Stock covered by SARs shall be counted against the number of shares available for the grant of Awards under the Plan; provided, however, that (i) SARs that may be settled only in cash shall not be so counted and (ii) if the Company grants an SAR in tandem with an Option for the same number of shares of Common Stock and provides that only one such Award may be exercised (a “Tandem SAR”), only the shares covered by the Option, and not the shares covered by the Tandem SAR, shall be so counted, and the expiration of one in connection with the other’s exercise will not restore shares to the Plan;

(B) if any Award (i) expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) or (ii) results in any Common Stock not being issued (including as a result of an SAR that was settleable either in cash or in stock actually being settled in cash), the unused Common Stock covered by such Award shall again be available for the grant of Awards; provided, however, that (1) in the case of Incentive Stock Options, the foregoing shall be subject to any limitations under the Code, (2) in the case of the exercise of an SAR, the number of shares counted against the shares available under the Plan shall be the full number of shares subject to the SAR multiplied by the percentage of the SAR actually exercised, regardless of the number of shares actually used to settle such SAR upon exercise and (3) the shares covered by a Tandem SAR shall not again become available for grant upon the expiration or termination of such Tandem SAR; and

(C) shares of Common Stock delivered (by actual delivery, attestation, or net exercise) to the Company by a Participant to (i) purchase shares of Common Stock upon the exercise of an Award or (ii) satisfy tax withholding obligations with respect to Awards (including shares retained from the Award creating the tax obligation) shall be added back to the number of shares available for the future grant of Awards.

(b) Substitute Awards. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Awards may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan. Substitute Awards shall not count against the overall share limit set forth in Section 4(a)(1), except as may be required by reason of Section 422 and related provisions of the Code.

5. Stock Options

(a) General. The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable.

(b) Incentive Stock Options. An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of PartX, Inc., any of PartX, Inc.’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. An Option that is not intended to be an Incentive Stock Option shall be designated a “Nonstatutory Stock Option.” The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or if the Company converts an Incentive Stock Option to a Nonstatutory Stock Option.

(c) Exercise Price. The Board shall establish the exercise price of each Option or the formula by which such exercise price will be determined. The exercise price shall be specified in the applicable Option agreement. The exercise price shall be not less than 100% of the Grant Date Fair Market Value (as defined below) of the Common Stock on the date the Option is granted; provided that if the Board approves the grant of an Option with an exercise price to be determined on a future date, the exercise price shall be not less than 100% of the Grant Date Fair Market Value on such future date. “Grant Date Fair Market Value” of a share of Common Stock for purposes of the Plan will be determined as follows:

(1) if the Common Stock trades on a national securities exchange, the closing sale price (for the primary trading session) on the date of grant; or

(2) if the Common Stock does not trade on any such exchange, the average of the closing bid and asked prices on the date of grant as reported by an over-the-counter marketplace designated by the Board; or

(3) if the Common Stock is not publicly traded, the Board will determine the Grant Date Fair Market Value for purposes of the Plan using any measure of value it determines to be appropriate (including, as it considers appropriate, relying on appraisals) in a manner consistent with the valuation principles under Code Section 409A, except as the Board may expressly determine otherwise.

For any date that is not a trading day, the Grant Date Fair Market Value of a share of Common Stock for such date will be determined by using the closing sale price or average of the bid and asked prices, as appropriate, for the immediately preceding trading day and with the timing in the formulas above adjusted accordingly. The Board can substitute a particular time of day or other measure of “closing sale price” or “bid and asked prices” if appropriate because of exchange or market procedures or can, in its sole discretion, use weighted averages either on a daily basis or such longer period as complies with Code Section 409A.

The Board has sole discretion to determine the Grant Date Fair Market Value for purposes of the Plan, and all Awards are conditioned on the Participants’ agreement that the Board’s determination is conclusive and binding even though others might make a different determination.

(d) Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement; provided, however, that no Option will be granted with a term in excess of 10 years.

(e) Exercise of Options. Options may be exercised by delivery to the Company of a notice of exercise in a form (which may be electronic) approved by the Company, together with payment in full (in the manner specified in Section 5(f)) of the exercise price for the number of shares for which the Option is exercised. Shares of Common Stock subject to the Option will be delivered by the Company as soon as practicable following exercise.

(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:

(1) in cash or by check, payable to the order of the Company;

(2) except as may otherwise be provided in the applicable Option agreement or approved by the Board, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;

(3) to the extent provided for in the applicable Option agreement or approved by the Board, by delivery (either by actual delivery or attestation) of shares of Common Stock owned by the Participant valued at their fair market value (valued in the manner determined by (or in a manner approved by) the Board), provided (i) such method of payment is then permitted under applicable law, (ii) such Common Stock, if acquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be established by the Board and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements;

(4) to the extent provided for in the applicable Nonstatutory Stock Option agreement or approved by the Board, by delivery of a notice of “net exercise” to the Company, as a result of which the Participant would receive (i) the number of shares underlying the portion of the Option being exercised, less (ii) such number of shares as is equal to (A) the aggregate exercise price for the portion of the Option being exercised divided by (B) the fair market value of the Common Stock (valued in the manner determined by (or in a manner approved by) the Board) on the date of exercise;

(5) to the extent permitted by applicable law and provided for in the applicable Option agreement or approved by the Board by payment of such other lawful consideration as the Board may determine; or

(6) by any combination of the above permitted forms of payment.

(g) Limitation on Repricing. Unless such action is approved by the Company’s stockholders, the Company may not (except as provided for under Section 9): (1) amend any outstanding Option granted under the Plan to provide an exercise price per share that is lower than the then-current exercise price per share of such outstanding Option, (2) cancel any outstanding option (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan (other than Awards granted pursuant to Section 4(b)) covering the same or a different number of shares of Common Stock and having an exercise price per share lower than the then-current exercise price per share of the cancelled option, (3) cancel in exchange for a cash payment any outstanding Option with an exercise price per share above the then-current fair market value of the Common Stock (valued in the manner determined by (or in the manner approved by) the Board) or (4) take any other action under the Plan that constitutes a “repricing” within the meaning of the rules of any exchange or marketplace on which the Company stock is listed or traded (the “Exchange”).

6. Stock Appreciation Rights

(a) General. The Board may grant Awards consisting of stock appreciation rights (“SARs”) entitling the holder, upon exercise, to receive an amount of Common Stock or cash or a combination thereof (such form to be determined by the Board) determined by reference to appreciation, from and after the date of grant, in the fair market value of a share of Common Stock (valued in the manner determined by (or in the manner approved by) the Board) over the measurement price established pursuant to Section 6(b). The date as of which such appreciation is determined shall be the exercise date.

(b) Measurement Price. The Board shall establish the measurement price of each SAR and specify it in the applicable SAR agreement. The measurement price shall not be less than 100% of the Grant Date Fair Market Value of the Common Stock on the date the SAR is granted; provided that if the Board approves the grant of an SAR effective as of a future date, the measurement price shall be not less than 100% of the Grant Date Fair Market Value on such future date.

(c) Duration of SARs. Each SAR shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable SAR agreement; provided, however, that no SAR will be granted with a term in excess of 10 years.

(d) Exercise of SARs. SARs may be exercised by delivery to the Company of a notice of exercise in a form (which may be electronic) approved by the Company, together with any other documents required by the Board.

(e) Limitation on Repricing. Unless such action is approved by the Company’s stockholders, the Company may not (except as provided for under Section 9): (1) amend any outstanding SAR granted under the Plan to provide a measurement price per share that is lower than the then-current measurement price per share of such outstanding SAR, (2) cancel any outstanding SAR (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan (other than Awards granted pursuant to Section 4(b)) covering the same or a different number of shares of Common Stock and having an exercise or measurement price per share lower than the then-current measurement price per share of the cancelled SAR, (3) cancel in exchange for a cash payment any outstanding SAR with a measurement price per share above the then-current fair market value of the Common Stock (valued in the manner determined by (or in a manner approved by) the Board) or (4) take any other action under the Plan that constitutes a “repricing” within the meaning of the rules of the Exchange.

7. Restricted Stock; Restricted Stock Units

(a) General. The Board may grant Awards entitling recipients to acquire shares of Common Stock (“Restricted Stock”), subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award. The Board may also grant Awards entitling the recipient to receive shares of Common Stock or cash to be delivered at the time such Award vests or is settled (“Restricted Stock Units”) (Restricted Stock and Restricted Stock Units are each referred to herein as a “Restricted Stock Award”).

(b) Terms and Conditions for All Restricted Stock Awards. The Board shall determine the terms and conditions of a Restricted Stock Award, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any.

(c) Additional Provisions Relating to Restricted Stock.

(1) Dividends. Unless otherwise provided in the applicable Award agreement, any dividends (whether paid in cash, stock or property) declared and paid by the Company with respect to shares of Restricted Stock (“Accrued Dividends”) shall be paid to the Participant only if and when such shares become free from the restrictions on transferability and forfeitability that apply to such shares. Each payment of Accrued Dividends will be made no later than the end of the calendar year in which the dividends are paid to stockholders of that class of stock or, if later, the 15th day of the third month following the lapsing of the restrictions on transferability and the forfeitability provisions applicable to the underlying shares of Restricted Stock.

(2) Stock Certificates. The Company may require that any stock certificates issued in respect of shares of Restricted Stock, as well as dividends or distributions paid on such Restricted Stock, shall be deposited in escrow by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to his or her Designated Beneficiary. “Designated Beneficiary” means (i) the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death or (ii) in the absence of an effective designation by a Participant, the Participant’s estate.

(d) Additional Provisions Relating to Restricted Stock Units.

(1) Settlement. Upon the vesting of and/or lapsing of any other restrictions (i.e., settlement) with respect to each Restricted Stock Unit, the Participant shall be entitled to receive from the Company such number of shares of Common Stock or (if so provided in the applicable Award agreement) an amount of cash equal to the fair market value (valued in the manner determined by (or in a manner approved by) the Board) of such number of shares of Common Stock as are set forth in the applicable Restricted Stock Unit agreement. The Board may provide that settlement of Restricted Stock Units shall be deferred, on a mandatory basis or at the election of the Participant in a manner that complies with Section 409A of the Code.

(2) Voting Rights. A Participant shall have no voting rights with respect to any Restricted Stock Units.

(3) Dividend Equivalents. The Award agreement for Restricted Stock Units may provide Participants with the right to receive an amount equal to any dividends or other distributions declared and paid on an equal number of outstanding shares of Common Stock (“Dividend Equivalents”). Dividend Equivalents may be settled in cash and/or shares of Common Stock and shall be subject to the same restrictions on transfer and forfeitability as the Restricted Stock Units with respect to which paid, in each case to the extent provided in the Award agreement.

8. Other Stock-Based Awards

(a) General. The Board may grant other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other property (“Other Stock-Based Awards”). Such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may be paid in shares of Common Stock or cash, as the Board shall determine.

(b) Terms and Conditions. Subject to the provisions of the Plan, the Board shall determine the terms and conditions of each Other Stock-Based Award, including any purchase price applicable thereto.

9. Adjustments for Changes in Common Stock and Certain Other Events

(a) Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under the Plan, (ii) the share counting rules and sublimits set forth in Section 4(a), (iii) the number and class of securities and exercise price per share of each outstanding Option, (iv) the share and per-share provisions and the measurement price of each outstanding SAR, (v) the number of shares subject to and the repurchase price per share subject to each outstanding award of Restricted Stock and (vi) the share and per-share-related provisions and the purchase price, if any, of each outstanding Restricted Stock Unit award and each outstanding Other Stock-Based Award, shall be equitably adjusted by the Company (or substituted Awards may be made, if applicable) in the manner determined by the Board. Without limiting the generality of the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to an outstanding Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.

(b) Reorganization Events.

(1) Definition. A “Reorganization Event” shall mean: (a) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or is cancelled, (b) any transfer or disposition of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange or other transaction or (c) any liquidation or dissolution of the Company.

(2) Consequences of a Reorganization Event on Awards Other than Restricted Stock.

(A) In connection with a Reorganization Event, the Board may take any one or more of the following actions as to all or any (or any portion of) outstanding Awards other than Restricted Stock on such terms as the Board determines (except to the extent specifically provided otherwise in an applicable Award agreement or another agreement between the Company and the Participant): (i) provide that such Awards shall be assumed, or substantially equivalent Awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), (ii) upon written notice to a Participant, provide that all of the Participant’s unvested Awards will be forfeited immediately prior to the consummation of such Reorganization Event and/or unexercised Awards will terminate immediately prior to the consummation of such Reorganization Event unless exercised by the Participant (to the extent then exercisable) within a specified period following the date of such notice, (iii) provide that outstanding Awards shall become exercisable, realizable or deliverable, or restrictions applicable to an Award shall lapse, in whole or in part prior to or upon such Reorganization Event, (iv) in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share surrendered in the Reorganization Event (the “Acquisition Price”), make or provide for a cash payment to Participants with respect to each Award held by a Participant equal to (A) the number of shares of Common Stock subject to the vested portion of the Award (after giving effect to any acceleration of vesting that occurs upon or immediately prior to such Reorganization Event) multiplied by (B) the excess, if any, of (I) the Acquisition Price over (II) the exercise, measurement or purchase price of such Award and any applicable tax withholdings, in exchange for the termination of such Award, (v) provide that, in connection with a liquidation or dissolution of the Company, Awards shall convert into the right to receive liquidation proceeds (if applicable, net of the exercise, measurement or purchase price thereof and any applicable tax withholdings) and (vi) any combination of the foregoing. In taking any of the actions permitted under this Section 9(b)(2), the Board shall not be obligated by the Plan to treat all Awards, all Awards held by a Participant, or all Awards of the same type, identically.

(B) Notwithstanding the terms of Section 9(b)(2)(A), in the case of outstanding Restricted Stock Units that are subject to Section s09A of the Code: (i) if the applicable Restricted Stock Unit agreement provides that the Restricted Stock Units shall be settled upon a “change in control event” within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(i), and the Reorganization Event constitutes such a “change in control event”, then no assumption or substitution shall be permitted pursuant to Section 9(b)(2)(A)(i) and the Restricted Stock Units shall instead be settled in accordance with the terms of the applicable Restricted Stock Unit agreement; and (ii) the Board may only undertake the actions set forth in clauses (iii), (iv) or (v) of Section 9(b)(2)(A) if the Reorganization Event constitutes a “change in control event” as defined under Treasury Regulation Section 1.409A-3(i)(5)(i) and such action is permitted or required by Section 409A of the Code; if the Reorganization Event is not a “change in control event” as so defined or such action is not permitted or required by Section 409A of the Code, and the acquiring or succeeding corporation does not assume or substitute the Restricted Stock Units pursuant to clause (i) of Section 9(b)(2)(A), then the unvested Restricted Stock Units shall terminate immediately prior to the consummation of the Reorganization Event without any payment in exchange therefor.

(C) For purposes of Section 9(b)(2)(A)(i), an Award (other than Restricted Stock) shall be considered assumed if, following consummation of the Reorganization Event, such Award confers the right to purchase or receive pursuant to the terms of such Award, for each share of Common Stock subject to the Award immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise or settlement of the Award to consist solely of such number of shares of common stock of the acquiring or succeeding corporation (or an affiliate thereof) that the Board determines to be equivalent in value (as of the date of such determination or another date specified by the Board) to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event.

(3) Consequences of a Reorganization Event on Restricted Stock. Upon the occurrence of a Reorganization Event other than a liquidation or dissolution of the Company, the repurchase and other rights of the Company with respect to outstanding Restricted Stock shall inure to the benefit of the Company’s successor and shall, unless the Board determines otherwise, apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to such Restricted Stock; provided, however, that the Board may provide for termination or deemed satisfaction of such repurchase or other rights under the instrument evidencing any Restricted Stock or any other agreement between a Participant and the Company, either initially or by amendment. Upon the occurrence of a Reorganization Event involving the liquidation or dissolution of the Company, except to the extent specifically provided to the contrary in the instrument evidencing any Restricted Stock or any other agreement between a Participant and the Company, all restrictions and conditions on all Restricted Stock then outstanding shall automatically be deemed terminated or satisfied.

10. General Provisions Applicable to Awards

(a) Transferability of Awards. Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an Incentive Stock Option, pursuant to a qualified domestic relations order, and, during the life of the Participant, shall be exercisable only by the Participant; provided, however, that, except with respect to Awards subject to Section 409A of the Code, the Board may permit or provide in an Award for the gratuitous transfer of the Award by the Participant to or for the benefit of any immediate family member, family trust or other entity established for the benefit of the Participant and/or an immediate family member thereof if the Company would be eligible to use a Form S-8 under the Securities Act for the registration of the sale of the Common Stock subject to such Award to such proposed transferee; provided further, that the Company shall not be required to recognize any such permitted transfer until such time as such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument in form and substance satisfactory to the Company confirming that such transferee shall be bound by all of the terms and conditions of the Award. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees. For the avoidance of doubt, nothing contained in this Section 10(a) shall be deemed to restrict a transfer to the Company.

(b) Documentation. Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan.

(c) Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.

(d) Termination of Status. The Board shall determine the effect on an Award of the disability, death, termination or other cessation of employment, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award.

(e) Withholding. The Participant must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations before the Company will deliver stock certificates or otherwise recognize ownership of Common Stock under an Award. The Company may elect to satisfy the withholding obligations through additional withholding on salary or wages. If the Company elects not to or cannot withhold from other compensation, the Participant must pay the Company the full amount, if any, required for withholding or have a broker tender to the Company cash equal to the withholding obligations. Payment of withholding obligations is due before the Company will issue any shares on exercise, vesting or release from forfeiture of an Award or at the same time as payment of the exercise or purchase price, unless the Company determines otherwise. If provided for in an Award or approved by the Committee, a Participant may satisfy the tax obligations in whole or in part by delivery (either by actual delivery or attestation) of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their fair market value (valued in the manner determined by (or in a manner approved by) the Company); provided, however, except as otherwise provided by the Committee, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal, state and local tax purposes, including payroll taxes, that are applicable to such supplemental taxable income), except that, to the extent that the Company is able to retain shares of Common Stock having a fair market value (determined by, or in a manner approved by, the Company) that exceeds the statutory minimum applicable withholding tax without financial accounting implications or the Company is withholding in a jurisdiction that does not have a statutory minimum withholding tax, the Company may retain such number of shares of Common Stock (up to the number of shares having a fair market value equal to the maximum individual statutory rate of tax (determined by, or in a manner approved by, the Company)) as the Company shall determine in its sole discretion to satisfy the tax liability associated with any Award. Shares used to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.

