UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

 

 

 

FORM 8-K

 

 

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

 

May 12, 2016

Date of Report (date of earliest event reported)

 

 

 

Asiya Pearls, Inc.

(Exact name of Registrant as specified in its charter)

 

 

 

Nevada   333-192877   33-1230229
(State or other jurisdiction of
incorporation or organization)
  (Commission File Number)   (I.R.S. Employer
Identification Number)

 

Paseo del la Reforma 404 Piso 15 PH
Col. Juarez, Del. Cuauhtemoc
Mexico, D.F. C.P. 06600

(Address of principal executive offices) 

 

1900 Glades Road, Suite 265

Boca Raton, Florida 33431

(Mailing Address)

 

+52 (55) 55-110-110

  (Registrant’s telephone number, including area code) 

 

H. 2434, Tengengar Galli

Belgaum, Karnataka, India 590001

Telephone No.: 011 91 97 65 24 89 53

(Former name or former address, if changed since last report)

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Current Report on Form 8-K contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “ Securities Act ”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), which statements involve substantial risks and uncertainties. In some cases, it is possible to identify forward-looking statements because they contain words such as “anticipates,” believes,” “contemplates,” “continue,” “could,” “estimates,” “expects,” “future,” “intends,” “likely,” “may,” “plans,” “potential,” “predicts,” “projects,” “seek,” “should,” “target” or “will,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Many factors could cause our actual operations or results to differ materially from the operations and results anticipated in forward-looking statements. These factors include, but are not limited to:

 

  our financial performance, including our history of operating losses;

 

  our ability to obtain additional funding to continue our operations;

 

  our ability to successfully develop and commercialize our products;

 

  changes in the regulatory environments of the United States and other countries in which we intend to operate;

 

  our ability to attract and retain key management and other personnel;

 

  competition from new market entrants;

 

  our ability to identify and pursue development of additional products; and

 

  the other factors contained in the section entitled “Risk Factors” contained in this Current Report on Form 8-K.

 

We have based the forward-looking statements contained in this Current Report on Form 8-K primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements are subject to risks, uncertainties, assumptions, and other factors including those described in the section of this Current Report on Form 8-K entitled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements used herein.

 

You should not rely on forward-looking statements as predictions of future events. Except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements, and we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

 

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EXPLANATORY NOTE

 

As used in this Current Report on Form 8-K, (1) the terms the “Company,” “we,” “us,” and “our” refer to the combined enterprises of, Asiya Pearls, Inc., a Nevada corporation (“Asiya”), and QPAGOS Corporation, a Delaware corporation (“ Qpagos”) , after giving effect to the Merger (defined below) and the related transactions described herein, (2) the term Asiya refers to the business of Asiya Pearls, Inc. prior to the Merger, and (3) the term Qpagos refers to the business of Qpagos Corporation (Delaware), prior to the Merger, in each case unless otherwise specifically indicated or as is otherwise contextually required. To avoid confusion and for purposes of clarity, the historical pre-merger operations of the Company are referred to in this Current Report as “Asiya”.

 

This Current Report on Form 8-K is being filed in connection with a series of transactions consummated by us that relate to the Merger (as defined below) between us and QPAGOS Corporation, which transactions are described herein, together with certain related actions taken by us.

 

The information contained in this Current Report on Form 8-K responds to the following items of Form 8-K:

 

   Item 1.01 Entry into a Material Definitive Agreement.
   Item 2.01 Completion of Acquisition or Disposition of Assets.
    Form 10 Information
    Description of Business
    Risk Factors
    Management’s Discussion and Analysis
    Description of Properties
    Security Ownership of Certain Beneficial Owners and Management
    Directors, Executive Officers and Corporate Governance
    Executive Compensation
    Certain Relationships and Related Transactions, and Director Independence
    Legal Proceedings
    Recent Sales of Unregistered Securities
    Controls and Procedures
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    Description of Capital Stock
    Indemnification of Officers and Directors
    Financial Statements and Supplementary Data
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    Exhibits, Financial Statement Schedules
   Item 3.02 Unregistered Sales of Equity Securities.
   Item 4.01 Changes in Registrant’s Certifying Accountant.
   Item 5.01 Changes in Control of Registrant.
   Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
   Item 5.06 Change in Shell Company Status.
   Item 9.01 Financial Statements and Exhibits.

  

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Item 1.01. Entry into a Material Definitive Agreement.

 

On May 12, 2016, Asiya Pearls, Inc., a Nevada corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with QPAGOS Corporation, a Delaware corporation (“Qpagos”), and QPAGOS Merge, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”).  Pursuant to the Merger Agreement, on May 12, 2016 QPAGOS and Merger Sub merged (the “Merger”), and Qpagos continued as the surviving corporation of the Merger. 

 

As a result of the Merger, each outstanding share of Qpagos common stock (other than shares owned by any stockholder of Qpagos who is entitled to and properly exercises dissenters’ rights under Delaware law) will be converted into the right to receive two (2) shares of the Company’s common stock as set forth in the Merger Agreement. Under the terms of the Merger Agreement, the Company will issue, and Qpagos stockholders will receive in a tax-free exchange, shares of the Company common stock such that Qpagos stockholders will own approximately ninety-one percent (91%) of the Company and the Company stockholders will own approximately ninety one percent (91%) of the Company. In addition, each outstanding warrant of Qpagos has been assumed by the Company and converted into a warrant to acquire a number of shares of Company common stock equal to twice the number of shares of common stock of Qpagos subject to the warrant immediately before the effective time of the Merger at an exercise price per share of Company common stock equal to fifty percent (50%) of the warrant exercise price for Qpagos common stock. There are no outstanding stock options of Qpagos. 

 

The foregoing description of the Merger and the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 to this Form 8-K and is incorporated into this report by reference. This description of the Merger and the Merger Agreement and the copy of the Merger Agreement filed as an exhibit to this Form 8-K are intended to provide information regarding the terms of the Merger Agreement and are not intended to modify or supplement any factual disclosures about the Company in its public reports filed with the Securities and Exchange Commission. In particular, the representations, warranties and covenants in Merger Agreement are not intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to the Company.

 

Item 2.01.  Completion of Acquisition or Disposition of Assets.

 

The Merger and Related Transactions

 

On May 12, 2016, pursuant to the Merger Agreement, Merger Sub and Qpagos consummated the Merger, and Qpagos became a wholly owned subsidiary of Asiya.

 

Pursuant to the Merger Agreement, upon consummation of the Merger, each share of Qpagos’ capital stock issued and outstanding immediately prior to the Merger was converted into the right to receive two shares of Asiya’s common stock, par value $0.0001 per share (the “Common Stock”). Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, Asiya assumed all of Qpagos’ warrants issued and outstanding immediately prior to the Merger, which are now exercisable for approximately 6,219,200 shares of Common Stock, respectively, as of the date of the Merger. Prior to and as a condition to the closing of the Merger, the then-current Asiya stockholder of 5,000,000 shares of Common Stock agreed to return to Asiya 4,775,000 shares of Common Stock held by such holder to Asiya and the then-current Asiya stockholder retained an aggregate of 25,000 shares of Common Stock and the other stockholders of Asiya retained 5,000,000 shares of Common Stock. Therefore, following the Merger, Qpagos’ former stockholders now hold 49,929,000 shares of Asiya common stock which is approximately 91% of the Company Common Stock outstanding.

 

Upon consummation of the Merger, Asiya expanded its board of directors (the “Board”) from one to three directors, each of whom will be directors designated by Qpagos.

 

Pursuant to the Merger Agreement, each party has made certain customary representations and warranties to the other parties thereto. The Merger was conditioned upon approval by Qpagos’ stockholders and certain other customary closing conditions.

 

The foregoing description of the Merger Agreement is only a summary and is qualified in its entirety by reference to the complete text of the Original Merger Agreement which is filed as Exhibit 2.1, to this Current Report on Form 8-K, and each of which is incorporated by reference herein.

 

Accounting Treatment

 

The Merger is being treated as a reverse acquisition of Asiya, a public shell company, for financial accounting and reporting purposes. As such, Qpagos is treated as the acquirer for accounting and financial reporting purposes while Asiya is treated as the acquired entity for accounting and financial reporting purposes. Further, as a result, the historical financial statements that will be reflected in the Company’s future financial statements filed with the United States Securities and Exchange Commission (“SEC”) will be those of Qpagos, and the Company’s assets, liabilities and results of operations will be consolidated with the assets, liabilities and results of operations of Qpagos.

 

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Smaller Reporting Company

 

Following the consummation of the Merger, the Company will continue to be a “smaller reporting company,” as defined in Regulation S-K promulgated under the Exchange Act.

  

FORM 10 INFORMATION

 

For purposes of this Current Report on Form 8-K, the Company is providing certain information that it would be required to disclose if it were a registrant filing a general form for registration of securities on Form 10 under the Exchange Act. As such, the terms the “Company,” “we,” “us,” and “our” refer to the combined enterprises of Asiya and Qpagos, after giving effect to the Merger and the related transactions described below, except with respect to information for periods before the consummation of the Merger which refer expressly to Qpagos or Asiya, as specifically indicated.

 

BUSINESS

 

Overview

 

We are a provider of next generation physical and virtual payment services that we introduced to the Mexican market in the third quarter of 2014. We have a ten-year renewable exclusive license agreement for the use of technology that can be used to perform services that are similar to services that have been successfully deployed with this technology in several European, Asian, North and South American countries.

 

We provide an integrated network of kiosks, terminals and payment channels that enable consumers to deposit cash, convert it into a digital form and remit the funds to any merchant in our network quickly and securely. We help consumers and merchants connect more efficiently in markets and consumer segments, such as Mexico, that are largely cash-based and lack convenient alternatives for consumers to pay for goods and services in physical, online and mobile environments. For example, our licensed technology can be used to pay bills, add minutes to mobile phones, purchase transportation tickets, shop online, buy digital services or send money to a friend or relative.

 

Our current focus is on Mexico which remains a cash-dominated society for retail consumer payments with approximately 80% of the value of personal payments exchanged in cash (Bank of Mexico). The penetration of electronic payment services, such as credit and debit cards and point of sale terminals, significantly lags behind more developed economies. We believe that opportunities for our services in Mexico are vast. With over 107 million mobile subscribers in Mexico, 88% of which are under prepaid plans, mobile top-up alone, was a $12 billion business in 2014 as reported by PwC Telecom in Mexico 2015, America Móvil 4Q’15. We also believe that there is opportunity for growth in the Mexican market and we have expanded to service providers beyond the mobile telephone operators to service providers of electricity, transportation, utilities, municipal services and taxes, consumer credit installments, insurance premiums, and many more. Altogether as of the first quarter of 2016 our platform had integrated 160 such services.

 

Our primary strategy in Mexico to date has been the attraction of service providers as well as the deployment of kiosks through Redpag Electrónicos, our kiosk management subsidiary. In 2015, we generated net revenue of $1,510,369 from our operations in Mexico. Our primary source of revenue are fees we receive for processing payments made by consumers to service providers. We also generate revenue from non-payment services such as kiosk rentals and sales. We currently have in excess of 160 service providers integrated into our payment gateway, which includes all mobile phone providers in Mexico as well as most utility companies, financial services, entertainment venues and others. As of December 31, 2015, we have deployed over 270 kiosks and terminals. Our kiosks and terminals can be found at convenience stores, next to metro stations, retail stores, airport terminals, education centers, and malls in major urban centers, as well as many small and rural towns.

 

Also in the first quarter of 2016, we launched our mobile app by which smart phone users can now access the exact same menu of services available in our kiosks and make payments from the convenience of their phones. Cash to make payments is uploaded to the mobile phone app at any of our kiosks.

 

We believe that our platform provides simple and intuitive user interfaces, convenient access and best-in-class services. We run our network and process our transactions using a proprietary, advanced technology platform that leverages the latest virtualization, analytics and security technologies to create a fast, highly reliable, secure and redundant system. We believe that the breadth and reach of our network, along with the proprietary nature of our technology platform, differentiate us from our competitors and allow us to effectively manage and update our services and realize significant operating leverage with growth in volumes.

 

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History

 

Qpagos was incorporated on May 1, 2015 under the laws of Delaware under the name QPAGOS Corporation as the holding company for two wholly owned operating subsidiaries, QPagos, S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V. Each of these entities were incorporated in November 2013 in Mexico.

 

QPagos, S.A.P.I. de C.V. was formed to process payment transactions for service providers it contracts with, and Redpag Electrónicos S.A.P.I. de C.V. was formed to deploy and operate kiosks as a distributor.

 

On August 31, 2015, Qpagos entered into a share exchange agreement with stockholders of QPagos, S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V. to effect a reverse merger transaction. Pursuant to the transaction, the majority of the stockholders of QPagos, S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V. exchanged 99.996% and 99.99% of the outstanding shares of QPagos, S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V. , respectively, for shares of Qpagos. Upon consummation of the transaction QPagos, S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V. became subsidiaries of Qpagos.

 

Our Strategy

 

Our mission is to leverage the experience and success of other global companies in our industry, and establish ourselves as the leading developer and supplier of state-of-the-art electronic payment solutions to Mexican merchants and service providers across all consumer services sectors, such as: fixed and mobile telephone operators, internet services providers, cable, entertainment, public and municipal services such as electricity, water and gas, financial and travel services. Our near term strategy includes:

 

· Positioning ourselves as the leading consumer payment solutions provider for all service providers that rely on electronic payments for their collection needs

· Establishing a successful distributor network based on a competitive distribution model for entrepreneurs that look at our self-service kiosks as a profitable business opportunity, as well as retail chains and retail banks that need to expedite electronic payments that are clogging teller lines through the assistance of self-service kiosks

· Supporting distributors and franchisees through training, point of sale marketing materials, and an ever increasing amount of payment services, many of which are regional in nature

· Developing a Franchising Model through the creation and expansion of one-stop payment services stores which cater to the vast need for a digital payment solution in Mexico

· Developing a motivated and effective sales management team

 

The Mexican Market

 

Mexico is the second largest economy in Latin America and the world’s 15 th largest economy as reported by The World Bank Group.

 

Mexico's $1.3 trillion economy has become increasingly oriented toward manufacturing in the 22 years since the North American Free Trade Agreement (NAFTA) became effective. Per capita income is roughly one-third that of the US and income distribution remains highly unequal. Mexico has become the United States' second-largest export market and third-largest source of imports. In 2014, two-way trade in goods and services exceeded $590 billion. Mexico has free trade agreements with 46 countries, putting more than 90% of trade under free trade agreements. In 2012, Mexico formally joined the Trans-Pacific Partnership negotiations and formed the Pacific Alliance with Peru, Colombia and Chile.

 

The Organization for Economic Co-Operation and Development reports that Mexico’s GDP per capita, at over $18,000 in 2015 is amongst the highest in the Latin America region. Mexican jobless rate decreased to 4.3 percent in 2015 from 4.8 percent in 2014, well below market expectations. Mexico’s middle class is also among those that have grown the most in Latin America in 15 years. In fact, 17 percent of its population joined the middle class between 2000 and 2010 according to the World Bank Report: "Economic Mobility and the Rise of the Latin American Middle Class".

 

Despite these positive improvements, Mexico still has room for growth in areas of financial inclusion. According to MC (MasterCard) Advisors Cashless Journey, 61% of the Mexican population does not have bank accounts and when making an online purchase must complete payments at retail locations if they do not have a credit card, since debit cards are usually not an accepted form of online payment in Mexico. Electronic payments in Mexico are typically made using the Internet for banked individuals. This same source estimates that 80% of all consumer payment transactions are done in cash, aggregating approximately 50% of total consumer spending. Payroll cardholders typically empty these account on each payroll day through ATMs.

 

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We believe that these factors present an opportunity for us in Mexico and are very relevant for effectively positioning our terminals as a solution to expand the geographic reach and access to customers of several service providers who today collect most of their accounts receivables through digital means.

 

According to the November 2015 Quarterly Report of the IFT-Instituto Federal de Telecomunicaciones, Mexico’s overall telecom market (fixed and mobile telephone) in 2015 aggregated to 3.2% of GDP, or USD $32 billion, 60% of which relates to the mobile telephone sector. Mexico’s mobile penetration is over 88% with over 107 million subscribers of which 89% are under prepaid plans. The overall mobile telecommunications market is estimated at over USD $20 billion, 58% of which is generated through prepaid plans. Mobile top-ups are estimated to be worth USD $12 billion overall, and are primarily done at retail locations such as supermarkets and convenience stores.

 

Key Drivers

 

We believe that there are several drivers for the successful expansion of our payment solutions in the Mexican market, including market fit and size, market timing, technology, strategic plays, as well as the following facts reported by the November 2015 publication of the IMF World Economic Council and the November 2015 publication of IFT-Instituto Federal de Telecomunicaciones:

 

· Mexico is the 15 th largest world economy and second-largest in Latin America after Brazil.

 

· Mexico’s population exceeds 120 million inhabitants and has a GDP of $1.3 trillion.

 

· Mexico's informal sector is estimated at 30% of the economically active population and around 65% of Mexicans are unbanked. Consumer credit penetration in Mexico is low by regional standards, at approximately 15% of GDP compared to 45% in Brazil and 72% in Chile.

 

· Mexico’s over 107 million mobile subscribers make it the second largest mobile subscription base in the Latin American region. As is the case with many developing countries, most of these lines (89%) are under prepaid plans, as opposed to the typical postpaid prevalent in the United States.

 

· Prepaid mobile airtime revenues in Mexico are estimated at USD $1 billion per month, typically made of average transactions of $3.25 ($40 Pesos) each by over 70 million users multiple times per month. Mexico’s ARPU (average revenue per user) at $12 per month is among the highest in the world.

 

· Additionally, there are many more prepaid services in Mexico, including electricity and cable television, which offer consumers with irregular income or low financial stability the flexibility to use such services only when they can afford to, and allow service providers to do away with credit checking and payment collection.

 

Our Business Model

 

Our primary source of revenue are fees we receive for processing payments. For the year ended December 31, 2015, we generated $1,510,369 in net revenue, of which approximately $1,164,995 is net revenue derived from the operations of QPagos S.A.P.I. de C.V .and $345,374 is net revenue derived from the operations of Redpag. We receive either a fee from the service providers of typically 7.5% of the transaction on mobile payments or a fixed fee from customers of between USD$0.50 and USD$0.75 per transaction in the case of utility and municipal service payments. Certain service providers require that we receive the entire fee solely from the customers. We also receive fees for the rental and maintenance of the kiosks from certain distributors in addition to certain advertising fees.

 

A majority of our agents (our distributors) buy the kiosk or terminal from us for approximately $4,000, while some agents pay a rental fee. In both cases they also retain a portion of the fees that we derive from the service providers for services performed at the kiosks. Typically, 65% to 70% of the fees we receive from service providers are shared with the agent that has purchased the kiosk, and we retain 30-35% of such fees, while in the case of agents that rent the kiosk, 15% of fees we receive from service providers are shared with the distributor, and we retain 85% of such fees.

 

In addition, for certain high traffic public areas, such as malls and shopping centers, government agencies and large retailers who want to monetize high traffic areas, we pay the owner of the space a rental fee for the use of the space, and in those situations we will retain 100% of the transaction fee. Redpag, for example, entered into an agreement with OMA, an airport operator in 13 cities, to deploy over 20 kiosks based upon this model and is developing similar arrangements with pharmacy, convenience stores, retail chains, universities and transportation hubs.

 

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Lastly, we have developed a franchise model as well that will allow distributors to pay a franchise fee (currently estimated at $50,000, which includes five kiosks, store set up fee, a franchise fee and a transaction fee deposit) where we retain 20% of the service providers’ fees plus receive a royalty of 5% of earned commissions. We launched our franchise PA’PAGAR in March 2016. According to Promexico, the World Franchise Council considers Mexico the fifth largest franchising market in the world, with over 1,400 franchising entities. The franchisees will be entitled to receive our full suite of payment services, and we will provide franchise support, including marketing and technical support. Set forth below are the details of the franchise model.

 

Partners-Service Providers

 

Our current focus has been on the prepaid mobile telephone market. In Mexico, 88% of the more than 107 million mobile subscribers are under prepaid programs, millions of people make payments into these plans on a frequent basis. We currently have integrated all mobile operators in Mexico into our active list of service providers, as well as 150 additional service providers, including major utilities. Additionally, QPagos, S.A.P.I. de C.V has integrated 9 of Mexico’s 32 states in its payment platform, and citizens of these states can now pay at our kiosks municipal services such as car registration, property taxes, traffic tickets, etc.

 

Our Distribution Network

 

QPagos, S.A.P.I. de C.V is developing a distribution network along three verticals: (i) an agent network of independent businesses with high customer traffic in which our kiosks can be deployed; (ii) retail chains, financial services branch networks and institutions with high customer traffic such as postal offices, airports, etc.; and (iii) our own franchise stores that will deploy our kiosks.

 

Agents who own kiosks and terminals are responsible for placing, operating and servicing them in high-traffic, convenient retail locations. Several of our agents are mid-sized businesses which we believe provides them with insight into local market dynamics. Additionally, we enter into agreements with some agents pursuant to which they rent the kiosks, and we provide them with access to our full portfolio of service providers. The agreements are usually for an indefinite term and may be unilaterally terminated by either party. Our agent contracts do not have exclusivity clauses. We usually cap these fees, and normally award the agents a percentage of the merchant fees. No one agent represented a material amount of our revenue, and we do not view ourselves as being dependent upon any one agent.

 

Our retail and institutional clients and prospects include large retail and convenient store chains, such as Walmart and OXXO, whose tellers are being congested by service payments and who would like to move these frequent transactions to the front of their stores. We are also in field trials with financial institutions that want to expedite collections of their financial services as well as expand their hours of operation and geographic reach; and state, government and local municipalities that want to provide their citizens easy access to payment. In December we completed the sale of 38 kiosks to Financiera AMIGA, a micro lender with a multi-state footprint. An additional 18 kiosks were purchased in the first quarter of 2016 for May delivery. Additionally, we are currently in trials with a 2,000 plus branch financial institution who is seeking to reduce banker fees, the per transaction teller costs, and reduce lines by using our kiosks.

 

We also intend to franchise payment stores, which will be a one-stop shop for all electronic payments and will be anchored around Qpagos’ expanding menu of payment services and kiosk technology, complemented by correspondent bank services, domestic wire transfer, as well as SIM card retailing. According to Promexico, the World Franchise Council considers Mexico the fifth largest franchising market in the world with over 1,400 franchising entities, over 73,000 franchised locations, which generate approximately 750,000 jobs and a franchising revenue exceeding USD$80 billion, which is approximately 6% of Mexico’s gross domestic product (“GDP”).

 

Marketing

 

We intend to leverage the experience of other companies in our industry, such as QIWI plc, to market our products. In addition, we attend local events and exhibitions and provide promotional materials to distributors and retailers. We have also engaged in public relations campaigns geared towards corporate and institutional businesses, which has resulted in discussions with large box retailers such as Walmart, OXXO, Casa Ley, 7-Eleven and several others. We have participated in five International Franchising Exhibitions (Mexico City, Guadalajara, Puebla, Ciudad Juarez and Monterrey). and twice in ANTAD Guadalajara Exhibition, the association that groups the country’s mayor retail chains.

 

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Our Technology

 

We run our network and process our transactions using the proprietary, advanced technology platform that we license, which leverages the latest virtualization, analytics and security technologies to create a fast, highly reliable, secure and redundant system. We believe that the breadth and reach of our network, along with the proprietary nature of the technology platform that we license, differentiates us from our competitors and allow us to effectively manage and update our services and realize significant operating leverage with growth in volumes.

 

Localization and implementation of the different software and technology modules was supported through a recently completed Localization Agreement with Janor Enterprises, Ltd. Under this agreement, at a cost of $215,000 (which has been fully paid), Janor for a period of 18 months allocated engineering and programming resources to us. Since December 2015 source code and administration rights have been fully transferred to Qpagos. As of today, we have our own team of 8 IT engineers in Mexico City and Moscow that are in control of the software and developing gateways and updates on an ongoing basis.

 

On August 1, 2014, Qpagos entered into a license agreement with Janor for the rights to use three software programs (the “Programs”): RG Payment Switch (designed to transfer payments to providers of services), RG Processing (designed processing and counting of payments) and RG Kiosk (designed for performance of payments through payment collection equipment functioning in the self-service kiosks) to be used in Mexico. The Agreement was amended on November 1, 2015 to provide that subject to our payment of $5,000 per quarter, that neither Janor nor any of its subsidiaries or affiliated entities will install a terminal and/or kiosk that incorporates the Programs or a technology having the same or a similar effect nor will they provide any person or entity with the right to install a terminal and/or kiosk in Mexico that incorporates the Programs or a technology having the same or a similar effect. The term of the Agreement is for 10 years subject to an additional 10 year term so long as we are not in breach of any terms of the Agreement.

 

Under this agreement Janor is obligated to provide us with rights to use software updates developed by Janor. The ten-year term commences on the date of full payment of the localization contract which took place November 20, 2015. Janor retains exclusive rights to any intellectual property, including any addition, alteration, program updating, derivative or composed creation, obtained in the process of usage of the programs . The payment for the rights granted under the license is a total of $1,000, payable in annual payments of $100 per year over ten years and is in addition to the payments that we make under the Localization Agreement. The agreement provides, among other things, that we will pay the fee, ensure confidentiality of commercial and technical information received when performing the agreement and inform Janor of any changes in its structure. Janor has a right to terminate the agreement if we breach the terms of the agreement or do not properly perform or if we do not cure any breach or nonperformance within 30 days of receipt of notice of termination. If Janor suffers any damages, they are entitled to request compensation from us. The rights to use the Programs terminate upon termination of the Agreement. A team of programmers in Russia are supporting the Mexican team.

 

The RG Payment Switch

 

The RG Payment Switch (“RGS”) is a part of the processing system designed for implementation of payment interfaces between Qpagos and the service providers who contract Qpagos for collection of payment of their product and services. “RGS” is designed to accept integration with gateways of service providers. “RGS” also includes a management platform that controls multiple functions, including: performance of kiosk, the computer system, the second screen video console, and Windows operating system, among others. There is also a set of service functions for managing and monitoring terminals, as well as a training component for developers.

  

“RGS” provides one-stop service, allowing for the seamless delivery of payment transactions to consumers and allows for quick deployment of new payment services to the final users.

 

a) Advantages of RGS

 

1. Rapid deployment of payment solutions
2. Reduces payment gateway development costs
3. Ability to develop payment gateways by customer’s staff
4. Reduces the cost of sending registers and reconciliation with providers
5. Portable ready solutions between development teams
6. Minimum effort required to audit code and system security
7. Centralized and timely introduction of new methods and functional delivery transaction
8. Allows for expedient way of launching new solutions to meet market needs

 

9  

 

 

b) RGS Main Functions

 

1. Creating and sending requests according to the protocol provider
2. Obtaining response from the provider and its analysis
3. Entering response provider in the database
4. Correct handling errors
5. Module sales vouchers.
6. Module for working with advertising subsystem.

 

The RG Kiosk

 

The “RG Kiosk” is a platform designed for the collection of payments through self-service kiosks. The platform provides all necessary interfaces and functionality for collection of payment information, physical receipt of payment and transaction processing between the kiosk and the processing center, and additionally provides a set of other tools such as managing and controlling advertisement content on a second screen, as well as delivering automatic updates.

 

This program is designed to process multiple types of payments including mobile services, telephone, Internet, pay TV, utilities, etc. The RG Kiosk program consists of two parts: the user payment interface and the administrative interface.

 

· The user part of the program has a friendly and intuitive interface which allows customers to transfer funds into the account of service providers.

 

· The administrative part is to set up a process of receiving payment adjustment through to the Internet, setting alerts in case of problems, setting up the printer and bill acceptor, as well as setting the operating mode of the machine.

 

The program allows monitoring the status of self-service terminals in real time, including among many: check for errors in the terminal, find out the status of the printer and bill acceptor, search fees, and get information from a particular terminal or group of terminals.

 

RG Kiosk software can also support a variety of additional devices, for example:

 

· Mobile phones supporting JAVA, as well as iOS, Android, and Win mobile

 

· POS terminal

 

· WIN terminals

 

· XML-Gateway to connect clients such as online shopping, banks, mobile wallets etc.

 

Payment Gateway

 

Qpagos’ Payment Gateway, connects Service Providers and their clients through Qpagos proprietary technology and processing system. Housed in a fully redundant Mexico City data center, it includes:

 

· Redundant Internet-channels

 

· Minimum two independent lines of power supply

 

· Air-condition systems

 

· Hewlett Packard servers with Intel Xeon processors

 

· Main disc intersystem built on high-performance disc arrays

 

· Active Cisco Systems network equipment

 

· MS Windows Server Operating system

 

· MS SQL Server Enterprise Database Systems

 

· Payment applications based on C#/.NET

 

· Proprietary software solutions for receiving payments

 

 

 

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RG Processing System

 

The “RG Processing” is a platform designed for processing payments collected through different devices and interfaces such as self-service kiosks, WIN terminals, Java terminals and XML terminals. “RG Processing” controls all financial operations, provides monitoring services and accumulates statistics.

 

Through collected data and client certificates, the Program provides access for the agent to the predefined necessary information based on the role model (the access rights and functionality are limited by the role of the agent in the Program).

 

To guarantee security, each payment terminal generates a transaction ID and a timestamp, which together with the unique terminal identifier, identifies each payment in the system. Any attempt to create a new payment with the repeat of that pair of identifiers generates a request of status of the original payment.

 

 

 

Distributor Portal

 

The Distributor Portal, accessible through the Qpagos website, allows distributors’ real time access to each kiosk or terminal for the purpose of:

 

· Monitoring and control, including verification of amount of bills and coins, printer paper, connectivity, etc.
· Extensive system reporting, including transactions, encashment, reconciliation of encashment, status and effectiveness of the terminal network
· Flexible management of commissions in terminals
· Flexible management of agent fees
· Management of lists and remuneration received from service providers
· Ability to exchange data with accounting software
· Ability to control balances of service providers from agent portal
· System of providing and managing overdrafts

 

Regulation

 

Currently our business is not impacted by government regulation. We may in the future be subject to a variety of regulations aimed at preventing money laundering and financing criminal activity and terrorism, financial services regulations, payment services regulations, consumer protection laws, currency control regulations, advertising laws and privacy and data protection laws and therefore expect to experience periodic investigations by various regulatory authorities in connection with the same, which may sometimes result in monetary or other sanctions being imposed on us. Many of these laws and regulations are constantly evolving and are often unclear and inconsistent with other applicable laws and regulations, making compliance challenging and increasing our related operating costs and legal risks. In particular, there has been increased public attention and heightened legislation and regulations regarding money laundering and terrorist financing. We may have to make significant judgment calls in applying anti-money laundering legislation and risk being found in non-compliance with such laws.

 

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If local authorities in Mexico choose to enforce specific interpretations of the applicable legislation that differ from ours or enact new laws, we may be found to be in violation and subject to penalties or other liabilities. This could also limit our ability in effecting such payments going forward and may increase our cost of doing business.

 

In addition, there is significant uncertainty regarding future legislation on taxation of electronic payments in Mexico, including the place where taxation may be generated. Subsequent legislation and regulation and interpretations thereof, litigation, court rulings, or other events could expose us to increased costs, liability and reputational damage that could have a material adverse effect on our business, financial condition and results of operations.

 

Competition

 

There are no major self-service electronic payment vendors in Mexico today. However, there are a few small regional players, and many ATMs have expanded their services to also dispense airtime to account holders, but at unit costs that are four to five times higher than at our kiosks.

 

We believe that the most serious competition comes from bricks and mortar locations since the bulk of the mobile top-up business is done at major retail chains such as Walmart, Soriana, Chedraui and convenience stores such as OXXO and 7-Eleven. For example, Monterrey-based OXXO, owned by Coca-Cola bottler FEMSA, is the third largest retailer in Mexico with daily visits by approximately 8 million people. Because of this high concentration of customers, OXXO has become one of the primary destinations to top up prepaid phones as well as paying utility bills and other services.

 

We are currently in dialogues with several of these retailers which want to address teller congestion caused by customers seeking to make bill payments which affects their customers and core business as a retailer.

 

Yogipay Corporation 

 

On February 11, 2016 Qpagos entered into a consulting agreement with Yogipay Corporation, to provide consulting services to Yogipay Corporation with respect to establishing operations in the United States similar to those conducted by Qpagos. In consideration of the provision of the services Qpagos was issued 3,000,000 shares of common stock of Yogipay Corporation. Mr Harake is the manager of Gibbs Investment Holdings, the owner of 30.5% of the outstanding equity of Yogipay Corporation, and his spouse also owns 30.5% of the outstanding equity of Yogipay Corporation.

 

Facility and Employees

 

As of December 31, 2015, Qpagos had 2 full time employees, which are its and our executive officers, and 31 full-time contractors provided to it by an outsourcing company and designated to perform services for it, Qpagos had no part the employees. None of these employees are subject to collective bargaining agreements. Qpagos does not have employment agreements with any employees other than its Chief Executive Officer, Gaston Pereira and its Chief Operating Officer, Andrey Novikov. See “Executive Compensation.” Qpagos also enters into consulting arrangements for IT and operational services.

 

Qpagos leases approximately 1,600 square feet in Mexico City at Paseo de la Reforma 404, where its corporate offices are located. The lease is for a term of 36 months with a three-month termination clause. The current lease commenced in December 16, 2013, expires in December 16, 2016 and provides for an aggregate annual rent of approximately $40,800 per annum. We believe these facilities are in good condition and adequate to meet our current and anticipated requirements.

 

RISK FACTORS

 

  An investment in our Company involves a significant level of risk. Investors should carefully consider the risk factors described below together with the other information included in this Current Report on Form 8-K. If any of the risks described below occurs, or if other risks not identified below occur, our business, financial condition, and results of operations could be materially and adversely affected.

 

Risks Related to our Business

 

Risks Relating to Our Business and Industry

 

We have had limited operations to date.

 

Qpagos’ subsidiaries were incorporated in November 2013 and began deploying kiosks in Mexico in November 2014. As such, we have a very limited operating history. We have yet to demonstrate our ability to overcome the risks frequently encountered in the payment services industry and are still subject to many of the risks common to early stage companies, including the uncertainty as to our ability to implement our business plan, market acceptance of our proposed business and services, under-capitalization, cash shortages, limitations with respect to personnel, financing and other resources and uncertainty of our ability to generate revenues. There is no assurance that our activities will be successful or will result in any revenues or profit, and the likelihood of our success must be considered in light of the stage of our development. There can be no assurance that we will be able to consummate our business strategy and plans, or that financial, technological, market, or other limitations may force us to modify, alter, significantly delay, or significantly impede the implementation of such plans. We have insufficient results for investors to use to identify historical trends. Investors should consider our prospects in light of the risk, expenses and difficulties we will encounter as an early stage company. Our revenue and income potential is unproven and our business model is continually evolving. We are subject to the risks inherent to the operation of a new business enterprise, and cannot assure you that we will be able to successfully address these risks.

 

The consolidated financial statements of Qpagos have been prepared assuming that it will continue as a going concern .

 

Qpagos’ operating losses, negative cash flows from operations and limited alternative sources of revenue raise substantial doubt about its ability to continue as a going concern.  The consolidated financial statements of Qpagos for the year ended December 31, 2015 do not include any adjustments that might result from the outcome of this uncertainty.  If we or Qpagos cannot raise adequate capital on acceptable terms or generate sufficient revenue from operations we and Qpagos will need to revise our business plans.

 

We may continue to generate operating losses and experience negative cash flows and it is uncertain whether we will achieve profitability.

 

For the years ended December 31, 2015 and December 31, 2014, Qpagos incurred a net loss of $2.5 million and $1.5 million, respectively. Qpagos has  an accumulated deficit of $4.0 million through December 31, 2015. We expect to continue to incur operating losses until such time, if ever, as Qpagos is able to achieve sufficient levels of revenue from operations. There can be no assurance that we will ever generate significant sales or achieve profitability. Accordingly, the extent of future losses and the time required to achieve profitability, if ever, cannot be predicted at this point.

 

We also expect to experience negative cash flows for the foreseeable future as we fund our operating losses. As a result, we will need to generate significant revenues or raise additional financing in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability would likely negatively impact the value of our securities and financing activities.

 

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The payment services industry is highly competitive, and we have a number of competitors that are larger and have greater financial and other resources.

 

The payment services industry is highly competitive, and our continued growth depends on our ability to compete effectively. Although we do not face direct competition from any competitor in exactly the same line of business, we face competition from a variety of financial and non-financial business groups. These competitors include retail banks, non-traditional payment service providers, such as retailers and mobile network operators, traditional kiosk and terminal operators and electronic payment system operators, as well as other companies that provide various forms of payment services, including electronic payment and payment processing services. Competitors in our industry seek to differentiate themselves by features and functionalities such as speed, convenience, network size, accessibility, hours of operation, reliability and price. A significant number of our competitors have greater financial, technological and marketing resources than we have, operate robust networks and are highly regarded by consumers.

 

There is uncertainty as to market acceptance of our technology and services.

 

We have conducted our own research into the markets for our services; however because we are a new entrant into the market, we cannot guarantee market acceptance of our services and have somewhat limited information on which to estimate our anticipated level of sales. Our services require consumers and service providers to adopt our technology. Our industry is susceptible to rapid technological developments and there can be no assurance that we will be able to match any new technological advances. If we are unable to match the technological changes in the needs of our customers the demand for our products will be reduced.

 

The technology upon which our business is dependent is licensed from a third party under the terms of a ten year license agreement, which if terminated, would result in the cessation of our business operations .

 

The license with Janor Enterprises Ltd. (Janor) is for the rights to use three software programs upon which our business is completely dependent. The agreement is for a term of ten years, and may be extended for an additional ten years but may be terminated early by Janor if we fail to comply with its terms and conditions or make certain payments. The rights to the licensed programs terminate upon expiration or termination of the agreement. We have no guarantee that Janor will renew our agreement upon expiration of the extended term. If we are not able to maintain this license, we would have to cease operations unless we have developed or secured the rights to technology that would provide the same functionality and we are able to reconfigure our installed base of kiosks, terminals and other system infrastructure to work with the new technology. These hurdles would be extremely expensive and time consuming, and it is unlikely that we would be able stay in business.

 

Our exclusive right to the technology that we license is subject to forfeiture if we fail to make certain quarterly payments.

 

The technology that we license from Janor is licensed pursuant to the terms of a license agreement. Subject to us making quarterly payments of $5,000 per quarter, Janor has agreed that neither it nor any of its subsidiary or affiliated entity will install a terminal and/or kiosk that incorporates the Programs or a technology having the same or a similar effect nor will they provide any person or entity with the right to install a terminal and/or kiosk in Mexico that incorporates the Programs or a technology having the same or a similar effect; provided; however, If we should fail to make the quarterly payments, there is no prohibition from Janor licensing the same technology to another entity in Mexico that could compete with us. If Janor were to license the same technology to a third party our competitive position in Mexico could be substantially harmed.

 

We rely on one outside vendor for the supply of key kiosk parts and the partial or complete loss of this supplier could cause customer supply or production delays and as a result potentially a loss of revenues.

 

We rely on one outside vendor based outside Mexico to manufacture substantial portions of critical hardware that are used with or included in our kiosks. Although there are other suppliers that could supply the hardware required for the kiosks, we do not have a contract with such other suppliers and therefore, if our present vendor was to delay or terminate its performance, our business would likely be disrupted.

 

Our reliance on this vendor is expected to continue and involves other risks, including our limited control over the availability of components, delivery schedules, pricing and product quality. We may experience delays, additional expenses and lost sales as a result of our dependency upon this vendor. Although we expect that other existing vendors would be able to supply us with any needed products if this vendor was to cease or interrupt production or otherwise fail to supply us with an adequate supply of required parts, if these other existing vendors were unable to supply us in a timely manner, or on comparable terms, our business could be materially adversely impacted.  

 

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Our reliance on outside suppliers for our kiosk hardware involves several risks, including the following:

 

· our suppliers of required parts may cease or interrupt production or otherwise fail to supply us with an adequate supply of required parts for a number of reasons, including contractual disputes with our supplier or adverse financial developments at or affecting the supplier;

 

· we have reduced control over the pricing of third party-supplied materials, and our supplier may be unable or unwilling to supply us with required materials on commercially acceptable terms, or at all;

 

· we have reduced control over the timely delivery of third party-supplied materials; and

 

· our suppliers may be unable to develop technologically advanced products to support our growth and development of new systems.

