Exhibit Item 1

 

 

1.1        The recitals hereinabove are hereby incorporated by reference into this MOU.

1.2        Binding Effect.  By signing this MOU, each Party agrees and acknowledges that it wishes to enter into a business relationship with the other Party referred to hereinafter as a limited consolidation. This MOU setting forth the framework for the limited consolidation is intended to be a legally binding agreement on the Parties regarding the subject matter described herein as of the date hereof and until the MOU is terminated by its terms or until incorporated into a more detailed agreement.

To avoid any doubt, if this MOU does not result in an agreed upon and executed term sheet per section 1.4 below during the Term [defined below], or if a Definitive Agreement [defined below} is not concluded by the Parties negotiating in good faith prior to or upon the closing date of an investment, or if Pomega exercises its right to unilaterally terminate this MOU per section 1.4 below, this MOU shall be considered null and void, with no consequences to the Parties.

 

 

1.3        Definitive Agreement. The Parties agree to provide full disclosure of elements pertinent to the transaction and to negotiate in good faith the terms and conditions of a comprehensive and definitive agreement based on this MOU (the "Definitive Agreement") to be executed no later than the date of Closing on an investment in mBeach which meets the minimum requirements set by the Parties. The Definitive Agreement will require the approval of the Parties’ board of directors acting on advice of legal counsel.

 

1.4        Term. This MOU shall be binding for a period of 4 (four) months following the execution by the last Party to sign (“Term”). This MOU may be extended beyond the Term by either: a) mutual agreement in writing of the Parties, or, b) for another 1 (one) month, in the event mBeach secures an investment term sheet, which must be pre-approved by both Parties, during this 4 months period for at least US$2 Million as straight equity or a committed equity line, from credible third parties / investors to fund the budget requirements of Pomega and SCS, as may be agreed to by the Parties. This MOU may be terminated at any time by mutual agreement of both Parties, and unilaterally by Pomega, upon the occurrence of a “material adverse change“ such as an SEC or FINRA action against mBeach or its directors, a class action against mBeach, a lawsuit against mBeach or SCS, or non-disclosure of a material fact.

1.5       Costs.   Except as provided hereafter in the following sentence, each Party shall bear its own costs and expenses to include legal costs. mBeach hereby commits to pay the costs of (and shall engage directly the service providers to conduct) its own audit and the audit of Pomega Inc. as may be required by US SEC rules, any appraisal to the extent required, any upfront due diligence costs, all proxy fees to extent required, all filing fees with the SEC or FINRA to the extent required and all costs to register the shares issuable to the Pomega shareholders under the share swap described in Section 2 (a) below.

 

1.6       Joint efforts.    During the term of this MOU, mBeach and Pomega, jointly, will engage in commercially reasonable efforts to locate and secure from accredited third party investors at least US$2 million and maximum US$5 million to meet the financing needs to execute this limited consolidation and the financing resources required for both Parties business activities. The investment terms offered by the third party investor, and the final agreement, must be approved by each Party.

 

1.7        Additional Terms.  The scope of the issuance, the schedules and the amounts of funds to be raised shall be decided by mutual consent by Pomega and mBeach, as provided in section 5 below.

 

 

 

1.8        No Shop.  During the term of this MOU neither Party shall seek alternative direct investments in such Party or SCS without written consent of the other Party.

 

 

 

The Parties agree to discuss in good faith adjustments to the agreed upon holdings in Pomega or mBeach per Section 2 above to meet the requirements of a third party investor, if his term sheet is approved by both Parties.

 

The Parties shall mutually agree on a 3 years independent budget for SCS and for Pomega, and on the cash requirements of each company for the first year of operations following the Closing.

Since the funds raised via mBeach during the first 2 years are intended primarily to acquire shares in Pomega per Section 2(b) and to support its marketing efforts, the Parties agree that to the extent the investment by a third party is made via a committed equity line allowing consecutive tranche withdrawals, out of the first two withdrawals post-closing with an investor, Pomega shall receive no less than $250,000 [unless the Parties agree in writing otherwise].  The Parties shall mutually plan all future withdrawals based on agreed upon budgets of each company and the performance of the mMeach shares on the financial markets.

The Parties further agree that the cash needs of Pomega for the first and second year shall be no less than US$2 Million[but no less than US$1.5 Million for the first year] during which time Pomega will be expected to reach the milestones set in the plan and agreed to by mBeach.

If Pomega’s cash flow requirements were to exceed US$ 2 Million the parties shall discuss the options available to Pomega to raise  more money to include Pomega borrowing from banks, Pomega raising equity or debt from third parties, or Pomega borrowing from mBeach after mBeach raises more money for this purpose.

The terms of the loans from mBeach will include collateral, long term repayment schedules, market rate interest, etc.

This MOU is effective upon signature of the last of the Parties to sign and will remain in effect unless and until terminated as provided under Section 1.4.

 

 

 

This MOU may be modified or amended by written agreement among the Parties hereto.