(f) Amendment of Award. Except as otherwise provided in Sections 5(g) and 6(e) with respect to repricings and Section 11(d) with respect to actions requiring stockholder approval, the Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option. The Participant’s consent to such action shall be required unless (i) the Board determines that the action, taking into account any related action, does not materially and adversely affect the Participant’s rights under the Plan or (ii) the change is permitted under Section 9.

(g) Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously issued or delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and regulations and any applicable stock exchange or stock market rules and regulations and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.

(h) Acceleration. The Board may at any time provide that any Award shall become immediately exercisable in whole or in part, free from some or all restrictions or conditions, or otherwise realizable in whole or in part, as the case may be.

11. Miscellaneous

(a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award by virtue of the adoption of the Plan, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award.

(b) No Rights As Stockholder; Clawback Policy. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be issued with respect to an Award until becoming the record holder of such shares. In accepting an Award under the Plan, a Participant agrees to be bound by any clawback policy the Company has in effect or may adopt in the future.

(c) Effective Date and Term of Plan. The Plan shall become effective immediately prior to the effectiveness of the Company’s registration statement for the Offering (the “Effective Date”). No Awards shall be granted under the Plan after the expiration of 10 years from the Effective Date, but Awards previously granted may extend beyond that date.

(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time provided that no amendment that would require stockholder approval under the rules of the Exchange may be made effective unless and until the Company’s stockholders approve such amendment. In addition, if at any time the approval of the Company’s stockholders is required as to any other modification or amendment under Section 422 of the Code or any successor provision with respect to Incentive Stock Options, the Board may not effect such modification or amendment without such approval. Unless otherwise specified in the amendment, any amendment to the Plan adopted in accordance with this Section 11(d) shall apply to, and be binding on the holders of, all Awards outstanding under the Plan at the time the amendment is adopted, provided the Board determines that such amendment, taking into account any related action, does not materially and adversely affect the rights of Participants under the Plan. No Award shall be made that is conditioned upon stockholder approval of any amendment to the Plan unless the Award provides that (i) it will terminate or be forfeited if stockholder approval of such amendment is not obtained within no more than 12 months from the date of grant and (ii) it may not be exercised or settled (or otherwise result in the issuance of Common Stock) prior to such stockholder approval.

(e) Authorization of Sub-Plans (including for Grants to non-U.S. Employees). The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable securities, tax or other laws of various jurisdictions. The Board shall establish such sub-plans by adopting supplements to the Plan containing (i) such limitations on the Board’s discretion under the Plan as the Board deems necessary or desirable or (ii) such additional terms and conditions not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable. All supplements adopted by the Board shall be deemed to be part of the Plan, but each supplement shall apply only to Participants within the affected jurisdiction and the Company shall not be required to provide copies of any supplement to Participants in any jurisdiction which is not the subject of such supplement.

(f) Compliance with Section 409A of the Code. If and to the extent (i) any portion of any payment, compensation or other benefit provided to a Participant pursuant to the Plan in connection with his or her employment termination constitutes “nonqualified deferred compensation” within the meaning of Section 409A of the Code and (ii) the Participant is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, in each case as determined by the Company in accordance with its procedures, by which determinations the Participant (through accepting the Award) agrees that he or she is bound, such portion of the payment, compensation or other benefit shall not be paid before the day that is six months plus one day after the date of “separation from service” (as determined under Section 409A of the Code) (the “New Payment Date”), except as Section 409A of the Code may then permit. The aggregate of any payments that otherwise would have been paid to the Participant during the period between the date of separation from service and the New Payment Date shall be paid to the Participant in a lump sum on such New Payment Date, and any remaining payments will be paid on their original schedule.

The Company makes no representations or warranty and shall have no liability to the Participant or any other person if any provisions of or payments, compensation or other benefits under the Plan are determined to constitute nonqualified deferred compensation subject to Section 409A of the Code but do not to satisfy the conditions of that section.

(g) Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, employee or agent of the Company will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan, nor will such individual be personally liable with respect to the Plan because of any contract or other instrument he or she executes in his or her capacity as a director, officer, employee or agent of the Company. The Company will indemnify and hold harmless each director, officer, employee or agent of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been or will be delegated, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Board’s approval) arising out of any act or omission to act concerning the Plan unless arising out of such person’s own fraud or bad faith.

(h) Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, excluding choice-of-law principles of the law of such state that would require the application of the laws of a jurisdiction other than the State of Delaware.

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Exhibit 21.1

Subsidiaries of PartX, Inc.

The following is a list of the subsidiaries PartX, Inc. will have immediately after completion of the spin-off:

Exhibit 99.1

[●], 2019

Dear Nxt-ID, Inc. Stockholder:

I am pleased to inform you that the board of directors of Nxt-ID, Inc. (“Nxt-ID”) has approved the spin-off (the “spin-off”) of PartX, Inc. (“PartX” or the “Company”), a wholly-owned subsidiary of Nxt-ID. Upon completion of the spin-off, the stockholders of Nxt-ID will own 100% of the outstanding shares of common stock of PartX and will continue to own 100% of the outstanding shares of common stock of Nxt-ID. PartX will be a newcompany, which either directly, or through its subsidiary, Fit-Pay, Inc., which is currently a wholly-owned subsidiary of Nxt-ID, will hold a proprietary technology platform that delivers payment, credential management, authentication and other secure services to the Internet of Things (“IoT”) and ecommerce ecosystems. Following the spin-off, Nxt-ID will continue to be engaged in the development of proprietary products and solutions that serve multiple end markets, including the healthcare, security, and the IoT markets.

We believe the spin-off is in the best interests of Nxt-ID, its stockholders and other constituents, as it will result in two companies, with each company having increased strategic flexibility and an enhanced ability to maintain its focus on its core business and growth opportunities, facilitate future capital-raising as needed, and make the changes necessary to respond to developments in its respective markets.

The spin-off will be completed by way of a pro rata distribution of PartX common stock to Nxt-ID’s stockholders of record as of 5:00 p.m., Eastern time, on [●], 2019 (the “Record Date”). Each Nxt-ID stockholder will receive one (1) share of PartX common stock for every [●] shares of Nxt-ID common stock held by such stockholder on the Record Date. The distribution of these shares of PartX common stock will be made in book-entry form, meaning no physical share certificates will be issued. Nxt-ID stockholder approval of the distribution of PartX common stock is not required, and you will automatically receive your shares of PartX common stock.

The distribution of PartX common stock is subject to the satisfaction or waiver (as applicable) of certain conditions, including among other things: final approval of the distribution by the Nxt-ID board of directors; the Registration Statement on Form 10, of which this information statement forms a part, being declared effective by the Securities and Exchange Commission; the receipt of an opinion with respect to certain tax matters related to the distribution from Nxt-ID’s spin-off tax advisors; the receipt of a solvency opinion from a recognized, properly credentialed valuation firm with respect to the solvency of Nxt-ID after giving effect to the spin-off; Nxt-ID shall have received financing to repay its outstanding obligations under its revolving loan facility; the receipt of all material governmental approvals; no order, injunction or decree issued by any governmental entity preventing the consummation of all or any portion of the distribution being in effect; the completion of the assignment and assumption of certain indebtedness described in this information statement; and the completion of the pre-spinoff financing transaction described in this information statement. See “The Spin-Off—Assignment and Assumption of Certain Indebtedness and Incurrence of Additional Indebtedness” and “Description of Certain Indebtedness” for additional information regarding the pre-spinoff-financing. We expect that your receipt of shares of PartX common stock in the spin-off will be tax-free for U.S. federal income tax purposes, except for cash received in lieu of fractional shares. You should consult your own tax advisor as to the particular tax consequences of the distribution to you, including potential tax consequences under state, local and non-U.S. tax laws.

Immediately following the spin-off, you will own common stock in both Nxt-ID and PartX. Nxt-ID common stock will continue to trade on the NASDAQ Capital Market under the symbol “NXTD.” Currently, there is no trading market for PartX common stock. PartX has submitted an application to have its common stock quoted on the OTCQB of the OTC Markets Group Inc. under the symbol “PTXX.”

We have prepared the enclosed information statement, which describes the spin-off and related transactions in detail and contains important information about PartX, including historical audited financial statements and an unaudited pro forma combined balance sheet as of December 31, 2018 and unaudited pro forma combined statements of operations data for the years ended December 31, 2018 and 2017, which present PartX’s combined financial position and results of operations after giving effect to the spin-off, including the transfer of certain intellectual property and other financial technology (“FinTech”) assets by Nxt-ID (collectively, the “FinTech Assets”). Nxt-ID stockholders will receive a notice with instructions on how to access the information statement online via mail. We urge you to carefully read the information statement.

We remain focused on delivering value and return on capital for our stockholders and delivering reliable growth in a disciplined and responsible way. These stockholder-focused principles will continue to guide Nxt-ID in the years to come. We thank you for your support and look forward to your continued support in the future.

PartX, Inc.

[●], 2019

Dear PartX, Inc. Stockholder:

It is my pleasure to welcome you to PartX, Inc. (“PartX” or the “Company”). We have a proprietary technology platform that delivers payment, credential management, authentication and other secure services to the Internet of Things (“IoT”) and ecommerce ecosystems. The platform uses tokenization, a payment security technology that replaces cardholders’ account information with a unique digital identifier, to transact highly secure contactless payment and authentication services.

We build technology platforms and products that connect people to devices and devices to ecosystems. Our platform, applications, products and technologies facilitate digital commerce, making transactions frictionless, personalized and secure. PartX allows device manufacturers, merchants, banks and any entity making digital transactions to offer their customers a secure and convenient experience. Thus, whether users are making an in-store contactless payment, shopping online, entering an event, or riding the bus, their payment and other credentials are always available, authenticated and safe to use.

We invite you to learn more about PartX by reviewing the enclosed information statement. We look forward to our future as an independent company and to your support as a holder of PartX common stock.

Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

SUBJECT TO COMPLETION, DATED APRIL 29, 2019

INFORMATION STATEMENT

PartX, Inc.

Common Stock
(par value $0.0001 per share)

This information statement is being sent to you in connection with the separation of PartX, Inc. (“PartX” or the “Company”) from Nxt-ID, Inc. (collectively with its consolidated subsidiaries, “Nxt-ID”), following which PartX will be an independent company. As part of the separation, Nxt-ID will transfer to PartX (i) 100% of the issued and outstanding shares of common stock of Fit Pay, Inc., a wholly-owned subsidiary of Nxt-ID (“Fit Pay Sub”) and (ii) certain intellectual property and other financial technology (“FinTech”) assets of Nxt-ID (collectively, the “FinTech Assets”), and the holders of Nxt-ID’s Series C Non-Convertible Preferred Stock (the “Nxt-ID Series C Preferred Stock”) will exchange all of their shares of Nxt-ID Series C Preferred Stock for shares of PartX’s Series A Non-ConvertibleVoting Preferred Stock (the “Series A Preferred Stock”) after which Nxt-ID will complete the separation by distributing all of the outstanding shares of common stock of PartX on a pro rata basis to the holders of Nxt-ID’s common stock. We refer to this pro rata distribution as the “Distribution,” and we refer to the separation, including the transfer of such shares of Fit Pay Sub and such FinTech Assets, the exchange of the Nxt-ID Series C Preferred Stock for the Series A Preferred Stock and the Distribution, as the “spin-off.” We expect that the Distribution will be tax-free to the stockholders of Nxt-ID for U.S. federal income tax purposes, except to the extent of cash received in lieu of fractional shares. Each Nxt-ID stockholder will receive one (1) share of our common stock for every [●] shares of Nxt-ID common stock held by such stockholder on [●], 2019 (the “Record Date”). The Distribution will be made in book-entry form only. Nxt-ID will not distribute any fractional shares of PartX common stock. Instead, the distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market prices and distribute the aggregate net cash proceeds from the sales pro rata to each holder who would otherwise have been entitled to receive a fractional share in the spin-off. The Distribution will be effective as of 5:00 p.m., Eastern time, on [●], 2019 (the “Distribution Date”). Immediately after the Distribution becomes effective, PartX will be an independent company. We expect that in order to finance our research and development and other efforts to expand our business and to meet our working capital requirements shortly prior to the spin-off, we will complete a private placement of approximately $1 million to $2 million in non-convertible debt. See “The Spin-Off—Assignment and Assumption of Certain Indebtedness and Incurrence of Additional Indebtedness” and “Description of Certain Indebtedness.”

In addition, in connection with the spin-off, Nxt-ID will issue warrants to purchase PartX common stock to holders of certain outstanding warrants to purchase Nxt-ID common stock (collectively, the “Nxt-ID Warrants”) in order to meet certain obligations under such Nxt-ID Warrants. Such warrants to purchase PartX common stock will be exercisable following completion of the spin-off. See “The Spin-off—Treatment of Certain Nxt-ID Warrants.”

All of the outstanding shares of PartX common stock are currently owned, directly or indirectly, by Nxt-ID. Accordingly, there is no current trading market for PartX common stock. We have submitted an application to have PartX common stock quoted on the OTCQB of the OTC Markets Group Inc. under the ticker symbol “PTXX.” However, there can be no assurance of when or if we will receive approval for quotation of PartX common stock on the OTCQB. If PartX common stock is not approved for quotation on the OTCQB prior to the Distribution, immediately following the \Distribution a trading market for our common stock may not exist. See “Risk Factors.” Assuming PartX common stock is approved for quotation on the OTCQB, we expect that a limited trading market for PartX common stock, commonly known as a “when-issued” trading market, will develop at least one (1) trading day prior to the Record Date for the Distribution, and we expect “regular-way” trading of PartX common stock will begin on the first trading day following the Distribution Date.

We are an “emerging growth company” as the term is used in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and, as such, we have elected to comply with certain reduced public company reporting requirements for this information statement and future filings with the Securities and Exchange Commission. 

No vote or other action of Nxt-ID stockholders is required in connection with the spin-off. We are not asking you for a proxy and you should not send us a proxy. Nxt-ID stockholders will not be required to pay any consideration for the shares of PartX common stock they receive in the spin-off, and they will not be required to surrender or exchange their shares of Nxt-ID common stock or take any other action in connection with the spin-off.

In reviewing this information statement, you should carefully consider the matters described in “Risk Factors” beginning on page [ ] of this information statement.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

This information statement is not an offer to sell, or a solicitation of an offer to purchase, any securities.

The date of this information statement is [●], 2019.

A Notice of Internet Availability of Information Statement Materials containing instructions describing how to access this information statement was first mailed to Nxt-ID stockholders on or about [●], 2019.

TABLE OF CONTENTS

Unless otherwise indicated or the context otherwise requires, references herein to “PartX, Inc.,” “PartX,” “we,” “our,” “us,” “the Company” and “our company” refer (i) prior to the transfer of shares of common stock of Fit Pay Sub and the FinTech Assets described under “The Spin-Off—Manner of Effecting the Spin-Off,” to Fit Pay Sub and the FinTech Assets and (ii) after the consummation of the transfer of such shares of common stock of Fit Pay Sub and the FinTech Assets, to PartX, Inc. and its consolidated subsidiaries. Unless otherwise indicated or the context otherwise requires, references herein to “Nxt-ID” and “Parent” refer to Nxt-ID, Inc. and its consolidated subsidiaries.

Unless otherwise indicated or the context otherwise requires, all information in this information statement gives effect to the effectiveness of our certificate of incorporation and bylaws, the forms of which are filed as exhibits to the registration statement of which this information statement forms a part.

ABOUT THIS INFORMATION STATEMENT

Financial Statement Presentation

To effect the spin-off, Nxt-ID will transfer to PartX (i) 100% of the issued and outstanding shares of common stock of Fit Pay Sub and (ii) the FinTech Assets of Nxt-ID, and the holders of the Nxt-ID Series C Preferred Stock will exchange all of their shares of Nxt-ID Series C Preferred Stock for shares of PartX’s Series A Preferred Stock. We refer to the business of Fit Pay Sub and the FinTech Assets prior to the spin-off and of PartX immediately following the spin-off as the “Payments Business,” which constitutes, among other things, the business of creating, refining and maintaining platforms and other technology to assist in secure contactless payments and financial transactions. This information statement includes certain historical combined financial and other data for the Payments Business. PartX is the registrant under the registration statement of which this information statement forms a part and will be the financial reporting entity following the consummation of the spin-off. Our historical combined financial information as of and for the years ended December 31, 2018 and 2017 has been derived from our audited combined financial statements included elsewhere in this information statement.

Our historical financial data is not necessarily indicative of our future performance and does not necessarily reflect what our financial position and results of operations would have been had we been operating as an independent company during the periods presented. It also does not reflect changes that may occur in our operations and will occur in our capitalization as a result of the spin-off from Nxt-ID.

This information statement also includes an unaudited pro forma combined balance sheet as of December 31, 2018 and unaudited pro forma combined statements of operations data for the years ended December 31, 2018 and 2017, which present the financial position and results of operations of the Payments Business after giving effect to the spin-off as described under “Unaudited Pro Forma Combined Financial Statements.” The unaudited pro forma combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have occurred if the spin-off had been consummated on the date indicated, nor are they indicative of future operating results.

You should read the section titled “Unaudited Pro Forma Combined Financial Statements,” which is qualified in its entirety by reference to our audited combined financial statements and related notes thereto, and the financial and other information, including information in the sections titled “Risk Factors,” “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in each case included elsewhere in this information statement.

Industry and Market Data

The market data and certain other statistical information used in this information statement are based on independent industry publications, government publications or other published independent sources. These sources generally state that the information they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of the information are not guaranteed. The forecasts and projections are based on industry surveys and the preparers’ experience in the industry, and there is no assurance that any of the projected amounts will be achieved. We believe that the surveys and market research others have performed are reliable, but we have not independently verified this information. Nothing in the market data included herein should be construed as advice.