 

Disruptions in international trade and finance or in transportation also may have a material adverse effect on our business, financial condition and results of operation.  Any significant disruption in our operations for any reason, such as regulatory requirements, scheduling delays, quality control problems, loss of certifications, power interruptions, fires, hurricanes, war or threats of terrorism, labor strikes, contract disputes, could adversely affect our sales and customer relationships. In addition, in the event of a breach of law by a vendor based outside of Mexico or a breach of a contractual obligation that has an adverse effect upon our operations, we may have little or no recourse because all of our vendors’ assets could be located in a foreign country, such as Russia, Italy, Germany, Canada or the People’s Republic of China where it may not be possible to effect service of process and uncertainty exists as to whether the courts in such foreign jurisdiction would recognize or enforce a judgment of a Mexican court obtained against the vendor.

 

We are subject to the economic risk and business cycles of our merchants and agents and the overall level of consumer spending.

 

The payment services industry depends heavily on the overall level of consumer spending. We are exposed to general economic conditions that affect consumer confidence, consumer spending, consumer discretionary income or changes in consumer purchasing habits. Economic factors such as employment levels, business conditions, energy and fuel costs, interest rates, and inflation rate could reduce consumer spending or change consumer purchasing habits. A reduction in the amount of consumer spending could result in a decrease in our revenue and profits. If our merchants make fewer sales of their products and services using our services or consumers spend less money per transaction, we will have fewer transactions to process at lower amounts, resulting in lower revenue. Weakening in the Mexican economy could have a negative impact on our merchants, as well as consumers who purchase products and services using our payment processing systems, which could, in turn, negatively impact our business, financial condition and results of operations, particularly if the recessionary environment disproportionately affects some of the market segments that represent a larger portion of our payment processing volume. In addition, these factors could force some of our merchants and/or agents to liquidate their operations or go bankrupt, or could cause our agents to reduce the number of their locations or hours of operation, resulting in reduced transaction volumes. We also have a certain amount of fixed costs, including salaries and rent, which could limit our ability to adjust costs and respond quickly to changes affecting the economy and our business.

 

We do not control the rates of the fees levied by Qpagos’ agents on consumers.

 

Qpagos’ agents pay it an agreed fee using a portion of the fees levied by them on consumers. The fee paid to Qpagos by the agent is based on a percentage of the value of each transaction that Qpagos processes or a fixed rate per transaction. However, in most cases the amount of fees levied by an agent on a consumer for each particular transaction is determined by such agent at its own discretion. Qpagos usually does not cap the amount of such fees or otherwise control it. We believe that the fees set by agents are market-driven, and that our interests and Qpagos’ agents’ interests are aligned with a view to maintaining fees at a level that would simultaneously result in our agents’ profitability and customer satisfaction. However, we can provide no assurance that agents will not raise fees to a level that will adversely affect the popularity of our services among consumers. At the same time, if Qpagos is forced to cap customer fees to protect the strength of our brand or otherwise, it may lose a significant number of agents, which would reduce the penetration of our physical distribution network. In limited instances, we have introduced such caps at the request of our merchants. No assurance can be made that this trend will not increase. Material increases in customer fees by our agents or the imposition of caps on the rates of such fees by us could have an adverse effect on the business, financial condition and results of operations.

 

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If consumer confidence in our business deteriorates, our business, financial condition and results of operations could be adversely affected.

 

Our business is built on consumers’ confidence in our brands, as well as our ability to provide fast, reliable payment services. As a consumer business, the strength of our brand and reputation are of paramount importance to us. A number of factors could adversely affect consumer confidence in our brand, many of which are beyond our control, and could have an adverse impact on our results of operations. These factors include:

 

  ·     any regulatory action or investigation against us;
     
  ·   any significant interruption to our systems and operations; and
     
  ·   any breach of our security system or any compromises of consumer data.

 

In addition, we are largely dependent on our agents and, in the future, will be dependent, on franchisees to which we license our products to maintain the reputation of our brand. Despite the measures that we put in place to ensure their compliance with our performance standards, our lack of control over their operations may result in the low quality of service of a particular agent or franchisee being attributed to our brand, negatively affecting our overall reputation. Furthermore, negative publicity surrounding any assertion that our agents and/or merchants are implicated in fraudulent transactions, irrespective of the accuracy of such publicity or its connection with our current operations or business, could harm our reputation. Any event that hurts our brand and reputation among consumers as a reliable payment services provider could have a material adverse effect on our business, financial condition and results of operations.

 

A decline in the use of cash as a means of payment may result in a decline in the use of our kiosks and terminals.

 

Substantially all of our operations are in Mexico where a substantial part of the population relies on cash payments rather than credit and debit card payments or electronic banking. We believe that consumers making cash payments are more likely to use our kiosks and terminals than where alternative payment methods are available. As a result, we believe that our profitability depends on the use of cash as a means of payment. There can be no assurance that over time, the prevalence of cash payments in Mexico will not decline as a greater percentage of the population adopts credit and debit card payments and electronic banking. The shift from cash payments to credit and debit card payments and electronic banking could reduce our market share and payment volumes and may have a material adverse effect on our business, financial condition and results of operations.

 

Our business operations are geographically concentrated and could be significantly affected by any adverse change in the regions in which we operate.

 

Our business operations are located substantially in Mexico. While Qpagos recently invested in a company performing similar services in the United States and we may expand our business to new geographic regions, we are and will continue to still be highly concentrated in Mexico. Because to date we derive all of our total revenues from our operations in Mexico and expect to continue to derive a significant portion of our revenue from operations in Mexico for the near future, our business is exposed to adverse regulatory and competitive changes, economic downturns and changes in political conditions in Mexico. Moreover, due to the concentration of our businesses in Mexico, our business is less diversified and, accordingly, is subject to greater regional risks than some of our competitors.

 

We are not currently subject to extensive government regulation; however, we could be subject to extensive government regulation, and there can be no guarantee that new regulations applicable to our business will not be enacted.

 

Currently our business is not impacted by government regulation; however, we may be subject to a variety of regulations aimed at preventing money laundering and financing criminal activity and terrorism, financial services regulations, payment services regulations, consumer protection laws, currency control regulations, advertising laws and privacy and data protection laws and therefore experience periodic investigations by various regulatory authorities in connection with the same, which may sometimes result in monetary or other sanctions being imposed on us. Many of these laws and regulations are constantly evolving, and are often unclear and inconsistent with other applicable laws and regulations making compliance challenging and increasing our related operating costs and legal risks. In particular, there has been increased public attention and heightened legislation and regulations regarding money laundering and terrorist financing. We may have to make significant judgment calls in applying anti-money laundering legislation and risk being found in non-compliance with such laws.

 

If local authorities in Mexico choose to enforce specific interpretations of the applicable legislation that differ from ours or enact new laws, we may be found to be in violation and subject to penalties or other liabilities. This could also limit our ability in effecting such payments going forward and may increase our cost of doing business.

 

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In addition, there is significant uncertainty regarding future legislation on taxation of electronic payments in Mexico, including the place of taxation. Subsequent legislation and regulation and interpretations thereof, litigation, court rulings, or other events could expose us to increased costs, liability and reputational damage that could have a material adverse effect on our business, financial condition and results of operations.

 

We may not be able to complete or integrate successfully any potential future acquisitions, partnerships or joint ventures.

 

From time-to-time, we may evaluate possible acquisition transactions, partnerships or joint ventures, some of which may be material. Potential future acquisitions, partnerships and joint ventures may pose significant risks to our existing operations if they cannot be successfully integrated. These projects would place additional demands on our managerial, operational, financial and other resources, create operational complexity requiring additional personnel and other resources and require enhanced control procedures. In addition, we may not be able to successfully finance or integrate any businesses, services or technologies that we acquire or with which we form a partnership or joint venture. Furthermore, the integration of any acquisition may divert management’s time and resources from our core business and disrupt our operations. Moreover, even if we were successful in integrating newly acquired assets, expected synergies or cost savings may not materialize, resulting in lower than expected benefits to us from such transactions. We may spend time and money on projects that do not increase our revenue. Additionally, when making acquisitions it may not be possible for us to conduct a detailed investigation of the nature of the assets being acquired due to, for instance, time constraints in making the decision and other factors. We may become responsible for additional liabilities or obligations not foreseen at the time of an acquisition. In addition, in connection with any acquisitions, we must comply with various antitrust requirements. It is possible that perceived or actual violations of these requirements could give rise to regulatory enforcement action or result in us not receiving all necessary approvals in order to complete a desired acquisition. To the extent we pay the purchase price of any acquisition in cash, it would reduce our cash reserves, and to the extent the purchase price is paid with our stock, it could be dilutive to our stockholders. To the extent we pay the purchase price with proceeds from the incurrence of debt, it would increase our level of indebtedness and could negatively affect our liquidity and restrict our operations. All of the above risks could have a material adverse effect on our business, results of operations, financial condition, and prospects.

 

As our business develops we will need to implement enhanced compliance processes, procedures and controls with respect to the rules and regulations that apply to our business.

 

Our success requires significant public confidence in our ability to handle large and growing payment volumes and amounts of consumer funds, as well as comply with applicable regulatory requirements. Any failure to manage consumer funds or to comply with applicable regulatory requirements could result in the imposition of fines, harm our reputation and significantly diminish use of our products. In addition, if we are not in compliance with anti-corruption laws and other laws governing the conduct of business with government entities and/or officials (including local laws), we may be subject to criminal and civil penalties and other remedial measures, which could have an adverse impact on our business, financial condition, results of operations and prospects.

 

If we cannot keep pace with rapid developments and change in our industry and provide new services to our clients, the use of our services could decline, reducing our revenues.

 

The payment services industry in which we operate is characterized by rapid technological change, new product and service introductions, evolving industry standards, changing customer needs and the entrance of more established market players seeking to expand into these businesses. In order to remain competitive, we continually seek to expand the services we offer and to develop new projects, including, for example, the electronic wallet. These projects carry risks, such as delays in delivery, performance problems and lack of customer acceptance. In our industry, these risks are acute. Any delay in the delivery of new services or the failure to differentiate our services or to accurately predict and address market demand could render our services less desirable, or even obsolete, to consumers. In addition, if alternative payment mechanisms become widely available, substituting our current products and services, and we do not develop and offer similar alternative payment mechanisms successfully and on a timely basis, our business and prospects could be adversely affected. Furthermore, we may be unable to recover the costs we have incurred in developing new services. Our development efforts could result in increased costs and we could also experience a loss in business that could reduce our earnings or could cause a loss of revenue if promised new services are not timely delivered to our clients, are not able to compete effectively with our competitors’ or do not perform as anticipated. If we are unable to develop, adapt to or access technological changes or evolving industry standards on a timely and cost effective basis, our business, financial condition and results of operations could be materially adversely affected.

 

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Our systems and our third party providers’ systems may fail due to factors beyond our control, which could interrupt our service, cause us to lose business and increase our costs.

 

We depend on the efficient and uninterrupted operation of numerous systems, including our computer systems, software and telecommunications networks, as well as the data centers that we lease from third parties. We only have one data center in central Mexico that controls our operations and hosts our main equipment. Our systems and operations, or those of our third party providers, could be exposed to damage or interruption from, among other things, fire, flood, natural disaster, power loss, telecommunications failure, vendor failure, unauthorized entry, improper operation and computer viruses. Substantial property and equipment loss, and disruption in operations, as well as any defects in our systems or those of third parties or other difficulties could expose us to liability and materially adversely impact our business, financial condition and results of operations. In addition, any outage or disruptive efforts to our data center would result in the failure of our computers and kiosks to operate and would, if for an extensive period of time, adversely impact our reputation, brand and future prospects.

 

Unauthorized disclosure of data, whether through cybersecurity breaches, computer viruses or otherwise, could expose us to liability, protracted and costly litigation and damage our reputation.

 

We store and/or transmit sensitive data, such as mobile phone numbers, and we have ultimate liability to our consumers for our failure to protect this data. If breaches occur our encryption of data and other protective measures may not prevent unauthorized disclosure of data. Unauthorized disclosure of data or a cybersecurity breach could harm our reputation and deter clients from using electronic payments as well as kiosks and terminals generally and our services specifically, increase our operating expenses in order to correct the breaches or failures, expose us to uninsured liability, increase our risk of regulatory scrutiny, subject us to lawsuits, result in the imposition of material penalties and fines by state authorities and otherwise materially adversely affect our business, financial condition and results of operations.

 

Customer complaints or negative publicity about our customer service could affect attractiveness of our services adversely and, as a result, could have an adverse effect on our business, financial condition and results of operations.

 

Customer complaints or negative publicity about our customer service could diminish consumer confidence in, and the attractiveness of, our services. Breaches of our consumers’ privacy and our security systems could have the same effect. We sometimes take measures to combat risks of fraud and breaches of privacy and security, such as freezing consumer funds, which could damage relations with our consumers. These measures heighten the need for prompt and attentive customer service to resolve irregularities and disputes. Effective customer service requires significant personnel expense, and this expense, if not managed properly, could impact our profitability significantly. Any inability by us to manage or train our customer service representatives properly could compromise our ability to handle customer complaints effectively. If we do not handle customer complaints effectively, our reputation may suffer, and we may lose our customers’ confidence, which could have a material adverse effect on our business, financial condition and results of operations.

 

Qpagos’ agreements with our agents and our merchants do not include exclusivity clauses and may be terminated unilaterally at any time or upon short notice.

 

Qpagos normally does not include exclusivity clauses in its agreements with agents or merchants, which is standard in the payment services industry. Accordingly, merchants and agents do not have any restrictions on dealings with other providers and can switch from Qpagos payment processing system to another without significant investment. The termination of contracts with existing agents or merchants or a significant decline in the amount of business we do with them as a result of contracts not having exclusivity clauses could have a material adverse effect on our business, financial condition and results of operations.

 

Our payment system might be used for fraudulent, illegal or improper purposes, which could expose us to additional liability and harm our business.

 

Despite measures we have taken and continue to take, our payment system remains susceptible to potentially illegal or improper uses. These may include use of our payment services in connection with fraudulent sales of goods or services, illicit sales of prescription medications or controlled substances, software and other intellectual property piracy, money laundering, bank fraud and prohibited sales of restricted products. In the past there have been news articles on how organized crime groups have used other payment services to transfer money in the course of illegal transactions.

 

Criminals are using increasingly sophisticated methods to engage in illegal activities such as counterfeiting and fraud. It is possible that incidents of fraud could increase in the future. Our risk management policies and procedures may not be fully effective to identify, monitor and manage these risks. We are not able to monitor in each case the sources for our counterparties’ funds or the ways in which they use them. Increases in chargebacks or other liability could have a material adverse effect on our business, financial condition and results of operations. Furthermore, an increase in fraudulent transactions or publicity regarding chargeback disputes could harm our reputation and reduce consumer confidence in the use of our kiosks and electronic wallets.

 

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We are subject to fluctuations in currency exchange rates.

 

We are exposed to currency risks. Qpagos’ financial statements are expressed in U.S. dollars, while its revenues and expenses are in Mexican pesos. Accordingly, its results of operations and assets and liabilities are exposed to fluctuations in exchange rates between the U.S. dollar and the Mexican peso. In addition, changes in currency exchange rates also affect the carrying value of assets on the balance sheet, which may result in a decline in the dollar amount of our total assets on the balance sheet. During the year ended December 31, 2015 Qpagos incurred a foreign currency loss of ($ 466,920) attributable to the deterioration of the Mexican Peso against the US Dollar.

 

We may not be able to successfully protect the intellectual property we license and may be subject to infringement claims.

 

We rely on a combination of contractual rights, copyright, trademark and trade secret laws to establish and protect our proprietary technology. We customarily require our employees and independent contractors to execute confidentiality agreements or otherwise to agree to keep our proprietary information confidential when their relationship with us begins. Typically, our employment contracts also include clauses requiring our employees to assign to us all of the inventions and intellectual property rights they develop in the course of their employment and to agree not to disclose our confidential information. Nevertheless, others, including our competitors, may independently develop similar technology to that licensed by us, duplicate our services or design around our intellectual property. Further, contractual arrangements may not prevent unauthorized disclosure of our confidential information or ensure an adequate remedy in the event of any unauthorized disclosure of our confidential information. Because of the limited protection and enforcement of intellectual property rights in Mexico, our intellectual property rights may not be as protected as they may be in more developed markets such as the United States. We may have to litigate to enforce or determine the scope or enforceability of our intellectual property rights (including trade secrets and know-how), which could be expensive, could cause a diversion of resources and may not prove successful. The loss of intellectual property protection could harm our business and ability to compete and could result in costly redesign efforts, discontinuance of certain service offerings or other competitive harm. Additionally, we do not hold any patents for our business model or our business processes, and we do not currently intend to obtain any such patents in Mexico, the United States or elsewhere.

 

We may also be subject to costly litigation in the event our services or the technology that we license are claimed to infringe, misappropriate or otherwise violate any third party’s intellectual property or proprietary rights. Such claims could include patent infringement, copyright infringement, trademark infringement, trade secret misappropriation or breach of licenses. We may not be able to successfully defend against such claims, which may result in a limitation on our ability to use the intellectual property subject to these claims and also might require us to redesign affected services, enter into costly settlement or license agreements, pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling certain of our services. In such circumstances, if we cannot or do not license the infringed technology on reasonable terms or substitute similar technology from another source, our revenue and earnings could be adversely impacted. Additionally, in recent years, non-practicing entities have been acquiring patents, making claims of patent infringement and attempting to extract settlements from companies in our industry. Even if we believe that such claims are without merit and successfully defend these claims, defending against such claims is time consuming and expensive and could result in the diversion of the time and attention of our management and employees.

 

We may use open source software in a manner that could be harmful to our business.

 

We use open source software in connection with our technology and services. The original developers of the open source code provide no warranties on such code. Moreover, some open source software licenses require users who distribute open source software as part of their software to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code on unfavorable terms or at no cost. The use of such open source code may ultimately require us to replace certain code used in our products, pay a royalty to use some open source code or discontinue certain products. Any of the above requirements could be harmful to our business, financial condition and operations.

 

We do not have and may be unable to obtain sufficient insurance to protect ourselves from business risks.

 

The insurance industry in Mexico is not yet fully developed, and many forms of insurance protection common in more developed countries are not yet fully available or are not available on comparable or commercially acceptable terms. Accordingly, while we hold certain mandatory types of insurance policies, we do not currently maintain insurance coverage for business interruption, property damage or loss of key management personnel, as we have been unable to obtain these on commercially acceptable terms. We do not hold insurance policies to cover for any losses resulting from counterparty and credit risks or fraudulent transactions. We also do not generally maintain separate funds or otherwise set aside reserves for most types of business-related risks. Accordingly, our lack of insurance coverage or reserves with respect to business-related risks may expose us to substantial losses, which could materially adversely affect our business, financial condition and results of operations.

 

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In a dynamic industry like ours, the ability to attract, recruit, retain and develop qualified personnel is critical to our success and growth.

 

Our business functions at the intersection of rapidly changing technological, social, economic and regulatory developments that require a wide ranging set of expertise and intellectual capital. In order for us to compete and grow successfully, we must attract, recruit, retain and develop the necessary personnel who can provide the needed expertise across the entire spectrum of our capital needs. This is particularly true with respect to qualified and experienced software engineers and IT staff, who are highly sought after and are not in sufficient supply in Mexico. The market for such personnel is highly competitive, and we may not succeed in recruiting additional personnel or may fail to replace effectively current personnel who depart with qualified or effective successors. Our efforts to retain and develop personnel may result in significant additional expenses, which could adversely affect our profitability. We cannot assure you that we will be able to attract and retain qualified personnel in the future. Failure to retain or attract key personnel could have a material adverse effect on our business, financial condition and results of operations.

 

If we cannot establish profitable operations, we will need to raise additional capital to fully implement our business plan, which may not be available on commercially reasonable terms, or at all, and which may dilute your investment.

 

Achieving and sustaining profitability will require us to increase our revenues and manage our operating and administrative expenses. We cannot guarantee that we will be successful in achieving profitability. If we are unable to generate sufficient revenues to pay our expenses and our existing sources of cash and cash flows are otherwise insufficient to fund our activities, we will need to raise additional funds to continue our operations and in order to fully implement our business plan. To date, we have raised an aggregate of $6,190,187 from the sale of debt and equity securities. We estimate that we will need approximately $3,000,000 in order to implement our current business plan. If we do not generate such revenue from operations, we may be forced to limit our expansion. Furthermore, if we issue equity or debt securities to raise additional funds, our existing stockholders, may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we are unsuccessful in achieving profitability, and we cannot obtain additional funds on commercially reasonable terms or at all, we may be required to curtail significantly or cease its operations, which could result in the loss to investors of their investment in our securities.

 

The substantial share ownership position of ten of our largest stockholders may limit your ability to influence corporate matters.

 

As of the date of this Memorandum,12 stockholders own 39,190,199 shares of our Common Stock, representing approximately 70.2% of the voting power of our issued share capital. As a result of this concentration of share ownership, the twelve stockholders have sole discretion over certain matters submitted to our stockholders for approval that require a simple majority vote and has significant voting power on all matters submitted to our stockholders for approval that require a qualified majority vote, including the power to veto them. This concentration of ownership could delay, deter or prevent a change of control or other business combination, which could negatively impact the value of our shares. The interests of these twelve stockholders may not always coincide with the interests of our other stockholders. 

 

Certain of our officers may have a conflict of interest.

 

Certain of our officers are currently working for our company on a part-time basis. One such officer also works at other jobs and has discretion to decide what time he devotes to our activities, which may result in a lack of availability when needed due to responsibilities at other jobs.

 

Risks Relating to Doing Business in Mexico

 

Emerging markets, such as Mexico, are subject to greater risks than more developed markets, including significant legal, economic and political risks.

 

Investors in emerging markets, such as Mexico, should be aware that these markets are subject to greater risk than more developed markets, including in some cases significant legal, economic and political risks. Investors should also note that emerging economies are subject to rapid change and that the information set out herein may become outdated relatively quickly. Accordingly, investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in light of those risks, their investment is appropriate. Generally, investment in emerging markets is only suitable for sophisticated investors who fully appreciate the significance of the risks involved, and investors are urged to consult with their own legal and financial advisors before making an investment in our securities.

 

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Mexican federal governmental policies or regulations, as well as economic, political and social developments in Mexico, could adversely affect our business, financial condition, results of operations and prospects.

 

Substantially all of our assets and operations are located in Mexico. As a result, we are subject to political, legal and regulatory risks specific to Mexico, which can have a significant impact on our business, results of operations and financial condition. The Mexican federal government has exercised, and continues to exercise, significant influence over the Mexican economy. Accordingly, Mexican federal governmental actions, fiscal and monetary policy could have an impact on Mexican private sector entities, including our company, and on market conditions. We cannot predict the impact that political conditions will have on the Mexican economy. Furthermore, our business, financial condition, results of operations and prospects may be affected by currency fluctuations, price instability, inflation, interest rates, regulation, taxation, social instability and other political, social and economic developments in or affecting Mexico, over which we have no control. We cannot assure potential investors that changes in Mexican federal governmental policies will not adversely affect our business, financial condition, results of operations and prospects. Mexico has recently experienced periods of violence and crime due to the activities of drug cartels. In response, the Mexican government has implemented various security measures and has strengthened its police and military forces. Despite these efforts, drug-related crime continues to exist in Mexico. These activities, their possible escalation and the violence associated with them may have a negative impact on the Mexican economy or on our operations in the future. The social and political situation in Mexico could adversely affect the Mexican economy, which in turn could have a material adverse effect on our business, results of operations and financial condition.

 

We may be subject to the risks of doing business internationally.

 

We currently offer our services in Mexico and therefore our business is subject to risks associated with doing business internationally, including:

 

· trade restrictions and changes in tariffs;

 

· the impact of business cycles and downturns in economies outside of the United States;

 

· unexpected changes in regulatory requirements that may limit its ability to export its products or sell into particular jurisdictions;

 

· import and export license requirements and restrictions;

 

· difficulties in maintaining effective communications with employees and customers due to distance, language and cultural barriers;

 

· disruptions in international transport or delivery;

 

· difficulties in protecting our intellectual property rights, particularly in countries where the laws and practices do not protect proprietary rights to as great an extent as do the laws and practices of the United States;

 

· difficulties in enforcing agreements through non-U.S. legal systems;

 

· longer payment cycles and difficulties in collecting receivables; and

 

· potentially adverse tax consequences.

 

If any of these risks materialize, our operations could suffer.

 

Risks Relating to our Securities

 

There is currently a limited public trading market for our common stock and one may never develop .

 

There currently is a limited public trading market for our securities, and it is not assured that any such public market will develop in the foreseeable future. While this is true of any small cap company, the fact that one of our services are provided solely in Mexico, may make the path to a listing on an exchange or actively traded in the over-the-counter market more problematic. Moreover, there can be no assurance that even if our common stock is approved for listing on an exchange or is quoted in the over-the-counter market in the future, that an active trading market will develop or be sustained. Therefore, we cannot predict the prices at which our common stock will trade in the future, if at all. As a result, our investors may have limited or no ability to liquidate their investments.

 

Trading in our common stock is conducted on the OTC Pink Markets, as we currently do not meet the initial listing criteria for any registered securities exchange.  The OTCBB and OTC Markets are less recognized markets than the registered securities exchanges and is often characterized by low trading volume and significant price fluctuations.  These and other factors may further impair our stockholders’ ability to sell their shares when they want to and/or could depress our stock price. As a result, stockholders could find it difficult to dispose of, or obtain accurate quotations of the price of our securities because smaller quantities of shares could be bought and sold, transactions could be delayed and security analyst and news coverage of our Company may be limited.  If a public market for our common stock does develop, these factors could result in lower prices and larger spreads in the bid and ask prices for our shares of common stock.

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The market price of our common stock may be highly volatile and such volatility could cause you to lose some or all of your investment.

 

The market price of our common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, such as:

 

the announcement of new products or product enhancements by us or our competitors;

 

  developments concerning intellectual property rights;

  

changes in legal, regulatory, and enforcement frameworks impacting our services;

 

  variations in our and our competitors’ results of operations;

 

  fluctuations in earnings estimates or recommendations by securities analysts, if our common stock is covered by analysts;

 

  the results of intellectual property lawsuits;

 

  future issuances of common stock or other securities;

 

  the addition or departure of key personnel; and
     
  general market conditions and other factors, including factors unrelated to our operating performance.

 

Further, the stock market has recently experienced extreme price and volume fluctuations. The volatility of our common stock could be further exacerbated due to low trading volume. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock and the loss of some or all of our investors’ investment.

 

Some or all of the “restricted” shares of our common stock held by our stockholders, including, but not limited to, shares issued in connection with: (i) our incorporation in 2013 and (ii) our 2015 private placements may be offered from time to time in the open market pursuant to an effective registration statement under the Securities Act, or without registration pursuant to Rule 144 promulgated thereunder, and these sales may have a depressive effect on the market price of our common stock.

 

Because our common stock may be a “penny stock,” it may be more difficult for investors to sell shares of our common stock, and the market price of our common stock may be adversely affected.

 

Our common stock may be a “penny stock” if, among other things, the stock price is below $5.00 per share, it is not listed on a national securities exchange, or it has not met certain net tangible asset or average revenue requirements. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. This risk-disclosure document provides information about penny stocks and the nature and level of risks involved in investing in the penny-stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser and obtain the purchaser’s written agreement to the purchase. Broker-dealers must also provide customers that hold penny stock in their accounts with such broker-dealer a monthly statement containing price and market information relating to the penny stock. If a penny stock is sold to an investor in violation of the penny stock rules, the investor may be able to cancel its purchase and get their money back.

 

If applicable, the penny stock rules may make it difficult for stockholders to sell their shares of our common stock. Because of the rules and restrictions applicable to a penny stock, there is less trading in penny stocks and the market price of our common stock may be adversely affected. Also, many brokers choose not to participate in penny stock transactions. Accordingly, stockholders may not always be able to resell their shares of our common stock publicly at times and prices that they feel are appropriate.

 

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Because we became public by means of a reverse Merger, we may not be able to attract the attention of brokerage firms .

 

Additional risks may exist because we became public through a “Reverse Merger.” Securities analysts of brokerage firms may not provide coverage of our company since there is little incentive for brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct secondary offerings on our behalf in the future.

  

Compliance with the reporting requirements of federal securities laws can be expensive.

 

We are a public reporting company in the United States, and accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act of 2002.  The costs of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to stockholders are substantial. If we do not provide current information about our company to market makers, they will not be able to trade our stock. Failure to comply with the applicable securities laws could result in private or governmental legal action against us or our officers and directors, which could have a detrimental impact on our business and financials, the value of our stock, and the ability of stockholders to resell their stock.

 

Our investors’ ownership may be diluted in the future.

 

In the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of ownership interests of our present stockholders. We expect to need to issue a substantial number of shares of common stock or other securities convertible into or exercisable for common stock in connection with hiring or retaining employees, future acquisitions, raising additional capital in the future to fund our operations, and other business purposes. Additional shares of common stock issued by us in the future will dilute an investor’s investment in the Company.

 

Directors, executive officers, principal stockholders and affiliated entities own a significant percentage of our capital stock, and they may make decisions that our stockholders do not consider to be in their best interests .

 

As of the date of this Current Report, our directors, executive officers, principal stockholders and affiliated entities beneficially own, in the aggregate, approximately 70.2% of our outstanding voting securities as of the date hereof. As a result, if some or all of them acted together, they would have the ability to exert substantial influence over the election of our board of directors and the outcome of issues requiring approval by our stockholders. This concentration of ownership may also have the effect of delaying or preventing a change in control of our company that may be favored by other stockholders. This could prevent transactions in which stockholders might otherwise recover a premium for their shares over current market prices. This concentration of ownership and influence in management and board decision-making could also harm the price of our capital stock by, among other things, discouraging a potential acquirer from seeking to acquire shares of our capital stock (whether by making a tender offer or otherwise) or otherwise attempting to obtain control of our company.

 

Our board of directors has historically had significant control over us and we have yet to establish committees comprised of independent directors .

 

We only have three directors. Because of such limited number of directors, each of our board members had significant control over all corporate issues. In addition, two of our three directors also held officer positions in Qpagos. The third director is the manager of an entity that provides consulting services to us. We could not establish board committees comprised of independent members, and we did not have an audit or compensation committee comprised of independent directors. Our three directors performed these functions, despite not all being independent directors. Thus, there was potential conflict in that two of our directors were also engaged in management and participated in decisions concerning management compensation and audit issues that may affect management and Qpagos performance .

 

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or detect fraud. Consequently, investors could lose confidence in our financial reporting and this may decrease the trading price of our stock .

 

We must maintain effective internal controls to provide reliable financial reports and to detect and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as would be possible with an effective control system in place. We have not performed an in-depth analysis to determine if historical undiscovered failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.

 

We have been assessing our internal controls to identify areas that need improvement. We are in the process of implementing changes to internal controls, but have not yet completed implementing these changes. Failure to implement these changes to our internal controls or any others that it identifies as necessary to maintain an effective system of internal controls could harm our operating results and cause investors to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect on the trading price of our common stock.

 

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Investors in our Common Stock may have limited recourse against us, our directors and executive officers because we conduct our operations outside the United States and our current directors and executive officers reside outside the United States.

 

Our presence outside the United States may limit investors’ legal recourse against us. Our operating subsidiaries are incorporated under the laws of Mexico and all of our current directors and senior officers reside outside the United States, principally in Mexico. Substantially all of our assets and the assets of our current directors and executive officers are located outside the United States, principally in Mexico. As a result, investors may not be able to effect service of process within the United States upon our company or its directors and executive officers or to enforce U.S. court judgments obtained against our company or its directors and executive officers in Mexico or other jurisdictions outside the United States, including actions under the civil liability provisions of U.S. securities laws. In addition, it may be difficult for investors to enforce, in original actions brought in courts in jurisdictions outside the United States, liabilities predicated upon U.S. securities laws.

 

We do not expect to pay dividends on our Common Stock in the foreseeable future.

 

We do not expect to pay dividends on our Common Stock for the foreseeable future, and we may never pay dividends.  Consequently, the only opportunity for investors to achieve a return on their investment may be if a trading market develops, and investors are able to sell their shares for a profit or if our business is sold at a price that enables investors to recognize a profit, neither of which we can guarantee will ever take place. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, and growth plans.

 

We do not have an independent compensation committee, which presents the risk that compensation and benefits paid to those executive officers who are board members and other officers may not be commensurate with its financial performance.

 

A compensation committee consisting of independent directors is a safeguard against self-dealing by company executives. Our board of directors, is comprised of two executive officers and one other director, and absent an independent compensation committee currently determines the compensation and benefits of our executive officers, administers our employee stock and benefit plans, and reviews policies relating to the compensation and benefits of our employees Our lack of an independent compensation committee presents the risk that our executive officers on the board may have influence over their personal compensation and benefits levels that may not be commensurate with its financial performance.

 

Limitations on director and officer liability and indemnification of our officers and directors by it may discourage stockholders from bringing suit against an officer or director.

 

Our certificate of incorporation and by-laws provide, with certain exceptions as permitted by Delaware law, that a director or officer shall not be personally liable to us or our stockholders for breach of fiduciary duty as a director or officer, except for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage stockholders from bringing suit against a director or officer for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by stockholders on behalf of us against a director or officer.

 

We are responsible for the indemnification of our officers and directors.

 

Should our officers and/or directors require us to contribute to their defense in an action brought against them in their capacity as such, we may be required to spend significant amounts of our capital. Our certificate of incorporation and by-laws also provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of us. This indemnification policy could result in substantial expenditures, which we may be unable to recoup. If these expenditures are significant, or involve issues which result in significant liability for our key personnel, we may be unable to continue operating as a going concern.

 

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MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by, Qpagos audited annual financial statements and the related notes thereto, each of which appear elsewhere in this Current Report on Form 8-K. This discussion contains certain forward-looking statements that involve risks and uncertainties, as described under the heading “Forward-Looking Statements” in this Current Report on Form 8-K. Actual results could differ materially from those projected in the forward-looking statements. For additional information regarding these risks and uncertainties, please see the disclosure under the heading “Risk Factors” elsewhere in this Current Report on Form 8-K . The Management Discussion and Analysis of Financial Condition and Results of Operations below is based upon only the financial performance of Qpagos.

 

For information regarding the financial results of Asiya, you should refer to Asiya’s Annual Report on Form 10-K for the year ended October 31, 2015, filed with the SEC on December 10, 2015, and its Quarterly Report on Form 10-Q for the quarter ended January 31, 2016, filed with the SEC on February 19, 2016.

   

Overview and Financial Condition

 

Qpagos

 

Qpagos is a provider of next generation physical and virtual payment services that we introduced to the Mexican market in the third quarter of 2014. We have a ten-year renewable exclusive license agreement for the use of technology that can be used to perform services that are similar to services that have been successfully deployed with this technology in several European, Asian, North and South American countries.

 

Qpagos provides an integrated network of kiosks, terminals and payment channels that enable consumers to deposit cash, convert it into a digital form and remit the funds to any merchant in our network quickly and securely. Qpagos helps consumers and merchants connect more efficiently in markets and consumer segments, such as Mexico, that are largely cash-based and lack convenient alternatives for consumers to pay for goods and services in physical, online and mobile environments. For example, Qpagos licensed technology can be used to pay bills, add minutes to mobile phones, purchase transportation tickets, shop online, buy digital services or send money to a friend or relative.

 

Qpagos’ current focus is on Mexico which remains a cash-dominated society for retail consumer payments with approximately 80% of the value of personal payments exchanged in cash (Bank of Mexico). The penetration of electronic payment services, such as credit and debit cards and point of sale terminals, significantly lags behind more developed economies. Qpagos believes that opportunities for our services in Mexico are vast. With over 107 million mobile subscribers in Mexico, 88% of which are under prepaid plans, mobile top-up alone, was a $12 billion business in 2014 as reported by PwC Telecom in Mexico 2015, America Móvil 4Q’15. Qpagos believes that there is opportunity for growth in the Mexican market and has expanded to service providers beyond the mobile telephone operators to service provides of electricity, transportation, utilities, municipal services and taxes, consumer credit installments, insurance premiums, and many more. Altogether as of the first quarter of 2016 our platform had integrated 160 such services.

 

Qpagos’ primary strategy in Mexico to date has been the attraction of service providers as well as the deployment of kiosks through Redpag Electrónicos, our kiosk management subsidiary. In 2015, Qpagos generated net revenues of $1,510,369 from its operations in Mexico. Qpagos’ primary source of revenue are fees it receives for processing payments made by consumers to service providers. Qpagos also generates revenue from non-payment services such as kiosk rentals and sales. Qpagos currently has in excess of 160 service providers integrated into its payment gateway, which includes all mobile phone providers in Mexico as well as most utility companies, financial services, entertainment venues and others. As of December 31, 2015, Qpagos has deployed over 270 kiosks and terminals. Qpagos’ kiosks and terminals can be found at convenience stores, next to metro stations, retail stores, airport terminals, education centers, and malls in major urban centers, as well as many small and rural towns.

 

In addition, Qpagos has contracted for an electronic wallet which should enable consumers to hold balances in its kiosks for future use or to receive change. Launched in the first quarter of 2016 customers can now use cash and/or stored value in order to pay for goods and services across physical or virtual environments interchangeably. Also in the first quarter of 2016, Qpagos launched its mobile app by which smart phone users can now access the exact menu of services available in our kiosks and make payments from the convenience of their phones. To upload cash to the app they do it at the kiosks through the electronic wallet.

 

Qpagos believes that its platform provides simple and intuitive user interfaces, convenient access and best-in-class services. Qpagos runs its network and process its transactions using a proprietary, advanced technology platform that leverages the latest virtualization, analytics and security technologies to create a fast, highly reliable, secure and redundant system. Qpagos believes that the breadth and reach of our network, along with the proprietary nature of its technology platform, differentiate it from its competitors and allow it to effectively manage and update its services and realize significant operating leverage with growth in volumes.

 

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Management Discussion and Analysis of financial condition

 

The discussion and analysis of Qpagos’ financial condition and results of operations are based upon the audited consolidated financial statements as of December 31, 2015 and December 31, 2014 of Qpagos, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires Qpagos to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis Qpagos reviews its estimates and assumptions. The estimates are based on our historical experience and other assumptions that Qpagos believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions.

   

Results of Operations for the year ended December 31, 2015 and December 31, 2014

 

Net revenues

 

Net revenues in Qpagos were $1,510,369 and $137,250 for the year ended December 31, 2015 and 2014 respectively, an increase of $1,373,119 or 1,000.5%. Qpagos operates in Mexico and its functional currency is the Mexican Peso. Qpagos’ revenue in Mexican Pesos increased to MXN 23,965,826 from MXN 1,825,991 for the year ended December 31, 2015 and 2014, respectively, an increase of MXN 22,139,835 or 1,212.5%. The increase in revenue in MXN terms is primarily due to an increase in the volume of prepaid airtime sold, directly attributable to the increased deployment of kiosks during the current year, and we also increased the number of our customers over the prior year. The average US $ exchange rate has strengthened against the MXN over the prior year, from $13.304133 to $15.867526 or 19.3%, which results in a lower revenue growth in US $ terms of $291,013.

 

Cost of goods sold

 

Cost of goods sold in Qpagos was $1,521,128 and $132,988 for the years ended December 31, 2015 and 2014, respectively, an increase of $1,388,140 or 1,043.8%. Qpagos operates in Mexico and its functional currency is the Mexican Peso. Qpagos’ cost of sales in Mexican Pesos increased to MXN 24,364,147 from MXN 1,769,291 for the year ended December 31, 2015 and 2014, respectively, an increase of MXN 22,594,856 or 1,277.1%. The increase in cost of sales in MXN terms is primarily due to the increase in the volume of prepaid airtime sold which is directly attributable to the increased deployment of kiosks during the current year and also includes a once off charge of MXN 2,625,728 for stand-alone kiosk components, cash and coin acceptors and printers, which were sourced separately from the kiosks and were retrofitted. Cost of goods consists primarily of services acquired from third parties, such as prepaid air time and the cost of the kiosks and any retrofitted components. The average US $ exchange rate has strengthened against the MXN over the prior year, from $13.304133 to $15.867526 or 19.3%, which results in a lower cost of sales in US $ terms of $293,085.

 

Gross (loss) profit

 

Gross (loss) in Qpagos was $(10,759) and gross profit in Qpagos was $4,262 for the years ended December 31, 2015 and 2014, respectively, an increase in loss of $15,021 or 352.4%. Qpagos operates in Mexico and our functional currency is the Mexican Peso. This increase in loss is primarily attributable to the once off charge for retrofitting the cash and coin acceptors and printers into our existing kiosk, discussed under cost of sales above.

 

Total expenses

 

Total expenses in Qpagos were $2,038,524 and $1,295,135 for the years ended December 31, 2015 and 2014, respectively, an increase of $743,389 or 57.4%. Qpagos operates in Mexico and our functional currency is the Mexican Peso. The average US $ exchange rate has strengthened against the MXN over the prior year, from $13.304133 to $15.867526 or 19.3%, which results in a lower total expenses of approximately $403,828 in US $ terms.