SUMMARY

This summary highlights information contained in this information statement and provides an overview of the Company, our spin-off from Nxt-ID and the Distribution of our common stock by Nxt-ID to its stockholders. For a more complete understanding of our business and the spin-off, you should read this entire information statement carefully, particularly the sections entitled “Risk Factors,” “Unaudited Pro Forma Combined Financial Statements” and Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited combined financial statements and the notes thereto included in this information statement.

Our Company

On May 23, 2017, Nxt-ID completed a merger transaction pursuant to which Fit Pay, Inc. emerged as the surviving entity and a wholly-owned subsidiary of Nxt-ID. We sometimes refer to Fit Pay, Inc. in this information statement as “Fit Pay Sub.”

PartX was formed on October 11, 2018 as a wholly-owned subsidiary of Nxt-ID. In order to separate the Payments Business from Nxt-ID, Nxt-ID will transfer to PartX (i) 100% of the issued and outstanding shares of common stock of Fit Pay Sub and (ii) the FinTech Assets of Nxt-ID. In addition, the holders of the Nxt-ID Series C Preferred Stock will exchange all of their shares of Nxt-ID Series C Preferred Stock for shares of PartX’s Series A Preferred Stock.

After giving effect to the spin-off, PartX will consist of the Payments Business. Our core technology is a proprietary platform that enables contactless payment capabilities, allowing our customers, which include manufacturers of “smart devices,” to add payment capabilities to their products with very little start-up time and minimal investment in software development. We also connect our customers to leading payment card networks, including Visa, Mastercard and Discover, and to credit card issuing banks, globally. We became one of the first successful third-party payment network token service providers with the launch of the Garmin Pay™, which is our technology, platform and tokenization service that powers a contactless payment feature included in smartwatches manufactured by Garmin International, Inc. (“Garmin”). The payment feature, which went live in the fall of 2017, is now included in 11 of Garmin’s smartwatches.

In addition, the geographic and issuer footprint for Garmin Pay™ is expanding and now is a network of more than 330 issuers of credit and debit accounts in 45 countries with additions being made regularly. This represents a significant increase from year-end 2017, at which time the network included 60 issuers in 8 countries. As a part of this growth, we have announced recent agreements with Chase, Westpac, Discover and Mastercard’s Maestro network in Europe. This expansion of the Garmin Pay™ network increases the overall revenue opportunity of this flagship customer and establishes banking and network relationships that we may be able to use for future payment solutions. In January 2019, we also extended our contactless payment functionality to another iconic brand, announcing that our Token Requester Management (“TRM”) Platform is also enabling SwatchPAY! on four (4) new watch styles announced by Swatch AG.

Our TRM Platform offers an opportunity for a whole new range of devices to become payment-enabled, without the manufacturer of such devices having to invest in and develop such capabilities. We are continuously developing new products to leverage our TRM Platform and expanding our network of payment card issuers and issuing banks. We have also developed proprietary payment devices that we expect to offer through business-to-business and direct-to-consumer channels. These new products will leverage the TRM Platform and expand our reach to new customers and emerging markets, such as cryptocurrency and other connected devices and products, generally referred to as the Internet of Things (“IoT”).

Our initial consumer product offering was a platform extension and contactless payment device called Flip™, which enables Bitcoin holders to make contactless payment transactions at millions of retail locations with value exchanged from their cryptocurrency. We believe the product represents an opportunity to bring to market a unique offering in an emerging market segment.

We are also a technology partner for Visa’s Token Service for credential-on-file (“COF”) token requestors. Through this program, we will be able to tokenize COF digital payments on behalf of merchant and payment ecosystem clients, greatly expanding the addressable market for our platform services. We leverage the EMVCo Payment Tokenization Standard during a payment transaction to “tokenize” or replace sensitive personal information, such as payment card numbers and expiration dates, with a unique digital identifier or “token.” Tokenizing COF records offers increased security for consumers and merchants by never exposing personal information and therefore also lowers fraud related expenses to payment card networks and issuing banks.

In addition to enhancing security, our technology allows financial institutions to seamlessly update expired or compromised payment credentials at one point of reference, thereby eliminating a significant point of friction for consumers and merchants. We believe these additional services will be buoyed by the expected overall growth in digital payments.

Together, we believe these opportunities position our emerging payment and financial technology business for growth as we begin to monetize our core TRM Platform technology and expand our products and services to new markets and customers.

Our Competitive Strengths

We believe our success has been, and will be, driven by the significant competitive strengths that we have developed:

Our payment solutions offer several distinctive features, the primary of which is that our contactless payment solutions remove friction from the consumer payment experience by reducing user interaction. Our solutions also enhance security by tokenizing customer payment information, therefore reducing the probability for payment card fraud, which improves the consumer experience and reduces costs for payment card networks and issuing banks. Our technology has been developed to work without requiring an internet connection at the point of sale and also without requiring a secondary device, such as a mobile phone, to be present. Our solutions are not dependent on a particular operating system or device, and are, therefore, extensible to a wider range of devices than other contactless payment solutions.

Furthermore, we believe that the following factors add to our competitive strengths and create a barrier to entry in the payments solutions space: (1) we believe that, currently, we are the only independent platform (i.e. not owned by, developed by, or proprietary to a single original equipment manufacturer (“OEM”)) to complete secure element tokenization integrations with major card networks (based on our review of the listings of network-certified service providers for secure element tokenization services published by Visa and Mastercard); (2) we have established relationships with payment networks and issuing banks, globally; establishing such relationships is complex and deploying technology through these networks requires a level of experience that makes it difficult for new entrants and OEMs to develop the capability themselves; (3) we maintain the security keys for contactless devices, which limits the ability of our customers to change providers without disrupting the service to current customers; (4) we offer a comprehensive, end-to-end solution as a single source for all of our cloud-based and IoT applications, including full-featured APIs (application programming interfaces) and SDKs (software development kits) to simplify implementation; and (5) we offer a scalable platform with direct access to the major card network and issuing banks.

Our Strategy

Our primary strategy is to leverage our proprietary technology, competitive strengths and established relationships with payment networks and payment card issuing banks to expand our end-to-end, secure contactless payment solutions across various industries. Our position as an independent payment platform provider, with our comprehensive and proprietary platform, positions us to serve the rapidly expanding wearable and IoT markets and to expand our addressable market to include large and mid-sized companies and other companies conducting ecommerce and credential-on-file transactions. The complex ecosystem needed to support full-function payment capabilities serves as a barrier to entry for competitors and manufacturers that consider developing their own payment capabilities and encourages continuity on our existing customer base. We expect to achieve our goals by:

Company Information

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We will remain an emerging growth company for up to the last day of the fiscal year following the fifth anniversary of our initial public offering, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if, among other criteria, the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period. Pursuant to Section 102 of the JOBS Act, we have provided reduced executive compensation disclosure and have omitted a compensation discussion and analysis from this information statement. Pursuant to Section 107 of the JOBS Act, we have elected to utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards.

Where You Can Find Us

Our principal executive offices are located at 5650 El Camino Real, Carlsbad, CA 92008, and our telephone number is (760) 444-0029. We also have offices located at 3360 Mitchell Lane, Boulder, CO 80301. Our website address is www.PartXinc.com. The information contained therein or connected thereto is not part of this information statement and shall not be deemed to be incorporated into this information statement.

Summary Risk Factors

There are a number of risks relating to our business, our industry, the spin-off and our common stock, including:

These and other risks relating to our business, our industry, the spin-off and our common stock are discussed in greater detail under the heading “Risk Factors” in this information statement. You should read all of these risks carefully.

Summary of the Spin-Off

The following provides only a summary of the terms of the spin-off. For a more detailed description of the matters described below, see “The Spin-Off.”

Overview

On September 21, 2018, Nxt-ID announced its intention to implement the spin-off of the Payments Business from Nxt-ID. In order to implement the spin-off, Nxt-ID will transfer to PartX (i) 100% of the issued and outstanding shares of common stock of Fit Pay Sub and (ii) the FinTech Assets of Nxt-ID, and the holders of the Nxt-ID Series C Preferred Stock will exchange all of their shares of Nxt-ID Series C Preferred Stock for shares of PartX’s Series A Preferred Stock, following which PartX will be an independent company, and Nxt-ID will have no continuing stock ownership interest in PartX.

Before our spin-off from Nxt-ID, we will enter into a Separation and Distribution Agreement and several other agreements with Nxt-ID related to the spin-off, which agreements will become effective upon the consummation of the spin-off. These agreements will govern the relationship between us and Nxt-ID after completion of the spin-off and provide for the allocation between us and Nxt-ID of various assets, liabilities, rights and obligations. These agreements will also include arrangements with respect to employee matters, tax matters, the licensing of trademarks and certain other intellectual property between us and Nxt-ID, and transitional services to be provided by Nxt-ID to us and by us to Nxt-ID. See “Certain Relationships and Related Party Transactions—Agreements with Nxt-ID Related to the Spin-Off.”

The Distribution is subject to the satisfaction or waiver (as applicable) of certain conditions. In addition, until the Distribution has occurred, the board of directors of Nxt-ID (the “Nxt-ID board of directors”) has the right to not proceed with the Distribution, even if all of the conditions are satisfied. See “The Spin-Off—Conditions to the Distribution.”

In addition, in connection with the spin-off, Nxt-ID will issue warrants to purchase PartX common stock to holders of certain outstanding Nxt-ID Warrants in order to meet certain obligations under such Nxt-ID Warrants. Such warrants to purchase PartX common stock will be exercisable following completion of the spin-off. See “The Spin-off—Treatment of Certain Nxt-ID Warrants.”

Following the spin-off, PartX will be an independent company and will own and operate the Payments Business. We have submitted an application to have PartX common stock quoted on the OTCQB of the OTC Markets Group Inc. under the symbol “PTXX”. In addition, Nxt-ID will continue to be an independent, publicly traded company listed on the NASDAQ Capital Market under the ticker symbol “NXTD” and will continue to own and operate all of its business other than the Payments Business, including the businesses which develop proprietary products and solutions that serve multiple end markets, including the security, healthcare and IoT markets (collectively, the “Non-Payments Businesses”).

Questions and Answers about the Spin-Off

The following provides only a summary of the terms of the spin-off. For a more detailed description of the matters described below, see “The Spin-Off.”

Q: What is the spin-off?

A: The spin-off is the method by which we will separate from Nxt-ID. In the spin-off, Nxt-ID will distribute to Nxt-ID stockholders all of the outstanding shares of PartX’s common stock. We refer to this distribution of PartX common stock to Nxt-ID stockholders as the “Distribution.” Following the spin-off, PartX will be an independent company, and Nxt-ID will not retain any ownership of the outstanding shares of PartX common stock.

Q: What will I receive in the spin-off?

A: As a holder of Nxt-ID common stock, you will retain your shares of Nxt-ID common stock and will receive one (1) share of PartX common stock for every [●] shares of Nxt-ID common stock you own as of the Record Date. The number of shares of Nxt-ID common stock you own and your proportionate interest in Nxt-ID common stock will not change as a result of the spin-off. See “The Spin-Off.”

Q: What is PartX?

A: After the spin-off is completed, PartX will be a new independent company in the Payments Business. Nxt-ID will transfer to PartX (i) 100% of the issued and outstanding shares of common stock of Fit Pay Sub and (ii) the FinTech Assets of Nxt-ID, and the holders of the Nxt-ID Series C Preferred Stock will exchange all of their shares of Nxt-ID Series C Preferred Stock for shares of PartX’s Series A Preferred Stock. As a result of these transactions, we will own and operate Fit Pay Sub whose core technology is a proprietary platform that enables contactless payment capabilities, allowing manufacturers of “smart devices” to add payment capabilities to their products with very little start-up time and minimal investment in software development, while granting them access to the leading card network and global credit card issuing banks. PartX is currently a wholly-owned subsidiary of Nxt-ID.

Q: Why is the separation of PartX from Nxt-ID structured as a spin-off?

A: Nxt-ID determined, and continues to believe, that a spin-off that is generally tax-free to Nxt-ID and Nxt-ID stockholders for U.S. federal income tax purposes will enhance the long-term value of both Nxt-ID and the Payments Business. Further, Nxt-ID believes that a spin-off offers the most efficient way to accomplish a separation of the Payments Business from Nxt-ID. See “The Spin-Off—Reasons for the Spin-Off.”

Q: What are the conditions to the Distribution?

A: The Distribution is subject to the satisfaction, or waiver by Nxt-ID (as applicable), of the following conditions:

See “The Spin-Off—Conditions to the Distribution.”

Q: Can Nxt-ID decide to not proceed with the Distribution even if all of the conditions to the Distribution have been met?

A: Yes. Until the Distribution has occurred, the Nxt-ID board of directors has the right to not proceed with the Distribution, even if all of the conditions are satisfied.

Q: What is being distributed in the spin-off?

A: Approximately [●] shares of PartX common stock will be distributed in the spin-off, based on the number of shares of Nxt-ID common stock expected to be outstanding as of [●], 2019 (the “Record Date”), and assuming each holder of Nxt-ID common stock will receive one (1) share of PartX common stock for every [●] shares of Nxt-ID common stock. The actual number of shares of PartX common stock distributed will be calculated as of the Record Date. The shares of PartX common stock distributed by Nxt-ID will constitute all of the issued and outstanding shares of PartX common stock immediately prior to the Distribution. However, as part of the spin-off, the holders of the Nxt-ID Series C Preferred Stock will exchange all of their shares of Nxt-ID Series C Preferred Stock for shares of PartX’s Series A Preferred Stock. In addition, in connection with the spin-off, Nxt-ID will issue warrants to purchase PartX common stock to holders of certain outstanding Nxt-ID Warrants in order to meet certain obligations under such Nxt-ID Warrants. Such warrants to purchase PartX common stock will be exercisable following completion of the spin-off. See “The Spin-off—Treatment of Certain Nxt-ID Warrants.”

Q: When is the record date for the Distribution?

A: The Record Date will be [●], 2019 as of 5:00 p.m., Eastern time.

Q: When will the Distribution occur?

A: The distribution date of the spin-off is [●], 2019 (the “Distribution Date”). We expect that it will take the distribution agent, VStock Transfer, LLC, acting on behalf of Nxt-ID, up to two (2) weeks after the Distribution Date to fully distribute the shares of PartX common stock to Nxt-ID stockholders.

Q: What do I have to do to participate in the spin-off?

A: Nothing. You are not required to take any action, although we urge you to read this entire information statement carefully. No stockholder approval of the Distribution is required or sought. You are not being asked for a proxy. No action is required on your part to receive your shares of PartX common stock. You will neither be required to pay anything for the new shares of PartX common stock nor be required to surrender any shares of Nxt-ID common stock to participate in the spin-off.

Q: Do I have appraisal rights in connection with the spin-off?

A: No. Holders of Nxt-ID common stock are not entitled to appraisal rights in connection with the spin-off.

Q: How will fractional shares be treated in the spin-off?

A: Fractional shares of PartX common stock will not be distributed. Fractional shares of PartX common stock to which Nxt-ID stockholders of record would otherwise be entitled will be aggregated and sold in the public market by the distribution agent at prevailing market prices. The distribution agent, in its sole discretion, will determine when, how, at what prices to sell these shares and through which broker-dealers, provided that such broker-dealers are not affiliates of Nxt-ID or PartX. The aggregate net cash proceeds of the sales will be distributed ratably to those stockholders who would otherwise have received fractional shares of PartX common stock. See “The Spin-Off—Treatment of Fractional Shares” for a more detailed explanation. Receipt by a stockholder of proceeds from these sales in lieu of a fractional share generally will result in a taxable gain or loss to those stockholders for U.S. federal income tax purposes. Each stockholder entitled to receive cash proceeds from these shares should consult his, her or its own tax advisor as to such stockholder’s particular circumstances. We describe the material U.S. federal income tax consequences of the Distribution in more detail under “The Spin-Off—Material U.S. Federal Income Tax Consequences of the Distribution.”

Q: Why has Nxt-ID determined to undertake the spin-off?

A: The Nxt-ID board of directors has determined that the spin-off is in the best interests of Nxt-ID, Nxt-ID stockholders and other constituents because the spin-off will provide a number of benefits, including: (1) enhanced strategic and management focus on the core business and growth of each company; (2) more efficient capital allocation, direct access to capital and expanded growth opportunities for each company; (3) improved investor understanding of the business strategy and operating results of each company; and (4) enhanced investor choice by offering investment opportunities in separate entities. For a more detailed discussion of the reasons for the spin-off, see “The Spin-Off—Reasons for the Spin-Off.”

Q: What are the U.S. federal income tax consequences of the spin-off?

A: The spin-off is conditioned on the receipt of an opinion from Nxt-ID’s spin-off tax advisors confirming that the Distribution and certain related transactions will be treated as a reorganization for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (the “Code”) in which no gain or loss is recognized by Nxt-ID or its stockholders, except, in the case of Nxt-ID stockholders, for cash received in lieu of fractional shares. Such condition is solely for the benefit of Nxt-ID and Nxt-ID stockholders and, although Nxt-ID has no current intention to do so, may be waived by Nxt-ID in its sole discretion. The material U.S. federal income tax consequences of the Distribution are described in more detail under “The Spin-Off—Material U.S. Federal Income Tax Consequences of the Distribution.”

Q: Will the PartX common stock be listed or quoted on a stock exchange?

A: Although there is not currently a public market for PartX common stock, PartX has submitted an application to have its common stock quoted on the OTCQB of the OTC Markets Group Inc. under the symbol “PTXX.” However, there can be no assurance of when or if we will receive approval for quotation of PartX common stock on the OTCQB. If PartX common stock is not approved for quotation on the OTCQB prior to the Distribution, immediately following the Distribution a trading market for our common stock may not exist. See “Risk Factors.” Assuming PartX common stock is approved for quotation on the OTCQB, it is anticipated that trading of PartX common stock will commence on a “when-issued” basis at least one (1) trading day prior to the Record Date. “When-issued” trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. “When-issued” trades generally settle within three (3) trading days after the Distribution Date. On the first trading day following the Distribution Date, any “when-issued” trading with respect to PartX common stock will end, and “regular-way” trading will begin. “Regular-way” trading refers to trading after a security has been issued and typically involves a transaction that settles on the second full trading day following the date of the transaction. We cannot predict the trading prices of our common stock before, on or after the Distribution Date. See “Trading Market.”

Q: Will my shares of Nxt-ID common stock continue to trade?

A: Yes. Nxt-ID common stock will continue to be listed and trade on the NASDAQ Capital Market under the symbol “NXTD.”

Q: If I sell, on or before the Distribution Date, shares of Nxt-ID common stock that I held as of the Record Date, am I still entitled to receive shares of PartX common stock distributable with respect to the shares of Nxt-ID common stock I sold?

A: Beginning on or shortly before the Record Date and continuing through the Distribution Date for the spin-off, Nxt-ID common stock will begin to trade in two markets on the NASDAQ Capital Market: a “regular-way” market and an “ex-distribution” market. If you hold shares of Nxt-ID common stock as of the Record Date and choose to sell those shares in the “regular-way” market after the Record Date and on or before the Distribution Date, you will also be selling the right to receive the shares of PartX common stock in connection with the spin-off. However, if you hold shares of Nxt-ID common stock as of the Record Date and choose to sell those shares in the “ex-distribution” market after the Record Date and on or before the Distribution Date, you will still receive the shares of PartX common stock in the spin-off.

Q: Will the spin-off affect the trading price of my Nxt-ID common stock?

A: Yes. The trading price of shares of Nxt-ID common stock immediately following the Distribution is expected to be lower than immediately prior to the Distribution because its trading price will no longer reflect the value of the Payments Business. However, we cannot predict the price at which the shares of Nxt-ID common stock will trade following the spin-off.

Q: What assignment and assumption of indebtedness will be undertaken in connection with the spin-off?

A: In connection with Nxt-ID’s acquisition of Fit Pay Sub on May 23, 2017 pursuant to the agreement and plan of merger (the “Merger Agreement”) among Fit Pay, Inc., Fit Pay Merger Sub, Inc., certain selling stockholders of Fit Pay, Inc. (the “Fit Pay Sellers”) and Nxt-ID, Nxt-ID agreed to pay the Fit Pay Sellers an earnout payment equal to 12.5% of the gross revenue derived from Fit Pay Sub’s technology for sixteen (16) fiscal quarters commencing on October 1, 2017 and ending on September 30, 2021. We are assuming the portion of this obligation that is applicable to the period subsequent to the spin-off as part of the internal reorganization in connection with the spin-off. In addition, pursuant to the Merger Agreement, Nxt-ID did not require the Fit Pay Sellers to cause all of Fit Pay Sub’s indebtedness to be repaid prior to the Merger and as part of the spin-off we agree to be responsible for such indebtedness as well as all outstanding indebtedness incurred by the Payments Business following the Merger (excluding amounts that Nxt-ID funded to Fit Pay Sub subsequent to its acquisition), in each case to the extent outstanding at the time of the spin-off. See “The Spin-Off—Assignment and Assumption of Certain Indebtedness and Incurrence of Additional Indebtedness” and “Description of Certain Indebtedness.”

Q: Will PartX borrow funds or sell shares of its stock in connection with the spin-off?

A: We anticipate that in order to finance our research and development and other efforts to expand our business and to meet our working capital requirements that shortly prior to the spin-off, we will incur approximately $1 million to $2 million of non-convertible debt. See “The Spin-Off—Assignment and Assumption of Certain Indebtedness and Incurrence of Additional Indebtedness” and “Description of Certain Indebtedness.”

Q: Who will form the senior management team and board of directors of PartX after the spin-off?

A: The executive officers and members of the board of directors of PartX (our “Board of Directors”) following the spin-off will be as follows: Michael J. Orlando, Chief Operating Officer of Nxt-ID and President of Fit Pay, Inc., will be the Chief Executive Officer and Chairman of the Board of PartX; Thomas J. DaPolito will be the Chief Financial Officer of PartX; and Gino Pereira, Chief Executive Officer of Nxt-ID, Steven Pellizzer, Gunther Bright, Michael Walsh, Joshua Perttula and Lamell McMorris will serve as directors of PartX. See “Management” for information on our executive officers and Board of Directors.

Q: What will the relationship be between Nxt-ID and PartX after the spin-off?

A: Following the spin-off, PartX will be an independent company, and Nxt-ID will not hold any of the shares of PartX common stock. We will enter into a Separation and Distribution Agreement and several other agreements with Nxt-ID related to the spin-off. These agreements will govern the relationship between us and Nxt-ID after completion of the spin-off and provide for the allocation between us and Nxt-ID of various assets, liabilities, rights and obligations. These agreements will also include arrangements with respect to employee matters, tax matters, the licensing of trademarks and certain other intellectual property between us and Nxt-ID and transitional services to be provided by Nxt-ID to us and by us to Nxt-ID. See “Certain Relationships and Related Party Transactions—Agreements with Nxt-ID Related to the Spin-Off.”

Q: What will PartX’s dividend policy be after the spin-off?

A: Any decision to declare and pay dividends will be made at the sole discretion of our Board of Directors and will depend on, among other things, on our earnings, financial condition and other business and economic factors affecting us at such time as our Board of Directors may consider relevant. We currently intend to retain our future earnings to support operations and to finance expansion and, therefore, we do not anticipate paying any cash dividends on our common stock in the foreseeable future. See “Dividend Policy.”

Q: What are the anti-takeover effects of the spin-off?

A: Some provisions of Delaware law, certain of our agreements with Nxt-ID, and our certificate of incorporation and bylaws (as each will be in effect immediately following the spin-off) may have the effect of making it more difficult to acquire control of PartX in a transaction not approved by our Board of Directors. For example, our certificate of incorporation and bylaws, among other things, require advance notice for stockholder proposals and nominations, place limitations on convening stockholder meetings and authorize our Board of Directors to issue one or more series of preferred stock. Further, under the Tax Matters Agreement to be entered into with Nxt-ID, PartX will agree, subject to certain terms, conditions and exceptions, not to enter into any transaction governed by Section 355(e) of the Code for a period of two (2) years following the Distribution involving an acquisition (including issuance) of PartX common stock or certain other transactions that could cause the Distribution to be taxable to Nxt-ID. The parties will also agree to indemnify each other for any tax resulting from any transaction to the extent a party’s actions caused such tax liability, regardless of whether the indemnified party consented to such transaction or the indemnifying party was otherwise permitted to enter into such transaction under the Tax Matters Agreement, and for all or a portion of any tax liabilities resulting from the Distribution under certain other circumstances. Generally, Nxt-ID will recognize a taxable gain on the Distribution if there are (or have been) one or more acquisitions (including issuances) of PartX capital stock representing 50% or more of PartX common stock, measured by vote or value, and the acquisitions are deemed to be part of a plan or series of related transactions that include the Distribution. Any such acquisition of PartX common stock within two (2) years before or after the Distribution (with exceptions, including public trading by less-than-5% stockholders and certain compensatory stock issuances) generally will be presumed to be part of such a plan unless that presumption is rebutted. As a result, these obligations may discourage, delay or prevent a change of control of PartX. See “Description of Capital Stock—Anti-Takeover Effects of Our Certificate of Incorporation, Bylaws and Delaware Law” and “The Spin-Off—Treatment of the Spin-Off” for more information.

Q: What are the risks associated with the spin-off?

A: There are a number of risks associated with the spin-off and ownership of PartX common stock. These risks are discussed under “Risk Factors.”

Q: Who will be the distribution agent, transfer agent and registrar for PartX common stock?

A: The distribution agent for PartX common stock will be VStock Transfer, LLC, whose address is 18 Lafayette Place, Woodmere, NY 11598 and its telephone number is (212) 828-8436. The transfer agent and registrar for PartX common stock will be Philadelphia Stock Transfer, Inc., whose address is 2320 Haverford Rd, Ardmore, PA 19003, and its telephone number is (484) 416-3124.

Q: Where can I get more information about the mechanics of the Distribution?

A: If you have any questions relating to the mechanics of the Distribution, you should contact the distribution agent at:

VStock Transfer, LLC

18 Lafayette Place

Woodmere, NY 11598

Tel: (212) 828-8436

Before the spin-off, if you have any questions relating to the spin-off, you should contact Nxt-ID at:  

Nxt-ID, Inc.

1627 U.S. Highway 1

Unit 206

Sebastian, FL 32958

Tel: (203) 266-2103

After the spin-off, if you have any questions relating to PartX, you should contact PartX at:

PartX, Inc.

5650 El Camino Real

Carlsbad, CA 920008

Tel: (760) 444-0029

Summary of the Spin-Off

RISK FACTORS

You should carefully read each of the following risk factors and all of the other information set forth in this information statement. The risk factors generally have been separated into the following groups: risks relating to our business, risks relating to our platform, applications and related products, risks relating to the spin-off, and risks relating to our common stock. Based on the information currently known to us, we believe that the following information identifies the most significant risk factors affecting our company in each of these categories of risks. However, the risks and uncertainties we face are not limited to those set forth in the risk factors described below. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. In addition, past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.

If any of the following risks and uncertainties develops into actual events, these events could have a material adverse effect on our business, financial condition or results of operations. In such case, the trading price of our common stock could decline.

Risks Relating to the Company’s Business

We are uncertain of our ability to generate sufficient revenue and profitability in the future and there is substantial doubt about our ability to continue as a going concern.

We continue to develop and refine our business model, but we can provide no assurance that we will be able to generate a sufficient amount of revenue from our business in order to achieve profitability.  It is not possible for us to predict at this time the potential success of our business. The revenue and income potential of our proposed business and operations are currently unknown.

We are an emerging growth company (as defined in the JOBS Act). For the year ended December 31, 2018, we incurred a net loss of $1,795,896. As of December 31, 2018, we had cash, deficit and negative working capital of $36,274, $3,482,687 and $807,603, respectively. Although we plan to raise approximately $1 million to $2 million in a private placement of non-convertible debt immediately prior to the spin-off, we cannot provide any assurance that the funds raised by us in such private placement will be sufficient to satisfy our working capital requirements and, if such funds are not sufficient, there is no assurance that we will be able to raise additional cash from equity financings, secure debt financing, and/or generate revenue from the sales of our products to satisfy our working capital requirements. As a result, there is substantial doubt about our ability to continue as a going concern. If we are unable to secure sufficient capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve our cash in amounts sufficient to sustain operations and meet our obligations.

We have a limited operating history and we cannot offer any assurance as to our future financial results, and you should not rely on the historical financial data included in this information statement as an indicator of our future financial performance.

We have a limited operating history upon which to base any assumption as to the likelihood that we will be successful in implementing our business plan, and we may not be able to generate significant revenues or achieve profitability. You should consider our business and prospects in light of the risks and difficulties we face with our limited operating history and should not rely on our past results as an indication of our future performance. There is no assurance that the growth rate we have experienced to date will continue. Even if we generate future revenues sufficient to expand operations, increased infrastructure costs and cost of goods sold and marketing expenses could impair or prevent us from generating profitable returns. We recognize that if we are unable to generate significant revenues from our business development, we will not be able to earn profits or potentially continue operations. If we are unsuccessful in addressing these risks, our business will most likely fail.

If we fail to keep pace with changing industry technology and consumer preferences, we will be at a competitive disadvantage.

The industry segments in which we operate are evolving rapidly. They are characterized by changing technology, budding industry standards, frequent new and enhanced product introductions, rapidly changing end-user/consumer preferences and product obsolescence. In order to continue to compete effectively in these markets, we need to respond quickly to technological changes and to understand their impact on our customers’ preferences. It may take significant time and resources to respond to these technological changes. If we fail to keep pace with these changes, our business may suffer. Moreover, developments by others may render our technologies and intended products noncompetitive or obsolete, or we may be unable to keep pace with technological developments or other market factors. If any of our competitors implement new technologies before we are able to implement them, those competitors may be able to provide more effective products than ours. Any delay or failure in the introduction of new or enhanced products could have a material adverse effect on our business, results of operations and financial condition.

Because we are an emerging growth company, we expect to incur significant additional operating losses.

We are an emerging growth company (as defined in the JOBS Act). The amount of future losses and when, if ever, we will achieve profitability are uncertain. Our current products have not generated significant commercial revenue for us and there can be no guarantee that we can generate sufficient revenues from the commercial sale of our products in the near future to fund our ongoing capital needs.

If we cannot obtain additional capital required to finance our research and development efforts, our business will suffer.

Notwithstanding any funds we raise from the issuance of non-convertible debt immediately prior to the spin-off (See “The Spin-Off—Assignment and Assumption of Certain Indebtedness and Incurrence of Additional Indebtedness” and “Description of Certain Indebtedness), we will still require additional funds to further execute our business plan and expand our business. If we raise additional funds through the sale of common stock or the issuance of other securities which are convertible into or exercisable for our shares of common stock, your ownership percentage of our common stock will be reduced. In addition, if we issue additional shares of common stock or other securities which are convertible into or exercisable for our shares of common stock the value of our common stock may be diluted. We may have to issue securities that have rights, preferences and privileges senior to our common stock. The terms of any additional indebtedness may also include restrictive financial and operating covenants that would limit our ability to compete and expand. There can be no assurance that we will be able to obtain the additional financing we may need to fund our business, or that such financing will be available on terms acceptable to us. In addition, if we are unable to obtain additional capital when needed, we may have to restructure our business or delay or abandon our development and expansion plans.

We face intense competition in our market, especially from larger, well-established companies, and we may lack sufficient financial or other resources to maintain or improve our competitive position.

A number of other companies engage in the business of developing contactless payment and tokenization platform-related businesses. The market for these products is intensely competitive, and we expect competition to increase in the future from established competitors and new market entrants. Our current competitors include both emerging or developmental stage companies, such as ourselves, as well as larger companies. Many of our existing competitors have, and some of our potential competitors could have, substantial competitive advantages such as:

In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products or incorporate functionality into existing products to gain business in a manner that discourages users from purchasing our products, including through selling at zero or negative margins, product bundling, or closed technology platforms. Conditions in our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation. New start-up companies that innovate and large competitors that are making significant investments in research and development may invent similar or superior products and technologies that compete with our products and technology. Our current and potential competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their resources.

Our markets are subject to technological change and our success depends on our ability to develop and introduce new products.

Each of the markets for our products is characterized by:

Our success will be dependent in part on the design and development of new products. To develop new products and designs for our target markets, we must develop, gain access to and use leading technologies in a cost-effective and timely manner and continue to expand our technical and design expertise. The product development process is time-consuming and costly, and there can be no assurance that product development will be successfully completed, that necessary regulatory clearances or approvals will be granted on a timely basis, or at all, or that the potential products will achieve market acceptance. Our failure to develop, obtain necessary regulatory clearances or approvals for, or successfully market potential new products could have a material adverse effect on our business, financial condition and results of operations.

Claims by others that we infringe their intellectual property rights could increase our expenses and delay the development of our business. As a result, our business and financial condition could be harmed.

Our industry is characterized by the existence of a large number of patents as well as frequent claims and related litigation regarding patent and other intellectual property rights. We cannot be certain that our products do not and will not infringe issued patents, patents that may be issued in the future, or other intellectual property rights of others.

We do not have the resources to conduct exhaustive patent searches to determine whether the technology used in our products infringe patents held by third parties. In addition, product development is inherently uncertain in a rapidly evolving technological environment in which there may be numerous patent applications pending, many of which are confidential when filed.

We may face claims by third parties that our products or technology infringe on their patents or other intellectual property rights. Any claim of infringement could cause us to incur substantial costs defending against the claim, even if the claim is invalid, and could distract our management. If any of our products are found to violate third-party proprietary rights, we may be required to pay substantial damages. In addition, we may be required to re-engineer our products or obtain licenses from third parties to continue to offer our products. Any efforts to re-engineer our products or obtain licenses on commercially reasonable terms may not be successful, which would prevent us from selling our products, and, in any case, could substantially increase our costs and have a material adverse effect on our business, financial condition and results of operations. 

We may not be able to protect our intellectual property rights adequately.

Our ability to compete for customers is affected, in part, by our ability to protect our intellectual property rights. We rely on a combination of patents, trademarks, copyrights, trade secrets, confidentiality procedures and non-disclosure and licensing arrangements to protect our intellectual property rights. Despite these efforts, we cannot be certain that the steps we take to protect our proprietary information will be adequate to prevent misappropriation of our technology or protect that proprietary information. The validity and breadth of claims in technology patents involve complex legal and factual questions and, therefore, may be highly uncertain. Nor can we assure you that, if challenged, our patents will be found to be valid or enforceable, or that the patents of others will not have an adverse effect on our ability to do business. In addition, the enforcement of laws protecting intellectual property may be inadequate to protect our technology and proprietary information.

We may not have the resources to assert or protect our rights to our patents and other intellectual property. Any litigation or proceedings relating to our intellectual property, whether or not meritorious, will be costly and may divert the efforts and attention of our management and technical personnel.

We also rely on other unpatented proprietary technology, trade secrets and know-how and no assurance can be given that others will not independently develop substantially equivalent proprietary technology, techniques or processes, that such technology or know-how will not be disclosed or that we can meaningfully protect our rights to such unpatented proprietary technology, trade secrets, or know-how. Although we intend to enter into non-disclosure agreements with our employees and consultants there can be no assurance that such non-disclosure agreements will provide adequate protection for our trade secrets or other proprietary know-how.

Our success will depend, in part, on our ability to protect our existing intellectual property and to obtain new patents.

To date, we have applied for 17 patents in the U.S., two (2) of which have been awarded, and our success will depend, in part, on our ability to obtain patent and trade secret protection for proprietary technology that we currently possess or that we may develop in the future. No assurance can be given that any pending or future patent applications will issue as patents, that the scope of any patent protection obtained will be sufficient to exclude competitors or provide competitive advantages to us, that any of our patents will be held valid if subsequently challenged or that others will not claim rights in or ownership of the patents and other proprietary rights held by us.

Furthermore, there can be no assurance that our competitors have not or will not independently develop technology, processes or products that are substantially similar or superior to ours, or that they will not duplicate any of our products or design around any patents issued or that may be issued in the future to us. In addition, whether or not patents are issued to us, others may hold or receive patents which contain claims having a scope that covers products or processes developed by us.