 

Total expenses consisted primarily of the following:

 

· General and administrative expenditure was $2,000,714 and $1,264,535 for the years ended December 31, 2015 and 2014, respectively, an increase of $736,119 or 58.2%. Qpagos has operations in Mexico and a US holding company presence which incurs some expenditure.

 

§ The general and administrative expenditure in Mexico increased to MXN 22,559,541 from MXN 15,111,165 for the years ended December 31, 2015 and 2014, respectively, an increase of MXN 7,448,376 or 49.3%. The increase is primarily due to:

 

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o Payroll expenses increased by MXN 4,255,172 or 85.4% to MXN 9,235,055 from MXN 4,979,883 due to an increase in our Mexican headcount from 18 to 31 contractors;
o An increase in our foreign employees expenses of MXN 1,694,292 or 30.7% to MXN 7,205,134 from MXN 5,510,842, to assist with our software development;
o An increase in importation costs of approximately MXN 587,098 due the importation of a higher volume of kiosks;
o An increase in logistic expenditure as we increased our market penetration by deploying and installing kiosks nationwide.

 

§ The general administrative expenses incurred by Qpagos in the US, during the 2015 year, amounted to US$ 422,600, which primarily consists of stock based compensation charges of $166,715 related to consulting agreements entered into with a management consultant; consulting fees paid to IT consultants and management consultants of $178,843 and general corporate legal expenditure of $48,327 due to the amount of legal activity involved in setting up the corporation; entering into the various reverse merger agreements with the Mexican operations and preparation of private placement memorandum for the fund raising completed during the current year.

   

Other (expense) income

 

Other expense in Qpagos was an expense of ($ 9,991) and an income of $2,419 for the years ended December 31, 2015 and 2014, respectively. Qpagos other expense consists of lease payments paid to store owners for placement of kiosks in their premises in the current year.

 

Interest expense, net

 

Interest expense in Qpagos of $3,319 during the current year consists primarily of interest on a loan due to YP Holdings, which was not exchanged for shares in Qpagos along with the other loans. This loan with a principal balance of $100,000 remains outstanding and earns interest at 12% per annum.

 

Foreign currency loss

 

The foreign currency loss in Qpagos was $466,920 and $200,875 for the years ended December 31, 2015 and 2014, respectively, an increase of $266,045. The increase is primarily due to the deterioration of the Mexican Peso against the US Dollar over the reporting period. All monetary assets and liabilities which are denominated in US $ that were either settled or remain outstanding at the year-end gave rise to an increase in the loss, there are also significant intercompany balances between the US holding company and the Mexican subsidiaries which arose during the 2015 year, as funds raised in the US were invested in the Mexican operations, these intercompany balances result in an increased foreign exchange loss. The average US $ exchange rate for the years ended December 31, 2015 and 2014, was $15.867526 and $13.304133, respectively, a strengthening of 19.3%, the rate of exchange as of December 31, 2015 and 2014, was $17.373473 and $14.71699, respectively, a strengthening of 18.1%.

 

Net loss

 

Qpagos incurred a net loss of $2,529,513 and $1,489,318, for the years ended December 31, 2015 and 2014, respectively, an increase of $1,040,195 or approximately 69.8%, and which consist of the various items discussed above.

 

Liquidity and Capital Resources .

 

To date, Qpagos’ primary sources of cash have been funds raised from the sale of its securities and the issuance of debt as well as revenue derived from operations. During the year ended December 31, 2015 Qpagos raised gross proceeds of $2,990,000 from the issuance of 2,392,000 common units at a price of $1.25 per unit, each unit consisting of one share of common stock and one warrant to acquire a share of common stock at an exercise price of $1.25 per share, the total share issue expenses incurred in this private placement amounts to $388,700, realizing net proceeds of $2,601,300. Qpagos also issued debt securities in the principal amount $685,001 to several private investors during the current year to fund the operations of the business through its development stage. The majority of these loans together with loan funds raised in the prior year of $2,324,422 were exchanged for common shares in Qpagos upon consummation of the reverse merger between the newly formed US corporation and the two Mexican operating companies, Redpag Electrónicos S.A.P.I. de C.V. and QPagos, S.A.P.I. de C.V. (the Mexican operating company). Included in the $685,001 is a debt security of $100,000, which was not converted to equity and is expected to be repaid in 2016. Qpagos will need to generate additional revenue from operations and/or obtain additional financing to pursue its business strategy or to take advantage of opportunities that may arise. These factors raise substantial doubt about its ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on the Qpagos consolidated financial statements as of and for the year ended December 31, 2015 with respect to this uncertainty.  To meet our financing needs, we are considering multiple alternatives, including, but not limited to, additional equity financings and, debt financings and/or funding from partnerships. There can be no assurance that we will be able to complete any such transactions on acceptable terms or otherwise.

 

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At December 31, 2015, Qpagos had cash of $832,159 and a working capital of $1,849,829. We believe that the current cash balances together with revenue anticipated to be generated from operations will be sufficient to meet Qpagos’ current working capital needs.

 

Qpagos utilized $2,678,026 and $2,270,858 of cash in operating activities for the years ended December 31, 2015 and 2014, respectively, an increase of $407,168 or 17.9%. Primarily due to an increase in operating losses of $1,040,195, discussed above, an increase in non-cash flow items of $172,339 primarily due to the equity based compensation charge of $166,715 for the current year; offset by a reduction in the investment in working capital of $460,688 over the prior year, primarily due to lower investment in inventory during the current financial year.

 

Qpagos utilized $219,779 and $132,171 in investing activities for the years ended December 31, 2015 and 2014, respectively, an increase of $87,608 or 66.3%. In the prior year, the company purchased plant and equipment during its development stage, during the current year, the investment consisted primarily of the acquisition of the license agreement from the Licensor for $215,000.

 

Qpagos raised $3,286,301 and $2,377,625 from investing activities for the years ended December 31, 2015 and 2014, respectively, an increase of $908,676 or 38.2%. The Company raised $2,324,422 and $685,001 in loan funds for the years ended December 31, 2014 and 2015, respectively. These loan funds, with the exception of $100,000 were converted into equity on August 31, 2015. Qpagos raised a net $2,601,300 after a placement agents’ commission of $388,700 through a private placement with Paulson during the current year. These funds were used to fund the operations and investing activities while Qpagos developed the Mexican market.

 

Qpagos has incurred an accumulated deficit of $4,019,428 through December 31, 2015 and incurred negative cash flow from operations of $2,678,026 for the year ended December 31, 2015. Qpagos has spent, and need to continue to spend, substantial amounts in connection with implementing its business strategy, including our planned product development effort and will be required to raise additional funding.

 

Qpagos has minimal commitments going forward, primarily a lease of premises, with a future commitment of $32,748 for the year ending December 31, 2016.

 

Qpagos entered into an additional ten-year licensing agreement with the Licensor on May 1, 2015, whereby it is committed to pay an annual license fee of $20,000 to the Licensor for an exclusive license for the Mexican market of certain revenue payment services.

 

The primary financial commitments of Qpagos as of the date hereof are payments owed under the License Agreement. The minimum commitments due under the license agreement is summarized as follows:

 

    Amount  
       
2016   $ 20,100  
2017     20,100  
2018     20,100  
2019     20,100  
2020 and thereafter     107,167  
    $ 187,567  

 

EMPLOYEES

 

As of December 31, 2015, Qpagos had 2 full time employees, which are its and our executive officers and 31 full time contractors provided to Qpagos by an outsourcing company and designated to perform full the services to Qpagos and no part time employees. None of these employees are subject to collective bargaining agreements. Neither we nor Qpagos have employment agreements with any employees other than our Chief Executive Officer, Gaston Pereira and our Chief Operating Officer, Andrey Novikov. See “Executive Compensation.” Qpagos also enters into consulting arrangements for IT and operational services.

 

DESCRIPTION OF PROPERTIES

 

Qpagos leases approximately 1,600 square feet in Mexico City at Paseo de la Reforma 404, where its corporate offices are located. The lease is for a term of 36 months with a three month termination clause. The current lease commenced in December 16, 2013, expires in December 16, 2016 and provided for a monthly rental of approximately $3,425 for 2014 and $2,929 for 2015. The annual rental payments for 2016 are expected to be approximately $32,748. We believe these facilities are in good condition and adequate to meet our current and anticipated requirements. We believe our leased office space is adequate for its current needs.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of May 12, 2016 for:

 

each of our directors and nominees for director;

 

  each of our named executive officers;

 

  all of our current directors and executive officers as a group; and

 

  each person, entity or group, who beneficially owned more than 5% of each of our classes of securities.

  

We have based our calculations of the percentage of beneficial ownership on 54,954,000 shares of our common stock. We have deemed shares of our common stock subject to warrants that are currently exercisable within 60 days of May 12, 2016 to be outstanding and to be beneficially owned by the person holding the warrant or restricted stock unit for the purpose of computing the percentage ownership of that person. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.

 

Unless otherwise indicated, the mailing address of each beneficial owner is c/o QPAGOS Corporation, 1900 Glades Road., Suite 265, Boca Raton, Florida 33431.

 

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The information provided in the table is based on our records, information filed with the SEC, and information provided to us, except where otherwise noted.

 

 
Name and Address of
Beneficial Owner
  Amount and
Nature of
Beneficial
Ownership
Common Stock
Included
    Percentage of
Common Stock
Beneficially
Owned
 
             
Gaston Pereira (Chief Executive Officer)     2,880,000 (1)     5.2 %
                 
Andrey Novikov (Chief Operating Officer)     1,440,000 (2)     2.6 %
                 
Sam Harake (Director)     3,865,000 (3)     6.9 %
                 
Mark Korb (Chief Financial Officer)     25,000 (4)     *  
                 
Irina Galikhanova     3,800,000 (5)     6.9 %
                 
Panatrade Business Limited     3,507,540 (6)     6.4 %
                 
Delinvest Commercial Ltd.     4,047,781 (7)     7.4 %
                 
Olga Akhmetova     3,889,448 (8)     7.1 %
                 
Huppay Global Corp.     5,965,430 (9)     10.9 %
                 
Newvello Ltd.     3,200,000 (10)     5.8 %
                 
Strategic IR     3,150,000 (11)     5.7 %
                 
Gibbs International, Inc.     4,300,000 (12)     7.8 %
                 
All officers and directors as a group (4 persons)     6,265,000       11.4 %

 

*Less than 1%

 

(1) Consists of 2,880,000 shares of Asiya common stock that were exchanged for 1,440,000 shares of Qpagos common stock
(2) Consists of 1,440,000 shares of Asiya common stock that were exchanged for 720,000 shares of Qpagos common stock
(3) Consists of 1,920,000 shares of Asiya common stock that is owned by Eurosa, Inc., which were exchanged for 960,000 shares of Qpagos common stock. Sam Harake is the principal of Eurosa, Inc. Also consists of 1,065,000 shares of Asiya common stock issued to Gibbs Investment Holdings for consulting services that were exchange for 532,500 shares of Qpagos common stock. Sam Harake is the manager of Gibbs Investment Holdings. Also includes warrants exercisable for 880,000 shares of Asiya common stock
(4) Consists of 25,000 shares of Asiya common stock that were purchased in connection with the Merger
(5) Consists of 3,800,000 shares of Asiya common stock that were exchanged for 1,900,000 shares of Qpagos common stock
(6) Consists of 3,507,540 shares of Asiya common stock that were exchanged for 1,753,770 shares of Qpagos common stock. The principal of Panatrade Business Limited is Fermin Milciades Castanedas Chacon or by Power of Attorney Victor Amirov and the address is Parque Lefevre Condominio Maria Nr. 5B Republic of Panama
(7) Consists of 3,889,448 shares of Asiya common stock that were exchanged for 1,944,724 shares of Qpagos common stock and 158,333 common shares that were purchased in a private sale of Asiya stock. The principal of Delinvest Commercial Ltd. is Alex Motorin and the address is Drake Chambers, P.O. Box 3321 Road Town, Tortola, British Virgin Islands
(8) Consists of 3,889,448 shares of Asiya common stock that were exchanged for 1,944,724 shares of Qpagos common stock.  The address for Olga Akhmetova is 9 Gzhatskaya Street, Apt. 100, Saint Petersburg, Russia 195220
(9) Consists of 5,965,430 shares of Asiya common stock that were exchanged for 2,982,715 shares of Qpagos common stock. The principal of Huppay Global Corp. is Director, A.J.K. CORPORATE MANAGEMENT INC., represented by Cherlin Armstrong as a sole director and the address is 33 Porter Road. P.O. Box 3169 PMB 103. Road Town, Tortola, British Virgin Islands
(10) Consists of 3,200,000 shares of Asiya common stock that was exchange for 1,600,000 shares of Qpagos common stock. The principal of Newvello Ltd.  is Vladimir Skigin and the address is P.O. Box 146, Road Town, Tortola, British Virgin Islands

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(11) Consists of 1,250,000 shares of Asiya common stock that were exchanged for 625,000 shares of Qpagos common stock and 1,900,000 common shares that were purchased in a private sale of Asiya stock. The principal of Strategic IR is Anna Mosk who address is 109 E. 17-th Street #25, Cheyenne, WY  82001
(12) Consists of 2,800,000 shares of Asiya common stock that were exchanged for 1,400,000 shares of Qpagos common stock and 1,500,000 common shares that were acquired by Gibbs International, Inc. in a private sale of Asiya stock. Jimmy Gibbs is the principal of Gibbs International, Inc. The address of Gibbs International, Inc. is 9855 Warren H. Abernathy Highway, Spartanburg, South Carolina 29301

 

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

The table below sets certain information concerning our executive officers and directors as of the closing of the Merger, including their names, ages, anticipated positions with us. Our executive officers are chosen by our Board and hold their respective offices until their resignation or earlier removal by the Board.

 

In accordance with our certificate of incorporation, incumbent directors are elected to serve until our next annual meeting and until each director’s successor is duly elected and qualified.

 

Name   Age   Position
         
Gaston Pereira   69   Chief Executive Officer and Chairman of the Board
Andrey Novikov   44   Chief Operating Officer, Secretary and Director
Sam Harake   48   Director
Mark Korb   48   Chief Financial Officer

 

The following information pertains to the members of our Board effective as of the closing of the Merger, their principal occupations and other public company directorships for at least the last five years and information regarding their specific experiences, qualifications, attributes and skills:

 

Gaston Pereira - President, Chief Executive Officer and Chairman of the Board

 

Since the incorporation of Qpagos, Mr. Pereira has served as its President, Chief Executive Officer and Chairman of the Board and has served in the same capacity for each of Qpagos, S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V. since their incorporation in Mexico in November 2013. From August 2013 until November 2013, Mr. Pereira served as a consultant to Panatrade, Inc., an international business consulting firm, where he was responsible for the research and development of a strategy for implementation of electronic payment services in Mexico. Panatrade, Inc. was the largest stockholder of Qpagos and Redpag until it distributed its interest in each of Qpagos and Redpag to its stockholders. From July 2012 until July 2013, he served as the Chief Marketing Officer of Liberty Card, Inc., where he was responsible for developing the strategy for the 24/7 CARD. From June 2010 until July 2012, he was President of SUMACARD, a program manager for prepaid debit cards. He also served as the President of STAR Strategic Partners, LLC, a consulting firm from January 2009 until July 2012, providing market and telecom consulting to the Hispanic market and from March 2004 until October 2008, he served as Chief Sales and Marketing Officer for SIGUE, Corp. a money transfer operator. We chose Mr. Pereira to serve as a member of our Board of Director due to his vast knowledge of the Hispanic market and our industry, as well extensive experience in banking in the region (CITIBANK), as well as in the telecom industry (Bell Atlantic, Tellabs).

 

Andrey Novikov - Chief Operating Officer and Director

 

Mr. Novikov has served as the Chief Operating Officer and a director of Qpagos and has served in the same capacity for each of Qpagos, S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V. since their incorporation in Mexico since April 2014. Mr. Novikov served as the QIWI Vice President of International Business Development from May 2008 until 2012, where as Vice President of International Business Development he had a leading role in QIWI startups in several countries, including China, Brazil, Argentina, Chile, and Peru. From December 2012 until October 2014, Mr. Novikov serves as an adviser for QIWI International Development. We chose Mr. Novikov to serve as a member of our Board of Director due to his vast knowledge of the industry.

 

Sam Harake, Director

 

Mr. Harake was appointed to our Board of Directors in May 2016.  He is currently a partner/managing director of Gibbs Investment Holding, a multi-class asset investment company, including technology, energy and software development businesses. From 2009 to 2015 he was the principal of Eurofund Holdings, a holding company that invests in technology companies, customer support businesses, online sales and marketing verticals. From 2008 to 2015, Mr. Harake served as an advisor to the president of the Union of Comoros, Ambassador at Large and the Honorary Consul of the Union of Comoros in Turkey, Comoros Alt Rep at the United Nations. From 2004 to 2006 he served as the Middle East Representative of Eurosa Corporation Ltd, an international trading house. Mr. Harake’s international business experience makes him a valuable member of our Board of Directors.

 

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Mark Korb, Chief Financial Officer

 

Mark Korb has served as the Chief Financial Officer of Qpagos since June 2015 and as the Chief Executive Officer of Asiya from May 6, 2016 until May 12, 2016 and Chief Financial Officer of Asiya since May 6, 2016.  Mr. Korb has over 20 years’ experience with high-growth companies and experience taking startup operations to the next level.  Mr. Korb also serves as Chief Financial Officer of Icagen, Inc. a biotech company and First South Africa Management, a company. First South Africa Management provides financial management and strategic management services to various companies.

 

From 2007 to 2009 Mr. Korb was the group chief financial officer and director of Foodcorp (Proprietary) Limited (“Foodcorp”), a multimillion dollar consumer goods company based in South Africa. In his role as chief financial officer, Mr. Korb delivered operational and strategic leadership for the full group financial function during a period of change including Mergers, acquisitions and organic growth. As a board director he cultivated relationships with shareholders, bond holders, financial institutions, rating agencies, and auditors. Mr. Korb was also responsible for leading the group IT strategy and implementation and supervised 16 direct reports including 10 divisional financial directors. From 2001 to 2007 Mr. Korb was the group Chief Financial Officer of First Lifestyle, initially a publicly traded company on the Johannesburg Stock Exchange in South Africa which was then purchased by management which included Mr. Korb. He anchored the full group financial function with responsibility for mergers and acquisitions activity, successfully leading the process whereby the Company was sold to Foodcorp mentioned above. Upon completion of the merger, Mr. Korb was appointed as the group Chief Financial Officer of Foodcorp.

 

Involvement in Legal Proceedings

 

To the Company’s knowledge, none of our officers or our directors has, during the last ten years:

 

  · been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
     
  · had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

 

  · been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

 

  · been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

 

  · been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

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  · been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

To the Company’s knowledge, there are no material proceedings to which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or any associate of any such director, officer, affiliate of the Company, or security holder is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.

 

Arrangements for Appointment of Directors and Officers

 

Pursuant to the Merger Agreement, as of the Closing Date, Qpagos has the right to appoint each of the directors of the Company and has the right to designate all of the executive officers of the Company.

 

The disclosures set forth in Item 5.01 of this Current Report on Form 8-K are incorporated by reference into this item.

 

Family Relationships

 

There are no family relationships among the members of our Board or our executive officers.

 

Composition of the Board

 

In accordance with our certificate of incorporation, our Board is elected annually as a single class.

   

Communications with our Board of Directors

 

Our stockholders may send correspondence to our board of directors c/o the Corporate Secretary at QPAGOS Corporation, 1900 Glades Road, Suite 265, Boca Raton, Florida 33431. Our corporate secretary will forward stockholder communications to our board of directors prior to the board’s next regularly scheduled meeting following the receipt of the communication.

 

Code of Business Conduct and Ethics

 

Effective as of May 12, 2016, the Company adopted a Code of Business Conduct and Ethics that applies to, among other persons, our president or chief executive officer as well as the individuals performing the functions of our chief financial officer, corporate secretary and controller. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:

  

  · honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

  · full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to regulatory agencies, including the Securities and Exchange Commission;

 

  · the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and

 

  · accountability for adherence to the Code of Business Conduct and Ethics.

 

Our Code of Business Conduct and Ethics requires, among other things, that all of our personnel be afforded full access to our president or chief executive officer with respect to any matter which may arise relating to the Code of Business Conduct and Ethics. Further, all of our personnel are to be afforded full access to our board of directors if any such matter involves an alleged breach of the Code of Business Conduct and Ethics by our president or chief executive officer.

 

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In addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly managers and/or supervisors, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal, provincial and state securities laws. Any employee who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to his or her immediate supervisor or to our president or chief executive officer. If the incident involves an alleged breach of the Code of Business Conduct and Ethics by our president or chief executive officer, the incident must be reported to any member of our board of directors or use of a confidential and anonymous hotline phone number. Any failure to report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our company policy to retaliate against any individual who reports in good faith the violation or potential violation of our Code of Business Conduct and Ethics by another. Our Code of Business Conduct and Ethics is available, free of charge, to any stockholder upon written request to our Corporate Secretary at QPAGOS Corporation, 1900 Glades Road, Suite 265, Boca Raton, Florida 33431.  A copy of our Code of Business Conduct and Ethics is also attached as an exhibit to this Current Report on Form 8-K.

 

CORPORATE GOVERNANCE

 

Board Committees

 

Our board of directors intends to establish an audit committee, a nominating and governance committee and a compensation committee. The audit committee will review the results and scope of the audit and other services provided by the independent auditors and review and evaluate the system of internal controls. The compensation committee will manage any stock option plan we may establish and review and recommend compensation arrangements for the officers. The nominating and governance committee will assist our board of directors in fulfilling its oversight responsibilities and identify, select and evaluate our board of directors and committees. No final determination has yet been made as to the memberships of the other committees.

 

We will reimburse all directors for any expenses incurred in attending directors’ meetings provided that we have the resources to pay these fees. We will provide officers and directors liability insurance.

 

Leadership Structure

 

The chairman of our board of directors and chief executive officer positions are currently the same person, Mr. Pereira. Our bylaws do not require our board of directors to separate the roles of chairman and chief executive officer but provides our board of directors with the flexibility to determine whether the two roles should be combined or separated based upon our needs.  Our board of directors believes the combination of the chairman and the chief executive officer roles is the appropriate structure for the company at this time. Our board of directors believes the current leadership structure serves as an aid in the board of directors’ oversight of management and it provides us with sound corporate governance practices in the management of our business.

 

Risk Management

 

The board of directors discharges its responsibilities, and assesses the information provided by our management and the independent auditor, in accordance with its business judgment.  Management is responsible for the preparation, presentation, and integrity of the Company's financial statements, and management is responsible for conducting business in an ethical and risk mitigating manner where decisions are undertaken with a culture of ownership.  Our board of directors oversees management in their duty to manage the risk of our company and each of our subsidiaries. Our board of directors regularly reviews information provided by management as management works to manage risks in the business. Our board of directors intends to establish board committees to assist the full board of directors’ oversight by focusing on risks related to the particular area of concentration of the relevant committee. For example, the compensation committee will oversee risks related to our executive compensation plans and arrangements, the audit committee will oversee the financial reporting and control risks and the nominating and governance committee will oversee risks associated with the independence of our board of directors and potential conflicts of interest. If a risk is of sufficient magnitude, a committee will report on the discussions of the applicable relevant risk to the full board of directors during the committee reports portion of the board of directors meetings. The full board of directors will incorporate the insight provided by these reports into its overall risk management analysis.

 

Meetings

 

No director who served as a director during the past year of Qpagos attended fewer than 75% of the aggregate of the total number of meetings of the Qpagos board of directors.

 

 

EXECUTIVE COMPENSATION

 

Qpagos became our wholly owned subsidiary as a result of the consummation of the Merger on May 12, 2016. The following table summarizes all compensation earned in each of Qpagos and its subsidiaries during its last two fiscal years ended December 31, 2015 and 2014 by: (i) its principal executive officer; and (ii) its most highly compensated executive officer other than the principal executive officer who was serving as an executive officer of Qpagos as of the end of the last completed fiscal year. The tables below reflect the compensation for the Qpagos executive officers who are also named executive officers of the combined company.

 

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Summary Compensation Table

 

The following table lists the summary compensation of Qpagos and its subsidiaries named executive officers for the prior two fiscal years (Qpagos was incorporated in 2015 and its subsidiaries were incorporated in 2013): 

 

Name and principal
position
  Year     Salary     Bonus     Stock
awards
    Option
awards
    All
other
comp.
    Total  
                                           
Gaston Pereira/Chief Executive Officer (1)     2015      $ 240,000       -     $ 288,000       -     $ 21,600 a   $ 549,600  
      2014      $ 240,000       -     $ -       -     $ 21,600 a   $ 261,600  
                                                         
Andrey Novikov/Chief Operating Officer (2)     2015      $ 165,976       -     $ 144,000       -     $ 51,946 b   $ 361,922  
      2014      $ 103,446       -       -       -     $ 14,780 c   $ 118,226  
                                                         
Mark Korb/Chief
Financial Officer (3)
    2015      $ 37,500       -       -       -       -     $ 37,500  
      2014      $ -       -       -       -       -       -  

 

(a) Consists of an annual housing allowance of $21,600.
(b) Consists of a housing allowance of $25,946, a vehicle allowance of $16,000 and a relocation allowance of $10,000
(c) Consists of a housing allowance of $14,780

 

(1) Mr. Pereira has served as the President, Chief Executive Officer and Treasurer and a director of Qpagos and has served in the same capacity for each of Qpagos, S.A.P.I. de C.V. and Redpag Electronicos S.A.P.I. de C.V. since their incorporation in Mexico in November 2013.
(2) Mr. Novikov has served as our Chief Operating Officer and a director of Qpagos and has served in the same capacity for each of Qpagos, S.A.P.I. de C.V. and Redpag Electronicos S.A.P.I. de C.V. since their incorporation in Mexico in April 2014.
(3) Mr. Korb has served as Chief Financial Officer of Qpagos since June 2015. Qpagos pays Mr. Korb’s employer, First South Africa Management a fee of $7,500 per month.

 

Agreements with Named Executive Officers

 

On May 18, 2015, Qpagos entered into a three-year employment agreement with Gaston Pereira to serve as its Chief Executive Officer, President and Treasurer. During the term of the employment agreement, Mr. Pereira receives an annual base salary of not less than $240,000 and is entitled to an annual performance cash bonus targeted at up to 50% of his base salary, in the discretion of the board of directors. Mr. Pereira was issued 1,440,000 shares of Qpagos common stock that vest on the one-year anniversary of the date of issuance. Mr. Pereira is generally entitled to receive all other benefits provided to other employees, including health and disability insurance. He also receives a housing allowance of $1,800 a month. The agreement also provides for a one- time payment of moving expenses up to $25,000 and $10,000 of reimbursement of fees of a tax attorney for professional services regarding legal advice in connection with the employment agreement.

 

On May 18, 2015, Qpagos entered into a three-year employment agreement with Andrey Novikov to serve as its Chief Operating Officer and Secretary. During the term of the employment agreement, Mr. Novikov receives an annual base salary of not less than $180,000 and is entitled to an annual performance cash bonus targeted at up to 50% of his base salary, in the discretion of the board of directors. Mr. Novikov was issued 720,000 shares of Qpagos common stock that vest on the one year anniversary of the date of issuance. Mr. Novikov is generally entitled to receive all other benefits provided to other employees, including health and disability insurance. He also receives a housing allowance of approximately $2,000 a month. The agreement also provides for a one- time payment of moving expenses up to $15,000.

 

The employment agreement with each of Mr. Pereira and Mr. Novikov (the “Employment Agreements”) also include confidentiality obligations and inventions assignments by each of Mr. Pereira and Mr. Novikov (the “Executives”) and non-solicitation and non-competition provisions.

 

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The Employment Agreements have a stated term of three years but may be terminated earlier pursuant to their terms. If the Executive’s employment is terminated for any reason, he or his estate as the case may be, will be entitled to receive the accrued base salary, vacation pay, expense reimbursement and any other entitlements accrued by him to the extent not previously paid (the “Accrued Obligations”); provided , however , that if his employment is terminated (i) by us without Cause or by the Executive for Good Reason (as each is defined below) then in addition to paying the Accrued Obligations, (x) we will continue to pay his then current base salary and continue to provide benefits at least equal to those which were provided at the time of termination for a period of 12 months and (y) he shall have the right to exercise any vested equity awards until the earlier of six months after termination or the remaining term of the awards, or (ii) by reason of his death or Disability (as defined in the Employment Agreements), then in addition to paying the Accrued Obligations, he would have the right to exercise any vested options until the earlier of six months after termination or the remaining term of the awards. In such event, if the Executive commenced employment with another employer and becomes eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits to be provided by us as described herein will terminate.

 

The Employment Agreements provide that upon the closing of a “Change in Control” (as defined below), all unvested options shall immediately vest and the time period that the Executive will have to exercise all vested stock options and other awards that the Executive may have will be equal to the shorter of: (i) six months after termination, or (ii) the remaining term of the award(s). If within one year after the occurrence of a Change in Control, the Executive terminates his employment for “Good Reason” or we terminate his employment for any reason other than death, disability or Cause, the Executive will be entitled to receive: (i) the portion of his base salary for periods prior to the effective date of termination accrued but unpaid (if any); (ii) all unreimbursed expenses (if any); (iii) an aggregate amount (the “Change in Control Severance Amount”) equal to two times the sum of the base salary plus an amount equal to the bonus that would be payable if the “target” level performance were achieved under our annual bonus plan (if any) in respect of the fiscal year during which the termination occurs (or the prior fiscal year if bonus levels have not yet been established for the year of termination); and (iv) the payment or provision of any other benefits.

 

For the purposes of the Employment Agreement “Change in Control” is defined as: (i) any person or entity becoming the beneficial owner, directly or indirectly, of our securities representing 50% of the total voting power of all its then outstanding voting securities; (ii) a Merger or consolidation of our company in which its voting securities immediately prior to the Merger or consolidation do not represent, or are not converted into securities that represent, a majority of the voting power of all voting securities of the surviving entity immediately after the Merger or consolidation; or (iii) a sale of substantially all of our assets or our liquidation or dissolution.

 

For purpose of the Employment Agreement, “Good Reason” is defined as the occurrence of any of the following events without Executive’s consent: (i) a material reduction in the Executive’s base salary (other than an across-the-board decrease in base salary applicable to all of our executive officers; (ii) a material breach of the employment agreement by us; (iii) a material reduction in the Executive’s duties, authority and responsibilities relative to the Executive’s duties, authority, and responsibilities in effect immediately prior to such reduction; or (iv) the relocation of the Executive’s principal place of employment, without Executive’s consent, in a manner that lengthens his one-way commute distance by 50 or more miles from his then-current principal place of employment immediately prior to such relocation.

 

For purposes of the Employment Agreements, “Cause” is defined as (i) Executive's conviction (which, through lapse of time or otherwise, is not subject to appeal) of any crime or offense involving money or other property of our company or its subsidiaries or which constitutes a felony in the jurisdiction involved; (ii) Executive's performance of any act or his failure to act, for which if he were prosecuted and convicted, a crime or offense involving money or property of our company or its subsidiaries, or which would constitute a felony in the jurisdiction involved would have occurred; (iii) Executive's breach of any of the representations, warranties or covenants set forth in the Employment Agreement; or (iv) Executive's continuing, repeated, willful failure or refusal to perform his duties required by the Employment Agreement, provided that Executive shall have first received written notice from us stating with specificity the nature of such failure and refusal and affording Executive an opportunity, as soon as practicable, to correct the acts or omissions complained of.

 

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Outstanding Equity Awards at Fiscal Year End

 

The following table lists the outstanding equity awards held by Qpagos’ named executive officers at December 31, 2015:

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
    OPTION AWARDS (1)   STOCK AWARDS  
                Equity
Incentive Plan
                            Equity
Incentive Plan
    Equity
Incentive
Plan
Awards:
 
                Awards:                       Market     Awards:     Market  
    Number of     Number of     Number of                 Number of    

Value of

    Number of     or Payout  
    Securities     Securities     Securities                 Shares or     Shares or     Unearned     Value of  
    Underlying     Underlying     Underlying                 Units of     Units of     Shares, Units or     Unearned Shares,  
    Unexercised     Unexercised     Unexercised     Option     Option     Stock that     Stock that     Other Rights     Units or Other  
    Options     Options     Unearned     Exercisable     Expiration     have Not     have not     that have Not    

Rights  that have

 
Name   Exercisable     Unexercisable     Options     Price     Date     Vested     Vested     Vested     Not Vested  
                                                                         
Gaston Pereira     -       -       -       -       -       2,880,000     $ 288,000       -       -  
                                                                         
Andrey Novikov     -       -       -       -       -       1,440,000     $ 144,000       -       -  
                                                                         
Mark Korb     -       -       -       -       -       -       -       -       -  

 

Director Compensation

 

Qpagos did not pay any fees to any of our directors for their service as directors; however, each of Messrs. Pereira and Novikov received compensation for service as officers of our company.

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Transactions with Related Persons

 

The following includes a summary of any transaction occurring since January 1, 2014 for Qpagos and its subsidiaries since November 1, 2014 for Asiya, or any proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds $120,000, and in which any related person had or will have a direct or indirect material interest (other than compensation described under "Executive Compensation" above).  We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm's-length transactions:

  

In May 2015, Qpagos issued 2,880,000 (1,440,000 prior to entering into the merger agreement) shares of common stock to Gaston Pereira, in consideration of his services to be rendered as our Chief Executive Officer, and 1,440,000 (720,000 prior to entering into the merger agreement) shares of common stock to Andrey Novikov in consideration of his services to be rendered as our Chief Operating Officer.

 

On February 11, 2016 Qpagos entered into a consulting agreement with Yogipay Corporation, to provide consulting services to Yogipay Corporation in establishing operations in the United States similar to those conducted by Qpagos. In consideration of the provision of the services Qpagos was issed 3,000,000 shares of common stock of Yogipay Corporation. Mr. Harake is the manager of Gibbs Investment Holdings, the owner of 30.5% of the outstanding equity of Yogipay Corporation, and his spouse also owns 30.5% of the outstanding equity of Yogipay Corporation.

 

In February 2016, Qpagos issued 1,065,000 (532,000 prior to entering into the merger agreement) and 1,920,000 (960,000 prior to entering into the merger agreement) shares of common stock to Gibbs Investment Holdings and Eurosa, Inc., respectively, entities controlled by Sam Harake.

 

Asiya

 

None

 

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Review and Approval of Transactions with Related Persons

 

In reviewing and approving transactions with related persons, Qpagos’ board of directors considered all material factors in relation to such related person’s role in a proposed transaction, including, without limitation, the related person’s indirect or direct financial interest in the proposed transaction, other interests such related person may have in the proposed transaction, the terms and conditions of the proposed transaction, and whether such transaction is on an equivalent to arms-length basis. After reviewing and factoring all these considerations, Qpagos’ board of directors, determined whether to approve the proposed transaction with the respective related person. While Qpagos did not have any written polices with respect to review and approval of any such transactions with related persons, Qpagos’ believes the processes its board of directors has followed ensure the appropriateness of its entry into such transactions with related persons and that they were entered into on terms on an equivalent basis to an arms-length transaction.

 

Director Independence

 

Board of Directors

 

The Board, in the exercise of its reasonable business judgment, has determined that none of our directors qualifies as an independent director pursuant to Nasdaq Stock Market Rule 5605(a)(2) and applicable SEC rules and regulations. Mr. Pereira and Mr. Novikov currently employed as our and Qpagos Chief Executive Officer and Chief Operating Officer respectively, and therefore would not be considered independent directors. Mr. Harake is one of our consultants and has received cash compensation valued in excess of $100,000 and therefore would not be considered independent.

 

Potential Conflicts of Interest

 

Since we did not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees were performed by our directors. Thus, there was an inherent conflict of interest.

 

LEGAL PROCEEDINGS

 

From time to time we may be involved in claims arising in the ordinary course of business. No legal proceedings, governmental actions investigations or claims are currently pending against us or involve us.

 

RECENT SALES OF UNREGISTERED SECURITIES

 

In May 2015, Qpagos issued 1,667,150 (833,575 prior to entering into the merger agreement) shares of Common Stock to a consultant, in consideration of his services rendered. The issuances of the Common Stock were made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act as amended (the “Securities Act”) for the offer and sale of securities not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act and had adequate access, through employment, business or other relationships, to information about us.

 

In May 2015, Qpagos issued 2,880,000 (1,440,000 prior to entering into the merger agreement) shares of common stock to Gaston Pereira, in consideration of his services to be rendered as our Chief Executive Officer, and 1,440,000 (720,000 prior to entering into the merger agreement) shares of Common Stock to Andrey Novikov in consideration of his services to be rendered as our Chief Operating Officer. The issuances of the Common Stock were made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act as amended (the “Securities Act”) for the offer and sale of securities not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act and had adequate access, through employment, business or other relationships, to information about us.

 

In May 2015, Qpagos issued an aggregate of 29,094,222 (14,547,111 prior to entering into the merger agreement) shares of Common Stock to seventeen investors in consideration of the extinguishment of debt owed its subsidiaries. The issuance of the Common Stock were made in reliance on the exemption provided by Section 4(a)(2) of the Securities for the offer and sale of securities not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act and had adequate access, through employment, business or other relationships, to information about us.

 

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From May 2015 until December 2015 Qpagos raised $2,990,000 in a private financing of units and sold 2,392,000 units, each unit consisting of one share of common stock and one warrant to purchase common stock at an exercise price of $1.25 per share. The issuance of the warrants and common stock were made in reliance on the exemption provided by Section 4(a)(2) of the Securities for the offer and sale of securities not involving a public offering, and Regulation D promulgated under the Securities Act of 1933. After giving effect to the reverse merger, the 2,392,000 common shares outstanding were converted into 4,784,000 shares of Asiya Common Stock and the warrants are now exercisable for 4,784,000 common shares. In addition, we also issued to the placement agent in the offering 717,600 (358,800 prior to entering into the reverse merger agreement) warrant units each warrant unit consisting of a warrant to purchase one share of common stock and one additional warrant to purchase common stock, each at an exercise price of $1.25 per share. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act and had adequate access, through employment, business or other relationships, to information about us.

 

In June 2015, Qpagos issued 2,010,984 (1,005,492 prior to entering into the reverse merger agreement) shares of Common Stock to a consultant, in consideration of his services rendered. The issuances of the common stock were made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act as amended (the “Securities Act”) for the offer and sale of securities not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act and had adequate access, through employment, business or other relationships, to information about us.

 

In February 2016, Qpagos issued an aggregate of 5,145,000 (2,572,500 prior to entering into the reverse merger agreement) shares of our Common Stock to four consultants as consideration for consulting services. The issuances of the common stock were made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act for the offer and sale of securities not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act and had adequate access, through employment, business or other relationships, to information about us.

 

The description of the Merger in Item 2.01 is incorporated herein by reference. The issuance of the Common Stock was made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act for the offer and sale of securities not involving a public offering, promulgated under the Securities Act.

 

CONTROLS AND PROCEDURES

 

This report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the company’s registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

 

MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Our common stock is currently quoted on the OTC Pink Markets under the symbol “ASYP” To date, there has been limited trading in our common stock.

 

As of May 12, 2016 there were approximately 52 record holders of our common stock.

 

We paid no dividends or made any other distributions in respect of our common stock since inception and we have no plans to pay any dividends or make any other distributions in the future.

 

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DESCRIPTION OF CAPITAL STOCK

 

Our authorized capital stock consists of 100,000,000 shares of Common Stock, par value $0.0001 per share and 25,000,000 shares of preferred stock, par value $0.0001 per share.

 

Common Stock

 

Of the authorized Common Stock, 54,954,000 shares are outstanding as of immediately after the closing of the Merger and after giving effect to the shares to be issued to the former Qpagos stockholders as a result of the Merger. The holders of our Common Stock are entitled to receive dividends from our funds legally available therefor only when, as and if declared by our Board, and are entitled to share ratably in all of our assets available for distribution to holders of our Common Stock upon the liquidation, dissolution or winding-up of our affairs. Holders of our Common Stock do not have any preemptive, subscription, redemption or conversion rights. Holders of our Common Stock are entitled to one vote per share on all matters which they are entitled to vote upon at meetings of stockholders or upon actions taken by written consent pursuant to Nevada corporate law. The holders of our Common Stock do not have cumulative voting rights, which mean that the holders of a plurality of the outstanding shares can elect all of our directors. All of the shares of our Common Stock currently issued and outstanding are fully-paid and nonassessable. No dividends have been paid to holders of our Common Stock since our incorporation, and no cash dividends are anticipated to be declared or paid in the reasonably foreseeable future.

 

Preferred Stock

 

There are no shares of preferred stock outstanding.

 

Warrants

 

Pursuant to the terms of the Merger, we have assumed the warrants previously issued by Qpagos which after the Merger will be exercisable for a total of 6,219,200 shares of Common Stock. These warrants have a term of five years, are immediately exercisable and have an exercise price of $1.25 per share. The warrant holders are entitled to registration rights as described below. The exercise price and the number of shares underlying the warrants are subject to appropriate adjustment in the event of stock splits, stock dividends, stock combinations or similar events affecting our common stock. This description of the warrants does not purport to be a complete description of the rights and obligations of the parties thereunder, and such description is qualified in its entirety by reference to the form of warrant which is filed as an exhibit to this Current Report on Form 8-K.

 

Registration Rights

 

Qpagos entered into a Registration Rights Agreement with each investor in our 2015 private placement pursuant to which we have agreed to register the resale of the shares of Common Stock and shares of Common Stock underlying the Warrants that were issued to investors in Qpagos’ 2015 private placement and the shares of Common Stock underlying the warrants issued to the placement agent for the 2015 private placement (i) 90 days following the date on which our Common Stock begins trading on an exchange or in the over-the-counter market in the United States or (ii) if our fiscal year end falls within such 90-day period, 30 days following the date on which we would be required to file our Annual Report on Form 10-K.

 

Equity Compensation Plan Information

 

We currently do not have any equity compensation plans.

 

Anti-Takeover Effects of Certain Provisions of our Certificate of Incorporation, our By-Laws and Delaware Law

 

Anti-takeover Effects of Nevada Law

 

Business Combination

 

The “business combination” provisions of Sections 78.411 to 78.444, inclusive, of the Nevada Revised Statutes (“NRS”), generally prohibit a Nevada corporation with at least 200 stockholders from engaging in various “combination” transactions with any interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the transaction is approved by the board of directors prior to the date the interested stockholder obtained such status; and extends beyond the expiration of the three-year period, unless:

 

· the transaction was approved by the board of directors prior to the person becoming an interested stockholder or is later approved by a majority of the voting power held by disinterested stockholders, or

 

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· if the consideration to be paid by the interested stockholder is at least equal to the highest of: (a) the highest price per share paid by the interested stockholder within the three years immediately preceding the date of the announcement of the combination or in the transaction in which it became an interested stockholder, whichever is higher, (b) the market value per share of common stock on the date of announcement of the combination and the date the interested stockholder acquired the shares, whichever is higher, or (c) for holders of preferred stock, the highest liquidation value of the preferred stock, if it is higher.

 

A “combination” is generally defined to include Mergers or consolidations or any sale, lease exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions, with an “interested stockholder” having: (a) an aggregate market value equal to 5% or more of the aggregate market value of the assets of the corporation, (b) an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation, (c) 10% or more of the earning power or net income of the corporation, and (d) certain other transactions with an interested stockholder or an affiliate or associate of an interested stockholder.

 

In general, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years, did own) 10% or more of a corporation’s voting stock. The statute could prohibit or delay Mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire our Company even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.

 

Currently, we have no Nevada stockholders and since this offering will not be made in the State of Nevada, no shares will be sold to its residents. Further, we do not do business in Nevada directly or through an affiliate corporation and we do not intend to do so. Accordingly, there are no anti-takeover provisions that have the effect of delaying or preventing a change in our control.

 

Control Share Acquisition

 

The “control share” provisions of Sections 78.378 to 78.3793, inclusive, of the NRS apply to “issuing corporations,” which are Nevada corporations with at least 200 stockholders, including at least 100 stockholders of record who are Nevada residents, and which conduct business directly or indirectly in Nevada. The control share statute prohibits an acquirer, under certain circumstances, from voting its shares of a target corporation’s stock after crossing certain ownership threshold percentages, unless the acquirer obtains approval of the target corporation’s disinterested stockholders. The statute specifies three thresholds: one-fifth or more but less than one-third, one-third but less than a majority, and a majority or more, of the outstanding voting power. Generally, once an acquirer crosses one of the above thresholds, those shares in an offer or acquisition and acquired within 90 days thereof become “control shares” and such control shares are deprived of the right to vote until disinterested stockholders restore the right. These provisions also provide that if control shares are accorded full voting rights and the acquiring person has acquired a majority or more of all voting power, all other stockholders who do not vote in favor of authorizing voting rights to the control shares are entitled to demand payment for the fair value of their shares in accordance with statutory procedures established for dissenters’ rights.

 

A corporation may elect to not be governed by, or “opt out” of, the control share provisions by making an election in its articles of incorporation or bylaws, provided that the opt-out election must be in place on the tenth day following the date an acquiring person has acquired a controlling interest, that is, crossing any of the three thresholds described above. We have not opted out of the control share statutes, and will be subject to these statutes if we are an “issuing corporation” as defined in such statutes.

 

At this time, we do not have 100 stockholders of record resident of Nevada. Therefore, the provisions of the control share acquisition act do not apply to acquisitions of our shares and will not until such time as these requirements have been met. At such time as they may apply to us, the provisions of the control share acquisition act may discourage companies or persons interested in acquiring a significant interest in or control of the Company, regardless of whether such acquisition may be in the interest of our stockholders.

 

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Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies

 

Asiya was a shell company prior to the filing of this Current Report on Form 8-K. Historically, the SEC staff has taken the position that Rule 144 is not available for the resale of securities initially issued by companies that are, or previously were, blank check companies, like us. The SEC has codified and expanded this position in the amendments discussed above by prohibiting the use of Rule 144 for resale of securities issued by any shell companies (other than business combination related shell companies) or any issuer that has been at any time previously a shell company. The SEC has provided an important exception to this prohibition, however, if the following conditions are met:

 

· the issuer of the securities that was formerly a shell company has ceased to be a shell company;

 

  · the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
     
  · the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and

 

  · at least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company.

 

As a result, it is likely that pursuant to Rule 144 our stockholders will be able to sell their shares of our common stock from and after the one year anniversary of our filing of current comprehensive disclosure in this Current Report on Form 8-K without registration.

 

INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

Nevada law and certain provisions of our bylaws under certain circumstances provide for indemnification of our officers, directors and controlling persons against liabilities which they may incur in such capacities. A summary of the circumstances in which such indemnification is provided for is contained herein, but this description is qualified in its entirety by reference to our bylaws and to the statutory provisions.

 

In general, any officer, director, employee or agent may be indemnified against expenses, fines, settlements or judgments arising in connection with a legal proceeding to which such person is a party, if that person’s actions were in good faith, were believed to be in our best interest, and were not unlawful. Unless such person is successful upon the merits in such an action, indemnification may be awarded only after a determination by independent decision of our Board, by legal counsel, or by a vote of the stockholders, that the applicable standard of conduct was met by the person to be indemnified.

 

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The circumstances under which indemnification is granted in connection with an action brought on our behalf is generally the same as those set forth above; however, with respect to such actions, indemnification is granted only with respect to expenses actually incurred in connection with the defense or settlement of the action. In such actions, the person to be indemnified must have acted in good faith and in a manner believed to have been in our best interest, and have not been adjudged liable for negligence or misconduct.

 

Indemnification may also be granted pursuant to the terms of agreements which may be entered into in the future or pursuant to a vote of stockholders or directors. The statutory provision cited above also grants the power to us to purchase and maintain insurance which protects our officers and directors against any liabilities incurred in connection with their service in such a position, and such a policy may be obtained by us.

 

A stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees regarding which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

 

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

The financial statements set forth in Item 9.01(a) and (b) of this Current Report on Form 8-K are incorporated by reference into this item.

 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

The disclosures set forth in Item 4.01 of this Current Report on Form 8-K are incorporated by reference into this item.

 

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

The exhibits described in Item 9.01 of this Current Report on Form 8-K are incorporated by reference into this item.

 

Item 4.01. Change in Registrant’s Certifying Accountant.

 

The financial statements as of and for the year ended December 31, 2015, and 2014 and for the period from September 16, 2013 (date of inception) through December 31, 2015, of our newly acquired Delaware subsidiary were previously audited by RBSM LLP. Accordingly, financial statements prepared by Asiya for the two year period ended October 31, 2015, were audited by LBB & Associates Ltd, LLP (“LBB”) which statements were relied upon, in part in preparing the unaudited pro forma condensed combined Financial Statements annexed as an exhibit to this Report.

 

As the result of the Merger, Qpagos has become our subsidiary and, therefore, as of such date (e.g. review of the quarterly report for the period ended April 30, 2016 and thereafter) the independent registered public accounting firm of the Company, RBSM LLP., will continue to act as the auditor for the Company and Qpagos until their resignation or removal.

 

Pursuant to Item 304 of Regulation S-K under the Securities Act of 1933, as amended, and under the Securities Exchange Act of 1934, as amended, the Company reports as follows:

 

· The dismissal of LBB, which took effect on May 12, 2016, and appointment of the new independent registered public accounting firm, RBSM LLP., which took effect on May 12, 2016, were related solely to the change of control of Asiya resulting from our acquisition of Qpagos, and was not related in any way to any disagreement with LBB.

 

· LBB’s report on the financial statements of Asiya as of and for the two year period ended October 31, 2015, did not contained any adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principle, except for LBB’s audit report dated December 10, 2015 , which contains an explanatory paragraph that cited certain conditions that raised substantial doubt about the Company’s ability to continue as a going concern.

 

· The decision to utilize the Company’s current accountants was approved by the Company’s board of directors, as the Company does not have an audit committee.

 

42  

 

 

· During the years ended October 31, 2014 and 2015 and in the subsequent period through May 12, 2016 (the date of dismissal of LBB) neither the Company, nor, based on information, QPAGOS Corporation, has had any disagreements with LBB on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreement(s), if not resolved to the satisfaction of the former accountant, would have caused it to make reference to the subject matter of the disagreement(s) in connection with its report.

 

· During the year ended October 31, 2015 and in the subsequent interim period through May 12, 2016, there were no events otherwise reportable under Item 304(a)(1)(v) of Regulation S-K.

 

· During the Company’s two most recent years and in the subsequent interim period through May 12, 2016, the Company did not consult with RBSM LLP regarding the application of accounting principles to a specified transaction, either contemplated or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was provided that was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue, or with any of the matters outlined in Item 304(a)(2)(ii) of Regulation S-K.

 

A copy of the disclosure made herein by the Company has been provided to LBB prior to the date of filing of this Report with the Securities and Exchange Commission, and the independent registered public accounting firm have been requested to furnish the Company with a copy of a letter addressed to the Commission stating that it agrees with the statements made by the Company in this Item 4.01 of this Report. A copy of this letter has been filed as an exhibit to this Report.

 

Item 5.01. Changes in Control of Registrant.

 

The disclosures set forth in Item 2.01 of this Current Report on Form 8-K are incorporated by reference into this Item.

 

Upon consummation of the Merger, each share of Qpagos’ capital stock issued and outstanding immediately preceding the Merger was converted into the right to receive two shares of our common stock. Additionally, upon consummation of the Merger, Asiya assumed all of Qpagos’ warrants issued and outstanding immediately prior to the Merger, which are now exercisable for shares of our common stock, respectively. Following the Merger, Qpagos’ former stockholders now hold approximately 91% of the Company Common Stock outstanding.

 

Upon consummation of the Merger, we expanded our Board from one to three directors, each of whom was a director designated by Qpagos.

 

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers .

 

Effective as of the Closing Date, Mark Korb resigned from the board of directors and from any committee of the board of directors of which he was a member. In addition, Mark Korb resigned as our President and Chief Executive Officer, also effective as of the Closing Date; however, he remains as our Chief Financial Officer.

 

Also in connection with the closing of the Merger, Gaston Pereira, Andrey Novikov and Sam Harake became members of our board of directors, with Mr. Pereira serving as the Chairman of the board of directors. Mr. Pereira, the Chief Executive Officer of Qpagos, became our Chief Executive Officer, Andrey Novikov became our Chief Operating Officer and Secretary and Mark Korb remained as our Chief Financial Officer.

 

Accordingly, after consummation of the Merger, our Board consists of Gaston Pereira, Andrey Novikov and Sam Harake. Our executive officers are Gaston Pereira, Chief Executive Officer; Mark Korb, Chief Financial Officer and Andrey Novikov, Chief Operating Officer.

 

The disclosures set forth under the headings “Form 10 Information—Directors and Officers,” “Form 10 Information—Executive Compensation” and “Form 10 Information—Certain Relationships and Related Transactions and Director Independence” of this Current Report on Form 8-K are incorporated by reference into this Item 5.02.

 

43  

 

 

Item 5.06. Change in Shell Company Status.

 

As the result of the transactions effected by the closing of the Merger, as described above under Item 2.01 of this Current Report, we are no longer a shell company as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934. The disclosures under the heading “The Merger” set forth in Item 2.01 of this Current Report on Form 8-K are incorporated by reference into this Item 5.06. 

 

Item 9.01.  Financial Statements and Exhibits.

 

  (a) Financial Statements of the Businesses Acquired and of Asiya

 

In accordance with Item 9.01(a) Qpagos’ audited financial statements for the years ended December 31, 2015 and December 31, 2014 are filed as Exhibit 99.1 to this Current Report on Form 8-K;

 

  (b) Pro Forma Financial Information is filed in this Current Report on Form 8-K as Exhibit 99.2

 

  (d)  Exhibits

 

The exhibits listed in the following Exhibit Index are filed as part of this Current Report on Form 8-K.

 

Exhibit No.   Description
2.1    

Agreement and Plan of Merger, dated as of May 12, 2016, by and among Asiya Pearls, Inc., QPAGOS Merge, Inc. and QPAGOS Corporation *

3.1   Certificate of Incorporation*
3.2   Bylaws*
4.1   Form of Warrants issued to Investors*
4.2   Form of Warrant issued to Placement Agent and its designees*
10.1   Sublicense Agreement between Janor Enterprises and Qpagos Corporation dated May 1, 2015 *
10.2  

Additional Agreement No. 1 to Sublicense Agreement between Janor Enterprises and Qpagos Corporation dated November 1, 2015*

10.3   Employment Agreement Gaston Pereira *
10.4   Employment Agreement Andrey Novikov *
10.5   Form of Securities Purchase Agreement *
10.6   Placement Agent Agreement *
10.7   Form of Registration Rights Agreement *
10.8  

Consulting Agreement between Qpagos Corporation and Yogipay Corporation dated February 11, 2016*

10.9  

Consulting Agreement between Qpagos Corporation and Eurosa Inc. dated February 11, 2016*

14.1   Code of Ethics *
16.1   Letter from LBB & Associates Ltd; LLP to SEC*
99.1   QPAGOS Corporation audited financial statements for the fiscal years ended December 31, 2015 and 2014 *
99.2   Pro Forma Financial Information *

 

* Filed herewith

 

Indicates management contract or compensatory plan

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  QPAGOS Corporation
   
Date: May 13, 2016 By: /s/ Gaston Pereira
  Gaston Pereira
  Chief Executive Officer

 

44  

 

 

Exhibit 2.1 

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

Asiya Pearls, Inc.,

 

QPAGOS MERGE, INC.

 

and

 

QPAGOS CORPORATION

 

Dated as of

 

May 12, 2016

 

 

 

 

TABLE OF CONTENTS

 

    Page
ARTICLE I. THE MERGER 1
Section 1.01. The Merger 1
Section 1.02. Closing 1
Section 1.03. Effective Time of the Merger 2
Section 1.04. Effects of the Merger 2
Section 1.05. Certificate of Incorporation and By-laws of the Surviving Corporation. 2
Section 1.06. Directors and Officers of the Surviving Corporation. 2
Section 1.07. Post-Merger Operations. 2
ARTICLE II. CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES 3
Section 2.01. Effect on Capital Stock 3
Section 2.02. Exchange of Certificates. 4
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF QPAGOS 6
Section 3.01. Organization; Standing and Power; Charter Documents; Subsidiaries.  Organization; Standing and Power 6
Section 3.02. Capital Structure 7
Section 3.03. Authority; Non-Contravention; Necessary Consent. 7
Section 3.04. Takeover Statutes 8
Section 3.05. Brokers’ and Finders’ Fees; Fees and Expenses 8
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF ASIYA AND MERGER SUB 8
Section 4.01. Organization; Standing and Power; Charter Documents; Subsidiaries.  Organization; Standing and Power; Subsidiaries. 8
Section 4.02. Capital Structure. 9
Section 4.03. Authority; Non-Contravention; Necessary Consent. 9
Section 4.04. Financial Statements. 10
Section 4.05. Undisclosed Liabilities 11
Section 4.06. Absence of Certain Changes or Events 11
Section 4.07. Taxes. 11
Section 4.08. Compliance 12
Section 4.09. Litigation 12
Section 4.10. Employee Plans. 13
Section 4.11. Real Property 13
Section 4.12. Contracts 13
Section 4.13. Takeover Statutes 13
Section 4.14. Brokers’ and Finders’ Fees; Fees and Expenses 13
Section 4.15. Operations of Merger Sub 14
ARTICLE V. COVENANTS 14
Section 5.01. Covenants of Asiya 14
Section 5.02. Acquisition Proposals. 16
Section 5.03. Other Actions 16

 

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TABLE OF CONTENTS

(Continued)

 

    Page
ARTICLE VI. ADDITIONAL AGREEMENTS 16
Section 6.01. Preparation of the Form 8-K 16
Section 6.02. QPAGOS Stockholder Approval 17
Section 6.03. Access to Information; Effect of Review. 17
Section 6.04. Regulatory Matters; Reasonable Best Efforts. 17
Section 6.05. Employee Matters. 18
Section 6.06. Treatment of QPAGOS Warrants 18
Section 6.07. Director and Officer Indemnification, Exculpation and Insurance. 18
Section 6.08. Fees and Expenses 19
Section 6.09. Public Announcements 19
Section 6.10. Stockholder Litigation 19
Section 6.11. Tax-Free Reorganization Treatment 19
ARTICLE VII. CONDITIONS PRECEDENT 20
Section 7.01. Conditions to Each Party’s Obligation to Effect the Merger 20
Section 7.02. Conditions to Obligations of QPAGOS 20
Section 7.03. Conditions to Obligations of Asiya 21
Section 7.04. Frustration of Closing Conditions 21
ARTICLE VIII. SURVIVAL 21
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER 22
Section 9.01. Termination 22
Section 9.02. Effect of Termination 22
Section 9.03. Amendment 22
Section 9.04. Extension; Waiver 23
ARTICLE X. GENERAL PROVISIONS 23
Section 10.01. Nonsurvival of Representations, Warranties and Agreements 23
Section 10.02. Notices 23
Section 10.03. Definitions 24
Section 10.04. Interpretation and Other Matters. 28
Section 10.05. Counterparts; Electronic Signatures 28
Section 10.06. Entire Agreement; No Third-Party Beneficiaries 29
Section 10.07. Representations 29
Section 10.08. Governing Law 29
Section 10.09. Assignment 29
Section 10.10. Enforcement. 29

 

- ii -

 

 

AGREEMENT AND PLAN OF MERGER, dated as of May 12, 2016 (this “ Agreement ”), by and among Asiya Pearls, Inc., a Nevada corporation (“ Asiya ”), QPAGOS Merge, Inc., a Delaware corporation and a direct wholly owned subsidiary of Asiya (“ Merger Sub ”), and QPAGOS Corporation, a Delaware corporation (“ QPAGOS ”).

 

WHEREAS, the respective Boards of Directors of Asiya and Merger Sub have approved this Agreement, and deem it advisable and in the best interests of their respective stockholders to consummate the merger of Merger Sub with and into QPAGOS, with QPAGOS surviving the Merger, on the terms and conditions set forth herein (the “ Merger ”);

 

WHEREAS, the Board of Directors of QPAGOS has approved this Agreement, and deems it in the best interest of QPAGOS and its stockholders that it consummate the Merger on the terms and conditions set forth herein and has recommended to the stockholders of QPAGOS that they adopt this Agreement and approve the Merger;

 

WHEREAS, Asiya and QPAGOS desire to make certain representations, warranties, covenants and agreements in connection with the Merger and the transactions contemplated by this Agreement and also to prescribe various conditions to the Merger;

 

WHEREAS, for United States federal income tax purposes, it is intended that the Merger shall qualify as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), and this Agreement is intended to be, and is hereby, adopted as a plan of reorganization within the meaning of Section 368(a) of the Code.

 

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

 

ARTICLE I.

THE MERGER

 

Section 1.01.          The Merger .  Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, Merger Sub shall be merged with and into QPAGOS in accordance with the Delaware General Corporation Law (the “ DGCL ”). At the Effective Time, the separate corporate existence of Merger Sub shall cease, and QPAGOS shall be the surviving corporation in the Merger (the “ Surviving Corporation ”) and shall continue its corporate existence under the laws of the State of Delaware and shall succeed to and assume all of the rights and obligations of QPAGOS and Merger Sub in accordance with the DGCL and shall become, as a result of the Merger, a direct wholly owned subsidiary of Asiya.

 

Section 1.02.          Closing .  Unless this Agreement shall have been terminated pursuant to Section 9.01, the closing of the Merger (the “Closing”) will take place at 10:00 a.m., EST, on a date to be specified by the parties (the “Closing Date”), which shall be no later than the second (2 nd ) Business Day after satisfaction or waiver of the conditions set forth in ARTICLE VII (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver (to the extent permitted by applicable Legal Requirements) of such conditions at such time), unless another time or date is agreed to by the parties hereto. The Closing shall be held at such location as is agreed to by the parties hereto. By agreement of the parties, the Closing may take place by delivery of documents required to be delivered hereby by facsimile or other electronic transmission, including by email attachment.

 

 

 

 

Section 1.03.          Effective Time of the Merger .  Upon the Closing, Asiya and QPAGOS will cause a Certificate of Merger (the “ Certificate of Merger ”) to be executed, acknowledged and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required under the DGCL. The Merger shall become effective at such time as the Certificate of Merger shall have been duly filed with the Secretary of State of the State of Delaware or at such later date or time as may be agreed by the parties in writing and specified in the Certificate of Merger (the time at which the Merger becomes effective is referred to herein as the “ Effective Time ”).

 

Section 1.04.          Effects of the Merger .  The Merger shall generally have the effects set forth in this Agreement and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of QPAGOS and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of QPAGOS and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

 

Section 1.05.          Certificate of Incorporation and By-laws of the Surviving Corporation .

 

(a)          At the Effective Time, the certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with the provisions thereof and hereof and applicable Legal Requirements.

 

(b)          At the Effective Time, the by-laws of Merger Sub as in effect immediately prior to the Effective Time shall be the by-laws of the Surviving Corporation until thereafter amended in accordance with the provisions thereof and hereof and applicable Legal Requirements.

 

Section 1.06.          Directors and Officers of the Surviving Corporation .

 

(a)          The directors of QPAGOS at the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation in the Merger until their successors have been duly elected or appointed and qualified, or their earlier death, resignation or removal.

 

(b)          The officers of QPAGOS at the Effective Time shall, from and after the Effective Time, be the initial officers of the Surviving Corporation until their successors have been duly elected or appointed and qualified, or their earlier death, resignation or removal.

 

Section 1.07.          Post-Merger Operations .

 

(a)           Board Composition . At the Effective Time, Asiya shall take all necessary corporate action to cause the following to occur: (i) the number of directors constituting the Board of Directors of Asiya shall be up to three (3), of which QPAGOS shall be entitled to designate each director (each, a “ QPAGOS Designee ”), in each case at any time prior to the Closing and in each case subject to such individuals’ ability and willingness to serve, and (ii) the chairperson of the Board of Directors of Asiya will be a QPAGOS Designee, as designated by QPAGOS at any time prior to the Closing, subject to such individual’s ability and willingness to serve.

 

(b)           Executive Officers . Subject to such individuals’ ability and willingness to so serve, Asiya shall take all necessary corporate action so that the individuals designated by QPAGOS at any time prior to Closing be appointed to the Asiya senior executive officer positions specified by QPAGOS, effective as of the Effective Time. If, prior to the Effective Time, any such individual(s) is(are) unwilling or unable to serve in such officer position(s) as of the Effective Time, then QPAGOS shall be entitled to appoint other individual(s) to serve in such officer position(s), and Asiya shall take all necessary corporate action to effect such appointments.

 

  - 2 -  

 

 

ARTICLE II.

CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES

 

Section 2.01.          Effect on Capital Stock .  At the Effective Time, by virtue of the Merger and without any action on the part of holders of any shares of QPAGOS capital stock or any capital stock of Merger Sub:

 

(a)           Cancellation of Certain QPAGOS Capital Stock . Each share of QPAGOS capital stock that is owned by QPAGOS, Asiya, Merger Sub or any Subsidiaries of Asiya (“ Cancelled Shares ”) shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.

 

(b)           Conversion of QPAGOS Capital Stock . Each issued and outstanding share of QPAGOS capital stock (other than Cancelled Shares and Dissenting Shares) shall be converted into the right to receive two (2) (the “ Exchange Ratio ”) fully paid and non-assessable shares (such aggregate amount, the “ Stock Merger Consideration ”) of Asiya common stock, par value $.0001 per share (“ Asiya Common Stock ”). As of the Effective Time, all such shares of QPAGOS capital stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares of QPAGOS capital stock shall cease to have any rights with respect thereto, except the right to receive the Stock Merger Consideration as contemplated by this Section 2.01(b)to be issued or paid in consideration therefor upon the surrender of certificates in accordance with Section 2.02, without interest.

 

(c)           Conversion of Merger Sub Common Stock . At the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof, each share of common stock, par value $0.001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and non-assessable share of common stock, par value $.001 per share, of the Surviving Corporation and shall constitute the only outstanding capital stock of the Surviving Corporation. From and after the Effective Time, (i) all certificates representing the common stock of Merger Sub shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which they were converted in accordance with the immediately preceding sentence; (ii) the Surviving Corporation shall issue a new certificate to Asiya representing all of the outstanding common stock of Surviving Corporation; and (iii) the Surviving Corporation shall be a wholly owned subsidiary of Asiya.

 

(d)           Dissenting Shares .

 

(i)          Notwithstanding anything in this Agreement to the contrary, any shares of QPAGOS Capital Stock outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has exercised and perfected appraisal rights for such shares in accordance with Section 262 of the DGCL and has not effectively withdrawn or lost such appraisal rights (collectively, the “ Dissenting Shares ”) shall not be converted into or represent the right to receive Merger Consideration, and the holder or holders of Dissenting Shares shall be entitled only to such rights as may be granted to such holder or holders in Section 262 of the DGCL.

 

  - 3 -  

 

 

(ii)         Notwithstanding the provisions of Section 2.01(d)(i), if any holder of Dissenting Shares shall effectively withdraw or lose (through failure to perfect or otherwise) such holder’s appraisal rights under Section 262 of the DGCL, then, as of the later of the Effective Time and the occurrence of such event, such holder’s shares shall automatically be converted into and represent only the right to receive the applicable Merger Consideration in accordance with this Agreement, without interest, upon surrender of the certificate representing such shares.

 

(e)           QPAGOS Warrants. The treatment of QPAGOS Warrants shall be as set forth in Section 6.06.

 

Section 2.02.          Exchange of Certificates .

 

(a)           Exchange Agent. Prior to the Effective Time, Asiya shall enter into an agreement with such bank or trust company as may be mutually agreed by Asiya and QPAGOS (the “ Exchange Agent ”), which agreement shall provide that Asiya shall deposit with the Exchange Agent at the Effective Time, for the benefit of the holders of shares of QPAGOS capital stock, for exchange in accordance with this ARTICLE II, through the Exchange Agent, certificates representing the shares of Asiya Common Stock representing the Stock Merger Consideration (such shares of Asiya Common Stock and cash to be deposited being hereinafter referred to as the “ Exchange Fund ”), provided , that in lieu of depositing shares of Asiya Common Stock with the Exchange Agent, Asiya may elect to instruct its transfer agent to issue shares of Asiya Common Stock directly to holders of shares of QPAGOS capital stock, in which case such transfer agent shall be deemed an agent of the Exchange Agent for purposes of issuing Stock Merger Consideration hereunder.

 

(b)           Exchange Procedures . As soon as reasonably practicable after the Effective Time and in any event not later than the fifth (5 th ) Business Day following the Effective Time, Asiya shall cause the Exchange Agent to mail to each holder of record of a certificate or certificates that immediately prior to the Effective Time represented outstanding shares of QPAGOS capital stock (the “ Certificates ”) whose shares were converted into the right to receive Merger Consideration, (i) a letter of transmittal (which (a) shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent, and (b) shall be in such form and have such other provisions as Asiya and QPAGOS may reasonably specify) and (ii) instructions for use in surrendering the Certificates in exchange for certificates representing shares of Asiya Common Stock. Upon surrender of a Certificate for cancellation to the Exchange Agent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may reasonably be required by the Exchange Agent, the holder of such Certificate shall be entitled to receive in exchange therefor that number of shares of Asiya Common Stock, that such holder has the right to receive pursuant to the provisions of this ARTICLE II, and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of QPAGOS capital stock that is not registered in the transfer records of QPAGOS, the proper number of shares of Asiya Common Stock may be issued to a Person other than the Person in whose name the Certificate so surrendered is registered if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the Person requesting such issuance shall pay any transfer or other taxes required by reason of the issuance of shares of Asiya Common Stock (or the payment of cash consideration) to a Person other than the registered holder of such Certificate or establish to the reasonable satisfaction of Asiya that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 2.02, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the applicable Merger Consideration, which the holder thereof has the right to receive in respect of such Certificate pursuant to the provisions of this Article II. No interest shall be paid or will accrue on the Merger Consideration or any other cash payable to holders of Certificates pursuant to the provisions of this ARTICLE II.

 

  - 4 -  

 

 

(c)           No Further Ownership Rights in QPAGOS Capital Stock; Closing of Transfer Books . All shares of Asiya Common Stock issued upon the surrender for exchange of Certificates in accordance with the terms of this ARTICLE II (including any cash paid pursuant to this ARTICLE II) shall be deemed to have been issued (and paid) in full satisfaction of all rights pertaining to the shares of QPAGOS capital stock theretofore represented by such Certificates, subject, however, to QPAGOS’ obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time that may have been declared or made by QPAGOS on such shares of QPAGOS capital stock that remain unpaid at the Effective Time. As of the Effective Time, the stock transfer books of QPAGOS shall be closed, and there shall be no further registration of transfers on the stock transfer books of QPAGOS of the shares of QPAGOS capital stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to QPAGOS, Asiya or the Exchange Agent for any reason, they shall be canceled and exchanged as provided in this ARTICLE II, except as otherwise required by Legal Requirements.

 

(d)           Termination of Exchange Fund . Any portion of the Exchange Fund that remains undistributed to the holders of the Certificates for one year after the Effective Time shall be delivered to Asiya, upon demand, and any holders of the Certificates who have not theretofore complied with this ARTICLE II shall thereafter look only to Asiya for payment of their claim for Merger Consideration in accordance with this Agreement, and any dividends or distributions with respect to Asiya Common Stock issuable to such holders as Merger Consideration in accordance with this Agreement.

 

(e)           No Liability . None of Asiya, QPAGOS, Merger Sub, the Surviving Corporation or the Exchange Agent or any of their respective directors, officers, employees and agents shall be liable to any Person in respect of any shares of Asiya Common Stock or any cash from the Exchange Fund, in each case delivered to a public official pursuant to any applicable abandoned property, escheat or similar Legal Requirements. If any Certificate shall not have been surrendered prior to five years after the Effective Time (or immediately prior to such earlier date on which any Merger Consideration, or any cash payable to the holder of such Certificate formerly representing QPAGOS capital stock pursuant to this Article II, would otherwise escheat to or become the property of any Governmental Entity), any such Merger Consideration shall, to the extent permitted by applicable Legal Requirements, become the property of Asiya, free and clear of all claims or interest of any Person previously entitled thereto.

 

(f)           Withholding Rights . Asiya and the Exchange Agent shall be entitled to deduct and withhold from any Merger Consideration payable pursuant to this Agreement to any Person who was a holder of QPAGOS capital stock immediately prior to the Effective Time such amounts as Asiya and the Exchange Agent may be required to deduct and withhold with respect to the making of such payment under the Code or any other provision of applicable federal, state, local or foreign tax Legal Requirements. To the extent that amounts are so withheld by Asiya or the Exchange Agent and duly paid over to the applicable taxing authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person to whom such consideration would otherwise have been paid.

 

(g)           Lost, Stolen or Destroyed Certificates . If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Asiya, the posting by such Person of a bond in such reasonable amount as Asiya may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration pursuant to this Agreement.

 

  - 5 -  

 

 

(h)           Adjustments to Prevent Dilution . In the event that QPAGOS changes the number of shares of QPAGOS capital stock or securities convertible or exchangeable into or exercisable for shares of QPAGOS capital stock, or Asiya changes the number of shares of Asiya Common Stock or securities convertible or exchangeable into or exercisable for shares of Asiya Common Stock, issued and outstanding prior to the Effective Time, in each case as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, subdivision, exchange or readjustment of shares, or other similar transaction, the Exchange Ratio shall be ratably adjusted; provided , however , that nothing in this Section 2.02(h) shall be deemed to permit or authorize any party hereto to effect any such change that it is not otherwise authorized or permitted to undertake pursuant to this Agreement.

 

(i)           Legends . The shares of Asiya Common Stock issued as Stock Merger Consideration pursuant to this Agreement will not be registered under the Securities Act or the securities laws of any State, and each certificate evidencing any such shares of Asiya Common Stock shall bear a restrictive legend substantially in the following form:

 

“THE SHARES OF COMMON STOCK, PAR VALUE $0.001 PER SHARE, OF ASIYA PEARLS, INC., A NEVADA CORPORATION (THE “COMPANY”), EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF QPAGOS

 

QPAGOS represents and warrants to Asiya and Merger Sub as follows:

 

Section 3.01.          Organization; Standing and Power; Charter Documents; Subsidiaries Organization; Standing and Power . QPAGOS: (i) is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware; (ii) has the requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted; and (iii) is duly qualified or licensed and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed or to be in good standing would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect on QPAGOS.

 

(a)           Charter Documents . QPAGOS has delivered or made available to Asiya a true and correct copy of the Certificate of Incorporation and Bylaws of QPAGOS, each as amended to date (collectively, the “ QPAGOS Charter Documents ”), and each such instrument is in full force and effect. QPAGOS is not in violation of any of the provisions of the QPAGOS Charter Documents.

 

(b)           Subsidiaries . Other than Regpag Electronicos S.A.P.I. de C.V. an Qpagos S.A.P.I. de C.V., QPAGOS does not have any Subsidiaries and does not own any capital stock of, or other equity or voting interests of any nature in, or any interest convertible, exchangeable or exercisable for, capital stock of, or other equity or voting interests of any nature in, any other Person.

 

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Section 3.02.          Capital Structure .  The authorized capital stock of QPAGOS consists of 50,000,000 shares of Common Stock, par value $0.001 per share and 10,000,000 shares of Preferred Stock, par value $0.001 per share, of which 24,964,500 shares of Common Stock are issued and outstanding. Qpagos currently has outstanding warrants that were issued to investors and the placement agent in its 2015 private placement that are exercisable for an aggregate of 2,750,800 shares of Common Stock. All of the outstanding shares of capital stock of QPAGOS are duly authorized and validly issued, fully paid and non-assessable.

 

Section 3.03.          Authority; Non-Contravention; Necessary Consent .

 

(a)           Authority . QPAGOS has all requisite corporate power and authority to enter into this Agreement and, subject only to the adoption of this Agreement by QPAGOS’ stockholders, to consummate the transactions contemplated hereby, including the Merger. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby has been duly authorized by all necessary corporate action on the part of QPAGOS and no other corporate proceedings on the part of QPAGOS are necessary to authorize the execution and delivery of this Agreement or to consummate the Merger and the other transactions contemplated hereby, subject only to the adoption of this Agreement and the transactions contemplated herein by QPAGOS’ stockholders and the filing of the Certificate of Merger pursuant to Delaware Law. The affirmative vote of a majority of the issued and outstanding shares of QPAGOS Common Stock is the only vote of the holders of any class or series of QPAGOS Capital Stock necessary to adopt this Agreement, approve the Merger and consummate the Merger (collectively, the “ QPAGOS Stockholder Approval ”). This Agreement has been duly executed and delivered by QPAGOS and, assuming due execution and delivery by Asiya and Merger Sub, constitutes a valid and binding obligation of QPAGOS, enforceable against QPAGOS in accordance with its terms, except (A) as enforcement may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other Legal Requirements affecting the rights of creditors generally and general equitable principles (whether considered in a proceeding in equity or at law), and (B) as the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of a court of competent jurisdiction before which any proceeding may be brought.

 

(b)           Non–Contravention . The execution and delivery of this Agreement by QPAGOS does not, and performance of this Agreement by QPAGOS will not: (i) conflict with or violate QPAGOS Charter Documents, or (ii) subject to obtaining the QPAGOS Stockholder Approval and compliance with the requirements set forth in (c), conflict with or violate any Legal Requirement applicable to QPAGOS or by which QPAGOS or any of its properties is bound or affected.

 

(c)           Necessary Consents . No consent, approval, order or authorization of, or registration, declaration or filing with any Governmental Entity is required to be obtained or made by QPAGOS in connection with the execution and delivery of this Agreement or the consummation of the Merger and other transactions contemplated hereby, except for: (i) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which QPAGOS and/or Asiya are qualified to do business, (ii) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal, foreign and state securities (or other) Legal Requirements, (iii) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state securities or “blue sky” laws and the securities laws of any foreign country, (iv) such consents, authorizations, filings, approvals and registrations, which if not obtained or made would not be material, individually or in the aggregate, to QPAGOS. The consents, approvals, orders, authorizations, registrations, declarations and filings set forth in (i) and (ii) are referred to herein as the “ Necessary Consents .”

 

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Section 3.04.          Takeover Statutes .  The Board of Directors of QPAGOS has approved this Agreement and the transactions contemplated hereby as required to render inapplicable to such agreements and transactions DGCL Section 203, to the extent applicable. To the Knowledge of QPAGOS, no other state takeover or similar statute or regulation (each, a “ Takeover Statute ”) is applicable to the Merger or the other transactions contemplated by this Agreement.

 

Section 3.05.          Brokers’ and Finders’ Fees; Fees and Expenses .  QPAGOS has not incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with this Agreement.

 

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF ASIYA AND MERGER SUB

 

Asiya and Merger Sub represent and warrant to QPAGOS as follows:

 

Section 4.01.          Organization; Standing and Power; Charter Documents; Subsidiaries Organization; Standing and Power; Subsidiaries .

 

(a)          Asiya and each of its Subsidiaries, including Merger Sub (i) is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (except, in the case of good standing, for entities organized under the laws of any jurisdiction that does not recognize such concept), (ii) has the requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and (iii) is duly qualified or licensed and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed or to be in good standing would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect on Asiya.

 

(b)           Charter Documents . Asiya has delivered or made available to QPAGOS a true and correct copy of the Articles of Incorporation and Bylaws of Asiya, each as amended to date (collectively, the “ Asiya Charter Documents ”) and (ii) the Certificate of Incorporation and Bylaws, or like organizational documents (collectively, “ Asiya Subsidiary Charter Documents ”), of each of its Subsidiaries (including Merger Sub), and each such instrument is in full force and effect. Asiya is not in violation of any of the provisions of the Asiya Charter Documents and each of its Subsidiaries is not in violation of its respective Asiya Subsidiary Charter Documents.

 

(c)           Subsidiaries . Asiya has no subsidiaries as of the date hereof other than Merger Sub. All the outstanding shares of capital stock of, or other equity or voting interests in, each such Subsidiary have been validly issued and are fully paid and non-assessable and are owned by Asiya, a wholly owned Subsidiary of Asiya, or Asiya and another wholly-owned Subsidiary of Asiya, free and clear of all Liens and are duly authorized, validly issued, full paid and non-assessable. Other than the Subsidiaries of Asiya, neither Asiya nor any of its Subsidiaries owns any capital stock of, or other equity or voting interests of any nature in, or any interest convertible, exchangeable or exercisable for, capital stock of, or other equity or voting interests of any nature in, any other Person.

 

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Section 4.02.          Capital Structure .

 

(a)           Capital Stock. The authorized capital stock of Asiya consists of 100,000,000 shares of Asiya Common Stock per share and 15,000,000 shares of preferred stock, par value $.0001 per share. As of the date hereof 10,000,000 shares of Asiya Common Stock and no shares of Asiya preferred stock were issued and outstanding. All of the outstanding shares of capital stock of Asiya are, and all shares of capital stock of Asiya which may be issued as contemplated or permitted by this Agreement will be, when issued, duly authorized and validly issued, fully paid and non-assessable and not subject to any preemptive rights.