We may not have the resources to adequately defend any patent infringement litigation or proceedings. Any such litigation or proceedings, whether or not determined in our favor or settled by us, is costly and may divert the efforts and attention of our management and technical personnel. In addition, we may be required to obtain licenses to patents or proprietary rights from third parties. There can be no assurance that such licenses will be available on acceptable terms if at all. If we do not obtain required licenses, we could encounter delays in product development or find that the development, manufacture or sale of products requiring such licenses could be foreclosed. Accordingly, challenges to our intellectual property, whether or not ultimately successful, could have a material adverse effect on our business and results of operations.

Our future success depends on the continued service of management, engineering and sales personnel and our ability to identify, hire and retain additional personnel.

Our success depends, to a significant extent, upon the efforts and abilities of members of our senior management. Prior to the spin-off , we expect to enter into an employment agreement with our Chief Executive Officer, Michael J. Orlando. Subsequent to the spin-off , we also intend on entering into employment agreements with other key members of management. The loss of the services of one or more of our senior management or other key employees could adversely affect our business.

There is intense competition for qualified employees in our industry, particularly for highly skilled design, applications, engineering and sales people. We may not be able to continue to attract and retain developers, managers, or other qualified personnel necessary for the development of our business or to replace qualified individuals who may leave us at any time in the future. Our anticipated growth is expected to place increased demands on our resources and will likely require the addition of new management and engineering staff as well as the development of additional expertise by existing management employees. If we lose the services of or fail to recruit engineers or other technical and management personnel, our business could be harmed.

The requirements of being a public company may strain our resources and divert management’s attention.

As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act), the Dodd-Frank Wall Street Reform and Consumer Protection Act and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual and current reports with the SEC with respect to our business and operating results.

As a result of disclosure of information in this information statement and in filings required of a public company, our business and financial condition is more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert resources of our management and harm our business and operating results.

Periods of rapid growth and expansion could place a significant strain on our resources, including our employee base, which could negatively impact our operating results.

We may experience periods of rapid growth and expansion, which may place significant strain and demands on our management, our operational and financial resources, customer operations, research and development, marketing and sales, administrative, and other resources. To manage our possible future growth effectively, we will be required to continue to improve our management, operational and financial systems. Future growth would also require us to successfully hire, train, motivate and manage our employees. In addition, our continued growth and the evolution of our business plan will require significant additional management, technical and administrative resources. If we are unable to manage our growth successfully, we may not be able to effectively manage the growth and evolution of our current business and our operating results could suffer.

Some of our offerings depend on contract manufacturers, and our production and products could be harmed if such contract manufacturers are unable to meet our volume and quality requirements and alternative sources are not available.

We rely on contract manufacturers to provide manufacturing services for some of our products. If these services become unavailable, we would be required to identify and enter into an agreement with a new contract manufacturer or take the manufacturing in-house. The loss of our contract manufacturers could significantly disrupt production as well as increase the cost of production, thereby increasing the prices of our products. These changes could have a material adverse effect on our business and results of operations.

A limited number of customers account for a significant portion of our sales. The loss of a principal customer or other significant business relationship could have a material adverse effect on our business, financial condition and results of operations.

A significant portion of our product sales are made to a limited number of customers. Two (2) customers accounted for 95% and 89% of our revenue and accounts receivable, respectively, for the year ended December 31, 2018. For the year ended December 31, 2017, two (2) customers accounted for 85% of our revenue and three (3) customers accounted for 88% of our accounts receivable. The loss of our relationships with principal customers or a decline in sales to principal customers could materially adversely affect our business, financial condition and results of operations.

If we do not effectively manage changes in our business, these changes could place a significant strain on our management and operations.

Our ability to grow successfully requires an effective planning and management process. The expansion and growth of our business could place a significant strain on our management systems, infrastructure and other resources. To manage our growth successfully, we must continue to improve and expand our systems and infrastructure in a timely and efficient manner. Our controls, systems, procedures and resources may not be adequate to support a changing and growing company. If our management fails to respond effectively to changes and growth in our business, including acquisitions, this could have a material adverse effect on our business, financial condition, results of operations and future prospects.

We are an emerging growth company within the meaning of the JOBS Act, and if we decide to take advantage of certain exemptions from various reporting requirements applicable to emerging growth companies, our common stock could be less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are not applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five (5) years although we could lose that status sooner if our annual gross revenues exceed $1.07 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if, among other criteria, the market value of our common stock held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.

Under the JOBS Act, emerging growth companies may also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to utilize such extended transition period for complying with new or revised accounting standards.

We may not be able to access the equity or credit markets.

We face the risk that we may not be able to access various capital sources, including investors, lenders, or suppliers. Failure to access the equity or credit markets from any of these sources could have a material adverse effect on our business, financial condition, results of operations and future prospects.

Persistent global economic trends could adversely affect our business, liquidity and financial results.

Although improving, persistent global economic conditions, particularly the scarcity of capital available to smaller businesses, could adversely affect us, primarily through limiting our access to capital and disrupting our clients’ businesses. In addition, continuation or worsening of general market conditions in economies important to our businesses may adversely affect our clients’ level of spending and ability to obtain financing, leading to us being unable to generate the levels of sales that we require.  Current and continued disruption of financial markets could have a material adverse effect on our business, financial condition, results of operations and future prospects.

We may seek or need to raise additional funds. Our ability to obtain financing for general corporate and commercial purposes or acquisitions depends on operating and financial performance and is also subject to prevailing economic conditions and to financial, business and other factors beyond our control. The global credit markets and the financial services industry have experienced a period of unprecedented turmoil characterized by the bankruptcy, failure or sale of various financial institutions in recent history. An unprecedented level of intervention from the U.S. and other governments has been seen. As a result of such disruption, our ability to raise capital may be severely restricted and the cost of raising capital through such markets or privately may increase significantly at a time when we would like, or need, to do so. Either of these events could have an impact on our flexibility to fund our business operations, make capital expenditures, pursue additional expansion or acquisition opportunities, or make another discretionary use of cash and could adversely impact our financial results.

Although recent trends point to continuing improvements, there is still lingering volatility and uncertainty. A change or disruption in the global financial markets for any reason may cause consumers, businesses and governments to defer purchases in response to tighter credit, decreased cash availability and declining consumer confidence. Accordingly, demand for our products could decrease and differ materially from current expectations. Further, some of our customers may require substantial financing in order to fund their operations and make purchases from us. The inability of these customers to obtain sufficient credit to finance purchases of our products and meet their payment obligations to us or possible insolvencies of our customers could result in decreased customer demand, an impaired ability for us to collect on outstanding accounts receivable, significant delays in accounts receivable payments, and significant write-offs of accounts receivable, each of which could adversely impact our financial results.

Rising interest rates could adversely impact our business.

Changes in interest rates could have an adverse impact on our business by increasing our cost of capital. For example:

Rising interest rates could generally harm our business and financial condition.

We are dependent on credit and debit account issuers, payment card networks and independent standards boards, and any changes to their rules or practices could harm our business.

Key components of our business depend on technological programs, certifications or industry standards established by credit and debit account issuers, the payment card networks, including Visa, Mastercard, Maestro, and Discover, and standards established by industry organizations, including the Payment Card Industry Data Security Standard (PCI DSS). 

Actions may be taken by such credit and debit account issuers, payment card networks and industry organizations to alter these technological programs, certifications or standards that degrade the functionality of our services, impose additional costs or requirements on us or give preferential treatment to competitive services. If we are unsuccessful in meeting any new requirements, or renegotiating or maintaining mutually beneficial relationships with these entities or organizations, our business may be harmed. In addition, violations of such technological programs, certifications or standards, or any failure to maintain good relationships with the payment card networks and to secure certifications necessary for our business, could impact our ability to maintain our current customers or obtain new customers, increase our costs or otherwise harm our business.

We, our sellers, our partners and others who use our services obtain and process a large amount of sensitive data. Any real or perceived improper or unauthorized use of, disclosure of, or access to such data could harm our reputation as a trusted brand, as well as have a material adverse effect on our business.

We, our sellers, and our partners, including third-party vendors and data centers that we use, obtain and process large amounts of sensitive data, including data related to our sellers, their customers and their transactions. We face risks, including to our reputation as a trusted brand, in the handling and protection of this data, and these risks will increase as our business continues to expand to include new products and technologies. Our operations may involve the transmission of sensitive personally identifiable information of individuals and payment account number data using our services.

We have administrative, technical and physical security measures in place, and we have policies and procedures in place to contractually require third parties to whom we transfer data to implement and maintain appropriate privacy and security measures. However, if our privacy and security measures or those of the previously mentioned third parties are inadequate or are breached as a result of third-party action, employee error, malfeasance, malware, phishing, hacking attacks, system error, software bugs or defects in our products, trickery, process failure, or otherwise, and, as a result, there is improper disclosure of data, or someone obtains unauthorized access to our systems or our partners’ systems, or if we suffer a ransomware or advanced persistent threat attack, or if any of the foregoing is reported or perceived to have occurred, our reputation and business could be harmed. If the sensitive information is lost or improperly disclosed or threatened to be disclosed, we could incur significant liability, financial loss and be subject to regulatory scrutiny and penalties, including costs associated with remediation. 

While we maintain cybersecurity insurance, our insurance may be insufficient to cover all liabilities incurred by such attacks. We also cannot be certain that our insurance coverage will be adequate for data handling or data security liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, results of operations and reputation.

Because we have international operations, we will be subject to the risks of conducting business in foreign countries.

We currently sell our products internationally and, therefore, we are subject to the risks of conducting business in foreign countries, including:

No assurance can be given that we will be able to positively manage the risks inherent in the conduct of our international operations or that such operations will not have a material adverse effect on our financial condition and results of operations.

Risks Related to Our Platform, Applications and Related Products

Our platform, applications, products and technologies may not be accepted by the intended commercial consumers of our products, which could harm our future financial performance.

There can be no assurance that our platform, applications, products and technologies will achieve wide acceptance by commercial consumers of such security-based products, and/or market acceptance generally. The degree of market acceptance for products and services based on our technology will also depend upon a number of factors, including the receipt and timing of approvals and certifications, if any, and the establishment and demonstration of the ability of our proposed platform, applications and products to provide added security and convenience in an efficient manner and at a reasonable cost. Our failure to develop a commercial product to compete successfully with existing technologies could delay, limit or prevent market acceptance. Moreover, the market for contactless payment technology systems and services is largely undeveloped, and we believe that the overall demand for contactless payment technology will depend significantly upon public perception of the need for such services. There can be no assurance that the public will adopt contactless payment technology at a rate sufficient to support our growth plans. Long-term market acceptance of our products and services will depend, in part, on the capabilities, operating features and price of our products and technologies as compared to those of other available products and services. As a result, there can be no assurance that currently available products, or products under development for commercialization, will be able to achieve market penetration, revenue growth or profitability.

Our platform, applications and products may become obsolete if we do not effectively respond to rapid technological change on a timely basis.

The payments, authentication, credential management, and personal identification industries are characterized by rapid technological change, frequent new product innovations, changes in customer requirements and expectations and evolving industry standards. If we are unable to keep pace with these changes, our business may be harmed. Products using new technologies, or emerging industry standards, could make our technologies less attractive. In addition, we may face unforeseen problems when developing our products, which could harm our business. Furthermore, our competitors may have access to technologies not available to us, which may enable them to produce products of greater interest to consumers or at a more competitive cost.

Because of the new and evolving nature of payment and tokenization technology, it is difficult to predict the size of this specialized market, the rate at which the market for our platform, applications and products will grow or be accepted, if at all, or whether other technologies will render our applications less competitive or obsolete.  If the market for our applications fails to develop or grows slower than anticipated, we would be significantly and materially adversely affected.

If our products and services do not achieve market acceptance, we may never have significant revenues or any profits.

If we are unable to operate our business as contemplated by our business model or if the assumptions underlying our business model prove to be unfounded, we could fail to achieve our revenue and earnings goals within the time we have projected, or at all, which would have a detrimental effect on our business. 

We may in the future experience competition from other payment and tokenization platform, application and product developers.

Competition in the development of payment and tokenization technology is expected to become more intense. Competitors range from university-based research and development graphics labs to development-stage companies and major domestic and international companies. Many of these entities have financial, technical, marketing, sales, distribution and other resources significantly greater than those that we have. There can be no assurance that we can continue to develop our technologies, or that present or future competitors will not develop technologies that render our biometric applications obsolete or less marketable or that we will be able to introduce new products and product enhancements that are competitive with other products marketed by industry participants.

We may fail to create new applications for our products and enter new markets, which would have an adverse effect on our operations, financial condition and prospects.

Our future success depends in part on our ability to develop and market our technology for applications other than those currently intended. If we fail in these goals, our business strategy and ability to generate revenues and cash flow would be significantly impaired. We intend to expend significant resources to develop new technology, but the successful development of new technology cannot be predicted, and we cannot guarantee we will succeed in these goals.

Our products may have defects, which could damage our reputation, decrease market acceptance of our products, cause us to lose customers and revenue and result in costly litigation or liability.

Our products may contain defects for many reasons, including defective design or manufacture, defective material or software interoperability issues. Products as complex as those we offer frequently develop or contain undetected defects or errors. Despite testing, defects or errors may arise in our existing or new products, which could result in loss of revenue, market share, failure to achieve market acceptance, diversion of development resources, injury to our reputation, and increased service and maintenance cost. Defects or errors in our products and solutions might discourage customers from purchasing future products. Often, these defects are not detected until after the products have been shipped. If any of our products contain defects or perceived defects or have reliability, quality or compatibility problems or perceived problems, our reputation might be damaged significantly, we could lose or experience a delay in market acceptance of the affected product or products and might be unable to retain existing customers or attract new customers. In addition, these defects could interrupt or delay sales. In the event of an actual or perceived defect or other problem, we may need to invest significant capital and technical, managerial and other resources to investigate and correct the potential defect or problem and potentially divert these resources from other development efforts. If we are unable to provide a solution to the potential defect or problem that is acceptable to our customers, we may be required to incur substantial product recall, repair and replacement and even litigation costs. These costs could have a material adverse effect on our business and operating results.

We will provide warranties on certain product sales and allowances for estimated warranty costs are recorded during the period of sale. The determination of such allowances requires us to make estimates of product return rates and expected costs to repair or to replace the products under warranty. We will establish warranty reserves based on our best estimates of warranty costs for each product line combined with liability estimates based on the prior twelve months’ sales activities. If actual return rates and/or repair and replacement costs differ significantly from our estimates, adjustments to recognize additional cost of sales may be required in future periods. In addition, because our customers rely on secure authentication and identification of cardholders to prevent unauthorized access to programs, PCs, networks, or facilities, a malfunction of or design defect in its products (or even a perceived defect) could result in legal or warranty claims against us for damages resulting from security breaches. If such claims are adversely decided against us, the potential liability could be substantial and have a material adverse effect on our business and operating results. Furthermore, the possible publicity associated with any such claim, whether or not decided against us, could adversely affect our reputation. In addition, a well-publicized security breach involving smart card-based or other security systems could adversely affect the market’s perception of products like ours in general, or our products in particular, regardless of whether the breach is attributable to our products. Any of the foregoing events could cause demand for our products to decline, which would cause our business and operating results to suffer.

Risks Relating to the Spin-Off

The Distribution may not be completed on the terms or timeline currently contemplated, if at all.

While we are actively engaged in planning for the Distribution, unanticipated developments could delay or negatively affect the Distribution, including those related to the filing and effectiveness of appropriate filings with the SEC and receiving any required regulatory approvals. In addition, until the Distribution has occurred, the Nxt-ID board of directors has the right to not proceed with the Distribution, even if all of the conditions are satisfied. Therefore, the Distribution may not be completed on the terms or timeline currently contemplated, if at all.

If our application for quotation of our common stock on the OTCQB is not approved prior to the Distribution, immediately following the Distribution, a trading market for our common stock may not exist.

We intend to apply to have our common stock quoted on the OTCQB of the OTC Markets Group Inc. However, quotation of our common stock on the OTCQB is not a condition to the Distribution. If our application for quotation of our common stock is not approved by the OTC Markets Group Inc. prior to the Distribution, there may be no trading market for our common stock immediately following the Distribution, and there can be no assurance of when or if our common stock will be approved for quotation on the OTCQB. Without a trading market for our common stock, you will not be able to trade our common stock.

We may be unable to achieve some or all of the benefits that we expect to achieve from our spin-off from Nxt-ID.

We believe that as a standalone, independent company, our business will benefit from, among other things, allowing our management to design and implement corporate policies and strategies that are based primarily on the characteristics of our business, allowing us to focus our financial resources wholly on our own operations and implement and maintain a capital structure designed to meet our own specific needs. However, by separating from Nxt-ID, we may be more susceptible to market fluctuations and other adverse events than we would have been were we still a part of Nxt-ID. If we fail to achieve some or all of the benefits that we expect to achieve as an independent company, or do not achieve them in the time we expect, our results of operations and financial condition could be materially adversely affected.

We have no operating history as a separate company; our historical and pro forma financial information is not necessarily representative of the results we would have achieved as a separate publicly traded company and may not be a reliable indicator of our future results; we may be unable to make, on a timely or cost-effective basis, the changes necessary to operate as an independent company, and as a result, we may experience increased costs.

Since Nxt-ID’s acquisition of Fit Pay Sub on May 23, 2017, Nxt-ID has performed various corporate functions for us, including tax administration, governance, compliance, accounting, internal audit and external reporting. Our historical and pro forma financial results reflect allocations of corporate expenses from Nxt-ID for these and similar functions that may be less than the comparable expenses we would have incurred had we operated as a separate publicly traded company. Prior to the spin-off, we shared economies of scope and scale in costs, employees and vendor relationships. While we expect to enter into short-term transition agreements and longer-term licensing, marketing and other agreements that will govern certain commercial and other relationships between us and Nxt-ID, those arrangements may not capture the benefits our business has enjoyed as a result of being integrated with the other businesses of Nxt-ID.

Generally, our working capital requirements, including acquisitions and capital expenditures, have historically been satisfied as part of the corporate-wide cash management policies of Nxt-ID. Following the completion of the spin-off, Nxt-ID will not be providing us with funds to finance our working capital or other cash requirements, and, in addition to any funds raised in our contemplated private placement of $1 million to $2 million in non-convertible debt immediately prior to the spin-off, we may need to obtain financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements. We may be unable to obtain such financing in a timely manner or on comparable terms and costs of the services or other benefits that Nxt-ID previously provided to us.