 

(b)           Other Securities . There are no securities, options, warrants, calls, rights, Contracts, commitments, agreements, instruments, arrangements, understandings, obligations or undertakings of any kind to which Asiya or any of its Subsidiaries is a party or by which any of them is bound obligating Asiya or any of its Subsidiaries to (including on a deferred basis) issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock, voting debt or other voting securities of Asiya or any of its Subsidiaries, or obligating Asiya or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, instrument, arrangement, understanding, obligation or undertaking. All outstanding shares of Asiya Common Stock and all outstanding shares of capital stock of each Subsidiary of Asiya have been issued and granted in compliance in all material respects with all applicable securities Legal Requirements and all other applicable Legal Requirements. There are not any outstanding Contracts of Asiya or any of its Subsidiaries that require Asiya or its Subsidiaries to (i) repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity or voting interests in, Asiya or any of its Subsidiaries or (ii) dispose of any shares of the capital stock of, or other equity or voting interests in, any of its Subsidiaries. Asiya is not a party to any voting agreement with respect to shares of the capital stock of, or other equity or voting interests in, Asiya or any of its Subsidiaries and there are no irrevocable proxies and no voting agreements, voting trusts, rights plans or anti-takeover plans with respect to any shares of the capital stock of, or other equity or voting interests in, Asiya or any of its Subsidiaries.

 

Section 4.03.          Authority; Non-Contravention; Necessary Consent .

 

(a)           Authority . Each of Asiya and Merger Sub has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, including the Merger. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby has been duly authorized by all necessary corporate action on the part of Asiya and Merger Sub, and no other corporate proceedings on the part of Asiya or Merger Sub are necessary to authorize the execution and delivery of this Agreement or to consummate the Merger and the other transactions contemplated hereby, subject only to the filing of the Certificate of Merger pursuant to Delaware Law. This Agreement has been duly executed and delivered by Asiya and Merger Sub and, assuming due execution and delivery by QPAGOS, constitutes a valid and binding obligation of Asiya and Merger Sub, enforceable against Asiya and Merger Sub in accordance with its terms, except (A) as enforcement may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other Legal Requirements affecting the rights of creditors generally and general equitable principles (whether considered in a proceeding in equity or at law), and (B) as the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of a court of competent jurisdiction before which any proceeding may be brought.

 

(b)           Non–Contravention . The execution and delivery of this Agreement by Asiya and Merger Sub does not, and performance of this Agreement by Asiya and Merger Sub will not: (i) conflict with or violate Asiya Charter Documents or any Asiya Subsidiary Charter Documents, (ii) subject to compliance with the requirements set forth in Section 4.03(c), conflict with or violate any Legal Requirement applicable to Asiya or any of its Subsidiaries or by which Asiya or any of its Subsidiaries or any of their respective properties are bound or affected, or (iii) result in any material breach of or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, or materially impair Asiya’s or any of its Subsidiaries’ rights or alter the rights or obligations of any Person under, or give to others any rights of termination, material amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the properties or assets of Asiya or any of its Subsidiaries pursuant to any Asiya Material Contract.

 

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(c)           Necessary Consents . No consent, approval, order or authorization of, or registration, declaration or filing with any Governmental Entity is required to be obtained or made by Asiya in connection with the execution and delivery of this Agreement or the consummation of the Merger and other transactions contemplated hereby, except for: (i) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which Asiya and/or QPAGOS are qualified to do business, (ii) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal, foreign and state securities (or other) Legal Requirements, (iii) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state securities or “blue sky” laws and the securities laws of any foreign country, (iv) such consents, authorizations, filings, approvals and registrations, which if not obtained or made would not be material, individually or in the aggregate, to Asiya and its Subsidiaries, taken as a whole. The consents, approvals, orders, authorizations, registrations, declarations and filings set forth in (i) and (ii) are referred to herein as the “ Necessary Consents .”

 

Section 4.04.          Financial Statements.

 

(a)          The Asiya’s unaudited balance sheet, income statement and statement of cash flows of Asiya as of and for the three (3) and six (6) month periods ended January 31, 2016, and the audited balance sheet, income statement and statement of cash flows of Asiya for the year ended October 31, 2015 (the “ Asiya Financial Statements ”) as set forth in Asiya’s filings with the Securities and Exchange Commission (“SEC”) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated and with each other. The Asiya Financial Statements present fairly the financial condition and operating results of Asiya and its consolidated Subsidiaries as of the dates, and for the periods, indicated therein, subject to normal year-end audit adjustments (none of which, individually or in the aggregate, are material). Asiya maintains a standard system of accounting established and administered in accordance with GAAP. Asiya’s unaudited balance sheet as of January 31, 2016, is referred to as the “ Asiya Balance Sheet .”

 

(b)          Asiya and its Subsidiaries have filed or furnished each form, report, schedule, registration statement, registration exemption, if applicable, definitive proxy statement and other document (together with all amendments thereof and supplements thereto) required to be filed or furnished by Asiya or any of its Subsidiaries pursuant to the Securities Act or the Exchange Act with the SEC since March 12, 2014 (as such documents have since the time of their filing been amended or supplemented, the “ Asiya SEC Reports ”). As of their respective dates, after giving effect to any amendments or supplements thereto, the Asiya SEC Reports (A) complied as to form in all material respects with the requirements of the Securities Act and the Exchange Act, if applicable, as the case may be, and, to the extent applicable, the Sarbanes-Oxley Act of 2002 (“ SOX ”), and (B) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Asiya Financial Statements complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto in effect at the time of filing or furnishing the applicable Asiya SEC Report.

 

(i)          Each of the principal executive officer of Asiya and the principal financial officer of Asiya (or each former principal executive officer of Asiya and each former principal financial officer of Asiya, as applicable) has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act or Sections 302 and 906 of SOX and the rules and regulations of the SEC promulgated thereunder with respect to the Asiya SEC Reports. For purposes of the preceding sentence, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in SOX. Since October 15, 2013, neither Asiya nor any of its Subsidiaries has arranged any outstanding “extensions of credit” to directors or executive officers within the meaning of Section 402 of SOX.

 

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Section 4.05.          Undisclosed Liabilities .  Except as disclosed in the Asiya Financial Statements, since the date of Asiya Balance Sheet through the date hereof, Asiya and its Subsidiaries have no liabilities (whether or not of a nature required to be disclosed on a consolidated balance sheet or in the related notes to the consolidated financial statements prepared in accordance with GAAP) which are, individually or in the aggregate, material to Asiya and its Subsidiaries taken as a whole, except for (i) liabilities shown on the Asiya Balance Sheet; (ii) liabilities which have arisen in the ordinary course of business since the date of the Asiya Balance Sheet; (iii) liabilities incurred pursuant to Contracts in effect as of the date hereof; or (iv) liabilities incurred in connection with this Agreement or the transactions contemplated hereby.

 

Section 4.06.          Absence of Certain Changes or Events .  Since the date of the Asiya Balance Sheet and through the date hereof, Asiya and its Subsidiaries have not taken any actions (or entered into a binding commitment to take any actions) which, if taken on or after the date hereof, would have required QPAGOS’ consent pursuant to Section 5.01(b).

 

Section 4.07.          Taxes

 

(a)          Tax Returns and Audits.

 

(i)          Asiya and each of its Subsidiaries have prepared and timely filed all material Tax Returns required to be filed relating to any and all Taxes concerning or attributable to Asiya, its Subsidiaries or their respective operations, and such Tax Returns have been completed in accordance with applicable Legal Requirements in all material respects.

 

(ii)         Asiya and each of its Subsidiaries have paid or withheld all Taxes required to be paid or withheld with respect to their Employees and have paid over to the appropriate Taxing authority all such Taxes.

 

(iii)        Neither Asiya nor any of its Subsidiaries has executed any outstanding waiver of any statute of limitations on or outstanding extension of the period for the assessment or collection of any Tax.

 

(iv)        No audit or other examination of any Tax Return of Asiya or any of its Subsidiaries is presently in progress, nor has Asiya or any of its Subsidiaries been notified in writing of any request for such an audit or other examination.

 

(v)         Neither Asiya nor any of its Subsidiaries has any liabilities for unpaid Taxes which have not been accrued or reserved on the Asiya Balance Sheet in accordance with GAAP, and neither Asiya nor any of its Subsidiaries has incurred any liability for Taxes since the date of the Asiya Balance Sheet other than in the ordinary course of business.

 

(vi)        There are no Liens on the assets of Asiya or any of its Subsidiaries relating to or attributable to Taxes.

 

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(vii)       Neither Asiya nor any of its Subsidiaries has been, during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code, a “United States Real Property Holding Company” within the meaning of Section 897(c)(2) of the Code.

 

(viii)      Neither Asiya nor any of its Subsidiaries (a) has ever been a member of an affiliated group (within the meaning of Code §1504(a)) filing a consolidated federal income Tax Return (other than a group the common parent of which was Asiya), (b) owes any amount under any Tax sharing, indemnification or allocation agreement, (c) has any liability for the Taxes of any Person (other than Asiya or any of its Subsidiaries) under Treas. Reg. § 1.1502-6 (or any similar provision of state, local or foreign Legal Requirements), as a transferee or successor, by contract, or otherwise.

 

(ix)         Neither Asiya nor any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code.

 

(x)          There is no agreement, plan, arrangement or other Contract covering any current or former employee or other service provider of Asiya or any of its Subsidiaries to which Asiya or any of its Subsidiaries is a party or by which Asiya or any of its Subsidiaries is bound that, considered individually or considered collectively with any other such agreements, plans, arrangements or other Contracts, will, or could be expected to, as a result of the transactions contemplated hereby, give rise directly or indirectly to the payment of any amount that would be characterized as an “parachute payment” within the meaning of Section 280G of the Code (or any corresponding or similar provision of state, local or foreign tax law. No employee, director, consultant or other service provider of Asiya or any of its Subsidiaries is entitled to receive any additional gross up payment from Asiya or any of its Subsidiaries by reason of any taxes imposed by Section 4999 of the Code.

 

(xi)         There is no Contract of Asiya or any of its Subsidiaries covering any of their Employees that, considered individually or considered collectively with any other such Contract of Asiya or any of its Subsidiaries, will, or would reasonably be expected to, as a result of the transactions contemplated hereby (whether alone or upon the occurrence of any additional or subsequent events), give rise directly or indirectly to the payment of any amount that could reasonably be expected to be non-deductible under Section 162(m) of the Code (or any corresponding or similar provision of state, local or foreign Tax Legal Requirements).

 

Section 4.08.          Compliance . Neither Asiya nor any of its Subsidiaries is in any material respect in conflict with, or in default or in violation of, any Legal Requirement applicable to Asiya or any of its Subsidiaries or by which Asiya or any of its Subsidiaries or any of their respective businesses or properties is bound or affected, including, Legal Requirements relating to anticompetitive or unfair pricing or trade practices, false advertising, consumer protection, export or import controls, government contracting, antikickback compliance, occupational health and safety, equal employment opportunities, fair employment practices, and sex, race, religious and age discrimination. There is no judgment, injunction, order or decree binding upon Asiya or any of its Subsidiaries which has or would reasonably be expected to have the effect of prohibiting or materially impairing the Asiya’s business or the parties’ ability to consummate the transactions contemplated herein.

 

Section 4.09.          Litigation .  As of the date hereof, there are no claims, suits, actions or proceedings pending or, to the Knowledge of Asiya, threatened against Asiya or any of its Subsidiaries, before any court, governmental department, commission, agency, instrumentality or authority, including any such claims, suits, actions or proceedings seeking to restrain or enjoin the consummation of the transactions contemplated hereby.

 

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Section 4.10.          Employee Plans

 

(a)          Neither Asiya nor any of its ERISA Affiliates has ever maintained, established, sponsored, participated in, or contributed to any Asiya Employee Plan. Asiya is not a party, and never has been a party, to any Asiya Employee Agreement. Neither Asiya nor any of its ERISA Affiliates has any commitment to establish any new Asiya Employee Plan or Asiya Employee Agreement, to materially modify any Asiya Employee Plan or Asiya Employee Agreement (except to the extent required by applicable Legal Requirements or to conform any such Asiya Employee Plan or Asiya Employee Agreement to any Legal Requirements or as required by this Agreement), or to adopt or enter into any Asiya Employee Plan or Asiya Employee Agreement.

 

(b)           No Pension or Welfare Plans . Neither Asiya nor any of its ERISA Affiliates has ever maintained, established, sponsored, participated in, or contributed to, any (i) Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code; (ii) Multiemployer Plan; (iii) “multiple employer plan” as defined in ERISA or the Code; or (iv) a “funded welfare plan” within the meaning of Section 419 of the Code. No Asiya Employee Plan provides health benefits that are not fully insured through an insurance contract.

 

(c)           Employment Matters . Asiya does not have any employees or consultants. Neither Asiya nor any of its Subsidiaries is in conflict with, or in default under or in violation of, any applicable foreign, federal, state and local Legal Requirements, or collective bargaining agreements or arrangements respecting employment, employment practices, terms and conditions of employment, Tax withholding, prohibited discrimination, equal employment, fair employment practices, immigration status, employee safety and health, and wages and hours, except for those conflicts, defaults or violations that, individually or in the aggregate, would not be material, individually or in the aggregate, to Asiya and its Subsidiaries, taken as a whole.

 

(d)           Labor . Asiya is not a party to any collective bargaining agreement or union contract with respect to Asiya Employees and no collective bargaining agreement is being negotiated by Asiya or any of its Subsidiaries. There is no labor dispute, strike or work stoppage against Asiya or any of its Subsidiaries pending or, to the Knowledge of Asiya, threatened or reasonably anticipated. As of the date hereof, there are no actions, suits, claims, or proceedings pending, or, to the Knowledge of Asiya, threatened against Asiya or any of its Subsidiaries, relating to any labor, safety or discrimination matters involving any Asiya Employee, including, without limitation, charges of material unfair labor practices or discrimination complaints.

 

Section 4.11.          Real Property .  Neither Asiya nor any of its Subsidiaries currently owns, or has ever owned, any real property. Neither Asiya nor any of its Subsidiaries currently leases, or has ever leased, any real property.

 

Section 4.12.          Contracts .  Asiya does not have any Material Contracts to which it or any of its Subsidiaries is a party or is bound by as of the date hereof.

 

Section 4.13.          Takeover Statutes .  The Board of Directors of Asiya has approved this Agreement and the transactions contemplated hereby as required to render inapplicable to such agreements and transactions DGCL Section 203, to the extent applicable. To the Knowledge of Asiya, no other Takeover Statute is applicable to the Merger or the other transactions contemplated by this Agreement.

 

Section 4.14.          Brokers’ and Finders’ Fees; Fees and Expenses .  Asiya has not incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with this Agreement.

 

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Section 4.15.          Operations of Merger Sub . Merger Sub has been formed solely for the purpose of engaging in the transactions contemplated hereby and, prior to the Effective Time, Merger Sub will not have engaged in any other business activities and will have incurred no liabilities or obligations other than as contemplated by this Agreement.

 

ARTICLE V.

COVENANTS

 

Section 5.01.          Covenants of Asiya .  From and after the date of this Agreement until the Effective Time, Asiya covenants and agrees as to itself and its Subsidiaries that for transactions solely involving Asiya and one or more of its direct or indirect wholly owned Subsidiaries or between two or more direct or indirect wholly owned Subsidiaries of Asiya, as required by Legal Requirements, or to the extent that QPAGOS shall otherwise previously consent in writing, such consent not to be unreasonably withheld or delayed):

 

(a)           Ordinary Course . Asiya and each of its Subsidiaries shall conduct their businesses in the ordinary course of business consistent with past practice in all material respects.

 

(b)           Negative Covenants . Asiya shall not do any of the following, and shall not permit any of its Subsidiaries to do any of the following:

 

(i)          Cause, permit or propose any amendments to Asiya Charter Documents or any of the Asiya Subsidiary Charter Documents;

 

(ii)         Declare, set aside or pay any dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of any capital stock or split, combine or reclassify any capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock;

 

(iii)        Purchase, redeem or otherwise acquire, directly or indirectly, any shares of its capital stock or the capital stock of its Subsidiaries;

 

(iv)        Issue, deliver, sell, authorize, pledge or otherwise encumber any shares of Asiya Common Stock, or any securities convertible into shares of Asiya Common Stock, or subscriptions, rights, warrants or options to acquire any shares of Asiya Common Stock or any securities convertible into shares of Asiya Common Stock, or enter into other agreements or commitments of any character obligating it to issue any such securities or rights;

 

(v)         (A) Acquire or agree to acquire by merging or consolidating with, or by purchasing any equity or voting interest in or a portion of the assets of, or by any other manner, any business or any Person or division thereof, or otherwise acquire or agree to acquire any assets or (B) otherwise make any capital expenditure, or commit to make any capital expenditure;

 

(vi)        Sell, lease, transfer, license, mortgage, pledge, permit to become subject to Liens or otherwise dispose of any properties or assets of Asiya;

 

(vii)       Incur any indebtedness for borrowed money or guarantee any such indebtedness of another Person, issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of Asiya or any of its Subsidiaries, guarantee any debt securities of another Person, enter into any “keep well” or other agreement to maintain any financial statement condition of any other Person (other than of any wholly-owned Subsidiary of it);

 

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(viii)      Make any loans, advances or capital contributions to, or investments in, any other Person;

 

(ix)         (A) amend, modify or terminate, or waive, release or assign any rights under, any Asiya Material Contract, or (B) enter into any Contract which, if in effect on the date hereof, would have been required to be disclosed as a Asiya Material Contract;

 

(x)          enter into any Contract to purchase or sell any interest in real property, grant any security interest in any real property, enter into any lease, sublease, license or other occupancy agreement with respect to any real property or materially alter, amend or modify, or violate or terminate any of the terms of any Asiya Lease;

 

(xi)         Commence or settle any lawsuit, threat of any lawsuit or proceeding or other investigation by or against Asiya or any Subsidiary other than to enforce or preserve its rights under this Agreement;

 

(xii)        Except as required by GAAP, make any change in its methods or principles of accounting;

 

(xiii)       Make any Tax election (other than elections made in connection with the filing of Asiya’s federal and state Tax returns, which elections will not, individually or in the aggregate, materially increase Asiya’s Tax liability) or Tax accounting method change, settle or compromise any material income Tax liability or consent to any extension or waiver of any limitation period with respect to any Tax;

 

(xiv)      Adopt or amend any employee benefit plan, policy or arrangement, or stock option plan, or enter into any employment contract or collective bargaining agreement, or pay any bonus or special remuneration (cash, equity or otherwise) to any director or employee (including rights to severance or indemnification) of its directors, officers, employees or consultants;

 

(xv)       Grant any severance or termination pay (cash, equity or otherwise) to any officer, or adopt any new severance plan, or amend or modify or alter in any respect any severance plan, agreement or arrangement existing on the date hereof;

 

(xvi)      Hire or terminate any Employee, or increase or make any other change that would result in increased cost to Asiya to the salary, wage rate, employment status, title or other compensation (including equity-based compensation) payable or to become payable by Asiya or any Subsidiary to any Asiya Employee;

 

(xvii)     Adopt a plan of complete or partial liquidation or dissolution, or commence or agree to commence any bankruptcy, voluntary liquidation, dissolution, winding up, examinership, insolvency or similar proceeding in respect of itself or any of its Subsidiaries; or

 

(xviii)    take, commit, or agree in writing or otherwise to take, any of the actions described in each of the above clauses of this Section 5.01(b).

 

  - 15 -  

 

 

Section 5.02.          Acquisition Proposals .

 

(a)           No Solicitation . Asiya agrees that neither it nor any of its Subsidiaries nor any of the officers and directors of it or its Subsidiaries shall, and that it shall cause its and its Subsidiaries’ Employees, stockholders, agents and representatives (including any investment banker, attorney or accountant retained by it or any of its Subsidiaries) (collectively, “ Representatives ”) to not, directly or indirectly: (i) solicit, initiate, knowingly encourage or knowingly facilitate any inquiries with respect to, or the making, submission or announcement of, any offer or proposal for an Acquisition Proposal (as defined below); (ii) participate in any discussions or negotiations regarding, or furnish to any Person any nonpublic information with respect to, any Acquisition Proposal; (iii) engage in discussions with any Person with respect to any Acquisition Proposal, except as to the existence of these provisions; (iv) approve, endorse or recommend any Acquisition Proposal; or (v) enter into any letter of intent or similar document or any contract agreement or commitment contemplating any Acquisition Proposal or transaction contemplated thereby. Asiya and its Subsidiaries, will immediately cease any and all existing activities, discussions or negotiations with any third parties conducted heretofore with respect to any Acquisition Proposal.

 

(b)           Notification of Unsolicited Acquisition Proposals. As promptly as practicable after receipt of any Acquisition Proposal or any request for nonpublic information or inquiry which it reasonably believes would lead to an Acquisition Proposal, Asiya shall, subject to any existing confidentiality obligation with the party making such request or inquiry, provide QPAGOS with oral and written notice of the material terms and conditions of such Acquisition Proposal, request or inquiry, and the identity of the Person or group making any such Acquisition Proposal, request or inquiry.

 

(c)           Responsibility of Representatives . Asiya hereby agrees to be responsible for the breach of this Section 5.02 by any of its Representatives.

 

Section 5.03.         Other Actions .  Asiya shall use its best efforts not to, and shall use its best efforts not to permit any of its respective Subsidiaries to, take any action that would, or that could reasonably be expected to, result in: (i) any of the representations and warranties of Asiya set forth in this Agreement that is qualified as to materiality or Material Adverse Effect becoming untrue; (ii) any of such representations and warranties that is not so qualified becoming untrue in any material respect; or (iii) any condition to the Merger set forth in ARTICLE VII not being satisfied.

 

ARTICLE VI.

ADDITIONAL AGREEMENTS

 

Section 6.01.          Preparation of the Form 8-K .  As promptly as practicable after the date hereof, QPAGOS and Asiya shall cooperate and work together in good faith to prepare one or more Current Reports on Form 8-K under the Exchange Act (including any amendments thereof, the “ Form 8-K ”) as required by the Exchange Act for disclosure of the transactions contemplated hereby. QPAGOS and Asiya shall cooperate and work together in good faith to prepare one or more, such Form 8-Ks to be filed by Asiya with the SEC, from time to time after the Closing, as required by applicable Legal Requirements. Such Form 8-Ks shall comply as to form in all material respects with the applicable provisions of the Exchange Act and the rules and regulations thereunder and shall contain all information regarding QPAGOS, Asiya and the transactions contemplated herein as would be required to be contained in a General Form for Registration of Securities on Form 10, including the consent of QPAGOS’ independent accountants as to the filing of QPAGOS’ financial statements contained therein, to the extent applicable, except that QPAGOS and Asiya shall be permitted to defer the filing of pro forma financial information to the extent permitted to do so under applicable Legal Requirements (a final draft capable of being filed with the SEC shall be referred to as the “ Final Draft Form 8-K ”).

 

  - 16 -  

 

 

Section 6.02.          QPAGOS Stockholder Approval .  QPAGOS shall use reasonable best efforts to obtain the QPAGOS Stockholder Approval as soon as practicable following the date hereof in compliance with applicable Legal Requirements.

 

Section 6.03.          Access to Information; Effect of Review .

 

(a)           Access . To the extent permitted by applicable Legal Requirements, Asiya shall, and shall cause each of its Subsidiaries to, afford to QPAGOS and to the Representatives of QPAGOS reasonable access during normal business hours during the period prior to the Effective Time to all its properties, books, contracts, commitments, personnel and records and, during such period, to the extent permitted by applicable Legal Requirements, Asiya shall, and shall cause each of its Subsidiaries to, (i) advise QPAGOS of any change or event that has had or could reasonably be expected to cause a breach of any representation, warranty or covenant of such party, and (ii) furnish promptly all other information concerning its business, properties and personnel as QPAGOS may reasonably request; provided , however , that no actions shall be taken pursuant to this Section 6.03 that would create a risk of loss or waiver of the attorney/client privilege.

 

(b)           Effect of Review . No review pursuant to this Section 6.01 shall have any effect for the purpose of determining the accuracy of any representation or warranty given by any of the parties hereto to any of the other parties hereto.

 

Section 6.04.         Regulatory Matters; Reasonable Best Efforts .

 

(a)           Regulatory Approvals . Each party hereto shall cooperate and promptly prepare and file all necessary documentation, to effect all necessary applications, notices, petitions and filings, and shall use reasonable best efforts to take or cause to be taken all actions, and do or cause to be done all things in order to obtain all approvals and authorizations of all Governmental Entities, necessary or advisable to consummate and make effective, in the most expeditious manner reasonably practicable, the Merger and the other transactions contemplated by this Agreement. QPAGOS shall have the right to review and approve in advance all characterizations of the information relating to QPAGOS, on the one hand, and Asiya shall have the right to review and approve in advance all characterizations of the information relating to Asiya, on the other hand, in either case, that appear in any application, notice, petition or filing made in connection with the Merger or the other transactions contemplated by this Agreement with any Governmental Entity. QPAGOS and Asiya agree that they will consult and cooperate with each other with respect to the obtaining of all such necessary approvals and authorizations of Governmental Entities.

 

(b)           Reasonable Best Efforts . Subject to the terms and conditions set forth in this Agreement, each of the parties hereto shall use its reasonable best efforts (subject to, and in accordance with, applicable Legal Requirements) to take, or cause to be taken, promptly all actions, and to do, or cause to be done, promptly and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective the Merger and the other transactions contemplated by this Agreement, including: (i) the obtaining of all necessary consents or waivers from third parties and Governmental Entities; (ii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated by this Agreement; and (iii) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by this Agreement. Notwithstanding the foregoing, nothing in this Section 6.04(b) shall: (i) limit any applicable rights a party may have to terminate this Agreement pursuant to Section 9.01 so long as such party has up to then complied in all material respects with its obligations under this Section 6.04(b); (ii) require any party to offer, accept or agree to (A) dispose or hold separate any part of its businesses, operations, assets or product lines; (B) not compete in any geographic area or line of business; (C) restrict the manner in which, or whether, such party or any of its Affiliates may carry on business in any part of the world; or (D) pay any consideration (other than ordinary course filing, application or similar fees and charges) to obtain any approval, consent or waiver from a third party necessary, proper or advisable to consummate the transactions contemplated hereby, including the Merger; or (iii) require any party to this Agreement to contest or otherwise resist any administrative or judicial action or proceeding, including any proceeding by a private party, challenging any of the transactions contemplated hereby, including the Merger, as violative of any antitrust law.

 

  - 17 -  

 

 

Section 6.05.          Employee Matters .

 

(a)          From and after the Effective Time, the QPAGOS Employee Plans in effect as of the date of this Agreement and at the Effective Time shall remain in effect in accordance with their respective terms with respect to employees and former employees of QPAGOS (the “ Newco Employees ”), respectively, covered by such QPAGOS Employee Plans at the Effective Time, until such time as QPAGOS shall otherwise determine, subject to applicable Legal Requirements and the terms of such plans.

 

(b)          Without limiting the generality of 0, the provisions of this Section 6.05 are solely for the benefit of the parties to this Agreement, and no current or former director, officer, employee or independent contractor or any other person shall be a third-party beneficiary of this Agreement, and nothing herein shall be construed as an amendment to any Employee Plan or other compensation or benefit plan or arrangement for any purpose.

 

Section 6.06.          Treatment of QPAGOS Warrants . At the Effective Time, each QPAGOS Warrant shall be assumed by Asiya and converted into a warrant to acquire, on the same terms and conditions as were applicable under such QPAGOS Warrant, a number of shares of Asiya Common Stock equal to two times the number of shares of QPAGOS Common Stock subject to such QPAGOS Warrant immediately before the Effective Time at an exercise price per share of Asiya Common Stock equal to the fifty percent (50%) of the exercise price per share under such QPAGOS Warrant.

 

Section 6.07.          Director and Officer Indemnification, Exculpation and Insurance .

 

(a)          Each of Asiya, Merger Sub and QPAGOS agrees that, to the fullest extent permitted under applicable Legal Requirements, all rights to indemnification, advancement and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time now existing in favor of the current or former directors and officers of such entity, or any person who comes to serve in such capacity prior to the Effective Time, as provided in such entity’s certificate or certificate of incorporation, by-laws or other agreements providing indemnification, advancement or exculpation shall survive the Merger and shall continue in full force and effect in accordance with their terms, and no such provision in any certificate or certificate of incorporation, by-laws (or comparable organizational document) or other agreement shall be amended, modified or repealed in any manner that would adversely affect the rights or protections thereunder to any such individual with respect to acts or omissions occurring at or prior to the Effective Time. From and after the Effective Time, Asiya shall, and shall cause the Surviving Corporation and its Subsidiaries to, honor and perform, in accordance with their respective terms, each of the covenants contained in this Section 6.08 without limit as to time.

 

(b)          From and after the Effective Time, subject to applicable Legal Requirements, Asiya will cause the Surviving Corporation to indemnify and hold harmless each present director and officer of QPAGOS (in each case, for acts or failures to act in such capacity), determined as of the date hereof, and any person who becomes such a director or officer between the date hereof and the Effective Time (collectively, the “ QPAGOS Parties ”), against any costs or expenses (including reasonable attorneys’ fees, costs and expenses), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time (including any matters arising in connection with the transactions contemplated by this Agreement), to the fullest extent permitted by applicable Legal Requirements (and Asiya will cause the Surviving Corporation to also advance expenses (including reasonable attorneys’ fees, costs and expenses) as incurred to the fullest extent permitted under applicable Legal Requirements; provided that if required by applicable Legal Requirements the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification).

 

  - 18 -  

 

 

(c)          The obligations of Asiya and the Surviving Corporation under this 0 Section 6.08 shall not be terminated or modified by such parties in a manner so as to adversely affect any QPAGOS Party, or any other person entitled to the benefit of Section 6.07 (a) or (b), to whom this Section 6.08 applies without the consent of such affected QPAGOS Party, or such other person, as the case may be. If Asiya, the Surviving Corporation or any of their respective successors or assigns (i) shall consolidate with or merge into any other corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any individual, corporation or other entity, then, and in each such case, proper provisions shall be made so that the successors and assigns of Asiya or the Surviving Corporation, as the case may be, shall assume all of the obligations of Asiya, or the Surviving Corporation, as the case may be, set forth in this 0 Section 6.08.

 

(d)          The provisions of Section 6.08 are (i) intended to be for the benefit of, and will be enforceable by, each indemnified party, his or her heirs and his or her representatives and (ii) in addition to, and not in substitution for, any other rights to indemnification, advancement, exculpation or contribution that any such person may have by contract or otherwise.

 

Section 6.08.          Fees and Expenses . All fees and expenses incurred in connection with the Merger, this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated.

 

Section 6.09.         Public Announcements .  QPAGOS and Asiya will consult with each other before issuing, and provide each other the reasonable opportunity to review, comment upon and concur with, any press release or other public statements with respect to the transactions contemplated by this Agreement, including the Merger, and shall not issue any such press release or make any such public statement prior to such consultation, except as any party, after consultation with counsel, determines is required by applicable Legal Requirements.

 

Section 6.10.         Stockholder Litigation .  Each of QPAGOS and Asiya shall give the other the reasonable opportunity to consult concerning the defense of any stockholder litigation against QPAGOS or Asiya, as applicable, or any of their respective directors or officers relating to the transactions contemplated by this Agreement. Neither party shall settle any such litigation without the prior consent of the other party, not to be unreasonably withheld, conditioned or delayed.

 

Section 6.11.          Tax-Free Reorganization Treatment .  The parties to this Agreement intend that the Merger will qualify as a reorganization under Section 368(a) of the Code, and each shall not, and shall not permit any of their respective Subsidiaries to, take any action, or fail to take any action, that would reasonably be expected to jeopardize the qualification of the Merger as a reorganization under Section 368(a) of the Code. Each party to this Agreement will report the Merger as a reorganization within the meaning of Section 368(a) of the Code for all Tax purposes, including attaching the statement described in Treasury Regulations Section 1.368-3(a) on or with its return for the taxable year of the Merger.

 

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ARTICLE VII.

CONDITIONS PRECEDENT

 

Section 7.01.          Conditions to Each Party’s Obligation to Effect the Merger .  The respective obligation of each party to effect the Merger is subject to the satisfaction or waiver by QPAGOS and Asiya on or prior to the Closing Date of the following conditions:

 

(a)            Stockholder Approvals . The QPAGOS Stockholder Approval shall have been obtained.

 

(b)           No Injunctions or Restraints . No (i) temporary restraining order or preliminary or permanent injunction or other order by any federal or state court of competent jurisdiction preventing consummation of the Merger or (ii) applicable federal or state Legal Requirements prohibiting consummation of the Merger (collectively, “ Restraints ”) shall be in effect.

 

(c)            Form 8-K . The Final Draft Form 8-K has been prepared and is capable of being filed immediately after the Closing (or the immediate next Business Day thereafter).

 

Section 7.02.          Conditions to Obligations of QPAGOS .  The obligation of QPAGOS to effect the Merger is further subject to satisfaction or waiver of the following conditions:

 

(a)            Representations and Warranties . The representations and warranties of Asiya set forth herein shall be true and correct both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” set forth therein) would not be material to Asiya and its Subsidiaries, taken as a whole.

 

(b)           Performance of Obligations of Asiya . Asiya shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date.

 

(c)           No Material Adverse Effect . Since the date hereof, there shall not have been any change, event, occurrence or development that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect on Asiya.

 

(d)           Closing Certificates . QPAGOS shall have received a certificate signed by Mark Korb, the Chief Executive Officer of Asiya, in his individual and corporate capacity, dated the Effective Time, to the effect that, to his knowledge, the conditions set forth in 0 (a), Section 7.02(b) and Section 7.02(c) have been satisfied.

 

(e)           Share Repurchase Agreements . Each holder of Asiya Common Stock shall have executed a Stock Repurchase Agreement in substantially the form attached hereto as Exhibit A , pursuant to which each holder of Asiya Common Stock shall have returned their share certificates to Asiya for cancellation and retirement without payment of any cash consideration therefor, in order to help facilitate the Merger provided , however , that the current holders of Asiya Common Stock may retain, and need not return or sell to Asiya, an aggregate of 25,000 shares of Asiya Common Stock. On the Closing Date, Asiya shall have delivered to QPAGOS a copy of the Asiya shareholders list dated as of the Closing Date as prepared by the Asiya transfer agent. .

 

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Section 7.03.          Conditions to Obligations of Asiya .  The obligation of Asiya to effect the Merger is further subject to satisfaction or waiver of the following conditions:

 

(a)           Representations and Warranties . The representations and warranties of QPAGOS set forth herein shall be true and correct both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” set forth therein) would not be material to QPAGOS.

 

(b)           Performance of Obligations of QPAGOS . QPAGOS shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date.

 

(c)           No Material Adverse Effect . Since the date hereof, there shall not have been any change, event, occurrence or development that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect on QPAGOS.

 

(d)           Closing Certificates . Asiya shall have received a certificate signed by an executive officer of QPAGOS, dated the Effective Time, to the effect that, to such officer’s knowledge, the conditions set forth in 0(a), 7.03(b) and 7.03(c) have been satisfied.

 

Section 7.04.          Frustration of Closing Conditions .  Neither QPAGOS nor Asiya may rely on the failure of any condition set forth in Section 7.01, 7.02 or 7.03 as the case may be, to be satisfied if such failure was caused by such party’s failure to use reasonable best efforts to consummate the Merger and the other transactions contemplated by this Agreement, to the extent required by and subject to Section 6.04.

 

ARTICLE VIII.

SURVIVAL

 

8.01          Survival . The representations and warranties of Asiya contained in ARTICLE IV of this Agreement, or in any certificate or other writing delivered pursuant hereto or thereto or in connection herewith or therewith, shall survive the Closing until the twelve (12) month anniversary of the Closing Date (the “ Survival Period ”); provided that the representations and warranties of the Company set forth in Sections 4.01 (Organization; Standing and Power; Subsidiaries), 4.02 (Capital Structure), 4.03 (Authority; Non-Contravention; Necessary Consent), 4.05 (Undisclosed Liabilities), and 4.07 (Taxes) (collectively, the “ Specified Representations ”) shall survive until the expiration of the applicable statute of limitations applicable to claims related thereto. The covenants and agreements of the parties hereto contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing indefinitely or for the shorter period explicitly specified therein, except that for such covenants and agreements that survive for such shorter period, breaches thereof shall survive indefinitely or until the latest date permitted by law. Notwithstanding the preceding sentences, any breach of representation, warranty, covenant or agreement in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to the preceding sentences, if written notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been given to the party against whom such indemnity may be sought prior to such time.

 

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ARTICLE IX.

TERMINATION, AMENDMENT AND WAIVER

 

Section 9.01.         Termination .  This Agreement may be terminated at any time prior to the Effective Time, whether before or after the QPAGOS Stockholder Approval:

 

(a)          by mutual written consent of QPAGOS and Asiya;

 

(b)          by either QPAGOS or Asiya:

 

(i)          if the Merger shall not have been consummated by the two (2) month anniversary of the date of this Agreement (the “ Outside Termination Date ”); provided , however , that the right to terminate this Agreement pursuant to this Section 9.01(b)(i) shall not be available to any party that is then in breach of any representation, warranty, covenant, agreement or obligation contained in this Agreement;

 

(ii)         if any Restraint having any of the effects set forth in Section 7.01(b) shall be in effect and shall have become final and nonappealable; provided that the party seeking to terminate this Agreement pursuant to this Section 9.01(b)(ii) shall have used its reasonable best efforts to remove such Restraint; or

 

(c)          by QPAGOS, if Asiya shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (A) would give rise to the failure of a condition set forth in 0 (a) or (b), and (B) is incapable of being cured by Asiya or is not cured by Asiya within 60 days following receipt of written notice from QPAGOS of such breach or failure to perform; or

 

(d)          by Asiya, if QPAGOS shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (A) would give rise to the failure of a condition set forth in 0 (a) or (b), and (B) is incapable of being cured by QPAGOS or is not cured by QPAGOS within 60 days following receipt of written notice from Asiya of such breach or failure to perform.

 

Section 9.02.          Effect of Termination .  In the event of termination of this Agreement by either Asiya or QPAGOS as provided in Section 9.01, this Agreement shall forthwith become null and void and have no effect, without any liability or obligation on the part of QPAGOS or Asiya, other than the provisions of Section 6.08 (Fees and Expenses), this Section 9.02 and ARTICLE VIII, which provisions shall survive such termination, and except to the extent that such termination results from the knowing and intentional material breach by a party of any of its representations, warranties, covenants or agreements set forth in this Agreement, in which case such termination shall not relieve any party of any liability or damages resulting from its knowing and intentional material breach of this Agreement or fraud. No termination of this Agreement shall affect the obligations of the parties contained in the Confidentiality Agreement, all of which obligations shall survive termination of this Agreement in accordance with their terms.

 

Section 9.03.         Amendment .  This Agreement may be amended by the parties at any time before or after the QPAGOS Stockholder Approval; provided , however , that after any such approval, there shall not be made any amendment that by applicable Legal Requirements requires further approval by the stockholders of QPAGOS without the further approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties.

 

  - 22 -  

 

 

Section 9.04.          Extension; Waiver .  At any time prior to the Effective Time, a party may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties of the other parties contained in this Agreement or in any document delivered pursuant to this Agreement or (c) subject to the provision of 0, waive compliance by the other parties with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.

 

ARTICLE X.

GENERAL PROVISIONS

 

Section 10.01.          Nonsurvival of Representations, Warranties and Agreements. The representations, warranties and agreements in this Agreement shall terminate at the Effective Time or, except as otherwise provided in Section 9.02, upon the termination of this Agreement pursuant to Section 8.01, as the case may be, except that the agreements set forth in ARTICLE II, 6.05 (Indemnification, Exculpation and Insurance) and 6.08 (Fees and Expenses) and any other agreement in this Agreement which contemplates performance after the Effective Time shall survive the Effective Time indefinitely and those set forth in Sections 6.08 (Fees and Expenses) and 9.02 (Effect of Termination) and this ARTICLE VIIIARTICLE X shall survive termination indefinitely.