The loss of the benefits from being a part of Nxt-ID could have an adverse effect on our business, results of operations and financial condition following the completion of the spin-off. Other significant changes may occur in our cost structure, management, financing and business operations as a result of our operating as a company separate from Nxt-ID.

We might have received better terms from unaffiliated third parties than the terms we received in our agreements with Nxt-ID entered into in connection with the spin-off.

The agreements related to the spin-off from Nxt-ID were negotiated in the context of the spin-off from Nxt-ID while we were still part of Nxt-ID. Although these agreements are intended to be on an arm’s-length basis, they may not reflect terms that would have resulted from arm’s-length negotiations among unaffiliated third parties. The terms of the agreements being negotiated in the context of the spin-off are related to, among other things, allocations of assets and liabilities, rights and indemnification and other obligations between us and Nxt-ID. To the extent that certain terms of those agreements provide for rights and obligations that could have been procured from third parties, we might have received better terms from third parties because third parties might have competed with each other to win our business. See “Certain Relationships and Related Party Transactions—Agreements with Nxt-ID Related to the Spin-Off.”

We will incur certain indebtedness, assume certain indebtedness and contingent obligations as part of our spin-off from Nxt-ID, which may subject us to various restrictions and decrease our profitability.

In connection with the spin-off, PartX will assume certain indebtedness that Fit Pay, Inc. held prior to its being acquired by Nxt-ID and certain contingent obligations of Nxt-ID to the Fit Pay Sellers, and we will be responsible for servicing this indebtedness and obtaining and maintaining sufficient working capital and other funds to satisfy our cash requirements. We also expect that in order to finance our research and development and other efforts to expand our business and to meet our working capital requirements immediately prior to the spin-off, we will complete a private placement of $1 million to $2 million in non-convertible debt. The agreement for these indebtedness and contingent obligations may contain restrictions, covenants and events of default that could limit our ability to (i) respond to market conditions, provide for capital investment needs or take advantage of business opportunities by restricting our ability to incur or guarantee additional indebtedness or requiring us to offer to repurchase such indebtedness in the event of a change of control; (ii) pay dividends or make distributions; (iii) make investments or acquisitions; (iv) sell, transfer or otherwise dispose of certain assets; (v) create liens; (vi) consolidate or merge; (vii) enter into transactions with affiliates; and (viii) prepay and repurchase or redeem certain indebtedness. In addition, our financing costs may be higher than they were as part of Nxt-ID.

Our accounting and other management systems and resources may not meet the financial reporting and other requirements to which we will be subject following the spin-off, and failure to achieve and maintain effective internal controls could have a material adverse effect on our business and the price of our common stock.

As a result of the spin-off, we will be directly subject to reporting and other obligations under U.S. securities laws and will be required to comply with internal controls and reporting requirements thereunder. These reporting and other obligations may place significant demands on our management, administrative and operational resources, including accounting systems and resources and may require us to upgrade our systems, implement additional financial and management controls, reporting systems and procedures and hire additional accounting and finance staff. If we are unable to obtain or maintain adequate financial and management controls, reporting systems, information technology systems and procedures in a timely and effective fashion, our ability to comply with the internal controls, financial reporting requirements and other rules that apply to reporting companies under U.S. securities laws may be impaired. In addition, any failure to comply with the internal controls, financial reporting requirements and other rules that apply to reporting companies under U.S. securities laws, or difficulties encountered in their implementation, could have a material adverse effect on our operating results. Any material weakness in our internal controls may also cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our company and, if a public market develops for our securities, the trading price of our common stock. We expect to incur additional annual expenses for the purpose of addressing these requirements that may be significant.

The spin-off and related transactions may expose us to potential liabilities arising out of state and federal fraudulent conveyance laws and legal distribution requirements.

While Nxt-ID will receive a solvency opinion from an investment bank confirming that Nxt-ID will be adequately capitalized immediately after the spin-off, the spin-off could be challenged under various state and federal fraudulent conveyance laws. An unpaid creditor could claim that Nxt-ID did not receive fair consideration or reasonably equivalent value in the spin-off, that the spin-off left Nxt-ID insolvent or with unreasonably small capital or that Nxt-ID intended or believed it would incur debts beyond its ability to pay such debts as they mature. If a court were to agree with such a plaintiff, then such court could void the spin-off as a fraudulent transfer and could impose a number of different remedies, including without limitation, returning our assets or your shares in our company to Nxt-ID or providing Nxt-ID with a claim for money damages against us in an amount equal to the difference between the consideration received by Nxt-ID and the fair market value of our company at the time of the spin-off.

Certain directors who serve on our Board of Directors will serve as directors of the Nxt-ID board of directors, and ownership of shares of Nxt-ID common stock or equity awards of Nxt-ID by directors and executive officers of PartX may create conflicts of interest or the appearance of conflicts of interest.

Michael J. Orlando and Gino M. Pereira, who will serve on our Board of Directors, will continue to serve on the Nxt-ID board of directors. This could create, or appear to create, potential conflicts of interest when our or Nxt-ID’s management and directors face decisions that could have different implications for us and Nxt-ID, including the resolution of any dispute regarding the terms of the agreements governing the spin-off and the relationship between us and Nxt-ID after the spin-off, any commercial agreements entered into in the future between us and Nxt-ID and the allocation of such directors’ time between us and Nxt-ID.

Because of their current or former positions with Nxt-ID, certain of our directors and executive officers will own shares of Nxt-ID common stock. The continued ownership of Nxt-ID common stock by PartX directors and executive officers following the spin-off creates or may create the appearance of conflicts of interest when these directors and executive officers are faced with decisions that could have different implications for us and Nxt-ID.

If the Distribution, together with certain related transactions, were to fail to qualify as a reorganization for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Code, then our stockholders, we and Nxt-ID might be required to pay substantial U.S. federal income taxes (including as a result of indemnification under the Tax Matters Agreement).

The Distribution is conditioned upon Nxt-ID’s receipt of an opinion from its spin-off tax advisors to the effect that the Distribution, together with certain related transactions, will qualify as a reorganization for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Code in which no gain or loss is recognized by Nxt-ID or its stockholders, except, in the case of Nxt-ID stockholders, for cash received in lieu of fractional shares. The opinion from Nxt-ID’s spin-off tax advisors will be based on, among other things, certain assumptions as well as on the continuing accuracy of certain factual representations and statements that we and Nxt-ID make to the spin-off tax advisors. In providing their opinion, the spin-off tax advisors will also rely on certain covenants that we and Nxt-ID will enter into, including the adherence by Nxt-ID and us to certain restrictions on our future actions contained in the Tax Matters Agreement. If any of the representations or statements that we or Nxt-ID make are or become inaccurate or incomplete, or if we or Nxt-ID breach any of our covenants, the Distribution and such related transactions might not qualify for such tax treatment. The opinion from Nxt-ID’s spin-off tax advisors is not binding on the Internal Revenue Service (the “IRS”) or a court, and there can be no assurance that the IRS will not challenge the validity of the Distribution and such related transactions as a reorganization for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Code eligible for tax-free treatment, or that any such challenge ultimately will not prevail.

If the Distribution, together with certain related transactions, does not qualify as a tax-free transaction for any reason, including as a result of a breach of a representation or covenant, Nxt-ID would recognize taxable gain on the Distribution equal to the amount by which the fair market value of the PartX common stock distributed to Nxt-ID stockholders exceeds Nxt-ID’s tax basis in its shares of PartX common stock. In such case, under U.S. Treasury regulations, each member of the Nxt-ID consolidated group at the time of the spin-off (including us and certain of our subsidiaries) would be jointly and severally liable for the entire resulting amount of any U.S. federal income tax liability. Additionally, if the Distribution of our common stock does not qualify as tax-free under Section 355 of the Code, Nxt-ID stockholders will be treated as having received a taxable distribution equal to the value of our stock distributed, treated as a taxable dividend to the extent of Nxt-ID’s current and accumulated earnings and profits, and then would have a tax-free basis recovery up to the amount of their tax basis in their shares, and then would have taxable gain from the sale or exchange of the shares to the extent of any excess. For more information, see “The Spin-Off—Material U.S. Federal Income Tax Consequences of the Distribution.”

In addition, pursuant to the Tax Matters Agreement, if the Distribution, together with certain related transactions, does not qualify as a tax-free transaction under Section 355 of the Code due to the fault of PartX, PartX will be responsible for the payment of any resulting tax liabilities and will indemnify Nxt-ID with respect thereto. Similarly, if the failure of the Distribution, together with certain related transactions, to qualify as a tax-free transaction under Section 355 of the Code is due to the fault of Nxt-ID, Nxt-ID will be responsible for the payment of any resulting tax liabilities and will indemnify PartX with respect thereto.

Our ability to engage in acquisitions and other strategic transactions is subject to limitations because we are agreeing to certain restrictions intended to support the tax-free nature of the Distribution.

The U.S. federal income tax laws that apply to transactions like the spin-off generally create a presumption that the Distribution would be taxable to Nxt-ID (but not to Nxt-ID stockholders) if we engage in, or enter into an agreement to engage in, a transaction that would result in a 50% or greater change by vote or by value in our stock ownership during the four-year period beginning two years before the Distribution Date, unless it is established that the transaction is not pursuant to a plan or series or transactions related to the Distribution. U.S. Treasury regulations currently in effect generally provide that whether an acquisition transaction and a Distribution are part of a plan is determined based on all of the facts and circumstances, including specific factors listed in the Treasury regulations. In addition, these Treasury regulations provide several “safe harbors” for acquisition transactions that are not considered to be part of a plan that includes a Distribution.

There are other restrictions imposed on us under current U.S. federal income tax laws with which we will need to comply in order for the Distribution and certain related transactions to qualify as a transaction that is tax-free under Sections 368(a)(1)(D) and 355 of the Code. For example, we will generally be required to continue to own and manage our Payments Business, and there will be limitations on issuances, redemptions and sales of our stock for cash or other property following the Distribution, except in connection with certain stock-for-stock acquisitions and other permitted transactions. If these restrictions are not followed, the Distribution could be taxable to Nxt-ID and Nxt-ID stockholders.

We will enter into a Tax Matters Agreement with Nxt-ID under which we will allocate, between Nxt-ID and ourselves, responsibility for U.S. federal, state and local and non-U.S. income and other taxes relating to taxable periods before and after the spin-off and provide for computing and apportioning tax liabilities and tax benefits between the parties. In the Tax Matters Agreement, we will agree that, among other things, we may not take, or fail to take, any action following the Distribution if such action, or failure to act: would be inconsistent with or prohibit the spin-off and certain restructuring transactions related to the Distribution and certain related transactions from qualifying as a tax-free reorganization under Sections 368(a)(1)(D) and 355 and related provisions of the Code to Nxt-ID and Nxt-ID stockholders (except with respect to the receipt of cash in lieu of fractional shares of our stock); or would be inconsistent with, or cause to be untrue, any representation, statement, information or covenant made in connection with the opinion provided by Nxt-ID’s spin-off tax advisors or the Tax Matters Agreement relating to the qualification of the Distribution and certain related transactions as a tax-free transaction under Sections 368(a)(1)(D) and 355 and related provisions of the Code.

In addition, we will agree that we may not, among other things, during the two-year period following the spin-off, except under certain specified circumstances, issue, sell or redeem our stock or other securities (or those of certain of our subsidiaries); liquidate, merge or consolidate with another person; sell or dispose of assets outside the ordinary course of business or materially change the manner of operating our business; or enter into any agreement, understanding or arrangement, or engage in any substantial negotiations with respect to any transaction or series of transactions which would cause us to undergo a specified percentage or greater change in our stock ownership by value or voting power. These restrictions could limit our strategic and operational flexibility, including our ability to finance our operations by issuing equity securities, make acquisitions using equity securities, repurchase our equity securities, or raise money by selling assets or enter into business combination transactions. We will also agree to indemnify Nxt-ID for certain tax liabilities resulting from any such transactions. Further, our stockholders may consider these covenants and indemnity obligations unfavorable as they might discourage, delay or prevent a change of control.

Risks Relating to Our Common Stock

There is no existing market for our common stock, and a trading market that will provide you with adequate liquidity may not develop for our common stock. If and when a larger trading market for our common stock develops, the market price of our common stock is still likely to be highly volatile and subject to wide fluctuations.

There is currently no public market for our common stock and an active trading market for our common stock may not develop as a result of the Distribution or be sustained in the future. The lack of an active trading market may make it more difficult for you to sell your shares of common stock and could lead to our stock price being depressed or more volatile.

We cannot predict the prices at which our common stock may trade after the Distribution. The market price of our common stock may be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including, but not limited to:

In addition, if the market for technology stocks or the stock market in general experiences loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or operating results. The trading price of our common stock might also decline in reaction to events that affect other companies in our industry, even if these events do not directly affect us. Each of these factors, among others, could harm the value of our common stock. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, operating results and financial condition.

For many reasons, including the risks identified in this information statement, the market price of our common stock following the spin-off may be more volatile than the market price of Nxt-ID common stock before the spin-off. These factors may result in short-term or long-term negative pressure on the value of our common stock. Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our common stock.

The concentration of stock ownership by our executive officers and directors may enable such stockholders to exert significant influence over matters requiring stockholder approval.

Our executive officers and directors will beneficially own approximately [●]% of our common stock following the spin-off. As a result, our executive officers and directors may have significant influence to:

The interests of our executive officers and directors may not always coincide with the interests of other stockholders, and these stockholders may act in a manner that advances their interests and not necessarily those of other stockholders. In addition, any sale of a significant amount of our common stock held by our directors and executive officers, or the possibility of such sales, could adversely affect the market price of our common stock. Management’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing any gains from our common stock.

The market price for our common stock is likely to be particularly volatile given our status as a corporation that prior to the spin-off was a subsidiary of a relatively unknown company with a small and thinly traded public float and lack of profits. This could lead to wide fluctuations in the price of our common stock.

The market for Nxt-ID’s common stock is characterized by significant price volatility when compared to the securities of larger, more established companies that trade on a national securities exchange and have large public floats, and as we are appreciably smaller than Nxt-ID in terms of assets, revenues and earnings, and lack any trading history we expect that following the spin-off the price of our common stock will be more volatile than the securities of larger, more established companies for the indefinite future. The volatility in the price of our common stock may be attributable to a number of factors. First, as noted above, Nxt-ID’s common stock is, compared to the securities of such larger, more established companies, sporadically and thinly traded and we have no basis to conclude that following the spin-off our common stock will trade more frequently and heavily. The price of our common stock could, for example, decline precipitously in the event that a large number of shares of our common stock were sold on the market without commensurate demand. Second, we are a speculative or “risky” investment due to our lack of profits to date. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares of common stock on the market more quickly and at greater discounts than would be the case with the securities of a larger, more established company that trades on a national securities exchange and has a large public float. Many of these factors are beyond our control and may decrease the market price of our common stock regardless of our operating performance.

Our stockholders may experience significant dilution.

The issuance of material amounts of common stock by us in the future would cause our existing stockholders to experience significant dilution in their investment in us. We will need to raise additional capital in the future to execute our business plan, and if we obtain additional financing involving the issuance of equity securities or securities convertible into or exercisable for equity securities, our existing stockholders’ investment would be diluted. Any such dilution could cause the market price of our common stock to decline, which could impair our ability to raise additional financing.  

We do not anticipate paying dividends in the foreseeable future.

The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our Board of Directors may consider relevant.  If we do not pay dividends, our common stock may be less appealing because a return on a stockholder’s investment would only occur if our stock price appreciates.

We currently intend to retain our future earnings to support operations and to finance expansion and, therefore, we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

We could issue “blank check” preferred stock without stockholder approval with the effect of diluting then current stockholder interests and impairing their voting rights, and provisions in our charter documents could discourage a takeover that stockholders may consider favorable.

Our certificate of incorporation authorizes the issuance of up to 20,000,000 shares of “blank check” preferred stock with designations, rights and preferences as may be determined from time to time by our Board of Directors. Pursuant to our certificate of incorporation, in addition to the Series A Preferred Stock discussed elsewhere in this information statement, our Board of Directors is empowered, without stockholder approval, to issue a series of preferred stock with dividend, liquidation, conversion, voting or other rights which could dilute the interest of, or impair the voting power of, our common stockholders. The issuance of a series of preferred stock could be used as a method of discouraging, delaying or preventing a change in control of the Company. For example, it would be possible for our Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of the Company.

Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may limit a stockholder’s ability to buy and sell our common stock.

FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for certain customers. Since PartX common stock is a speculative investment due to our lack of profits to date, FINRA requirements will likely make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity in our common stock. As a result, fewer broker-dealers may be willing to make a market in our common stock, reducing a stockholder’s ability to resell shares of our common stock.

Sales of a significant number of shares of our common stock in the public markets or significant short sales of our common stock, or the perception that such sales could occur, could depress the market price of our common stock and impair our ability to raise capital.

Sales of a substantial number of shares of our common stock or other equity-related securities in the public markets could depress the market price of our common stock. If there are significant short sales of our common stock, the price decline that could result from this activity may cause the share price to decline more so, which, in turn, may cause long holders of the common stock to sell their shares, thereby contributing to sales of common stock in the market. Such sales also may impair our ability to raise capital through the sale of additional equity securities in the future at a time and price that our management deems acceptable, if at all.

We anticipate that we will issue non-convertible debt securities shortly prior to the spin-off and, depending on our future capital needs, we may issue additional debt or equity securities, including common stock, notes, options, warrants and convertible securities subsequent to the spin-off. The issuance of common stock, the exercise of options or warrants or the conversion of convertible securities would have a dilutive effect on your percentage ownership of common stock and might result in a dilution of your voting power and an increase in the number of shares of common stock eligible for future resale in the public market, which may negatively impact the trading price of our common stock.

Our Board of Directors is empowered, without stockholder approval, to issue additional common stock, options, warrants and convertible securities. The issuance of such common stock or the exercise or conversion of such options, convertible securities and warrants that may be issued following the spin-off could result in significant dilution in the percentage ownership interest of our existing common stockholders and in a significant dilution of voting rights and earnings per share.

In addition to the dilutive effects described above, the exercise or conversion of such securities would lead to an increase in the number of shares of common stock eligible for resale in the public market. Sales of substantial numbers of such shares of common stock in the public market could adversely affect the market price of our common stock. Substantial dilution and/or a substantial increase in the number of shares of common stock available for future resale may negatively impact the trading price of our common stock.

In the future, we may seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing securities that would dilute the ownership of our common stock. Depending on the terms available to us, if these activities result in significant dilution, it may negatively impact the trading price of our common stock.

We have financed our operations, and we expect to continue to finance our operations, acquisitions, if any, and the development of strategic relationships by issuing equity and/or convertible securities, which could significantly reduce the percentage ownership of our existing stockholders. Further, any additional financing that we secure may require the granting of rights, preferences or privileges senior to, or pari passu with, those of our common stock. Any issuances by us of equity securities may be at or below the prevailing market price of our common stock and in any event may have a dilutive impact on your ownership interest, which could cause the market price of our common stock to decline. We may also raise additional funds through the incurrence of debt or the issuance or sale of other securities or instruments senior to our shares of common stock. The holders of any securities or instruments we may issue may have rights superior to the rights of our holders of common stock. If we experience dilution from the issuance of additional securities and we grant superior rights to new securities over holders of common stock, it may negatively impact the trading price of our common stock.

Our charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our common stock.

Our certificate of incorporation and our bylaws contain provisions that could delay or prevent a change in control of our Company. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:

In addition, the provisions of Section 203 of the Delaware General Corporation Law govern us. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time without the consent of our Board of Directors.

These and other provisions in our certificate of incorporation and our bylaws and under Delaware law could discourage potential takeover attempts, reduce the price that investors might be willing to pay in the future for shares of our common stock and result in the market price of our common stock being lower than it would be without these provisions. See the section entitled “Description of Capital Stock” for additional information on anti-takeover provisions.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our common stock adversely, our common stock price and trading volume could decline.

The trading market for our shares of common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our common stock adversely, or provide more favorable relative recommendations about our competitors, our share price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our common stock price or trading volume to decline.

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

This information statement contains forward-looking statements, including in the sections titled “Summary,” “Risk Factors,” “The Spin-Off,” “Trading Market,” “Dividend Policy,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Our Business,” that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include, but are not limited to, statements related to our expectations regarding the performance of our business, our financial results, our liquidity and capital resources, the benefits resulting from the spin-off, the effects of competition and the effects of future legislation or regulations and other non-historical statements. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “outlook,” “believes,” “expects,” “outlook,” “potential,” “continues,” “may,” “might,” “will,” “should,” “could,” “seeks,” “approximately,” “goals,” “future,” “projects,” “predicts,” “guidance,” “target,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words.

The risk factors discussed in “Risk Factors” could cause our results to differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include general economic conditions, the performance of the financial and credit markets, the economic environment for the payments industry, the impact of war, terrorist activity or political strife, operating risks associated with our Payments Business, uncertainties that may delay or negatively impact the spin-off or cause the spin-off to not occur at all, uncertainties related to our ability to realize the anticipated benefits of the spin-off, uncertainties related to our ability to successfully complete the spin-off on a tax-free basis within the expected time frame or at all, unanticipated developments that delay or otherwise negatively affect the spin-off, uncertainties related to our ability to obtain financing or the terms of such financing, unanticipated developments related to the impact of the spin-off on our relationships with customers, suppliers, employees, Nxt-ID and others with whom we have relationships, unanticipated developments resulting from possible disruption to our operations resulting from the spin-off. There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business. Any such risks could cause our results to differ materially from those expressed in forward-looking statements.

Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any forward-looking statements in this information statement. We do not have any obligation to update forward-looking statements after we distribute this information statement except as required by law.

THE SPIN-OFF

Background

On September 21, 2018, Nxt-ID announced its intention to implement the spin-off of the Payments Business from Nxt-ID. In order to implement the spin-off, Nxt-ID will transfer to PartX (i) 100% of the issued and outstanding shares of common stock of Fit Pay Sub and (ii) the FinTech Assets of Nxt-ID, and the holders of the Nxt-ID Series C Preferred Stock will exchange such shares for shares of PartX’s Series A Preferred Stock.

Before our spin-off from Nxt-ID, we will enter into a Separation and Distribution Agreement and several other agreements with Nxt-ID related to the spin-off. These agreements will govern the relationship between us and Nxt-ID after completion of the spin-off and provide for the allocation between us and Nxt-ID of various assets, liabilities, rights and obligations. These agreements will provide that (i) all of the assets and liabilities (whether accrued, contingent or otherwise, and including, without limitation, the earn-out payments due to the Fit Pay Sellers pursuant to the Merger Agreement) associated with the Payments Business, subject to certain exceptions, will be retained by or transferred to PartX; and (ii) all other assets and liabilities (whether accrued, contingent or otherwise) of Nxt-ID, subject to certain exceptions (including the shared contingent assets and the shared contingent liabilities), will be retained by or transferred to Nxt-ID. See “The Spin-off—Manner of Effecting the Spin-Off—Internal Reorganization.” These agreements will also include arrangements with respect to employee matters, tax matters, the licensing of trademarks and certain other intellectual property between us and Nxt-ID, and transitional services to be provided by Nxt-ID to us, and by us to Nxt-ID. See “Certain Relationships and Related Party Transactions—Agreements with Nxt-ID Related to the Spin-Off.”

To complete the spin-off, Nxt-ID will, following the internal transfers to PartX of 100% of the issued and outstanding shares of Fit Pay Sub and the FinTech Assets and the exchange of shares of Nxt-ID Series C Preferred Stock for shares of PartX Series A Preferred Stock, distribute to Nxt-ID stockholders all of the outstanding shares of PartX common stock. The Distribution will occur on the Distribution Date, which is expected to be [●], 2019. Each holder of Nxt-ID common stock will receive one (1) share of our common stock for every [●] shares of Nxt-ID common stock held at 5:00 p.m., Eastern time, on [●], 2019, the Record Date.

After completion of the spin-off:

Each holder of Nxt-ID common stock will continue to hold his, her or its shares in Nxt-ID. No vote of Nxt-ID stockholders is required or is being sought in connection with the spin-off, including the internal reorganization set forth above, and Nxt-ID stockholders will not have any appraisal rights in connection with the spin-off.

The Distribution is subject to the satisfaction or waiver of certain conditions. In addition, until the Distribution has occurred, the Nxt-ID board of directors has the right to not proceed with the Distribution, even if all of the conditions are satisfied. See “—Conditions to the Distribution.”

Reasons for the Spin-Off

The Nxt-ID board of directors believes that the spin-off of PartX is in the best interests of Nxt-ID and its stockholders because the spin-off is expected to provide various benefits, including: (i) enhanced strategic and management focus for each company; (ii) more efficient capital allocation, direct access to capital and expanded growth opportunities for each company; (iii) improved investor understanding of the business strategy and operating results of each company; and (iv) enhanced investor choices by offering investment opportunities in separate entities.

Enhanced Strategic and Management Focus. The Non-Payments Businesses and the Payments Business currently compete with each other for management attention and resources. While there can be no assurance, Nxt-ID management believes that the spin-off could permit each of Nxt-ID and PartX to tailor its business strategies to best address market opportunities in its industry. In addition, the spin-off could allow the management of each company to enhance its strategic vision and focus on the core business and growth of that company. The spin-off could also provide each company with the flexibility needed to pursue its own goals and serve its own needs.

More Efficient Capital Allocation, Direct Access to Capital and Expanded Growth Opportunities. As part of Nxt-ID, the Payments Business effectively competes with the Non-Payments Businesses for capital resources. After the spin-off, however, management believes that each company could be able to access the capital markets directly to fund its growth strategy and to establish a capital structure tailored to its business needs. Each company could be able to allocate capital and make investments as its management determines in order to grow its business. Moreover, the liquidity of its stock could enable PartX to use its securities to fund future growth.

Improved Investor Understanding. After the spin-off, investors will receive disclosure about our operating results and Nxt-ID’s operating results on a stand-alone basis, which could better enable them to evaluate the financial performance of each company, as well as each company’s strategy within the context of its industry, thereby increasing the likelihood that each company’s common stock will be appropriately valued by the market.

Enhanced Investor Choices by Offering Investment Opportunities in Separate Entities. The Nxt-ID board of directors believes that the Payments Business and the Non-Payments Businesses may appeal to different types of investors with different investment goals and risk profiles. Finding investors who want to invest in both industries together may be more challenging than finding investors for each individually. After the spin-off, investors will be able to pursue investment goals in either or both companies. In addition, the management of each company will be able to establish goals, implement business strategies and evaluate growth opportunities in light of investor expectations specific to that company’s particular business, without undue consideration of investor expectations for the other business. Each company will also be able to focus its public relations efforts on cultivating its own separate identity.

Manner of Effecting the Spin-Off

The general terms and conditions relating to the spin-off will be set forth in the Separation and Distribution Agreement between PartX and Nxt-ID.

Internal Reorganization

As part of the spin-off, Nxt-ID will transfer to PartX (i) 100% of the issued and outstanding shares of common stock of Fit Pay Sub and (ii) the FinTech Assets of Nxt-ID, and the holders of the Nxt-ID Series C Preferred Stock will exchange all of their shares of Nxt-ID Series C Preferred Stock for shares of PartX’s Series A Preferred Stock on a 1:1 basis pursuant to an Exchange Agreeement by and among Nxt-ID, PartX and the holders of Nxt-ID Series C Preferred Stock. Before our spin-off from Nxt-ID, we will enter into a Separation and Distribution Agreement and several other agreements with Nxt-ID related to the spin-off, which agreements will become effective upon the consummation of the spin-off. These agreements will govern the relationship between us and Nxt-ID after completion of the spin-off and provide for the allocation between us and Nxt-ID of various assets, liabilities, rights and obligations. These agreements will provide that (i) all of the assets and liabilities (whether accrued, contingent or otherwise, and including, without limitation, the earn-out payments due to the Fit Pay Sellers pursuant to the Merger Agreement) associated with the Payments Business, subject to certain exceptions, will be retained by or transferred to PartX; and (ii) all other assets and liabilities (whether accrued, contingent or otherwise) of Nxt-ID, subject to certain exceptions (including the shared contingent assets and the shared contingent liabilities), will be retained by or transferred to Nxt-ID. These agreements will also include arrangements with respect to employee matters, tax matters, the licensing of trademarks and certain other intellectual property between us and Nxt-ID, and transitional services to be provided by Nxt-ID to us, and by us to Nxt-ID. See “Certain Relationships and Related Party Transactions—Agreements with Nxt-ID Related to the Spin-Off.”

Distribution of Shares of Our Common Stock

Under the Separation and Distribution Agreement, the Distribution will be effective as of 5:00 p.m., Eastern time, on the Distribution Date. As a result of the spin-off, on the Distribution Date, each holder of Nxt-ID common stock will receive one (1) share of our common stock for each share of Nxt-ID common stock that he, she or it owns as of 5:00 p.m., Eastern time, on the Record Date. The actual number of shares to be distributed will be determined based on the number of shares of Nxt-ID common stock expected to be outstanding as of the Record Date and will be reduced to the extent that cash payments are to be made in lieu of the issuance of fractional shares of PartX common stock. The actual number of shares of PartX common stock to be distributed will be calculated as of the Record Date. The shares of PartX common stock to be distributed by Nxt-ID will constitute all of the issued and outstanding shares of PartX common stock immediately prior to the Distribution.

On the Distribution Date, Nxt-ID will release the shares of our common stock to our distribution agent to distribute to Nxt-ID stockholders. Our distribution agent will credit the shares of our common stock to the book-entry accounts of Nxt-ID stockholders established to hold their shares of our common stock. Our distribution agent will send these stockholders a statement reflecting their ownership of our common stock. Book-entry refers to a method of recording stock ownership in our records in which no physical certificates are issued. For stockholders who own Nxt-ID common stock through a broker or other nominee, their shares of our common stock will be credited to these stockholders’ accounts by the broker or other nominee. It may take the distribution agent up to two (2) weeks to distribute shares of our common stock to Nxt-ID stockholders or to their bank or brokerage firm electronically by way of direct registration in book-entry form. Trading of our stock will not be affected by this delay in distribution by the distribution agent. As further discussed below, we will not issue fractional shares of our common stock in the Distribution.

Nxt-ID stockholders will not be required to make any payment or surrender or exchange their shares of Nxt-ID common stock or take any other action to receive their shares of our common stock. No vote of Nxt-ID stockholders is required or sought in connection with the spin-off, including the internal reorganization, and Nxt-ID stockholders have no appraisal rights in connection with the spin-off.

Treatment of Fractional Shares

The distribution agent will not distribute any fractional shares of our common stock to Nxt-ID stockholders. Instead, as soon as practicable on or after the Distribution Date, the distribution agent will aggregate fractional shares of our common stock to which Nxt-ID stockholders of record would otherwise be entitled into whole shares, sell them in the open market at the prevailing market prices and then distribute the aggregate net sale proceeds ratably to Nxt-ID stockholders who would otherwise have been entitled to receive fractional shares of our common stock. The amount of this payment will depend on the prices at which the distribution agent sells the aggregated fractional shares of our common stock in the open market shortly after the Distribution Date and will be reduced by any amount required to be withheld for tax purposes and any brokerage fees and other expenses incurred in connection with these sales of fractional shares. Receipt of the proceeds from these sales generally will result in a taxable gain or loss to those Nxt-ID stockholders. Each stockholder entitled to receive cash proceeds from these shares should consult his, her or its own tax advisor as to the stockholder’s particular circumstances. The tax consequences of the Distribution are described in more detail under “—Material U.S. Federal Income Tax Consequences of the Distribution.” In addition, if our common stock is not approved for quotation on the OTCQB prior to the Distribution Date, the distribution agent will not be able to sell the fractional shares on the open market until our common stock is approved for quotation on the OTCQB, and there can be no assurance of when or if we will receive such approval.

Transaction and Separation Costs

One-time separation costs related to the spin-off are expected to be approximately $[●], consisting of estimated transaction costs, including debt issuance costs, legal, accounting, capital markets fees and expenses, investment banking, severance, and other costs relating to the internal reorganization. Pursuant to the Separation and Distribution Agreement, these separation costs and expenses are to be primarily borne by Nxt-ID.

Material U.S. Federal Income Tax Consequences of the Distribution

The following is a summary of the material U.S. federal income tax consequences to the holders of shares of Nxt-ID common stock in connection with the Distribution and certain related transactions. This summary is based on the Code, the Treasury regulations promulgated thereunder, and judicial and administrative interpretations thereof, all as in effect as of the date of this information statement, and all of which are subject to differing interpretations and may change at any time, possibly with retroactive effect. Any such change could affect the tax consequences described below. This summary assumes that the spin-off will be consummated in accordance with the Separation and Distribution Agreement and as described in this information statement.

This summary is limited to holders of shares of Nxt-ID common stock that are U.S. Holders, as defined immediately below. For purposes of this summary, a “U.S. Holder” is a beneficial owner of Nxt-ID common stock that is, for U.S. federal income tax purposes:

This summary does not discuss all tax considerations that may be relevant to U.S. Holders in light of their particular circumstances, nor does it address the consequences to U.S. Holders subject to special treatment under the U.S. federal income tax laws, such as:

This summary addresses only U.S. Holders that hold shares of Nxt-ID common stock as a capital asset (generally, property held for investment). Moreover, this summary does not address the alternative minimum tax, the Medicare tax on net investment income) or any aspects of U.S. state, local or non-U.S. taxes.

In addition, this summary does not address the tax treatment of partnerships or persons who hold their Nxt-ID common stock through partnerships or other entities that are pass-through entities for U.S. federal income tax purposes. If a partnership (or any other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of Nxt-ID common stock, the tax treatment of a partner in that partnership generally will depend on the status of the partner and the activities of the partner and the partnership. Such a partner or partnership is urged to consult its tax advisor as to the tax consequences of the spin-off.

WE URGE YOU TO CONSULT WITH YOUR TAX ADVISOR AS TO THE SPECIFIC U.S. FEDERAL, STATE AND LOCAL, AND NON-U.S. TAX CONSEQUENCES OF THE SPIN-OFF IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES.

Treatment of the Spin-Off

The Distribution is conditioned upon Nxt-ID’s receipt of an opinion from its spin-off tax advisors to the effect that the Distribution of our common stock and certain related transactions will qualify as a reorganization under Sections 368(a)(1)(D) and 355 of the Code that is tax-free to Nxt-ID and its stockholders, except, in the case of Nxt-ID stockholders, for cash received in lieu of fractional shares. The opinion from the spin-off tax advisors will not address any U.S. state or local or non-U.S. consequences of the spin-off. The opinion will assume that the Distribution and certain related transactions will be completed according to the terms of the Separation and Distribution Agreement and will rely on the facts as stated in the Separation and Distribution Agreement, the Tax Matters Agreement, the other ancillary agreements, this information statement and a number of other documents. The opinion will also be based on, among other things, current law and certain assumptions and representations as to factual matters made by Nxt-ID and us. Any change in currently applicable law, which may or may not be retroactive, or the failure of any factual representation or assumption to be true, correct and complete in all material respects, could adversely affect the conclusions reached by the spin-off tax advisors in the opinion. The opinion will be expressed as of the date issued and does not cover subsequent periods. The opinion will represent the spin-off tax advisors’ best legal judgment based on current law. The opinion from the spin-off tax advisors will not be binding on the IRS or the courts, and the IRS or the courts may not agree with the conclusions expressed in the opinion. We cannot assure you that the IRS will agree with the conclusions set forth in the opinion, and it is possible that the IRS or another tax authority could adopt a position contrary to one or all of those conclusions and that a court could sustain that contrary position. If any of the facts, representations, assumptions or undertakings described or made in connection with the opinion are not correct, are incomplete or have been violated, our ability to rely on the opinion could be jeopardized. We are not aware of any facts or circumstances, however, that would cause these facts, representations or assumptions to be untrue or incomplete, or that would cause any of these undertakings to fail to be complied with, in any material respect.

Material U.S. Federal Income Tax Consequences if the Distribution, Together with Certain Related Transactions, Qualifies Under Sections 355 and 368(a)(1)(D) of the Code

Assuming the Distribution together with certain related transactions, qualifies as a transaction described under Section 355 and 368(a)(1)(D) of the Code, for U.S. federal income tax purposes:

U.S. Holders that have acquired different blocks of Nxt-ID common stock at different times or at different prices are urged to consult their tax advisors regarding the allocation of their aggregate adjusted basis among, and their holding period of, our common stock and Nxt-ID common stock.