 

Section 10.02.          Notices .  All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given (as of the time of delivery or, in the case of a telecopied communication, of confirmation) if delivered personally, telecopied (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

 

if to Asiya, to:

 

Asiya Pearls, Inc.

c/o 1900 Glades Road, Suite 265

Boca Raton, Florida 33431

Attention: Mark Korb

Email: markkorb@gmail.com

 

if to QPAGOS, to:

 

QPAGOS Corporation

1900 Glades Road, Suite 265

Boca Raton, Florida 33431

Attention: Gaston Pereira

Email: gaston.pereira@qpagos.com

 

  - 23 -  

 

 

with a copy (which shall not constitute notice) to:

 

Gracin & Marlow, LLP

The Chrysler Building

405 Lexington Avenue, 26 th Floor

New York, New York 10174

Facsimile: (212) 208-6457

Attention: Hank Gracin, Esq.

Email: hgracin@gracinmarlow.com

 

Section 10.03.          Definitions .  For purposes of this Agreement:

 

(a)          “ Acquisition Proposal ” means any inquiry, proposal or offer from any Person relating to any direct or indirect acquisition or purchase of 25% or more of the aggregate equity interests of Asiya, any tender offer or exchange offer that if consummated would result in any person beneficially owning 25% or more of the aggregate equity interests of Asiya, or any of its Subsidiaries, or any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the acquisition of 25% or more of the aggregate equity interests or assets of Asiya, or any of its Subsidiaries, other than the transactions contemplated by this Agreement.

 

(b)          An “ Affiliate ” of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person, where “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a person, whether through the ownership of voting securities, by contract, as trustee or executor, or otherwise;

 

(c)           “ Asiya Employee ” means an Employee of Asiya or any of its ERISA Affiliates.

 

(d)          “ Asiya Employee Agreement ” means an Employee Agreement of Asiya or any of its ERISA Affiliates.

 

(e)          “ Asiya Employee Plan ” means an Employee Plan maintained by Asiya or its Subsidiaries.

 

(f)          “ Asiya Material Contract ” mean any Material Contract of Asiya or its Subsidiaries.

 

(g)          “ Business Day ” means a day other than a Saturday, Sunday or other day on which banks located in New York are authorized or required by Legal Requirements to close.

 

(h)          “ capital stock ” or “ shares of capital stock ” means (i) with respect to a corporation, as determined under the laws of the jurisdiction of organization of such entity, capital stock or such shares of capital stock; (ii) with respect to a partnership, limited liability company, or similar entity, as determined under the laws of the jurisdiction of organization of such entity, units, interests, or other partnership or limited liability company interests; or (iii) any other equity ownership or participation;

 

(i)           “ Contract ” means any written or oral agreement, contract, subcontract, lease, instrument, note, license or sublicense;

 

(j)          “ Employee ” will mean any current or former employee, consultant or director of QPAGOS or Asiya, as applicable, or any ERISA Affiliate of QPAGOS or Asiya, as applicable.

 

  - 24 -  

 

 

(k)          “ Employee Agreement ” will mean each employment, severance, consulting, relocation, or other agreement or contract between Asiya or any ERISA Affiliate of Asiya and any Employee of Asiya, under which Asiya or any ERISA Affiliate of Asiya has a current material obligation.

 

(l)          “ Employee Plan ” will mean any material plan, program, policy, practice, contract, agreement or other arrangement providing for compensation, severance, termination pay, deferred compensation, performance awards, stock or stock-related awards, fringe benefits or other employee benefits or remuneration of any kind, whether written or unwritten or otherwise, funded or unfunded, including without limitation, each “employee benefit plan,” within the meaning of Section 3(3) of ERISA which is currently maintained, contributed to, or required to be contributed to, by Asiya or any ERISA Affiliate of Asiya for the benefit of any Employee of Asiya, or with respect to which Asiya or any ERISA Affiliate of Asiya has or may have any current material liability or obligation.

 

(m)          “ Environmental Laws ” means any and all Legal Requirements and Permits issued, promulgated or entered into by or with any Governmental Entity, relating to the environment, preservation or reclamation of natural resources, or to the protection of human health as it relates to the environment, including Legal Requirements and Permits relating to noise levels, or to the management, release or threatened release of Hazardous Materials.

 

(n)          “ ERISA ” will mean the Employee Retirement Income Security Act of 1974, as amended.

 

(o)          “ ERISA Affiliate ” will mean each Subsidiary of Asiya and any other person or entity under common control with Asiya or any of its respective Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations issued thereunder.

 

(p)          “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

 

(q)          “ GAAP ” means United States generally accepted accounting principles

 

(r)          “ Governmental Entity ” means a supranational, national, state, municipal, local or foreign government, any instrumentality, subdivision, court, administrative agency or commission or other governmental authority or instrumentality

 

(s)          “ Hazardous Material ” means any chemical or substance that has been defined or listed by any Governmental Entity as “radioactive”, “toxic”, “hazardous” or a “pollutant” pursuant to applicable Environmental Laws, but excluding office and janitorial supplies properly and safely maintained.

 

(t)          “ IRS ” shall mean the United States Internal Revenue Service, or any successor entity thereto.

 

(u)          “ Legal Requirements ” means any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, order, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity.

 

(v)         “ Knowledge ” means (i) with respect to QPAGOS, the knowledge of Gaston Pereira, and (ii) with respect to Asiya, the knowledge of Mark Korb, in each case including knowledge that any such person would have had if such person had conducted a reasonable inquiry with respect to the subject matter thereof.

 

  - 25 -  

 

 

(w)          “ Liens ” means any mortgage, lien, security interest, pledge, reservation, equitable interest, charge, easement, lease, sublease, conditional sale or other title retention agreement, right of first refusal, hypothecation, covenant, servitude, right of way, variance, option, warrant, claim, community property interest, restriction (including any restriction on use, voting, transfer, alienation, receipt of income or exercise of any other attribute of ownership) or encumbrance of any kind.

 

(x)          “ Material Adverse Effect ” means, when used in connection with QPAGOS or Asiya, as the case may be, any change, effect, event, occurrence or state of facts (i) that is materially adverse to the business, assets, properties, financial condition or results of operations of such person and its Subsidiaries taken as a whole but excluding any of the foregoing resulting from (A) changes in international or national political or regulatory conditions generally (in each case, to the extent not disproportionately affecting the applicable person and its Subsidiaries, taken as a whole, as compared to similarly situated persons), (B) changes or conditions generally affecting the U.S. economy or financial markets or generally affecting any of the segments of the industry in which the applicable person or any of its Subsidiaries operates (in each case, to the extent not disproportionately affecting the applicable person and its Subsidiaries, taken as a whole, as compared to similarly situated persons), or (C) changes in such Person’s relationships with employees, customers, distributors, suppliers, vendors, licensors or other business partners as a result of the announcement or pendency of this Agreement or the anticipated consummation of the Merger and the other transactions contemplated by this Agreement, or (ii) that prevents or materially delays such person from performing its material obligations under this Agreement or consummation of the transactions contemplated hereby.

 

(y)          “ Material Contract ” means:

 

(i)          any Contract relating to or evidencing indebtedness of such Person, including mortgages, other grants of security interests, guarantees or notes;

 

(ii)         any Contract pursuant to which such Person has provided funds to or made any loan, capital contribution or other investment in, or assumed any liability or obligation of, any other Person;

 

(iii)        any Contract with any Governmental Entity;

 

(iv)        any Contract with any Related Party of such Person;

 

(v)         any Employee Agreements;

 

(vi)        any Employee Plans;

 

(vii)       any Contract that limits, or purports to limit, in any material respect, the right of such Person to engage in any line of business or with any other Person or in any geographic area or during any period of time, or that restricts the right of such Person to sell to or purchase from any other Person or to hire any Person, or that grants the other party or any third person “most favored nation” status or any type of special discount rights;

 

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(viii)      any Contract pursuant to which such Person is the lessee or lessor of, or holds, uses, or makes available for use to any other Person, (A) any real property or (B) any tangible personal property;

 

(ix)         any Contract for the sale or purchase of any real property, or for the sale or purchase of any tangible personal property;

 

(x)          any Contract providing for indemnification to or from any Person with respect to liabilities relating to any current or former business of such Person or any predecessor Person;

 

(xi)         any joint venture or partnership, merger, asset or stock purchase or divestiture Contract relating to such Person;

 

(xii)        any Contract with any labor union;

 

(xiii)       any Contract for the purchase of any debt or equity security or other ownership interest of any Person, or for the issuance of any debt or equity security or other ownership interest, or the conversion of any obligation, instrument or security into debt or equity securities or other ownership interests of, such Person;

 

(xiv)      any Contract relating to settlement of any administrative or judicial proceedings within the past five (5) years;

 

(xv)       any Contract that is (or would be if the party were subject to the reporting requirements under the Exchange Act) a material contract (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC); and

 

(xvi)      any other Contract, whether or not made in the ordinary course of business that (x) involves a future or potential liability or receivable, as the case may be, in excess of $1,000 over the current Contract term, (y) has a term greater than one year and may not be terminated by such Person without penalty upon notice of 30 days or less, or (z) might result in payments to such Person in excess of $1,000.

 

(z)          “ Multiemployer Plan ” will mean any “Pension Plan” which is a “multiemployer plan,” as defined in Section 3(37) of ERISA.

 

(aa)         “ Pension Plan ” shall mean each Employee Plan which is an “employee pension benefit plan,” within the meaning of Section 3(2) of ERISA.

 

(bb)         “ Permits ” means all permits, licenses, variances, clearances, consents, commissions, franchises, exemptions, orders and approvals.

 

(cc)         “ Person ” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity.

 

(dd)         “ QPAGOS Employee Plan ” means an Employee Plan maintained QPAGOS.

 

(ee)         “ Related Party ” means: (a) with respect to any Person that is not an individual: (i) any Affiliate of such Person; (ii) any Person that serves as a director, officer, partner, executor, or trustee of such Person (or in any other similar capacity); and (iii) any Person with respect to which such Person serves as a general partner or trustee (or in any other similar capacity); and (b) with respect to any Person that is an individual: (i) each other member of such individual’s immediate family and (ii) any Person with respect to which such Person serves as a director, officer, partner, executor, or trustee (or in any other similar capacity).

 

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(ff)          “ SEC ” means the Securities Exchange Commission, or any successor entity thereto.

 

(gg)         “ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

 

(hh)         “ Subsidiary ,” when used with respect to any party, means any corporation or other entity, whether incorporated or unincorporated, at least a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other entity is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries.

 

(ii)         “ Tax ” or, collectively, “ Taxes ” means any and all U.S. federal, state, local and non-U.S. taxes and other like governmental charges, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts.

 

(jj)         “ Tax Returns ” means all U.S. federal, state, local and non-U.S. returns, estimates, information statements and reports, including amendments thereto and schedules thereof.

 

Section 10.04.        Interpretation and Other Matters .

 

(a)          When a reference is made in this Agreement to an Article, Section or Exhibit, such reference shall be to an Article or Section of, or an Exhibit to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words without limitation. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors and assigns.

 

(b)          Asiya agrees to cause Merger Sub to comply with its obligations under this Agreement.

 

Section 10.05.      Counterparts; Electronic Signatures .  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each party and delivered to the other parties. Facsimile or other electronically transmitted signatures, including by e-mail attachment, shall be deemed originals for all purposes of this Agreement.

 

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Section 10.06.          Entire Agreement; No Third-Party Beneficiaries .  This Agreement (including the documents and instruments referred to herein) (i) constitutes the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement and (ii) except for the provisions of 0 (which shall be enforceable by the QPAGOS Indemnified Parties and such other persons who are entitled to the benefit of Section 6.07 (a) or (b) ), and except for the rights of QPAGOS’ stockholders to receive the Merger Consideration after the Effective Time in the event the Merger is consummated, are not intended to confer upon any Person other than the parties any rights or remedies. The representations and warranties in this Agreement are the product of negotiations among the parties and are for the sole benefit of the parties. Any inaccuracies in such representations and warranties are subject to waiver by the parties in accordance with the terms of this Agreement without notice or liability to any other person. The representations and warranties in this Agreement may represent an allocation among the parties of risks associated with particular matters regardless of the knowledge of any of the parties and may have been qualified by certain disclosures not reflected in the text of this Agreement. Accordingly, persons other than the parties may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.

 

Section 10.07.       Representations . Each party hereto agrees that, except for the representations and warranties contained in ARTICLE III and ARTICLE IV of this Agreement, neither QPAGOS, Asiya or Merger Sub makes any other representations or warranties and each hereby disclaims any other representations or warranties made by itself or any of its Representatives, with respect to the execution and delivery of this Agreement or the transactions contemplated hereby, including the Merger, notwithstanding the delivery or disclosure to any other party or any other party’s Representatives of any document or other information with respect to any one or more of the foregoing. Without limiting the generality of the foregoing, and notwithstanding any otherwise express representations and warranties made by the parties in this Agreement, each of the parties agrees that none of the other parties makes or has made any representation or warranty with respect to (i) any projections, forecasts, estimates, plans or budgets or future revenues, expenses or expenditures, future results of operations (or any component thereof), future cash flows (or any component thereof) or future financial condition (or any component thereof) of such party or the future business, operations or affairs of such party heretofore or hereafter delivered to or made available to it, or (ii) any other information, statements or documents heretofore or hereafter delivered to or made available to it with respect to such party or the business, operations or affairs of such party, except to the extent and as expressly covered by a representation and warranty made in this Agreement.

 

Section 10.08.        Governing Law .  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflict of laws.

 

Section 10.09.        Assignment .  Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties hereto without the prior written consent of the other party. Any attempted or purported assignment in violation of the preceding sentence shall be null and void and of no effect whatsoever. Subject to the preceding two sentences, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and permitted assigns.

 

Section 10.10.         Enforcement .

 

(a)          The parties agree that irreparable damage would occur and that the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, without the necessity of posting bonds or similar undertakings in connection therewith, this being in addition to any other remedy to which they are entitled at law or in equity.

 

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(b)          Each of the parties (i) irrevocably submits itself to the personal jurisdiction of each state or federal court sitting in the State of Delaware, as well as to the jurisdiction of all courts to which an appeal may be taken from such courts, in any suit, action or proceeding arising out of or relating to this Agreement or any of the transactions contemplated herein, (ii) agrees that every such suit, action or proceeding shall be brought, heard and determined exclusively in the Court of Chancery of the State of Delaware ( provided that, in the event subject matter jurisdiction is unavailable in or declined by the Court of Chancery, then all such claims shall be brought, heard and determined exclusively in any other state or federal court sitting in the State of Delaware), (iii) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from such court, (iv) agrees not to bring any suit, action or proceeding arising out of or relating to this Agreement or any of the transactions contemplated herein in any other court, and (v) waives any defense of inconvenient forum to the maintenance of any suit, action or proceeding so brought.

 

(c)          Each of the parties agrees that service of any process, summons, notice or document by U.S. registered mail to its address set forth in ARTICLE X shall be effective service of process for any action, suit or proceeding brought against it, provided , however , that nothing contained in the foregoing clause shall affect the right of any party to serve legal process in any other manner permitted by applicable Legal Requirements.

 

Section 10.11        Severability .  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless 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 hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable Legal Requirements in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

Section 10.12        Waiver of Jury Trial .  EACH PARTY TO THIS AGREEMENT KNOWINGLY AND VOLUNTARILY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

 

(Signature page follows)

 

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IN WITNESS WHEREOF, Asiya, Merger Sub and QPAGOS have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above.

 

  ASIYA PEARLS, INC.
   
  By: /s/ Mark Korb
  Name: Mark Korb
  Title:   President
     
  QPAGOS MERGE, INC.
   
  By: /s/ Mark Korb
  Name: Mark Korb
  Title:   President
     
  QPAGOS CORPORATION
   
  By: /s/ Gaston Pereira
  Name: Gaston Pereira
  Title: President

 

SIGNATURE PAGE TO THE AGREEMENT AND PLAN OF MERGER

 

 

 

 

Exhibit 3.1

 

CERTIFICATE OF INCORPORATION

 

OF

 

QPAGOS CORPORATION

 

FIRST: The name of the corporation is: QPAGOS Corporation.

 

SECOND: The address of its registered office in the State of Delaware is to be located at The Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The name of its registered agent at such address is The Corporation Trust Company.

 

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 total number of shares of stock which the corporation shall have authority to issue is FIFTY MILLION (50,000,000) shares of Common Stock, par value $.001 per share (the “Common Stock”) and TEN MILLION (10,000,000) shares of Preferred Stock, par value $.001 per share (the “Preferred Stock”).

 

The Preferred Stock of the corporation shall be issued by the Board of Directors of the corporation in one or more classes or one or more series within any class and such classes or series shall have such voting powers, full or limited, or no voting powers, and such designations, preferences, limitations or restrictions as the Board of Directors of the corporation may determine, from time to time.

 

The holders of the Common Stock are entitled to one vote for each share held at all meetings of stockholders (and written actions in lieu of meetings). There shall be no cumulative voting.

 

Shares of Common Stock and Preferred Stock may be issued from time to time as the Board of Directors shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors.

 

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

 

NAME   MAILING ADDRESS
     
Leslie Marlow   Gracin & Marlow, LLP
    The Chrysler Building
    405 Lexington Avenue, 26 th Floor
    New York, NY 10174

 

SIXTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-laws of the corporation.

 

SEVENTH: Meetings of stockholders may be held within or without the State of Delaware, as the By-laws may provide. The books of the corporation may be kept (subject to any provisions contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-laws of the corporation. Elections of directors need not be by written ballot unless the By-laws of the corporation shall so provide.

 

 

 

 

EIGHTH: Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the corporation shall be given in the manner provided in the bylaws of the corporation.

 

NINTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware General Corporation Law or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 279 of Title 8 of the Delaware General Corporation Law order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the corporation shall be given in the manner provided in the bylaws of the corporation.

 

TENTH: The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

 

ELEVENTH: The corporation shall to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, as the same may be amended or supplemented, or by any successor thereto, indemnify, advance expenses and reimburse any and all persons whom it shall have the power to indemnify under said Section from and against any and all of the expenses, liabilities or other matters referred to in, or covered by said Section. Notwithstanding the foregoing, the indemnification provided for in this Article ELEVENTH shall not be deemed exclusive of any other rights to which those entitled to receive indemnification or reimbursement hereunder may be entitled under any By-law of the corporation, agreement, vote of stockholders or disinterested directors or otherwise.

 

TWELVTH: No director of this corporation shall be personally liable to the corporation or any of its stockholders for monetary damages for breach of a fiduciary duty as a director, except for liability (i) for any breach of a director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the Delaware General Corporation Law as the same exists or hereafter may be amended; or (iv) for any transaction from which the director derived an improper benefit. If the Delaware General Corporation Law hereafter is amended to authorize the further elimination or limitation of the liability of directors, then liability of a director of the corporation, in addition to limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Delaware General Corporation Law. Any repeal or modification of this paragraph by the stockholders of the corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of directors of the corporation existing at the time of such repeal or modification.

 

  2  

 

 

THIRTEENTH: Unless the corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any derivative action or proceeding brought on behalf of the corporation, (2) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, other employee or stockholder of the corporation to the corporation or the corporation's stockholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware, or (4) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the corporation shall be deemed to have notice of and consented to the provisions of this Article THIRTEENTH.

 

IN WITNESS WHEREOF , I, the undersigned, being the incorporator hereinbefore named, hereby declare and certify the facts herein stated are true, and accordingly have hereunto set my hand this 21 st day of April, 2015.

 

  /s/ Leslie Marlow
   
  Leslie Marlow, sole incorporator

 

  3  

   

Exhibit 3.2

 

BYLAWS OF

 

QPAGOS CORPORATION

 

(a Delaware corporation)

  

 

 

ARTICLE 1

 

STOCKHOLDERS

 

1.01          Annual Meetings . If required by applicable law, an annual meeting of stockholders shall be held for the election of Directors at such date, time and place either within or without the State of Delaware as shall be designated by the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting.

 

1.02          Special Meetings . Special meetings of stockholders may be called at any time by the Board of Directors, Chairman of the Board, if any, the Vice Chairman of the Board, if any, or the President to be held at such date, time and place either within or without the State of Delaware as may be stated in the notice of the meeting s uch special meetings may not be called by any other person or persons.  No business may be transacted at such special meeting other than the business specified in the notice to stockholders. The Board may postpone, reschedule or cancel any special meeting of stockholders previously scheduled by the Board. A special meeting of stockholders shall be called by the Secretary within one hundred twenty (120) days of his or her receipt of a written request, stating the purpose of the meeting, of stockholders who together own of record a majority of the outstanding shares of each class of stock entitled to vote at such meeting.

 

1.03          Notice of Meetings . Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. Without limiting the manner by which notice otherwise may be given to stockholders, any notice shall be effective if given by a form of electronic transmission consented to (in a manner consistent with the General Corporation Law of the State of Delaware (the “DGCL”)) by the stockholder to whom the notice is given.  The notices of all meetings shall state the place, date and time of the meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting.  The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation.  If notice is given by electronic transmission, such notice shall be deemed given at the time specified in Section 232 of the DGCL. Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the Certificate of Incorporation or these Bylaws, 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.  Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if:

 

 

 

  

(i)          the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent; and

 

(ii)         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.

 

However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

 

Any notice given pursuant to the preceding paragraph 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 (A) such posting and (B) the giving of such separate notice; and

 

(iv)        if by any other form of electronic transmission, when directed to the stockholder.

 

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 by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

 

Notwithstanding the foregoing, notice by a form of electronic transmission shall not apply to Sections 164, 296, 311, 312 or 324 of the DGCL.

 

An “ electronic transmission ” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

 

1.04          Adjournments . Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

1.05          Quorum . At each meeting of stockholders, except where otherwise provided by law or the certificate of incorporation or these by-laws, the holders of a majority of the outstanding shares of each class of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum. For purposes of the foregoing, two (2) or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a single class at the meeting. In the absence of a quorum the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided by Section 1.4 of these by-laws until a quorum shall attend. Shares of its own capital stock belonging on the record date for the meeting 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 is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided , however , that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.

 

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1.06          Organization . Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in the absence of the President by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting.

 

1.07          Rules and Procedures . 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 at the meeting by the chairperson of the meeting. The Board may adopt by resolution such rules, regulations and procedures for the conduct of any meeting of stockholders as it shall deem appropriate including, without limitation, such guidelines and procedures as it may deem appropriate regarding the participation by means of remote communication of stockholders and proxyholders not physically present at a meeting.  Except to the extent inconsistent with such rules, regulations and procedures as adopted by the Board, the chairperson of any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairperson, are appropriate for the proper conduct of the meeting.  Such rules, regulation or procedures, whether adopted by the Board or prescribed by the chairperson of the meeting, 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 shall be determined; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. The chairperson of any meeting of stockholders, 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 presiding person should so determine, such presiding person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board or the chairperson of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

 

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1.08          Voting; Proxies . Unless otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. If the certificate of incorporation provides for more or less than one vote for any share on any matter, every reference in these by-laws to a majority or other proportion of stock shall refer to such majority or other proportion of the votes of such stock. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or by proxy at such meeting shall so determine. At all meetings of stockholders for the election of directors a plurality of the votes cast shall be sufficient to elect. With respect to other matters, unless otherwise provided by law or by the certificate of incorporation or these by-laws, the affirmative vote of the holders of a majority of the shares of all classes of stock present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, provided that (except as otherwise required by law or by the certificate of incorporation) the Board of Directors may require a larger vote upon any such matter. Where a separate vote by class is required, the affirmative vote of the holders of a majority of the shares of each class present in person or represented by proxy at the meeting shall be the act of such class, except as otherwise provided by law or by the certificate of incorporation or these by-laws.

 

1.09          Fixing Date for Determination of Stockholders of Record . In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action (other than action by written consent in writing without a meeting), the Board of Directors may fix, in advance, a record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which record date: (i) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting and (ii) in the case of any other action (other than action by consent in writing without a meeting), shall be not more than sixty (60) days prior to any other action. If no record date is fixed: (1) 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, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (and (2) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. 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 the adjourned meeting.

 

1.10          List of Stockholders Entitled to Vote . The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Company shall not be required to include the electronic mail address or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. 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.

 

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1.11          Consent of Stockholders in Lieu of Meeting . (a) 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. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request that the Board fix a record date. The Board shall promptly, but in all events within ten (10) days after the date on which such written notice is received, adopt a resolution fixing the record date (unless a record date has previously been fixed by the Board pursuant to the first sentence of this Section 1.10(a)). If no record date has been fixed by the Board pursuant to the first sentence of this Section 1.10(a) or otherwise within ten (10) days after the date on which such written notice is received, 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 after the expiration of such ten (10) day time period 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 1.10(a), 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.

 

(b)          In the event of the delivery, in the manner provided by this Section 1.10 and applicable law, to the Corporation of written consent or consents to take corporate action and/or any related revocation or revocations, the Corporation shall engage independent inspectors of elections for the purpose of performing promptly a ministerial review of the validity of the consents and revocations. For the purpose of permitting the inspectors to perform such review, no action by written consent and without a meeting shall be effective until such inspectors have completed their review, determined that the requisite number of valid and unrevoked consents delivered to the Corporation in accordance with this Section 1.10 and applicable law have been obtained to authorize or take the action specified in the consents, and certified such determination for entry in the records of the Corporation kept for the purpose of recording the proceedings of meetings of stockholders. Nothing contained in this Section 1.10(b) shall in any way be construed to suggest or imply that the Board or any stockholder shall not be entitled to contest the validity of any consent or revocation thereof, whether before or after such certification by the independent inspectors, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).

 

(c)          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.

 

1.11          Notice of Stockholder Business and Nominations .

 

(A) Annual Meetings of Stockholders .

 

(1) Nominations of persons for election to the Board of the Corporation and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders only (a) pursuant to the Corporation’s notice of meeting (or any supplement thereto), (b) by or at the direction of the Board or any committee thereof or (c) by any stockholder of the Corporation who was a stockholder of record of the Corporation at the time the notice provided for in this Section 1.11 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 1.11.

 

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(2)         For any nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this Section 1.11, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and any such proposed business (other than the nominations of persons for election to the Board) must constitute a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90 th ) 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 must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90 th ) day prior to such annual meeting or the tenth (10 th ) 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: (a) as to each person whom the stockholder proposes to nominate for election as a director (i) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Section 14(a) of 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; (b) 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 of the Corporation, 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; and (c) 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 which are owned beneficially and of record by such stockholder and such beneficial owner; (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 such beneficial owners, 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 the stockholder or the beneficial owner, if any, intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (b) otherwise to solicit proxies or votes from stockholders in support of such proposal or nomination; 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 paragraph (A) of this Section 1.11 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 Company 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.

 

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(3)         Notwithstanding anything in the second sentence of paragraph (A)(2) of this Section 1.11 to the contrary, in the event that the number of directors to be elected to the Board of the Corporation at the annual meeting is increased effective after the time period for which nominations would otherwise be due under paragraph (A)(2) of this Section 1.11 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 1.11 shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10 th ) day following the day on which such public announcement is first made by the Corporation.

 

(B)          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 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 meeting (1) by or at the direction of the Board or any committee thereof or (2) 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 the notice provided for in this Section 1.11 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and upon such election and who complies with the notice procedures set forth in this Section 1.11. 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 such election of 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 paragraph (A)(2) of this Section 1.11 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth (120 th ) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90 th ) day prior to such special meeting or the tenth (10 th ) 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.

 

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(C)          General . (1) Except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act, only such persons who are nominated in accordance with the procedures set forth in this Section 1.11 shall be eligible to be elected at an annual or special meeting of stockholders of the Corporation 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 1.11. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (a) to determine whether a nomination or any 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 1.11 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made, solicited (or is part of a group which 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 clause (A)(2)(c)(vi) of this Section 1.11) and (b) if any proposed nomination or business was not made or proposed in compliance with this Section 1.11, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 1.11, 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 1.11, 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.

 

(2)         For purposes of this Section 1.11, “public announcement” shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press or other 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 and the rules and regulations promulgated thereunder.

 

(3)         Notwithstanding the foregoing provisions of this Section 1.11, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 1.11; provided however , that any references in these By-laws 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 1.11 (including paragraphs (A)(1)(c) and (B) hereof), and compliance with paragraphs (A)(1)(c) and (B) of this Section 1.11 shall be the exclusive means for a stockholder to make nominations or submit other business (other than, as provided in the penultimate sentence of (A)(2), 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 1.11 shall be deemed to affect any rights (a) of stockholders to request inclusion of proposals or nominations in the Corporation’s proxy statement pursuant to applicable rules and regulations promulgated under the Exchange Act or (b) of the holders of any series of Preferred Stock to elect directors pursuant to any applicable provisions of the certificate of incorporation.

 

ARTICLE 2

 

BOARD OF DIRECTORS

 

2.01          Powers; Number; Qualifications . The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided by law or in the certificate of incorporation. The Board shall consist of one or more members, the number thereof to be determined from time to time by the Board. Directors need not be stockholders.

 

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2.02          Election; Term of Office; Resignation; Removal; Vacancies . Each director shall hold office until the annual meeting of stockholders next succeeding his or her election and until his or her successor is elected and qualified or until his or her earlier death, resignation or removal. Any director may resign at any time upon written notice to the Board of Directors or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; except that, if the certificate of incorporation provides for cumulative voting and less than the entire Board is to be removed, no director may be removed without cause if the votes cast against his or her removal would be sufficient to elect him or her if then cumulatively voted at an election of the entire Board, or, if there be classes of directors, at an election of the class of directors of which he or she is a part. Whenever the holders of any class or series of stock are entitled to elect one or more directors by the provisions of the certificate of incorporation, the provisions of the preceding sentence shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Unless otherwise provided in the certificate of incorporation or these by-laws, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class or from any other cause may only be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may only be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by the sole remaining director so elected.

 

2.03          Regular Meetings . Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board may from time to time determine, and if so determined notice thereof need not be given.

 

2.04          Special Meetings . Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chairman of the Board, if any, by the Vice Chairman of the Board, if any, by the President or by any two directors. Reasonable notice thereof shall be given by the person or persons calling the meeting.

 

2.05          Participation in Meetings by Conference Telephone Permitted . Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting.

 

2.06          Quorum; Vote Required for Action . At all meetings of the Board of Directors one-third of the entire Board shall constitute a quorum for the transaction of business. 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 unless the certificate of incorporation or these by-laws shall require a vote of a greater number. In case at any meeting of the Board a quorum shall not be present, the members of the Board present may adjourn the meeting from time to time until a quorum shall attend.

 

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2.07          Organization . Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in their absence by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting.

 

2.08          Action by Directors Without a Meeting . Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.

 

2.09          Compensation of Directors . The Board of Directors shall have the authority to fix the compensation of directors.

 

ARTICLE 3

 

COMMITTEES

 

3.01          Committees . The Board of Directors 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 a committee, the member or members thereof present at any meeting and 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 the 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 which may require it; but no such committee shall have power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of dissolution, removing or indemnifying directors or amending these by-laws; and, unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock.

 

3.02          Committee Rules . Unless the Board of Directors otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a quorum for the transaction of business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee, and in other respects each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these by-laws.

 

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ARTICLE 4

 

OFFICERS

 

4.01          Officers; Election . As soon as practicable after the annual meeting of stockholders in each year, the Board of Directors shall elect a President and a Secretary, and it may, if it so determines, elect from among its members a Chairman of the Board and a Vice Chairman of the Board.

 

4.02          Additional Election . The Board may also elect one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and such other officers as the Board may deem desirable or appropriate and may give any of them such further designations or alternate titles as it considers desirable. Any number of offices may be held by the same person.

 

4.03          Term of office; Resignation; Removal; Vacancies . Except as otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until the first meeting of the Board after the annual meeting of stockholders next succeeding his or her election, and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board at any regular or special meeting.

 

4.04          Chairman of the Board . The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present and shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board and as may be provided by law.  The Chairman of the Board may be, but also need not be, an officer of the Corporation or employed in an executive or any other capacity by the Corporation.

 

4.05          Vice Chairman of the Board . In the absence of the Chairman of the Board, the Vice Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present and shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board and as may be provided by law.

 

4.06          President . In the absence of the Chairman of the Board and Vice Chairman of the Board, the President shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present. The President shall be the chief executive officer and shall have general charge and supervision of the business of the Corporation and, in general, shall perform all duties incident to the office of president of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or as may be provided by law.

 

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4.07          Vice Presidents . The Vice President or Vice Presidents, at the request or in the absence of the President or during the President’s inability to act, shall perform the duties of the President, and when so acting shall have the powers of the President. If there be more than one Vice President, the Board of Directors may determine which one or more of the Vice Presidents shall perform any of such duties; or if such determination is not made by the Board, the President may make such determination; otherwise any of the Vice Presidents may perform any of such duties. The Vice President or Vice Presidents shall have such other powers and shall perform such other duties as may, from time to time, be assigned to him or her or them by the Board or the President or as may be provided by law.

 

4.08          Secretary . The Secretary shall have the duty to record the proceedings of the meetings of the stockholders, the Board of Directors and any committees in a book to be kept for that purpose, shall see that all notices are duly given in accordance with the provisions of these by-laws or as required by law, shall be custodian of the records of the Corporation, may affix the corporate seal to any document the execution of which, on behalf of the Corporation, is duly authorized, and when so affixed may attest the same, and, in general, shall perform all duties incident to the office of secretary of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or the President or as may be provided by law.

 

4.09          Treasurer . The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation and shall deposit or cause to be deposited, in the name of the Corporation, all moneys or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by or under authority of the Board of Directors. If required by the Board, the Treasurer shall give a bond for the faithful discharge of his or her duties, with such surety or sureties as the Board may determine. The Treasurer shall keep or cause to be kept full and accurate records of all receipts and disbursements in books of the Corporation, shall render to the President and to the Board, whenever requested, an account of the financial condition of the Corporation, and, in general, shall perform all the duties incident to the office of treasurer of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or the President or as may be provided by law.

 

4.10          Other Officers . The other officers, if any, of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in a resolution of the Board of Directors which is not inconsistent with these by-laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties.

 

ARTICLE 5

 

STOCK

 

5.01          Certificates . Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, if any, 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, certifying the number of shares owned by such holder in the Corporation. If such certificate is manually signed by one officer or manually countersigned by a transfer agent or by a registrar, any other signature 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 such officer, transfer agent or registrar at the date of issue.

  

5.02          Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates . The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been 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.

 

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ARTICLE 6

 

MISCELLANEOUS

 

6.01          Fiscal Year . The fiscal year of the Corporation shall be determined by the Board of Directors.

 

6.02          Seal . The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

 

6.03          Waiver of Notice of Meetings of Stockholders, Directors and Committees . Whenever notice is required to be given by law or under any provision of the certificate of incorporation or these by-laws, a written waiver thereof, signed by the person entitled to notice, 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 written waiver of notice unless so required by the certificate of incorporation or these by-laws.

 

6.04          Indemnification of Directors, Officers and Employees . Indemnification for Expenses and Liabilities.  Any person who at any time serves or has served: (i) as a Director, officer, employee or agent of the Corporation; (ii) at the request of the Corporation as a Director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise; or (iii) at the request of the Corporation as a trustee or administrator under an employee benefit plan, or is called as a witness at a time when he or she has not been made a named defendant or respondent to any Proceeding, shall have a right to be indemnified by the Corporation to the fullest extent permitted by the DGCL against all Liability (as defined) and Expenses (as defined) in any Proceeding (as defined) (including without limitation a Proceeding brought by or on behalf of the Corporation itself) arising out of his or her status as such or activities in any of the foregoing capacities.

 

The Board shall take all such action as may be necessary and appropriate to authorize the Corporation to pay the indemnification required by this Article VI, including, without limitation, to the extent required, making a good faith evaluation of the manner in which the claimant for indemnity acted and of the reasonable amount of indemnity due him or her.

 

Any person who at any time serves or has served in any of the aforesaid capacities for or on behalf of the Corporation shall be deemed to be doing or to have done so in reliance upon, and as consideration for, the rights provided for herein.  Any repeal or modification of these indemnification provisions shall not affect any rights or obligations existing at the time of such repeal or modification. The rights provided for herein shall inure to the benefit of the legal representatives of any such person and shall not be exclusive of any other rights to which such person may be entitled apart from this provision.

 

The rights granted herein shall not be limited by the provisions contained in Section 145 of the DGCL or any successor to such statute.

 

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6.05          Advance Payment of Expenses .  The Company shall (upon receipt of an undertaking by or on behalf of the Director, officer, employee or agent involved to repay the Expenses described herein unless it shall ultimately be determined that he or she is entitled to be indemnified by the Corporation against such Expenses) pay Expenses incurred by such Director, officer, employee or agent in defending a Proceeding or appearing as a witness at a time when he or she has not been named as a defendant or a respondent with respect thereto in advance of the final disposition of such Proceeding.

 

6.06          Insurance .  The Company shall have the power to 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 domestic or foreign corporation, partnership, joint venture, trust or other enterprise or as a trustee or administrator under an employee benefit plan) 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.

 

6.07          Definitions .  The following terms as used in this Article shall have the following meanings.  “ Proceeding ” means any threatened, pending or completed action, suit, or proceeding and any appeal therein (and any inquiry or investigation that could lead to such action, suit, or proceeding), whether civil, criminal, administrative, investigative or arbitrative and whether formal or informal. “ Expenses ” means expenses of every kind, including counsel fees.  “ Liability ” means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), reasonable expenses incurred with respect to a Proceeding, and all reasonable expenses incurred in enforcing the indemnification rights provided herein.  “ Director ,” “ officer ,” “ employee ” and “ agent ” include the estate or personal representative of a Director, officer, employee or agent. “ Company ” shall include any domestic or foreign predecessor of this Company in a merger or other transaction in which the predecessor’s existence ceased upon consummation of the transaction. The Corporation shall indemnify to the full extent authorized by law any person made or threatened to be made a party to any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or such person’s testator or intestate is or was a director, officer or employee of the Corporation or serves or served at the request of the Corporation any other enterprise as a director, officer or employee. For purposes of this by-law, the term Corporation” shall include any predecessor of the Corporation and any constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term ‘other enterprise‘ shall include any corporation, partnership, joint venture, trust or employee benefit plan; service ‘at the request of the Corporation‘ shall include service as a director, officer or employee of the Corporation which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by a person with respect to an employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation.

 

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6.8            Interested Directors; Quorum . No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.

 

6.09          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 be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same.

 

6.10          Amendment of By-Laws . These by-laws may be amended or repealed, and new by-laws adopted, by the Board of Directors, but the stockholders entitled to vote may adopt additional by-laws and may amend or repeal any by-laws whether adopted by them or otherwise.

 

6.11          Forum Selection Bylaw . Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any derivative action or proceeding brought on behalf of the Corporation, (2) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (3) any action asserting a claim arising pursuant to any provision of the DGCL, or (4) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 8.10.

 

6.12           Document Priority .  In the event of a conflict between the terms and conditions of these Bylaws and the terms and conditions of the Certificate of Incorporation [or that certain Voting Agreement entered into as of even date herewith (the “Voting Agreement”), as applicable,] the Certificate of Incorporation or the Voting Agreement, as applicable] shall control.

 

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Exhibit 4.1

 

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE ON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY OTHER SECURITIES LAWS (THE “ACTS”). NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER MAY BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THIS WARRANT OR COMMON STOCK PURCHASABLE HEREUNDER, AS APPLICABLE, UNDER THE ACTS, OR (B) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACTS.

 

QPAGOS CORPORATION

WARRANT AGREEMENT

 

VOID AFTER 5:00 P.M. NEW YORK TIME, __________, 2020

 

Issue Date: _________, 2015

 

1.           Basic Terms . This Warrant Agreement (the “Warrant”) certifies that, for value received, the registered holder specified below or its registered assigns (“Holder”) is the owner of a warrant of QPAGOS Corporation, a Delaware corporation (the “Corporation”), subject to adjustments as provided herein, to purchase ______________________ (______) shares of the Common Stock, $.001 par value, of the Corporation (the “Common Stock”) from the Corporation at the price per share shown below (the “Exercise Price”).

 

Holder:  
   
Exercise Price per share: $1.25

 

Except as specifically provided otherwise, all references in this Warrant to the Exercise Price and the number of shares of Common Stock purchasable hereunder shall be to the Exercise Price and number of shares after any adjustments are made thereto pursuant to this Warrant.

 

2.           Corporation’s Representations/Covenants . The Corporation represents and covenants that the shares of Common Stock issuable upon the exercise of this Warrant shall at delivery be fully paid and non-assessable and free from taxes, liens, encumbrances and charges with respect to their purchase. The Corporation shall take any necessary actions to assure that the par value per share of the Common Stock is at all times equal to or less than the then current Exercise Price per share of Common Stock issuable pursuant to this Warrant. The Corporation shall at all times reserve and hold available sufficient shares of Common Stock to satisfy all conversion and purchase rights of outstanding convertible securities, options and warrants of the Corporation, including this Warrant.