If a U.S. Holder receives cash in lieu of a fractional share of our common stock as part of the Distribution, the U.S. Holder will be treated as though it first received a distribution of the fractional share in the Distribution and then sold it for the amount of cash actually received. Such U.S. Holder will generally recognize capital gain or loss measured by the difference between the cash received for such fractional share and the U.S. Holder’s tax basis in that fractional share, as determined above. Such capital gain or loss will be long-term capital gain or loss if the U.S. Holder’s holding period for the Nxt-ID common stock exceeds one (1) year on the date of the Distribution. The deductibility of capital losses is subject to significant limitations.

Material U.S. Federal Income Tax Consequences if the Distribution is Taxable

If, notwithstanding the conclusions included in the opinion, it is ultimately determined that the Distribution, together withcertain related transactions, does not qualify as a transaction described under Sections 355 and 368(a)(1)(D) of the Code, then Nxt-ID could recognize taxable gain or loss in an amount equal to the difference, if any, of the fair market value of the shares of our common stock over its tax basis in such shares. In addition, each Nxt-ID stockholder that receives shares of our common stock in the spin-off would be treated as receiving a distribution in an amount equal to the fair market value of our common stock that was distributed to the stockholder, which would generally be taxed as a dividend to the extent of the stockholder’s pro rata share of Nxt-ID’s current and accumulated earnings and profits, including Nxt-ID’s taxable gain, if any, on the spin-off, then treated as a non-taxable return of capital to the extent of the stockholder’s basis in the Nxt-ID stock and thereafter treated as capital gain from the sale or exchange of Nxt-ID common stock.

Under current U.S. federal income tax law, certain non-corporation citizens or residents of the United States (including individuals) currently are subject to U.S. federal income tax on dividends (assuming certain holding period requirements are met) and long-term capital gains (i.e., capital gains on assets held for more than one (1) year) at favorable rates.

Even if the Distribution otherwise qualifies as a transaction described under Sections 355 and 368(a)(1)(D) of the Code, it may result in corporate-level taxable gain to Nxt-ID under Section 355(e) of the Code if 50% or more, by vote or value, of the Nxt-ID stock or our stock is treated as acquired or issued as part of a plan or series of related transactions that includes the Distribution (including as a result of transactions occurring before the spin-off). The process for determining whether an acquisition or issuance triggering these provisions has occurred is complex, inherently factual and subject to interpretation of the facts and circumstances of a particular case, and any such acquisitions may not be within our or Nxt-ID’s control. For this purpose, any acquisitions or issuances of our stock or Nxt-ID stock within two (2) years before the Distribution, and any acquisitions or issuances of our stock or Nxt-ID stock within two (2) years after the Distribution generally are presumed to be part of such a plan (subject to certain exceptions and safe harbors), although we or Nxt-ID, as applicable, may be able to rebut that presumption. In connection with this, we note that Nxt-ID acquired Fit Pay, Inc. pursuant to the Merger Agreement on May 23, 2017. If an acquisition or issuance of our stock or Nxt-ID stock triggers the application Section 355(e) of the Code, Nxt-ID or we could incur significant U.S. federal income tax liabilities attributable to the Distribution and certain related transactions, but the Distribution would generally be tax-free to each of Nxt-ID stockholders, as described above.

In addition, pursuant to the Tax Matters Agreement, if the Distribution, together with certain related transactions, does not qualify as a tax-free transaction under Section 355 of the Code due to the fault of PartX, PartX will be responsible for the payment of any resulting tax liabilities and will indemnify Nxt-ID with respect thereto. Similarly, if the failure of the Distribution, together with certain related transactions, to qualify as a tax-free transaction under Section 355 of the Code is due to the fault of Nxt-ID, Nxt-ID will be responsible for the payment of any resulting tax liabilities and will indemnify PartX with respect thereto.

Information and Backup Withholding

Payments to Nxt-ID stockholders of cash in lieu of fractional shares of PartX common stock may be subject to information reporting and to backup withholding, unless such holder delivers a properly completed IRS Form W-9 certifying such holder’s correct U.S. taxpayer identification number and certain other information or otherwise establishes a basis for exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against such holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS. 

Additional Information to Help Calculate Tax Basis       

After completion of the Distribution and if and as required under the Code, additional information will be provided to Nxt-ID stockholders concerning the allocation of each stockholder’s basis in Nxt-ID common stock prior to the Distribution between the shares of Nxt-ID common stock and PartX common stock following the Distribution, including fractional shares. We intend to provide this information by making it publicly available on the investor websites of Nxt-ID and PartX.

Tax Return Statement

U.S. Treasury regulations require each U.S. Holder that owns at least 5% of the total outstanding Nxt-ID common stock to attach to their U.S. federal income tax returns for the year in which the spin-off occurs a statement setting forth certain information with respect to the transaction. U.S. Holders are urged to consult their tax advisors to determine whether they are required to provide the foregoing statement and the contents thereof.

THE FOREGOING DISCUSSION IS A SUMMARY OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION UNDER CURRENT LAW AND IS FOR INFORMATION ONLY. ALL HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO THEM, INCLUDING THE APPLICATION AND EFFECT OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.

Results of the Spin-Off

After the spin-off, we will be an independent company. Immediately following the spin-off, we expect to have approximately [●] record holders of shares of our common stock and approximately [●] shares of our common stock outstanding, based on the number of stockholders and outstanding shares of Nxt-ID common stock on  [●], 2019 and assuming each holder of Nxt-ID common stock will receive one (1) share of PartX common stock for every [●] shares of Nxt-ID common stock held by such stockholder and that Nxt-ID will retain no shares of our common stock. The actual number of shares to be distributed will be determined as of the Record Date.

Before the spin-off, we will enter into several agreements with Nxt-ID to effect the spin-off and provide a framework for our relationship with Nxt-ID after the spin-off. These agreements will govern the relationship between us and Nxt-ID after completion of the spin-off and provide for the allocation between us and Nxt-ID of the assets, liabilities, rights and obligations of Nxt-ID. See “Certain Relationships and Related Party Transactions—Agreements with Nxt-ID Related to the Spin-Off.”

Trading Prior to the Distribution Date

Assuming we are approved for quotation on the OTCQB, it is anticipated that, at least one (1) trading day prior to the Record Date and continuing up to and including the Distribution Date, there will be a “when-issued” market in our common stock. When-issued trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. The when-issued trading market will be a market for shares of our common stock that will be distributed to Nxt-ID stockholders on the Distribution Date. Any Nxt-ID stockholder who owns shares of Nxt-ID common stock at 5:00 p.m., Eastern time, as of the Record Date will be entitled to shares of our common stock distributed in the spin-off. Nxt-ID stockholders may trade this entitlement to shares of our common stock, without the shares of Nxt-ID common stock they own, on the when-issued market. Assuming we are approved for quotation on the OTCQB, on the first trading day following the Distribution Date, we expect when-issued trading with respect to our common stock will end and “regular-way” trading will begin. See “Trading Market.”

Following the Distribution Date, upon approval of our application for quotation, we expect shares of our common stock to be quoted on the OTCQB of the OTC Markets Group Inc. under the ticker symbol “PTXX.” We will announce the when-issued ticker symbol if and when it becomes available.

It is also anticipated that, at least one (1) trading day prior to the Record Date and continuing up to and including the Distribution Date, there will be two (2) markets in Nxt-ID common stock: a “regular-way” market and an “ex-distribution” market. Shares of Nxt-ID common stock that trade on the regular-way market will trade with an entitlement to shares of our common stock distributed pursuant to the Distribution. Shares that trade on the ex-distribution market will trade without an entitlement to shares of our common stock distributed pursuant to the Distribution. Therefore, if shares of Nxt-ID common stock are sold in the regular-way market up to and including the Distribution Date, the selling stockholder’s right to receive shares of our common stock in the Distribution will be sold as well. However, if Nxt-ID stockholders own shares of Nxt-ID common stock as of 5:00 p.m., Eastern time, as of the Record Date and sell those shares on the ex-distribution market up to and including the Distribution Date, the selling stockholders will still receive the shares of our common stock that they would otherwise receive pursuant to the Distribution. See “Trading Market.”

Assignment and Assumption of Certain Indebtedness and Incurrence of Additional Indebtedness

In connection with Nxt-ID’s acquisition of Fit Pay Sub pursuant to the Merger Agreement, Nxt-ID agreed to pay the Fit Pay Sellers an earnout payment equal to 12.5% of the gross revenue derived from Fit Pay Sub’s technology for sixteen (16) fiscal quarters commencing on October 1, 2017 and ending on September 30, 2021. Prior to the spin-off, we intend to enter into an Assignment and Assumption Agreement with Nxt-ID pursuant to which we will assume the portion of this earnout obligation that is applicable to the period subsequent to the spin-off as part of the internal reorganization in connection with the spin-off. As of December 31, 2018, the earnout was valued at approximately $2.9 million.

In addition, pursuant to an Assignment and Assumption Agreement with Nxt-ID, we will assume an obligation to repay the remaining outstanding amount due to our Chief Executive Officer in connection with a promissory note (the “Seller Note Payable”) issued to him in connection with Fit Pay Sub’s acquisition by Nxt-ID. As of March 31, 2019, the Seller Note Payable had a principal balance of $638,881. Prior to the spin-off, Nxt-ID has agreed to pay the accrued principal amount owed on the Seller Note Payable, which is $159,720 plus the accrued interest up through the effective date of the spin-off. See “Certain Relationships and Related Party Transactions—Agreements with Nxt-ID Related to the Spin-Off—Assumption and Assignment Agreements” for more information regarding our assumed obligations in connection with the earnout payments due to the Fit Pay Sellers and the Seller Note Payable.

As a result, we expect to have total indebtedness of approximately $3.3 million following the spin-off, which includes the estimated fair value of the obligation to pay the earnout payments commencing with the quarterly period ending June 30, 2019 to the Fit Pay Sellers and the obligation to pay the outstanding obligations due under the Seller Note Payable.

We also anticipate that in order to finance our research and development and other efforts to expand our business and to meet our working capital requirements, we will incur approximately $1 million to $2 million of non-convertible debt in a private placement transaction shortly prior to the spin-off. We have entered into an engagement agreement, dated February 19, 2019, with a financial advisor pursuant to which the financial advisor will act on our behalf on a best efforts basis with respect to such private placement. The incurrence of this indebtedness undertaken in connection with the spin-off will be described in greater detail in a subsequent amendment to the registration statement of which this information statement forms a part.

Conditions to the Distribution

We expect that the Distribution will be effective as of 5:00 p.m., Eastern time, on the Distribution Date. The Distribution is subject to the satisfaction, or waiver by Nxt-ID (as applicable), of the following conditions:

We are not aware of any material federal, foreign or state regulatory requirements that must be complied with or any material approvals that must be obtained, other than compliance with the rules and regulations of the SEC and the declaration of effectiveness of the Registration Statement on Form 10, of which this information statement forms a part, by the SEC, in connection with the Distribution. Nxt-ID and PartX cannot assure you that any or all of these conditions will be met, and Nxt-ID may waive (as applicable) any of the conditions to the Distribution. In addition, until the Distribution has occurred, the Nxt-ID board of directors has the right to not proceed with the Distribution, even if all of the conditions are satisfied. In the event the Nxt-ID board of directors determines to waive a material condition to the Distribution, to modify a material term of the Distribution or not to proceed with the Distribution, Nxt-ID intends to promptly issue a press release or other public announcement and file a Current Report on Form 8-K to report such event.

Treatment of Certain Nxt-ID Warrants

In connection with the spin-off, Nxt-ID will issue to certain holders of 2,469,163 outstanding Nxt-ID Warrants warrants to purchase an aggregate number of shares of PartX common stock determined as if the applicable Nxt-ID Warrant had been completely exercised as of the Record Date. Such warrants to purchase PartX common stock will be exercisable following completion of the spin-off for a period of five (5) years. The exercise price of the warrants to purchase PartX common stock will be $0.01 per share.

Reasons for Furnishing this Information Statement

This information statement is being furnished solely to provide information to Nxt-ID stockholders that are entitled to receive shares of PartX common stock in the spin-off. This information statement is not, and is not to be construed as, an inducement or encouragement to buy, hold or sell any of our securities or any securities of Nxt-ID. We believe that the information in this information statement is accurate as of the date set forth on the cover. Changes may occur after that date and neither Nxt-ID nor we undertake any obligation to update the information.

TRADING MARKET

Market for Our Common Stock

There is currently no public market for our common stock and an active trading market may not develop or may not be sustained. We have submitted an application to have our common stock quoted on the OTCQB of the OTC Markets Group Inc. under the ticker symbol “PTXX.” We will announce our “when-issued” trading symbol when and if it becomes available. Assuming our common stock is approved for quotation on the OTCQB, we anticipate that trading of our common stock will commence on a “when-issued” basis at least one (1) trading day prior to the Record Date and continue through the Distribution Date. When-issued trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. When-issued trades generally settle within three (3) trading days after the Distribution Date. If you own shares of Nxt-ID common stock as of 5:00 p.m., Eastern time, as of the Record Date, you will be entitled to shares of our common stock distributed pursuant to the spin-off. You may trade this entitlement to shares of our common stock, without the shares of Nxt-ID common stock you own, on the when-issued market. Assuming our common stock is approved for quotation on the OTCQB, on the first trading day following the Distribution Date, any when-issued trading with respect to our common stock will end and “regular-way” trading will begin.

It is also anticipated that, at least one (1) trading day prior to the Record Date and continuing up to and including the Distribution Date, there will be two (2) markets in Nxt-ID common stock: a “regular-way” market and an “ex-distribution” market. Shares of Nxt-ID common stock that trade on the regular-way market will trade with an entitlement to shares of our common stock distributed pursuant to the Distribution. Shares that trade on the ex-distribution market will trade without an entitlement to shares of our common stock distributed pursuant to the Distribution. Therefore, if you sell shares of Nxt-ID common stock in the regular-way market up to and including the Distribution Date, you will be selling your right to receive shares of our common stock in the Distribution. However, if you own shares of Nxt-ID common stock as of 5:00 p.m., Eastern time, as of the Record Date and sell those shares on the ex-distribution market up to and including the Distribution Date, you will still receive the shares of our common stock that you would otherwise receive pursuant to the Distribution.

We cannot predict the prices at which our common stock may trade before the spin-off on a “when-issued” basis or after the spin-off. Those prices will be determined by the marketplace. Prices at which trading in our common stock occurs may fluctuate significantly. Those prices may be influenced by many factors, including anticipated or actual fluctuations in our operating results or those of other companies in our industry, investor perception of PartX and the payments industry, market fluctuations and general economic conditions. In addition, the stock market in general has experienced extreme price and volume fluctuations that have affected the performance of many stocks and that have often been unrelated or disproportionate to the operating performance of these companies. These are just some factors that may adversely affect the market price of our common stock. See “Risk Factors—Risks Relating to Our Common Stock” for further discussion of risks relating to the trading prices of our common stock.

Transferability of Shares of Our Common Stock

On [●], 2019, Nxt-ID had approximately [●] shares of its common stock issued and outstanding. Based on this number and the fact that Nxt-ID will hold no shares of our common stock upon completion of the spin-off, we expect that upon completion of the spin-off, we will have approximately [●] shares of common stock issued and outstanding. The shares of our common stock that you will receive in the Distribution will be freely transferable, unless you are considered an “affiliate” of ours under Rule 144 under the Securities Act. Persons who can be considered our affiliates after the spin-off generally include individuals or entities that directly, or indirectly through one or more intermediaries, control, are controlled by, or are under common control with, us, and may include certain of our officers and directors. As of the Distribution Date, we estimate that our directors and executive officers will beneficially own in the aggregate approximately [●]% of our shares of common stock. In addition, Nxt-ID and individuals who are affiliates of Nxt-ID on the Distribution Date may be deemed to be affiliates of ours. Our affiliates may sell shares of our common stock received in the Distribution only:

In general, under Rule 144 as currently in effect, an affiliate will be entitled to sell, within any three-month period commencing the date that the registration statement of which this information statement is a part is declared effective, a number of shares of our common stock that does not exceed the greater of:

Sales under Rule 144 are also subject to restrictions relating to manner of sale and the availability of current public information about us.

In the future, we expect to adopt new equity-based compensation plans and issue stock-based awards. We currently expect to file a registration statement under the Securities Act to register shares to be issued under these equity plans. Shares issued pursuant to awards after the effective date of such registration statement, other than shares issued to affiliates, generally will be freely tradable without further registration under the Securities Act.

Except for shares of our common stock distributed in the Distribution,2,000 shares of our Series A Preferred Stock to be issued in exchange for 2,000 shares of Nxt-ID’s Series C Preferred Stock in connection with the spin-off and the warrants to purchase PartX common stock to be issued to certain Nxt-ID warrantholders in connection with the spin-off, we will have no equity securities outstanding immediately after the spin-off.

DIVIDEND POLICY

Any decision to declare and pay dividends will be made at the sole discretion of our Board of Directors and will depend on, among other things, on our earnings, financial condition and other business and economic factors affecting us at such time as our Board of Directors may consider relevant. We currently intend to retain our future earnings to support operations and to finance expansion and, therefore, we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

CAPITALIZATION

The following table sets forth the cash and capitalization of PartX as of December 31, 2018 on a historical basis and on a pro forma basis to give effect to the spin-off and related transactions, as if they occurred on December 31, 2018. Explanation of the pro forma adjustments made to our audited combined financial statements can be found under the section titled “Unaudited Pro Forma Combined Financial Statements.” The following table should be reviewed in conjunction with the sections titled “Unaudited Pro Forma Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited combined financial statements and related notes thereto, in each case included elsewhere in this information statement.

We have not yet finalized our post-spinoff capitalization. Pro forma financial information reflecting our post-spinoff capitalization is subject to change and we may include an update to such information in an amendment to the registration statement of which this information statement forms a part. See “Unaudited Pro Forma Combined Financial Statements” and the “Notes to Unaudited Pro Forma Combined Financial Statements” for an explanation of the pro forma assumptions.