 

 

 

  

3.           Method of Exercise; Fractional Shares .

 

(a) Method of Exercise . This Warrant is exercisable at the option of the Holder at any time by surrendering this Warrant, on any business day during the period (the “Exercise Period”) beginning the business day after the issue date of this Warrant specified above and ending at 5:00 p.m. (New York time) five (5) years after the issue date. To exercise this Warrant, the Holder shall surrender this Warrant at the principal office of the Corporation or that of the duly authorized and acting transfer agent for its Common Stock, together with the executed exercise form (substantially in the form of that attached hereto) and payment in cash or by wire transfer of immediately available funds of an amount equal to the Exercise Price multiplied by the number of shares of the Common Stock being purchased under this Warrant. The principal office of the Corporation is located at the address specified in Section 1 of this Warrant; provided , however , that the Corporation may change its principal office upon notice to the Holder. Payment shall be made by check payable to the order of the Corporation or by wire transfer. This Warrant is not exercisable with respect to a fraction of a share of Common Stock. In lieu of issuing a fraction of a share remaining after exercise of this Warrant as to all full shares covered by this Warrant, the Corporation shall either at its option (1) pay for the fractional share cash equal to the same fraction at the fair market price for such share; or (2) issue scrip for the fraction in the registered or bearer form which shall entitle the Holder to receive a certificate for a full share of Common Stock on surrender of scrip aggregating a full share.

 

(b)           Contingent Exercise . In the event of the exercise of this Warrant in connection with an initial primary public offering or the sale of substantially all of the Corporation’s assets or equity or a merger or consolidation to which the Corporation is a party, the exercise hereof may be conditioned, at the election of the exercising holder which shall be clearly evidenced in its notice of exercise, on the successful consummation of such event and in the event that such event is not consummated within ninety (90) days following delivery of the holder’s exercise notice, the notice of exercise may be withdrawn upon written notice from the exercising holder to the Corporation whereupon all exercise documentation and this Warrant shall be returned to the exercising holder and all of its rights hereunder shall be reinstated as if no notice of exercise had been delivered.

 

4.           Protection Against Dilution . If the Corporation, with respect to the Common Stock: (a) pays a dividend or makes a distribution on shares of common stock that is paid in shares of common stock or in securities convertible into or exchangeable for Common Stock (in which latter event the number of shares of common stock initially issuable upon the conversion or exchange of such securities shall be deemed to have been distributed); (b) subdivides outstanding shares of Common Stock; (c) combines outstanding shares of Common Stock into a smaller number of shares; or (d) issues by reclassification of common stock any shares of capital stock of the Corporation, the Exercise Price in effect immediately prior thereto shall be adjusted so that each Holder thereafter shall be entitled to receive the number and kind of shares of Common Stock or other capital stock of the Corporation that it would have owned or been entitled to receive in respect of this Warrant immediately after the happening of any of the events described above had this Warrant been converted immediately prior to the happening of that event. An adjustment made in accordance with this section shall become effective immediately after the record date, in the case of a dividend, and shall become effective immediately after the effective date, in the case of a subdivision, combination, or reclassification. If, as a result of an adjustment made in accordance with this Section  4 , the Holder becomes entitled to receive shares of two or more classes of capital stock or shares of common stock and other capital stock of the Corporation, the board of directors (whose determination shall be conclusive) shall determine the allocation of the adjusted Exercise Rate between or among shares of such classes of capital stock or shares of Common Stock and other capital stock.

 

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5.           Adjustment for Reorganization, Consolidation, Merger, Etc . In the event of any consolidation or merger to which the Corporation is a party other than a consolidation or merger in which the Corporation is the continuing corporation, or the sale or conveyance to another corporation of the property of the Corporation as an entirety or substantially as an entirety or any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Corporation) (each such transaction referred to herein as “ Reorganization ”), no adjustment of exercise rights or the Exercise Price shall be made; provided, however, the Holder shall thereupon be entitled to receive and provision shall be made therefor in any agreement relating to a Reorganization, the kind and number of securities or property (including cash) of the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold or otherwise transferred or with whom securities have been exchanged, which the Holder would have owned or been entitled to receive as a result of such Reorganization had this Warrant been exercised immediately prior to such Reorganization (and assuming the Holder failed to make an election, if any was available, as to the kind or amount of securities, property or cash receivable by reason of such Reorganization; provided that if the kind or amount of securities, property or cash receivable upon such Reorganization is not the same for each share of common stock in respect of which such rights of election shall not have been exercised (“non-electing share”) then for the purpose of this section the kind and amount of securities, property or cash receivable upon such Reorganization for each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). In any case, appropriate adjustment shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the Holder, to the end that the provisions set forth herein (including the specified changes and other adjustments to the conversion rate) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares, other securities or property thereafter receivable upon exercise of this Warrant. The provisions of this section similarly apply to successive Reorganizations.

 

6.           Notice of Adjustment . On the happening of an event requiring an adjustment of the Exercise Price or the shares purchasable under this Warrant, the Corporation shall, within thirty (30) days, give written notice to the Holder stating the adjusted Exercise Price and the adjusted number and kind of securities or other property purchasable under this Warrant resulting from the event and setting forth in reasonable detail the method of calculation and the facts upon which the calculation is based.

 

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7.           Dissolution, Liquidation . In case of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation (other than in connection with reorganization, consolidation, merger, or other transaction covered by paragraph 5 above) is at any time proposed; the Corporation shall give at least thirty days prior written notice to the Holder. Such notice shall contain: (a) the date on which the transaction is to take place; (b) the record date (which shall be at least thirty (30) days after the giving of the notice) as of which holders of Common Stock will be entitled to receive distributions as a result of the transaction; (c) a brief description of the transaction; (d) a brief description of the distributions to be made to holders of Common Stock as a result of the transaction; and (e) an estimate of the fair value of the distributions. On the date of the transaction, if it actually occurs, this Warrant and all rights under this Warrant shall terminate.

 

9.           Rights of Holder . The Corporation shall deliver to the Holder all notices and other information provided to its holders of shares of Common Stock or other securities which may be issuable hereunder concurrently with the delivery of such information to the holders. This Warrant does not entitle the Holder to any voting rights or, except for the foregoing notice provisions, any other rights as a shareholder of the Corporation. No dividends are payable or will accrue on this Warrant or the shares of Common Stock purchasable under this Warrant until, and except to the extent that, this Warrant is exercised. Upon the surrender of this Warrant and payment of the Exercise Price as provided above, the person or entity entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the record holder of such shares as of the close of business on the date of the surrender of this Warrant for exercise as provided above. Upon the exercise of this Warrant, the Holder shall have all of the rights of a shareholder in the Corporation.

 

10.          Exchange for Other Denominations . This Warrant is exchangeable, on its surrender by the Holder to the Corporation, for a new Warrant of like tenor and date representing in the aggregate the right to purchase the balance of the number of shares purchasable under this Warrant in denominations and subject to restrictions on transfer contained herein, in the names designated by the Holder at the time of surrender.

 

11.          Substitution . Upon receipt by the Corporation of evidence satisfactory (in the exercise of reasonable discretion) to it of the ownership of and the loss, theft or destruction or mutilation of the Warrant, and (in the case or loss, theft or destruction) of indemnity satisfactory (in the exercise of reasonable discretion) to it, and (in the case of mutilation) upon the surrender and cancellation thereof, the Corporation will issue and deliver, in lieu thereof, a new Warrant of like tenor.

 

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12.          Restrictions on Transfer . Neither this Warrant nor the shares of Common Stock issuable on exercise of this Warrant have been registered under the Securities Act or any other securities laws (the “Acts”). Neither this Warrant nor the shares of Common Stock purchasable hereunder may be sold, transferred, pledged or hypothecated in the absence of (i) an effective registration statement for this Warrant or Common Stock purchasable hereunder, as applicable, under the Acts, or (ii) an opinion of counsel reasonably satisfactory to the Corporation that registration is not required under such Acts. If the Holder seeks an opinion as to transfer without registration from Holder’s counsel, the Corporation shall provide such factual information to Holder’s counsel as Holder’s counsel reasonably requests for the purpose of rendering such opinion. Each certificate evidencing shares of Common Stock purchased hereunder will bear a legend describing the restrictions on transfer contained in this paragraph unless, in the opinion of counsel reasonably acceptable to the Corporation, the shares need no longer to be subject to the transfer restrictions.

 

13.          Transfer . Except as otherwise provided in this Warrant, this Warrant is transferable only on the books of the Corporation by the Holder in person or by attorney, on surrender of this Warrant, properly endorsed.

 

14.          Recognition of Holder . Prior to due presentment for registration of transfer of this Warrant, the Corporation shall treat the Holder as the person exclusively entitled to receive notices and otherwise to exercise rights under this Warrant. All notices required or permitted to be given to the Holder shall be in writing and shall be given by first class mail, postage prepaid, addressed to the Holder at the address of the Holder appearing in the records of the Corporation.

 

15.          Payment of Taxes . The Corporation shall pay all taxes and other governmental charges, other than applicable income taxes, that may be imposed with respect to the issuance of shares of Common Stock pursuant to the exercise of this Warrant.

 

16.          Headings . The headings in this Warrant are for purposes of convenience in reference only, shall not be deemed to constitute a part of this Warrant and shall not affect the meaning or construction of any of the provisions of this Warrant.

 

17.          Miscellaneous . This Warrant may not be changed, waived, discharged or terminated except by an instrument in writing signed by the Corporation and the Holder. This Warrant shall inure to the benefit of and shall be binding upon the successors and assigns of the Corporation. Under no circumstances may this Warrant be assigned by the Holder.

 

18.          Governing Law . This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to its principles governing conflicts of law.

 

  QPAGOS CORPORATION
   
  By:  
  Name: Gaston Pereira
  Title: President and Chief Executive Officer

 

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QPAGOS CORPORATION

Form of Transfer

 

(To be executed by the Holder to transfer the Warrant)

 

For value received the undersigned registered holder of the attached Warrant hereby sells, assigns, and transfers the Warrant to the Assignee(s) named below:

 

            Number of shares
Names of           subject to transferred
Assignee   Address   Taxpayer ID No.   Warrant
             
             
             

 

The undersigned registered holder further irrevocably appoints ____________________ _______________________________ attorney (with full power of substitution) to transfer this Warrant as aforesaid on the books of the Corporation.

 

Date:      
    Signature

 

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QPAGOS CORPORATION

Exercise Form

 

(To be executed by the Holder to purchase

Common Stock pursuant to the Warrant)

 

The undersigned holder of the attached Warrant hereby irrevocably elects to exercise purchase rights represented by such Warrant for, and to purchase, ___________ shares of Common Stock of QPAGOS Corporation, a Delaware corporation. The undersigned tenders payment for those shares by wire transfer or enclosed check.

 

The undersigned requests that (1) a certificate for the shares be issued in the name of the undersigned and (2) if the number of shares with respect to which the undersigned holder has exercised purchase rights is not all of the shares purchasable under this Warrant, that a new Warrant of like tenor for the balance of the remaining shares purchasable under this Warrant be issued.

 

Date:      
    Signature

 

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Exhibit 4.2

 

PURCHASE WARRANT

 

Issued to:

 

«Name»

 

Exercisable to Purchase

 

«Units» Units

Each Unit Consisting of One Share of Common Stock and One Common Stock Purchase Warrant

 

of

 

QPAGOS CORPORATION

 

Void after December 22, 2020

 

THIS WARRANT HAS NOT BEEN REGISTERED

UNDER THE SECURITIES ACT OF 1933

AND IS NOT TRANSFERABLE

EXCEPT AS PROVIDED HEREIN.

 

 

 

  

This is to certify that, for value received and subject to the terms and conditions set forth below, the Warrantholder (hereinafter defined) is entitled to purchase, and the Company (hereinafter defined) promises and agrees to sell and issue to the Warrantholder, at any time on or after the Issue Date and on or before the fifth anniversary of the Issue Date, up to «Units» Units (hereinafter defined) at the per Unit Exercise Price (hereinafter defined).

 

This Warrant Certificate is issued subject to the following terms and conditions:

 

1.           Definitions of Certain Terms . Except as may be otherwise clearly required by the context, the following terms have the following meanings:

 

(a)          “Cashless Exercise” means an exercise of a Warrant in which, in lieu of payment of the Exercise Price in cash, the Warrantholder elects to receive a lesser number of Securities in payment of the Exercise Price, as determined in accordance with Section 2(b).

 

(b)          “Closing Date” means the date or dates on which a closing under the Offering occurs.

 

(c)          “Commission” means the Securities and Exchange Commission.

 

(d)          “Common Stock” means the common stock, $0.001 par value, of the Company.

 

(e)          “Company” means QPAGOS Corporation, a Delaware corporation.

 

(f)          “Exercise Price” means the price at which the Warrantholder may purchase one Unit (or such other Securities as provided herein) upon exercise of a Warrant as determined from time to time pursuant to the provisions hereof, multiplied by the number of Securities as to which the Warrant is being exercised. The initial Exercise Price is $1.25 per Unit.

 

(g)          “Issue Date” means the Closing Date on which this Warrant is issued.

 

(h)          “Offering” means the private offering of up to 4,000,000 Units offered and sold to accredited investors in an offering exempt from the registration requirements of the Securities Act pursuant to Rule 506(b) promulgated thereunder.

 

(i)          “Placement Agent” means Paulson Investment Company, LLC, an Oregon limited liability company.

 

(j)          “Placement Agent Agreement” means that certain Placement Agent Agreement, dated April 10, 2015, between the Company and the Placement Agent.

 

(k)          “Rules and Regulations” means the rules and regulations of the Commission adopted under the Securities Act.

 

(l)          “Securities” means the securities obtained or obtainable upon exercise of the Warrant or securities obtained or obtainable upon exercise, exchange, or conversion of such securities.

 

(m)          “Securities Act” means the Securities Act of 1933, as amended.

 

(n)          “Unit” means one of the Units offered to the investors in the Offering, consisting of one share of the Company’s Common Stock and Unit Warrant.

 

 

 

  

(o)          “Unit Warrant” means a Common Stock purchase warrant included as a component of a Unit.

 

(p)          “Warrant” means the warrant evidenced by this certificate, any similar certificate issued in connection with the Offering, or any certificate obtained upon transfer or partial exercise of the Warrant evidenced by any such certificate.

 

(q)          “Warrant Certificate” means a certificate evidencing the Warrant.

 

(r)          “Warrantholder” means a record holder of the Warrant or Securities. The initial Warrantholder is Paulson Investment Company, LLC.

 

2.             Exercise of Warrant .

 

(a)          All or any part of the Warrant represented by this Warrant Certificate may be exercised commencing on the Issue Date and ending at 5:00 p.m. Pacific Time on the fifth anniversary of the Issue Date (the “Expiration Date”) by surrendering this Warrant Certificate, together with the Exercise Price and appropriate instructions, duly executed by the Warrantholder or by its duly authorized attorney, at the office of the Company, 1900 Glades Road, Suite 265, Boca Raton, Florida 33431; or at such other office or agency as the Company may designate. The date on which such instructions are received by the Company shall be the date of exercise. If the Warrantholder has elected a Cashless Exercise, such instructions shall so state.

 

(b)          In lieu of exercising this Warrant pursuant to Section 2(a), if the fair market value of one share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), the Holder may elect to receive a number of Units equal to the value of this Warrant (or of any portion of this Warrant being canceled) by surrender of this Warrant at the principal office of the Company (or such other office or agency as the Company may designate) together with a properly completed and executed Notice of Exercise reflecting such election, in which event the Company shall issue to the Holder that number of Shares computed using the following formula:

 

X

= Y (A – B)  
A  

 

Where:

 

X = The number of Units to be issued to the Holder
     
Y = The number of Units purchasable under this Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (at the date of such calculation)
     
A = The fair market value of one share of Common Stock (at the date of such calculation)
     
B = The Exercise Price (as adjusted to the date of such calculation)

 

2  

 

  

For purposes of the calculation above, the fair market value of one share of Common Stock shall be determined by the Board of Directors of the Company, acting in good faith; provided, however, that:

 

(i)          where a public market exists for the Company’s common stock at the time of such exercise, the fair market value per Share shall be the average of the closing bid prices of the Common Stock or the closing price quoted on the national securities exchange on which the Common Stock is listed as published in the Wall Street Journal , as applicable, for the 10 trading day period ending five trading days prior to the date of determination of fair market value; and

 

(ii)         if the Warrant is exercised in connection with the Company’s initial public offering of Common Stock, the fair market value shall be the per share offering price to the public of the Company’s initial public offering.

 

For purposes of this Section 2(b), no value shall be attributable to the Unit Warrant component; however, the number of Unit Warrants to be issued pursuant to this Section 2(b) shall equal the number of shares of Common Stock. Such Unit Warrants shall have terms identical to the Unit Warrants issued to investors in the Offering, including without limitation, the expiration date thereof, regardless of the date of the exercise of this Warrant.

 

(c)          Subject to the provisions below, upon receipt of notice of exercise, the Company shall promptly prepare or cause the preparation of certificates for the Securities to be received by the Warrantholder (which shall consist of one share of the Company’s Common Stock (subject to adjustment under Section 3) and one Unit Warrant) upon completion of the Warrant exercise. After such certificates are prepared, the Company shall notify the Warrantholder and, upon payment in full by the Warrantholder, in lawful money of the United States, of the Exercise Price payable with respect to the Securities being purchased, or, in the case of a Cashless Exercise, upon deemed surrender of Securities equal in value to the Exercise Price, deliver such certificates to the Warrantholder, or as per the Warrantholder’s instructions, promptly after such funds are available, if applicable, and otherwise promptly thereafter. The Securities to be obtained on exercise of the Warrant will be deemed to have been issued, and any person exercising the Warrant will be deemed to have become a holder of record of those Securities, as of the date of receipt by the Company of (a) available funds in cash in payment of the Exercise Price, or (b) notice of Cashless Exercise.

 

(d)          If fewer than all the Securities purchasable under the Warrant are purchased, the Company will, upon such partial exercise, execute and deliver to the Warrantholder a new Warrant Certificate (dated the date hereof), in form and tenor similar to this Warrant Certificate, evidencing that portion of the Warrant not exercised.

 

(e)          Notwithstanding the foregoing, in no event shall such Securities be issued, and the Company is authorized to refuse to honor the exercise of the Warrant, if such exercise would result in the opinion of the Company’s Board of Directors, upon advice of counsel, in the violation of any applicable securities law.

 

3.           Adjustments in Certain Events . The number, class, and price of Securities for which this Warrant Certificate may be exercised are subject to adjustment from time to time upon the happening of certain events as follows:

 

(a)          In case of any change in the Common Stock through merger, consolidation, reclassification, reorganization, partial or complete liquidation, purchase of substantially all the assets of the Company, or other change in the capital structure of the Company, then, as a condition of such change, lawful and adequate provision will be made so that the Warrantholder will have the right thereafter to receive upon the exercise of the Warrant the kind and amount of shares of stock or other securities or property to which the Warrantholder would have been entitled if, immediately prior to such event, the Warrantholder had held the number of shares of Common Stock obtainable upon the exercise of the Warrant. In any such case, appropriate adjustment will be made in the application of the provisions set forth herein with respect to the rights and interest thereafter of the Warrantholder, to the end that the provisions set forth herein will thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other securities or property thereafter deliverable upon the exercise of the Warrant. The Company will not permit any change in its capital structure to occur unless the issuer of the shares of stock or other securities to be received by the holder of this Warrant Certificate, if not the Company, agrees to be bound by and comply with the provisions of this Warrant Certificate.

 

3  

 

  

(b)          If the securities issuable upon exercise of this Warrant or Unit Warrant are changed into the same or a different number of securities of any other class or classes by reclassification, capital reorganization or otherwise (other than as otherwise provided for herein) (a “Reclassification”), then, in any such event, in lieu of the number of shares of Common Stock and Unit Warrants that the Holder would otherwise have been entitled to receive, the Holder shall have the right thereafter to exercise this Warrant for a number of shares of such other class or classes of stock and warrants for purchase thereof that a holder of the number of securities deliverable upon exercise of this Warrant immediately before that change would have been entitled to receive in such Reclassification, all subject to further adjustment as provided herein with respect to such other shares.

 

(c)          In the event that the outstanding shares of Common Stock are subdivided (by stock split, by payment of a stock dividend or otherwise) into a greater number of shares of such securities, the number of Shares issuable upon exercise of the rights under this Warrant immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately increased, and the Exercise Price shall be proportionately decreased, and in the event that the outstanding shares of Common Stock are combined (by reclassification or otherwise) into a lesser number of shares of such securities, the number of Shares issuable upon exercise of the rights under this Warrant immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately decreased, and the Exercise Price shall be proportionately increased. The increases and reductions provided for in this Section 3(c) will be made with the intent and, as nearly as practicable, the effect that neither the percentage of the total equity of the Company obtainable on exercise of the Warrants nor the price payable for such percentage upon such exercise will be affected by any event described in this Section 3(c).

 

(d)          When any adjustment is required to be made in the number of shares of Common Stock, other securities, or the property purchasable upon exercise of the Warrant, the Company will promptly determine the new number of such shares or other securities or property purchasable upon exercise of the Warrant and (i) prepare and retain on file a statement describing in reasonable detail the method used in arriving at the new number of such shares or other securities or property purchasable upon exercise of the Warrant and (ii) cause a copy of such statement to be mailed to the Warrantholder within thirty (30) days after the date of the event giving rise to the adjustment.

 

(e)          No fractional shares of Common Stock or other Securities will be issued in connection with the exercise of the Warrant, and the number of shares of Common Stock to be issued shall be rounded to the nearest whole number.

 

(f)          If securities of the Company or securities of any subsidiary of the Company are distributed pro rata to holders of Common Stock, such number of securities will be distributed to the Warrantholder or its assignee upon exercise of its rights hereunder as such Warrantholder or assignee would have been entitled to if this Warrant had been exercised prior to the record date for such distribution. The provisions with respect to adjustment of the Common Stock provided in this Section 3 will also apply to the securities to which the Warrantholder or its assignee is entitled under this Section 3(f). Notwithstanding anything herein to the contrary, there will be no adjustment made hereunder on account of the sale by the Company of the Common Stock or any other Securities purchasable upon exercise of the Warrant.

 

4  

 

  

4.           Reservation of Securities . The Company agrees during the term the rights under this Warrant are exercisable to take all reasonable action to reserve and keep available from its authorized and unissued shares of Common Stock for the purpose of effecting the exercise of this Warrant such number of shares (and shares of common stock for issuance on conversion of such shares and exercise of the Unit Warrants) as shall from time to time be sufficient to effect the exercise of the rights under this Warrant; and if at any time the number of authorized but unissued shares of Common Stock (and shares of common stock for issuance on conversion of such shares and exercise of the Unit Warrants) shall not be sufficient for purposes of the exercise of this Warrant in accordance with its terms and the conversion of the Shares, without limitation of such other remedies as may be available to the Holder, the Company will use all reasonable efforts to take such corporate action as may, in the opinion of counsel, be necessary to increase its authorized and unissued shares of its Common Stock (and shares of common stock for issuance on conversion of such shares and exercise of the Unit Warrants) to a number of shares as shall be sufficient for such purposes.

 

5.           Validity of Securities . All Securities delivered upon the exercise of the Warrant will be duly and validly issued in accordance with their terms and, upon payment of the Exercise Price, will be fully paid and non-assessable. The Company will pay all documentary and transfer taxes, if any, in respect of the original issuance thereof upon exercise of the Warrant.

 

6.           Transferability . This Warrant Certificate and the Warrant may be transferred to any individual who is a partner, manager, member, officer, director, or other licensed representative of the Placement Agent. The Warrant may be divided or combined, upon request to the Company by the Warrantholder, into a certificate or certificates evidencing the same aggregate number of Warrants.

 

7.           Securities Act Compliance . The Warrantholder hereby represents: (a) that this Warrant and any Common Stock to be acquired by the Warrantholder on exercise of the Warrant will be acquired for investment for the Warrantholder’s own account and not with a view to the resale or distribution of any part thereof, and (b) that the Warrantholder is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. In addition, unless the issuance of the Common Stock shall have been registered under the Securities Act, as a condition of its delivery of certificates for the Common Stock, the Company may require the Warrantholder to deliver to the Company, in writing, representations regarding the Warrantholder’s sophistication, investor status, investment intent, acquisition for its own account and such other matters as are reasonable and customary for purchasers of securities in an unregistered private offering. The Company may place conspicuously upon each certificate representing the Common Stock a legend substantially in the following form, the terms of which are agreed to by the Warrantholder:

 

“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS AND THE SECURITIES LAWS OF OTHER JURISDICTIONS AND, IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS.”

 

5  

 

  

8.           No Rights as a Stockholder . Except as otherwise provided herein, the Warrantholder will not, by virtue of ownership of the Warrant, be entitled to any rights of a shareholder of the Company but will, upon written request to the Company, be entitled to receive such quarterly or annual reports as the Company distributes to its shareholders.

 

9.           Notice . Any notices required or permitted to be given hereunder will be in writing and may be served personally or by mail, including by e-mail; and if served will be addressed as follows:

 

The Company : With a copy to:  
     
QPAGOS Corporation Gracin & Marlow, LLP  
1900 Glades Road, Suite 265 405 Lexington Avenue, 26 th Floor  
Boca Raton, Florida 33431 New York, New York 10174  
Attention:  Gaston Pereira Attention: Leslie Marlow, Esq.  
Email: gaston.pereira@qpagos.com Telephone: (212) 907-6457  
  Facsimile: (212) 208-4657  
  Email: lmarlow@gracinmarlow.com  
   
If to the Warrantholder: at the address furnished by the Warrantholder to the Company for notice purposes.

 

Any notice so given by mail will be deemed effectively given 48 hours after mailing when deposited in the United States mail, registered or certified mail, return receipt requested, postage prepaid and addressed as specified above. Any notice given by e-mail must be accompanied by confirmation of receipt, and will be deemed effectively given upon confirmation of such receipt. Any party may by written notice to the other specify a different address for notice purposes.

 

10.          Applicable Law . This Warrant Certificate will be governed by and construed in accordance with the laws of the State of Oregon, without reference to conflict of laws principles thereunder. All disputes relating to this Warrant Certificate shall be tried before the courts of Oregon located in Multnomah County, Oregon to the exclusion of all other courts that might have jurisdiction.

 

Dated as of December 23, 2015

 

  QPAGOS CORPORATION
   
  By:  
  Name: Gaston Pereira
  Title: Chief Executive Officer

 

6  

 

  

EXERCISE FORM

 

(To Be Executed by the Warrantholder
to Exercise the Warrant)

 

TO: QPAGOS Corporation

 

1.           The undersigned hereby irrevocably elects to exercise the right to purchase __________ shares of Common Stock, as follows:

 

¨            Exercise for Cash . Pursuant to Section 2(a) of the Warrant, the Holder hereby elects to exercise the Warrant for cash and tenders payment herewith (or has made a wire transfer) to the order of QPAGOS Corporation in the amount of  $____________.

 

2. ¨            Cashless Exercise . Pursuant to Section 2(b) of the Warrant, the Holder hereby elects to exercise the Warrant on a cashless basis.

 

3. The undersigned requests that the applicable number of shares of Common Stock and Common Stock Purchase Warrants be issued and delivered to the following address:

 

Name:  
   
Address:  
   
Deliver to:  
   
Address:  

 

4. The undersigned understands, agrees and recognizes that:

 

(a)           No federal or state agency has made any finding or determination as to the fairness of the investment or any recommendation or endorsement of the securities.

 

(b)           All certificates evidencing the shares of Common Stock, if any, may bear a legend substantially similar to the legend set forth in Section 6 of the Warrant regarding resale restrictions.

 

Dated:  _____________, 20___.    
    By:  
    Name:  
    Print:  
       
    Note: Signature must correspond with the name as written upon the face of the Warrant in all respects, without alteration or enlargement or any change whatsoever.

 

7  

Exhibit 10.1

 

SUBLICENSE AGREEMENT No. SJV-01082014-01

 

Road Town 1 May, 2015

 

Janor Enterprises Limited, company, duly incorporated in British Virgin Islands, registration number 1606379, having its registered office at the address: Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands, represented by the Director Maria Zanti acting by virtue of the Articles of Association, acting on the basis of the Charter, hereinafter referred to as the “ Licensor” , on the one part, and

 

QPAGOS Corporation. A company duly incorporated and registered in the State of Delaware located at The Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle 19801., represented by Chief Executive Officer, Gaston Enrique Pereira, acting by virtue of the Charter hereinafter referred to as the “Licensee”, on the other part, hereinafter collectively referred to as the Parties and separately a Party.

 

The Licensor and the Licensee have concluded this License Agreement (hereinafter – “ Agreement ” or “ License Agreement ”) as follows:

 

1. Terms and Definitions

 

1.1. « Computer Program» (or the « Program ») means the following Computer Programs:

1.1.1. «RG Payment Switch» (registration number 2013612131) ,

1.1.2. «RG Processing» (registration number 2013612133) ,

1.1.3. «RG Kiosk» (registration number 2013612132)

the right to use of which shall be transferred in accordance with this Agreement.

 

1.2. «Localization of the Program» means the performance of the works in order to ensure the Programs’ functioning (the Programs’ adaptation and decompillation), and the Programs’ installation on the Equipment.

 

1.3. «Territory» means the territory of Mexico, where the rights to the Program shall be used in accordance with the present Agreement.

 

1.4. «Result» means any intellectual property, including any addition, alteration, program updating, derivative or composed creation, obtained in the process of the Program usage according to the terms of this Agreement.

 

1.5. «Equipment» means the computer equipment, the servers, the payment terminals and any other equipment that the Licensee has at his disposal and that is set (placed) within the Territory and that is being used for acceptance of payments.

 

1.6. Acceptance of payments means receipt of money from individuals for the purposes of their fulfillment of monetary obligations to different suppliers as merchandise payments (service payments, payments for work) in the Territory with the use of the Equipment for the purposes of their fulfillment of monetary obligations to mobile operators registered in the Territory.

 

2. Subject of Agreement

 

2.1. The Licensor shall grant the simple rights (hereunder – “ Rights ”) to use the Program within the Territory to the Licensee on the terms of this Agreement.

 

Rights under this Agreement are subject to the conditions of the Present agreement.

 

 

 

  

The conditions for obtaining exclusivity described in the Article 2.10 of the Present agreement.

 

2.2. The Licensee is entitled to use the Rights to the Program only in the following ways:

1) make alterations to the Program only for the Programs’ functioning on the Licensee’s Equipment and perform actions, which are necessary for the Programs’ functioning in accordance with their functionality, as well as to perform recording and memorizing, as well as to make correction of conspicuous errors;

2) make a copy of the Program, provided that such copy is made only for backup and archive purposes or for change of the legally acquired copy of the Program in case when such copy was lost, destroyed or became unusable;

3) to examine, investigate and test the Programs’ functioning for determining the ideas and principles, which any element of the Program is based on;

4) to reproduce the Program;

5) to modify the Programs only within the frames of Localization of the Programs, though the Licensee shall not be entitled to make alterations affecting the operational stability and integrity of the Programs, in the nuclear structure of the Programs, in particular, database structure, finance module, procedure in charge of payments and funds accounting.

 

2.3. Rights specified in the item 2.2. of the present Agreement, provided to the Licensee from the date specified in item 2.7 of the present Agreement.

 

2.4. The Licensee shall be entitled to transfer to the third parties the Rights to use only the Program «RG Kiosk» (registration number 2013612132) under the sublicense agreement within the Territory provided the Licensee sends an advance written notification to the Licensor within reasonable time. The Licensee shall be liable to the Licensor for the actions of the third parties (hereinafter – “ Sublicensees ”).

 

2.5. The Program shall be applied by the Licensee solely pursuant to its functional intended use stated in the Specification (Annex No.1 hereto) and within the specified Territory.

 

2.6. The Licensee shall accept the copy of Program - in the source code format or in object code format by downloading the Program from the resource indicated by the Licensor in the Acceptance Report by entering the login and password provided by the Licensor, as well as to pay the Fee pursuant to the terms hereof.

 

2.7. The term for which the Licensor provides the Licensee with the Rights to use the Programs is 10 (ten) years from the date mentioned under the Preambule of the Present Agreement. In case of non-fulfillment of obligations to pay for Works on localization under the item 6.1. of the Localization contract № Contract No. SJV - 2014 on 01.08.2014 (Annex № 3) till 31.12.2015, this License Agreement shall not enter into force.

 

The term of license shall be subject to automatic renewal for an additional ten year term so long as the Licensee has not breached or violated any of the terms of this Agreement and at the time of the termination of the initial ten year term, the Licensee will have at least 7,000 terminals or kiosks or a combination thereof in operation in Mexico.

 

2.8. The Licensor reserves all the exclusive rights to the Result. The Licensee has the right to use the Result in the ways and during the term, provided in the present Agreement. The Compensation of the Licensor for providing the Licensee with the right to use the Result is included in the general fee rate specified in item 3.1 of the present Agreement.

 

 

 

 

2.9. The Licensee is not entitled to sell, resell and license the received Result; including to utterly and completely publicly disclose or publish the Result; to reverse engineer or attempt to reverse engineer the Result, except to the extent permitted by the applicable law or by this Agreement; to derive or attempt to derive any personally identifiable information from the data contained in the Result or allow a third party to do any of the above; or knowingly use the Result in a manner that creates any cause of legal action against the Licensor or a liability on the part of the Licensor.

 

2.10. The Licensor agrees that neither it nor any subsidiary, parent, entity under common control with the Licensor or any entity affiliated with the Licensor shall install a terminal and/ or kiosk or that incorporates the Program or technology that mentioned in the item 1.1. of the present Agreement; provided, however, that if at any time after the five year anniversary of the date of execution of this Agreement the Licensee does not have in operation at least 3,500 kiosks or terminals or a combination thereof in Mexico, the restrictions on the Licensor set forth in this Section 2.10 shall terminate until such time, if any, that the Licensee has at least 3,500 terminals or kiosks or a combination thereof in operation in Mexico.

 

The abovementioned right granted to the Licensee is subject to the payment in the amount not less then 50,000 USD per every year since the date of signing the Present Contract for the IT Works and Services in accordance of terms of IT agreement, that should be sign at the same date as the Present Agreement.

 

In case the Licensor will not receive such order on the abovementioned amount the remaining hours of Works and Services (the rate is not less than 65 dollars per hour) will be transferred to the next year. The remains of the abovementioned hours carried over each year during 5 years. After that all the accumulated hours of Works and Services will be expired and is not transferred to the next years.

 

In case of non-payment of abovementioned Fee the exclusivity provisions cease to apply and continues to operate non – exclusive license.

 

The fee set in item 2.10. of the Agreement, shall not include taxes applicable in the territories of the Licensor’s and the Licensee’s incorporation.

 

3. Amount and Procedure of Fee Payment

 

3.1. The overall fee payable by the Licensee for the Rights granted by the Licensor pursuant to this Agreement shall amount to 1000 (one thousand) USD for 10 (ten) years: 100 (one hundred) US Dollars (further referred as “Fee”) per year.

 

The fee set in item 3.1. of the Agreement, shall not include taxes applicable in the territories of the Licensor’s and the Licensee’s incorporation.

 

3.2 The Licensee shall pay the Fee in the following order:

 

- For the first year - 100 (one hundred) US Dollars must be paid in 10 (ten) days after enter of the present License agreement in force in accordance the item 2.7. of the present agreement.

- For the subsequent (9) nine years - 100 (one hundred) US Dollars must be paid every year in advance no later than December;

 

3.3. The Licensee’s obligations to pay the Fee shall be deemed duly fulfilled on the date of placing of the whole amount of the Fee into the Licensor’s bank account specified in section 12 hereof.

 

 

 

  

3.4. All settlements hereunder shall be effected by a wire transfer.

 

3.5. The Licensee shall be granted with the Rights to use the Computer Program for the period specified in item 2.7. herein on condition of the fulfillment by the Licensee of its obligations set out in items 2.7 and 3.1 and 5.2.1.

 

4. Essential Terms for Granting of Rights to Use the Programs

 

4.1. The Licensor shall provide the Licensee with the Rights to use the Program within 10 (ten) calendar days upon fulfillment of the obligation specified in item 3.2 herein by the Licensee.

 

The fact of providing the Licensee with the Rights and access to use the Program shall be confirmed by the Acceptance Report made according to form specified in Annex 2 hereto (hereinafter “Acceptance Report”). The relevant documents confirming the Licensor’s title to the Program shall be attached to the Acceptance Report.

 

4.2. The Licensor shall be deemed to have duly performed its obligations on transfer of the Rights to use the Program from the date of signing of the Acceptance Report by the Parties.

 

4.3. All data related to the Program shall be studied by the Licensee at the moment of signing of the Acceptance Report. If any discrepancies are detected the Parties shall make a relevant report with the list of those specifying procedures and terms of remedy thereof.

 

5. Guarantees

 

5.1. The Licensee is aware of the most important functional features of the Program; after signing of the Acceptance Report, provided there was no disagreements on behalf of the Licensee, the Licensee shall bear the risk of nonconformity of functional features of the Program to its intentions and needs.

 

5.2. The Licensor warrants the granting of the Rights to use the Program to the Licensee in the manner, by the dates and in the scope provided for by this Agreement free from any rights of the third parties pursuant to the applicable law.

 

5.2.1 The Licensor further warrants it has not granted to any other person any Rights in the Programs as a licensee in Mexico, nor shall it do so without the prior agreement from licensee, except for of licensed subsidiaries of Licensee. This item has the power only in the case of fulfillment of the item 2.10.

 

5.2.2 The use of the intellectual property as contemplated by the sublicense does not infringe upon or violate the patents, trademarks, tradenames, trade secrets or copyrights of anyone, nor has either Licensor received any notice of any infringement thereof. None of the intellectual property being sublicensed is being contested or infringed upon;

 

5.2.3 Licensor has the full right and power to sublicense the intellectual property;

 

5.2.4 Licensor has the exclusive right to bring actions for the infringement of, and has taken all actions and made all applicable applications and filings required to perfect and protect their interest and proprietary rights in, all of the intellectual property;

 

5.2.5 Licensor has no present or future obligation or requirement to compensate any person with respect to any of the intellectual property, whether by the payment of royalties or not, or whether by reason of the ownership, use, license, lease, sale or any commercial use or any disposition whatsoever of any of the intellectual property;

 

 

 

 

5.2.6 The ownership, production, marketing, license, lease, use or other disposition of any product or service presently being licensed or leased by Licensor to any person, including Licensee hereunder, does not and will not violate any license or agreement of Licensor with any person or infringe any right of any other person;

 

5.2.7 None of the present or former employees of Licensor own directly or indirectly, or has any other right or interest in, in whole or in part, any of the intellectual property;

 

6. Rights and Obligations of the Parties

 

6.1. The Licensee shall have a right to:

6.1.1 gain access to the Program and use the Program in accordance with the present Agreement;

6.1.2. Offer changes to be introduced in the Licensor’s Program;

6.1.3. To introduce changes into the Program, not effecting the integrity of the Program;

6.1.4. To sublicense its Rights to the Program exclusively to its Mexican subsidiary Qpagos, S.A.P.I. DE C.V., for any other companies only with the previous written agreement with the Licensor;

 

6.2. The Licensee shall be obliged to:

6.2.1. pay the fee in the manner and by the dates provided for by the Agreement;

6.2.2. ensure the confidentiality of commercial and technical information received when performing this Agreement;

6.2.3. Provided, there are no disagreements, sign the Acceptance Report within 10 (ten) business days from the date of its receipt from the Licensor;

6.2.4. inform the Licensor about any alteration of its details stated herein and in annexes hereto, as well as of any decisions of the Licensee affecting its liquidation, reorganization as a legal entity within 7 (seven) business days from the moment of alteration or decision;

6.2.5. Use the granted Rights within the limits provided for by this Agreement;

6.2.6. Upon the Licensor’s request by the term not exceeding 10 (ten) business days, provide the Licensor with information on concluded sublicense agreements specifying the Sublicensee’s identification data.

 

6.3. The Licensor shall have a right:

6.3.1. Request information from the Licensee on the concluded sublicense agreements, providing the identity data of the Parties of the sublicense agreements.

 

6.4. The Licensor is obliged to:

6.4.1. grant the Rights to use the Program to the Licensee in the manner and by the dates provided for by this Agreement;

6.4.2. provide the Licensee with the rights to use the Software updates developed by the Licensor on the additional conditions determined by the Parties.

6.4.3. To immediately provide to the Licensee the rights to use the updates of the Program. The cost of providing such rights is included in the Fee, set in item 3.1. of the Agreement.

6.4.4. To notify the Licensee about the changes in the Licensor’s payment details, address, contacts, indicated in the present Agreement and on any decisions with regards to its liquidation, reorganization within 7 (seven) working days from such decision (changes).

6.4.5. Provide the Acceptance report to the Licensee within 3 (three) business days, after full payment of the Localization Works according item 2.7. of the present Agreement.

 

 

 

 

6.5 Infringement

 

Licensor shall indemnify and hold Licensee free and harmless against any claim, liability, demand, loss, expense, cost or damage (including attorneys' fees) arising out of any charge of patent, trademark, copyright or trade secret infringement or unfair competition or trade practice resulting from the marketing, licensing or using of the Rights by Licensee in accordance with the terms and provisions of this Agreement. Licensor shall have an obligation to enforce, at its sole expense, any Rights to the extent licensed hereunder against infringement by third parties and shall notify Licensee in writing in advance of all such enforcement efforts. In the event that Licensor does not file suit against or commence and conclude settlement negotiations with a substantial infringer of Rights within ninety (90) days of receipt of a written demand from Licensee that Licensor bring suit, then Licensee shall have the right, at its own expense, to enforce any Rights licensed hereunder on behalf of itself and Licensor. Any damages or other recovery from an infringement action undertaken by Licensee shall be the sole property of Licensee.

 

During the term of this Agreement, Licensor shall be responsible for filing, prosecuting and maintaining rights to the Program at Licensor’s expense with due input from Licensee.

 

7. Liability of the Parties

 

7.1. For nonperformance or improper performance of obligations hereunder the Parties shall be liable pursuant to the legislation of the British Virgin Islands.

 

7.2. In case of breach by the Licensee of the obligations provided by the present Agreement, the Licensor has the right to postpone the transferal of the rights to the Program for as long as the Licensee continues violate his obligations under the Agreement.

 

7.3. In case of the Licensee’s breach and/or improper performance of the conditions of the Agreement the Licensor gives the Licensee a written notice of termination of this Agreement. If within 30 (thirty) consecutive days from the date the Licensee received the written notice on the termination of breach of the conditions of this Agreement the Licensee shall cure the infringements specified in this notice. Otherwise the Licensor shall have the right to terminate this Agreement unilaterally in accordance with civil procedures and revoke the license, sending a written notice to the Licensee to the contact details given in section 12 of the Agreement. The date specified on the official post document confirming the receipt of the notice by the Licensee shall be considered as the date of termination of this Agreement.

 

7.4. In cases when the Licensee does not perform (or performs poorly) its obligations under the present Agreement, the Licensor sends a written notification to the Licensee with a requirement to stop the infringement. If, in that case, the Licensor suffers any damages, the Licensor is entitled to demand a proper compensation from the Licensee.

 

7.5. The recovery of any fines and penalties, as well as raising the claim to compensate losses shall be the right, but not the obligation and shall be exercised by the Parties at their sole discretion.

 

7.6. Before exercising the right to recover losses or damages the Party the rights of which have been infringed shall serve a respective notice to the other Party. If within 10 (ten) business days the defaulting Party fails to take any actions for curing the breaches, the claim for applying sanctions provided for by this Agreement and the applicable law may be served by the Party.

 

7.7. The payment of penalties and compensation of losses shall not relive the Parties from the proper performance of undertaken obligations hereunder.

 

 

 

 

8. Exemption From Liability

 

8.1. Neither Party shall be liable for nonperformance or improper performance of its obligations if the proper performance was impossible due to the circumstances of insuperable force, i.e. extraordinary and insuperable circumstances in the said conditions which arose after the conclusion of this Agreement.

 

8.2. The occurrence and length of extraordinary and insuperable circumstances shall be confirmed in written form by the competent state authorities of the territory where such circumstances have occurred.

 

9. Confidentiality

 

9.1. The Licensee shall keep in secret the information regarding to the Program disclosed to the Licensee in accordance with this Agreement (including all specifications and methods) and any other information of a confidential nature (including but not limited to any information about the Licensor’s activity) (hereinafter “Confidential information”).

 

9.2. The Licensee shall not provide, transfer (except for the cases when such provision is directly prescribed by the applicable laws), or otherwise disclose to third parties such Confidential information.

 

9.3. The Licensee as well as his employees, representatives, agents shall keep the Licensor’s Confidential information in secret and shall not provide, use, transfer, publish or disclose the Confidential information to third parties without the prior written permission of the Licensor.

 

9.4. The Licensee shall compensate any Licensor’s losses, suffered by the latter as a result of failure by the Licensee as well as his employees, representatives, agents to in secret the Confidential information in accordance with the applicable legislation.

 

9.5. The confidential information may be submitted to the competent state authorities in the cases and in the manner provided for by the current legislation of that country within which there arose the need of submission that will not result in the origin of liability for its disclosure.

 

9.6. The information shall not be deemed confidential if there is free access to that information on a legal basis and the Party being the information owner does not take necessary steps to protect its confidentiality.

 

10. Procedure of Dispute Resolution and applicable law

 

10.1. The Parties shall take all steps in order to solve disputes and disagreements which may arise out of this Agreement or in connection with the same by way of negotiations.

 

10.2. Any Party shall, upon receipt of the claim from the other Party within the 20 (twenty) days, be obliged to satisfy the requirements raised in the claim or to give a reasonable refusal. In the event the arisen dispute is not settled by the claim procedure within 60 (sixty) days from the moment of claim receipt, the disputes shall be resolved by High Court of the British Virgin Islands in accordance with the applicable law.

 

10.3. The Parties have agreed the applicable law hereunder shall be the legislation of the British Virgin Islands.

 

 

 

 

11. Miscellaneous

 

11.1. The Parties may terminate this Agreement at any time by mutual consent in writing. In case of termination or term expiration of this Agreement the Licensee shall return the carrier, in which the Programs were provided, not later than the date notified by the Licensor in writing, and delete all copies, delete keys and codes received by the Licensee to use the Programs, and perform other actions specified by the Licensor. The Licensee shall not use the Programs in the future.

 

11.2. The Licensee hereto agree during the term of the Agreement, as well as within three years after the completion of the Agreement shall not create conditions or vacancies for transition of employees of the Licensor involved in the implementation of this Agreement. In the case of employment of employee of Lisensor by the Licensee (affiliated person), who participated in the implementation of this Agreement, the Present agreement will be canceled.

 

11.3. All amendments and supplements hereto shall be valid if made in writing, executed with the addendum, annex hereto, signed by the authorized persons of the Parties and sealed. They are the integral part of this Agreement.

 

11.4. The business day within the framework of this Agreement shall include any calendar day, which is not a day off or a holiday pursuant to the current legislation of the British Virgin Islands.

 

11.5. This agreement is made in 2 counterparts equally valid, one for each of the Parties.

 

11.6. The following documents shall be attached to this Agreement, which are its integral part:

 

Annex No. 1 - Specification;

Annex No. 2 – Form of Rights Acceptance Report.

Annex No. 3 – Contract No. SJV - 2014 on 01.08.2014

 

12. Addresses, Details, Signatures and Seals of the Parties.

 

Licensor:

 

Registration number:

 

Registered address: Trident Chambers,

 

USD account number:

 

Account name:

 

Bank: AP

 

Bank Address:

 

SWIFT:

 

Correspondent Bank:

 

Correspondent Bank Address:

 

SWIFT CODE:

 

 

 

  

USD account number of Correspondent Bank:

 

Directors

 

/ Maria Zanti /  

 

Licensee:

 

Registration number:

 

Registered address:

 

Bank requisites:

 

USD account number:

 

Account name:

 

Bank:

 

Bank address:

 

SWIFT:

 

Chief Executive Officer

 

/Gaston Enrique Pereira /

 

 

 

 

  

Annex No. 1

 

To the Sublicense Agreement No. SJV-01082014-01

 

as of «01» July 2015

 

SPECIFICATION

 

 №

  Name, functionality of the Program
     
1   Program «RG Payment Switch» is designed for transfer of payments to the providers of the goods (works, services). The Program is a web interface for receipt of payment, SDK for creating payment gateways, realization of different periodical tasks; formation of registrars, organization of comparison, works with PIN codes suppliers, payments division and issuance of change. The Program includes a Web-service for managing and monitoring, as well as educational component for gateway creation.
     
2  

Program «RG Processing» is designed processing and counting of clients’ payments, collected through different devices of payment collection system for the providers of goods (works, services).

 

The Program allows to execute financial control of the balances of the terminals owners, to form statistical reports, provides services of monitoring of payment collection system and the state of the terminals.

 

Through collected data and client certificates, the Program provides access for counteragent to the predefined necessary information based on the role model (the access rights and functionality are limited by the role of the counteragent in the Program).

     
3  

Program «RG Kiosk» is designed for the performance of payments through payment collection equipment, functioning in the automatic regime (self-service kiosks). The Program provides the necessary customary interface and necessary functions: formation of payment data; exchange of data with the processing center; uploading of advertisement content; documents printing to confirm the receipt of payment; incrassation service; support of the self-service kiosks; automatic updates. 

 

Licensor:

 

Directors

 / Maria Zanti /

 

 

Licensee:

 

Chief Executive Officer

 /Gaston Enrique Pereira /

 

 

 

 

 

Annex No. 2

To the Sublicense Agreement No. SJV-01082014-01

 

as of «01» July 2015

 

FORM OF ACCEPTANCE REPORT

 

 

Acceptance Report

under the Sublicense Agreement No. SJV-01082014-01

as of «01» July 2015 (hereinafter – the “Agreement”)

 

  «__» ________ 2015

 

Janor Enterprises Limited , company, duly incorporated in British Virgin Islands, registration number is 1606379, having its registered office at the address: Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands, represented by the Director Maria Zanti acting by virtue of the Articles of Association, hereinafter referred to as the “Licensor”, on the one part, and

 

Qpagos, S.A.P.I. DE C.V. company, duly incorporated in Mexico City, registration number QPA 131 106 6H7, having its registered office at the address: Paseo de la Reforma 404 Piso 15 Col. Juarez, Mexico City, represented by Chief Executive Officer Gaston Enrique Pereira, acting by virtue of the Charter hereinafter referred to as the “Licensee”, on the other part, hereinafter collectively referred to as the Parties and separately a Party.

 

have entered into the present Acceptance report of the following:

 

1. From the date of this Report by both Parties the Licensor provides and the Licensee accepts and gains an access to the use of the following Programs:

 

1.1.1. «RG Payment Switch» (registration number 2013612131),

1.1.2. «RG Processing» (registration number 2013612133),

1.1.3. «RG Kiosk» (registration number 2013612132).

 

2. As of the date of signing of this Report by both Parties the obligation of the Licensor to provide the Licensee with the Rights to use the Program according to the Agreement shall be deemed duly fulfilled.

 

3. Under this Report the Licensor has transferred the copies of Program as follows:

3.1. by providing an access to download the Program from the resource __________________________ by entering the login and password placed in the envelope by the Licensor.

 

4. The Licensee starts using the Rights to the Program from the date of this Report.

5. The Licensee has checked all data related to the granted Rights and the Program. No discrepancies have been detected. 

 

Customer:

 

Chief Executive Officer 

  

/Gaston Enrique Pereira/  

 

Contractor:

 

Director Maria Zanti/ L.S.  

 

 

 

 

 

 

Exhibit 10.2

 

ADDITIONAL AGREEMENT №1 TO THE SUBLICENSE AGREEMENT No. SJV-01052015

 

Road Town 01 November, 2015

 

Janor Enterprises Limited, company, duly incorporated in British Virgin Islands, registration number 1606379, having its registered office at the address: Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands, represented by the Director Maria Zanti acting by virtue of the Articles of Association, acting on the basis of the Charter, hereinafter referred to as the “ Licensor” , on the one part, and

 

QPAGOS Corporation. a company duly incorporated and registered in the State of Delaware located at The Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle 19801., represented by Chief Executive Officer Gaston Enrique Pereira, acting by virtue of the Charter hereinafter referred to as the “Licensee”, on the other part, hereinafter collectively referred to as the Parties and separately a Party.

 

The Licensor and the Licensee have concluded this Additional agreement to the License Agreement (hereinafter – “ Agreement ” or “ License Agreement ”) as follows:

 

1.    The item 2.10. of the Sublicense agreement should be read as follows

«2.10. The Licensor agrees that neither it nor any subsidiary, parent, entity under common control with the Licensor or any entity affiliated with the Licensor shall install a terminal and/ or kiosk or that incorporates the Program or technology that has the same or a similar effect and the Licensor shall not provide any person or entity other than Licensee with the right to install a terminal or kiosk in Mexico that incorporates the Program or technology that has the same or a similar effect on a third party terminal in Mexico.

 

The abovementioned right granted to the Licensee is subject to the payment in the amount of not less than 20,000 USD per year commencing on November 1st, 2015, and payable in quarterly installments of 5,000 USD in advance before the beginning of each quarter, except that the first two installments totaling 10,000 USD shall be payable till December 1st, 2015:

 

10, 000 USD for the period November 1, 2015 – April 30, 2016 - till December 1, 2015

5, 000 USD for the period May1, 2016 - July 31, 2016 5000 - before May 1, 2016

5, 000 USD for the period August 1, 2016 - October 31, 2016 - before August 1, 2016

and further in this manner if Licensee want to have exclusivity for other quarters.

 

In case of non-payment of abovementioned fee, the exclusivity provisions cease to apply and continues to operate as non-exclusive license.

 

The fee set in item 2.10 of the Agreement, shall not include taxes applicable in the territories od the Licensor’s and the Licensee’s incorporation.»

 

2. The Additional agreement is an integral part of the SUBLICENSE AGREEMENT No. SJV-01052015 and shall come into force from the date of the signing by the authorized representatives of the Parties (the date appointed above the preamble) and shall take effect till the date of full fulfillment of all obligations hereunder

 

  

 

 

 

3. This Additional agreement has been made in two counterparts having equal legal power, one counterpart for each Party.

 

4. All terms and definitions in this Additional agreement shall have the same meaning as in the SUBLICENSE AGREEMENT No. SJV-01052015

 

5. Illegality or invalidity of any provision of this Additional agreement shall not affect in any way the legality and the validity of its other provisions of the SUBLICENSE AGREEMENT No. SJV-01052015 and present Additional agreement.

 

Customer:
 
Director
 
/s/ Gaston Enrique Pereira / Gaston Enrique Pereira /  
 

L.S.
 
Contractor:
 
Director
 
/s/ MariaZanti /Maria Zanti/  

 

  

 

Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “ Agreement ”) between QPAGOS Corporation, a Delaware corporation (the “ Company ”), and Gaston Pereira (the “ Executive ”) is effective as of May 1, 2015 (the “ Effective Date ”).

 

WITNESSETH:

 

WHEREAS , the Executive has served as the Chief Executive Officer, President and Treasurer of the Company’s subsidiaries and the Company desires to employ the Executive as its Chief Executive Officer, President and Treasurer and the Executive desires to accept such employment, on the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE , in consideration of the promises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

 

1.           EMPLOYMENT TERM. The Company hereby offers to employ the Executive, and the Executive hereby accepts continued employment by the Company, upon the terms and conditions set forth in this Agreement, for a term of four (4) years unless there is an earlier termination in accordance with Section 11 below (the “ Employment Term ”).

 

2.           POSITION & DUTIES . During the Employment Term, the Executive shall serve as the Company’s Chief Executive Officer, President and Treasurer. As Chief Executive Officer, President and Treasurer, the Executive shall have such duties, authorities and responsibilities commensurate with the duties, authorities and responsibilities of persons in similar capacities in similarly sized companies and such other duties and responsibilities as the Company’s Board of Directors (the “ Board ”) shall designate that are consistent with the Executive’s position as Chief Executive Officer, President and Treasurer, including as directed by the Board, managing, supervising and having over-all responsibility for all aspects of the operations and general affairs of the Company.   Executive may not serve on the board of directors or as a general partner or manager of any entity other than the Company during the Employment Term without the prior written approval of the Board.  Executive, however, shall be permitted to retain any compensation received for approved service as a board member, general partner or manager to any such unaffiliated entity. During the Employment Term, the Executive shall, if requested by the Board, also serve, without additional compensation, as a member of the Board and in such other executive-level positions or capacities at the Company and/or its subsidiaries as may, from time to time, be reasonably requested by the Board.

 

3.           LOCATION . During the Employment Term, the Executive’s principal place of business for performance of the services under this Agreement shall be at the Company’s offices in Mexico City, Mexico.

 

4.           BASE SALARY . The Company agrees to pay the Executive a base salary (the “ Base Salary ”) at an annual rate of US$240,000, payable in accordance with the regular payroll practices of the Company. The Executive’s Base Salary shall be subject to review and adjustment from time to time by the Board (or a committee thereof) in its sole discretion, but may not be decreased.

 

 

 

 

5.           ANNUAL BONUS . With respect to each calendar year during the Employment Term (beginning in the year of the Effective Date), the Executive will be eligible to earn an annual performance bonus (the “ Annual Bonus ”). Beginning in the 2015 calendar year and for each full calendar year thereafter, the Executive will be eligible for an Annual Bonus of up to fifty percent (50%) of the Base Salary. The Annual Bonus will be based upon the Board’s assessment of the Executive’s performance and the Company’s attainment of targeted goals as set by the Board in its sole discretion. The Annual Bonus, if any, will be subject to applicable payroll deductions and withholdings. Following the close of each calendar year, the Board will determine whether the Executive has earned the Annual Bonus, and the amount of any Annual Bonus, based on the set criteria. No amount of the Annual Bonus is guaranteed, and the Executive must be an employee in good standing through the end of the applicable calendar year to be eligible to receive an Annual Bonus; no partial or prorated bonuses will be provided. The Annual Bonus, if earned, will be paid on or about December 1, but no later than December 31, of the applicable calendar year for which the Annual Bonus is being measured. The Executive’s eligibility for an Annual Bonus is subject to change in the discretion of the Board (or any authorized committee thereof).

 

6.           EQUITY . {to be completed}

 

7.           EMPLOYEE BENEFITS .

 

(a)           BENEFIT PLANS . The Executive shall, in accordance with Company policy and the terms of the applicable Company benefit plan documents, be eligible to participate in any benefit plan or arrangement, including health, life and disability insurance, retirement plans and the like, that may be in effect from time to time and made available to the Company’s senior management. All matters of eligibility for coverage or benefits under any benefit plan shall be determined in accordance with the provisions of such plan. The Company reserves the right to change, alter, or terminate any benefit plan in its sole discretion. Notwithstanding the foregoing, in the event that the terms of this Agreement differ from or are in conflict with the Company’s general employment policies or practices, this Agreement shall control.

 

(b)           VACATION . The Executive shall be entitled to up to four (4) weeks paid vacation, holiday and sick leave per year in accordance with the Company’s policies and shall be entitled to accrue ____ days of vacation time during the Employment Term in accordance with the Company’s vacation policy. Vacation is to be taken at such intervals as shall be appropriate and consistent with the proper performance of the Executive’s duties hereunder.

 

(c)           RELOCATION AND HOUSING . Commencing on the Effective Date, the Company agrees to pay Executive a temporary housing allowance of $3,000 per month, payable to Executive on or before the 10 th day of each calendar month, for the purpose of assisting Executive in paying the costs associated with temporary housing or living quarters in Mexico City. This temporary monthly housing allowance will end or expire upon the earlier to occur of (1) Executive’s move into permanent housing or living quarters In Mexico City, or (2) the expiration of the Employment Term. In addition thereto, the Company agrees to reimburse Executive for all reasonable and verifiable moving expenses that are incurred and paid by Executive in moving furniture, personal effects and vehicles to any temporary or permanent housing or living quarters that Executive may secure in Mexico City, in an amount not exceeding, in the aggregate, the sum of $25,000.

 

(d)           GENERAL EXPENSE REIMBURSEMENTS . The Company will reimburse the Executive for all usual, reasonable and necessary business expenses, including travel, computer and cellular phone costs that the Executive incurs in performing the services hereunder pursuant to the Company’s usual expense reimbursement policies and practices, following submission by the Executive of reasonable documentation thereof. The Company agrees to reimburse Executive in an amount of up to $10,000, in the aggregate, for professional fees and actual costs incurred by Executive in securing the services of tax counsel that Executive may retain in reviewing and advising Executive in the development and finalization of this Agreement. All reimbursements provided under this Agreement shall be made in accordance with the requirements of Section 409A (as defined below) to the extent that such reimbursements are subject to Section 409A, including, as applicable, the requirements that: (i) any reimbursement is for expenses incurred during the Employment Term; (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year; (iii) the reimbursement of an eligible expense shall be made on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (iv) the right to reimbursement is not subject to liquidation or exchange for any other benefit.

 

  2  

 

 

8 .            CONFIDENTIALITY AND POST-EMPLOYMENT OBLIGATIONS .

 

(a)           Executive agrees that during the course of his employment or at any time thereafter, he will not disclose or make accessible to any other person, the Company’s products, services and technology, both current and under development, promotion and marketing programs, lists, trade secrets and other confidential and proprietary business information of the Company or any affiliates or any of their clients. Executive agrees: (i) not to use any such information for himself or others, and (ii) not to take any such material or reproductions thereof from the Company’s facilities at any time during his employment by the Company other than to perform his duties hereunder. Executive agrees immediately to return all such material and reproductions thereof in his possession to the Company upon request and in any event upon termination of employment.

 

(b)           Except with prior written authorization by the Company, Executive agrees not to disclose or publish any of the confidential, technical or business information or material of the Company, its clients or any other party to whom the Company owes an obligation of confidence, at any time during or after his employment with the Company.

 

(c)           In the event that Executive breaches any provisions of this Section 8 or there is a threatened breach, then, in addition to any other rights which the Company may have, the Company shall be entitled, without the posting of a bond or other security, to injunctive relief to enforce the restrictions contained herein. In the event that an actual proceeding is brought in equity to enforce the provisions of this Section 8, Executive shall not urge as a defense that there is an adequate remedy at law, nor shall the Company be prevented from seeking any other remedies which may be available. In addition, Executive agrees that in the event that he breaches the covenants in this Section 8, in addition to any other rights that the Company may have, Executive shall be required to pay to the Company any amounts he receives in connection with such breach.

 

(d)           Executive recognizes that in the course of his duties hereunder, he may receive from the Company or others information which may be considered “material, non-public information” concerning a public company that is subject to the reporting requirements of the United States Securities and Exchange Act of 1934, as amended. Executive agrees not to:

 

(i)           Buy or sell any security, option, bond or warrant while in possession of relevant material, non-public information received from the Company or others in connection herewith, and

 

(ii)           Provide the Company with information with respect to any public company that may be considered material, non-public information, unless first specifically agreed to in writing by the Company.

 

  3  

 

 

9.           INVENTIONS DISCOVERED BY EXECUTIVE

 

(a)          Executive shall promptly disclose to the Company any invention, improvement, discovery, process, formula, or method or other intellectual property, whether or not patentable or copyrightable (collectively, “ Inventions ”), conceived or first reduced to practice by Executive, either alone or jointly with others, while performing services hereunder (or, if based on any Confidential Information, within one (1) year after the Term): (i) which pertain to any line of business activity of the Company, whether then conducted or then being actively planned by the Company, with which Executive was or is involved, (ii) which is developed using time, material or facilities of the Company, whether or not during working hours or on the Company premises, or (iii) which directly relates to any of Executive’s work during the Employment Term, whether or not during normal working hours. Executive hereby assigns to the Company all of Executive’s right, title and interest in and to any such Inventions. During and after the Employment Term, Executive shall execute any documents necessary to perfect the assignment of such Inventions to the Company and to enable the Company to apply for, obtain and enforce patents, trademarks and copyrights in any and all countries on such Inventions, including, without limitation, the execution of any instruments and the giving of evidence and testimony, without further compensation beyond Executive’s agreed compensation during the course of Executive’s employment. All such acts shall be done without cost or expense to Executive. Executive shall be compensated for the giving of evidence or testimony after the term of Executive’s employment at the rate of $1,000/day. Without limiting the foregoing, Executive further acknowledges that all original works of authorship by Executive, whether created alone or jointly with others, related to Executive’s employment with the Company and which are protectable by copyright, are "works made for hire" within the meaning of the United States Copyright Act, 17 U.S .C. (S) 101, as amended, and the copyright of which shall be owned solely, completely and exclusively by the Company. If any Invention is considered to be work not included in the categories of work covered by the United States Copyright Act, 17 U. S. C. (S) 101, as amended, such work is hereby assigned or transferred completely and exclusively to the Company. Executive hereby irrevocably designates counsel to the Company as Executive's agent and attorney-in-fact to do all lawful acts necessary to apply for and obtain patents and copyrights and to enforce the Company’s rights under this Section. This Section 9 shall survive the termination of this Agreement. Any assignment of copyright hereunder includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as "moral rights" (collectively “ Moral Rights ”). To the extent such Moral Rights cannot be assigned under applicable law and to the extent the following is allowed by the laws in the various countries where Moral Rights exist, Executive hereby waives such Moral Rights and consents to any action of the Company that would violate such Moral Rights in the absence of such consent. Executive agrees to confirm any such waivers and consents from time to time as requested by the Company.

 

10.          OUTSIDE ACTIVITIES DURING EMPLOYMENT .

 

(a)           NO ADVERSE INTERESTS . The Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by him to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise during the Employment Term without the consent of the Board. Except with the prior written consent of the Board, during the Employment Term the Executive will not undertake or engage in any other employment, occupation or business enterprise. Notwithstanding the foregoing, nothing shall not prevent the Executive from participating in charitable, civic, educational, professional, community or industry affairs or, with prior approval of the Board, serving on the board of directors or advisory boards of other companies; provided that such activities or services do not (i) create a conflict with his employment hereunder; (ii) materially interfere with the performance of his duties; or (iii) violate the terms of Section 8.

 

  4  

 

 

(b)           NON-COMPETITION . Other than as permitted by Section 10(a), during the Employment Term and for the one year period thereafter (the “ Non-Competition Period ”), except on behalf of the Company, the Executive will not directly or indirectly, whether as an officer, director, stockholder, partner, proprietor, associate, representative, consultant, or in any capacity whatsoever engage in, become financially interested in, participate in, be employed by or have any business connection with any other person, corporation, firm, partnership or other entity whatsoever which competes with the Company, anywhere throughout the world, in any line of business engaged in (or planned to be engaged in) by the Company or that is directly competitive with the business of the Company other than de minimis stock holdings in public companies; provided, however, that anything above to the contrary notwithstanding, he may own, as a passive investor, securities of any competitor corporation, so long as his direct holdings in any one such corporation shall not in the aggregate constitute more than five percent (5%) of the voting stock of such corporation, and provided that the Executive promptly discloses to the Board any such participation, other than such de minimis stock holdings.

 

(c)           NON-SOLICITATION . During the Non-Competition Period, Executive shall not, directly or indirectly: (i) induce or attempt to induce or aid others in inducing anyone working at or for the Company to cease working at or for the Company, or in any way interfere with the relationship between the Company and anyone working at or for the Company except in the proper exercise of Executive’s authority; or (ii) in any way interfere with the relationship between the Company and any customer, supplier, licensee or other business relation of the Company)

 

(d)           NON-DISPARAGEMENT . Executive agrees that at all times during the Employment Term and for a period of three (3) years following any cessation of employment with the Company:

 

(i)          He will not knowingly or intentionally perform any act or make any statement that will or may impair, damage or destroy the goodwill and esteem for the Company held by its suppliers, employees, patrons, customers and others that may at any time be employed by or engaged in conducting business with the Company or by the public at large or any segment thereof; and

 

(ii)          He will not knowingly or intentionally engage in any activity or conduct or perform or omit to perform any act or thing that is detrimental to the Company or its business or that is inconsistent with or in violation of the fiduciary duties owed by Executive to the Company and its Stockholders, including without limitation the duty of loyalty.

 

(e)           SCOPE .  If, at the time of enforcement of this Section 10, a court shall hold that the duration, scope, area or other restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope, area or other restrictions reasonable under such circumstances shall be substituted for the stated duration, scope, area or other restrictions.

 

(e)           INDEPENDENT AGREEMENT .  The covenants made in this Section 10 shall be construed as an agreement independent of any other provisions of this Agreement, and shall survive the termination of this Agreement.  Moreover, the existence of any claim or cause of action of Executive against the Company or any of its affiliates, whether or not predicated upon the terms of this Agreement, shall not constitute a defense to the enforcement of these covenants.

 

(f)           SURVIVAL . The provisions of paragraphs (a) and (b) of this Section 10 shall survive termination of this Agreement.

 

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11.           TERMINATION . The Executive’s employment and the Employment Term shall terminate on the first of the following to occur:

 

(a)           DISABILITY . Upon the 30 th day following the Executive’s receipt of notice of the Company’s termination due to Disability (as defined in this Section); provided that , the Executive has not returned to full-time performance of his duties within thirty (30) days after receipt of such notice. If the Company determines in good faith that the Executive’s Disability has occurred during the Employment Term, it will give the Executive written notice of its intention to terminate his employment.  For purposes of this Agreement, “ Disability ” shall occur when the Board determines that the Executive has become physically or mentally incapable of performing the essential functions of his job duties under this Agreement with or without reasonable accommodation, for ninety (90) consecutive days or one hundred twenty (120) nonconsecutive days in any twelve (12) month period. For purposes of this Section, at the Company’s request, the Executive agrees to make himself available and to cooperate in a reasonable examination by an independent qualified physician selected by the Board. The written medical opinion of such physician shall be conclusive and binding upon each of the parties hereto as to whether a Disability exists and the date when such Disability arose. If the Executive refuses to submit to appropriate examinations by such physician at the request of the Company, the determination of the Executive’s Disability by the Company in good faith will be conclusive as to whether such Disability exists

 

(b)           DEATH . Automatically on the date of death of the Executive.

 

(c)           CAUSE . Immediately upon written notice by the Company to the Executive of a termination for Cause. For purposes of this Agreement, “ Cause ” shall mean the occurrence of any of the following events, as determined by the Board in its sole and absolute discretion: (i) Executive's conviction (which, through lapse of time or otherwise, is not subject to appeal) of any crime or offense involving money or other property of the Company or its subsidiaries or which constitutes a felony in the jurisdiction involved; (ii) Executive's performance of any act or his failure to act, for which if he were prosecuted and convicted, a crime or offense involving money or property of the Company or its subsidiaries, or which would constitute a felony in the jurisdiction involved would have occurred; (iii) Executive's breach of any of the representations, warranties or covenants set forth in this Agreement; or (iv) Executive's continuing, repeated, willful failure or refusal to perform his duties required by this Agreement, provided that Executive shall have first received written notice from the Company stating with specificity the nature of such failure and refusal and affording Executive an opportunity, as soon as practicable, to correct the acts or omissions complained of. .

 

(d)           WITHOUT CAUSE . Upon written notice by the Company to the Executive of an involuntary termination without Cause and other than due to death or Disability.

 

(e)           WITH GOOD REASON . Upon the Executive’s notice following the end of the Cure Period (as defined in this Section). For purposes of this Agreement, “ Good Reason ” for the Executive to terminate his employment hereunder shall mean the occurrence of any of the following events without the Executive’s consent: (i) a material reduction in the Executive’s Base Salary (other than an across-the-board decrease in base salary applicable to all executive officers of the Company); (ii) a material breach of this Agreement by the Company; (iii) a material reduction in the Executive’s duties, authority and responsibilities relative to the Executive’s duties, authority, and responsibilities in effect immediately prior to such reduction; or (iv) the relocation of the Executive’s principal place of employment, without the Executive’s consent, in a manner that lengthens his one-way commute distance by fifty (50) or more miles from his then-current principal place of employment immediately prior to such relocation; provided, however, that, any such termination by the Executive shall only be deemed for Good Reason pursuant to this definition if: (1) the Executive gives the Company written notice of his intent to terminate for Good Reason within thirty (30) days following the first occurrence of the condition(s) that he believes constitute(s) Good Reason, which notice shall describe such condition(s); (2) the Company fails to remedy such condition(s) within thirty (30) days following receipt of the written notice (the “ Cure Period ”); and (3) the Executive voluntarily terminates his employment within thirty (30) days following the end of the Cure Period.

 

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(f)           WITHOUT GOOD REASON . Upon the expiration of the Transition Period (as defined in this Section) unless otherwise provided by the Company as provided herein. The Executive shall provide thirty (30) days’ prior written notice (the “ Transition Period ”) to the Company of the Executive’s intended termination of employment without Good Reason (“ Voluntary Termination ”). During the Transition Period, the Executive shall assist and advise the Company in any transition of business, customers, prospects, projects and strategic planning, and the Company shall continue to pay Executive’s Base Salary and benefits through the end of the Transition Period. The Company may, in its sole discretion, upon five (5) days prior written notice to the Executive, make such termination of employment effective earlier than the expiration of the Transition Period (“ Early Termination Right ”), but it shall pay the Executive’s Base Salary and benefits through the earlier of: the end of the Transition Period, or the date that the Executive accepts full-time employment or a full-time consulting engagement from a third party.

 

11.          CONSEQUENCES OF TERMINATION . Any termination payments made and benefits provided under this Agreement to the Executive shall be in lieu of any termination or severance payments or benefits for which the Executive may be eligible under any of the plans, policies or programs of the Company or its affiliates as may be in effect from time to time. Subject to satisfaction of each of the conditions set forth in Section 12, the following amounts and benefits shall be due to the Executive. Any Accrued Amounts (as defined in Section 11(a)) shall be payable on the next regularly scheduled Company payroll date following the date of termination or earlier if required by applicable law.

 

(a)           DISABILITY . Upon employment termination due to Disability, the Company shall pay or provide the Executive: (i) any unpaid Base Salary through the date of termination and any accrued vacation; (ii) any unpaid Annual Bonus earned with respect to any calendar year ending on or preceding the date of termination; (iii) reimbursement for any unreimbursed expenses incurred through the date of termination; and (iv) all other payments and benefits to which the Executive may be entitled under the terms of any applicable compensation arrangement or benefit, equity or perquisite plan or program or grant or this Agreement, including but not limited to any applicable insurance benefits (collectively, “ Accrued Amounts ”). In addition, upon the Executive’s termination due to Disability, the Executive shall be entitled to exercise any vested equity award(s) granted to the Executive for a period equal to the shorter of: (i) six months after termination, or (ii) remaining term of the award(s).

 

(b)           DEATH . In the event the Employment Term ends on account of the Executive’s death, the Executive’s estate (or to the extent a beneficiary has been designated in accordance with a program, the beneficiary under such program) shall be entitled to any Accrued Amounts, including but not limited to proceeds from any Company sponsored life insurance programs. In addition, upon the Executive’s death, the Company will extend the time period that the Executive’s estate (or to the extent a beneficiary has been designated in accordance with a program, the beneficiary under such program) shall be entitled to exercise any vested equity award(s) granted to the Executive for a period equal to the shorter of: (i) six (6) months after termination, or (ii) remaining term of the award(s).

 

(c)           TERMINATION FOR CAUSE OR WITHOUT GOOD REASON . If the Executive’s employment should be terminated (i) by the Company for Cause, or (ii) by the Executive without Good Reason, the Company shall pay to the Executive any Accrued Amounts only, and shall not be obligated to make any additional payments to the Executive.

 

(d)           TERMINATION WITHOUT CAUSE OR FOR GOOD REASON . If the Executive’s employment by the Company is terminated by the Company without Cause (and not due to Disability or death) or by the Executive for Good Reason, then the Company shall pay or provide the Executive with the Accrued Amounts and subject to compliance with Section 12:

 

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(i)          continue payment of the Executive’s Base Salary as in effect immediately preceding the last day of the Employment Term (ignoring any decrease in Base Salary that forms the basis for Good Reason), for a period of twelve (12) months following the termination date (the “ Severance Period ”) on the Company’s regular payroll dates; provided, however, that any payments otherwise scheduled to be made prior to the effective date of the General Release (namely, the date it can no longer be revoked) shall accrue and be paid in the first payroll date that follows such effective date with subsequent payments occurring on each subsequent Company payroll date;

 

(ii)         continue payment of any Company paid health insurance plans currently in effect for the benefit of Executive at the time of termination until the earliest of (i) twelve (12) months following the termination date; or (ii) the date when the Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment; and

 

(iii)        All unvested equity awards shall immediately vest and Executive shall be entitled to exercise all vested equity award(s) granted to the Executive for a period equal to the shorter of: (i) twelve (12) months after termination; or (ii) the remaining term of the award(s).

 

(iv)        Any payment made under this Section 11(d) shall be credited against any severance payment that Executive may otherwise be entitled to under the Mexican Labor Code or any other applicable law.

 

12.          CONDITIONS . Any payments or benefits made or provided pursuant to Section 11 (other than Accrued Amounts) are subject to the Executive’s (or, in the event of the Executive’s death, the beneficiary’s or estate’s, or in the event of the Executive’s Disability, the guardian’s):

 

(a)          compliance with the provisions of Section 8 hereof;

 

(b)          delivery to the Company of an executed waiver and general release of any and all known and unknown claims, and other provisions and covenants, in the form acceptable to the Company (which shall be delivered to the Executive within five (5) business days following the termination date) (the “ General Release ”) within 21 days of presentation thereof by the Company to the Executive (or a longer period of time if required by law), and permitting the General Release to become effective in accordance with its terms; and

 

(c)          delivery to the Company of a resignation from all offices, directorships and fiduciary positions with the Company, its affiliates and employee benefit plans effective as of the termination date.

 

Notwithstanding the due date of any post-employment payments, any amounts due following a termination under this Agreement (other than Accrued Amounts) shall not be due until after the expiration of any revocation period applicable to the General Release without the Executive having revoked such General Release, and any such amounts shall be paid or commence being paid to the Executive within fifteen (15) days of the expiration of such revocation period without the occurrence of a revocation by the Executive (or such later date as may be required under Section 19 of this Agreement). Nevertheless (and regardless of whether the General Release has been executed by the Executive), upon any termination of the Executive’s employment, the Executive shall be entitled to receive any Accrued Amounts, payable after the date of termination in accordance with the Company’s applicable plan, program, policy or payroll procedures. Notwithstanding anything to the contrary in this Agreement, if any severance pay or benefits are deferred compensation under Section 409A (as defined below), and the period during which the Executive may sign the General Release begins in one calendar year and the first payroll date following the period during which the Executive may sign the General Release occurs in the following calendar year, then the severance pay or benefit shall not be paid or the first payment shall not occur until the later calendar year.

 

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13.          CONSEQUENCES OF A CHANGE IN CONTROL .

 

(a)          Upon the closing of a Change in Control (as defined below), the time period that the Executive shall have to exercise all vested stock options and other awards that the Executive may have under the Plan (including the Initial Grant) or any successor equity compensation plan as may be in place from time to time shall be equal to the shorter of: (i) twelve (12) months days after termination, or (ii) the remaining term of the award(s).

 

(b)          If within one year after the occurrence of a Change in Control, the Executive terminates his employment with the Company for Good Reason or the Company terminates the Executive's employment for any reason other than death, Disability or Cause, the Company (or the then former Company subsidiary employing the Executive), or the consolidated, surviving or transferee person in the event of a Change in Control pursuant to a consolidation, merger or sale of assets shall pay and the Executive shall be entitled to receive from the Company (i) the portion of the Base Salary for periods prior to the effective date of termination accrued but unpaid (if any); (ii) all unreimbursed expenses (if any), subject to Section 7(b); (iii) an aggregate amount (the “ Change in Control Severance Amount ”) equal to two times the sum of the Base Salary plus an amount equal to the bonus that would be payable if the “target” level performance were achieved under the Company's annual bonus plan (if any) in respect of the fiscal year during which the termination occurs (or the prior fiscal year if bonus levels have not yet been established for the year of termination); and (iv) the payment or provision of any Other Benefits. The Change in Control Severance Amount shall be paid in a lump sum, if the Change in Control event constitutes a “change in the ownership” or a “change in the effective control” of the Company or a “change in the ownership of a substantial portion of a corporation's assets” (each within the meaning of Section 409A), or in 48 substantially equal payments, if the Change in Control event does not so comply with Section 409A. The lump sum amount shall be paid, or the installment payments shall commence, as applicable, on the first scheduled payroll date (in accordance with the Company's payroll schedule in effect for the Executive immediately prior to such termination) that occurs on or following the date that is 30 days after the Executive's termination of employment; provided, however , that the payment of such severance amount is subject to the Executive's compliance with the requirement to deliver the General Release contemplated pursuant to Section 12(b). Any such installment payment shall be treated as a separate payment as defined under Treasury Regulation §1.409A-2 (b)(2). If the Executive is a “specified employee” (as determined under the Company's policy for identifying specified employees) on the date of his “separation from service” (within the meaning of Section 409A) and if any portion of the severance amount described in clause (iii) would be considered “deferred compensation” under Section 409A, such severance amount shall not be paid or commence to be paid on any date prior to the first business day after the date that is six months following the Executive's separation from service (unless any such payment(s) shall satisfy the short-term deferral rule, as defined in Treasury Regulation §1.409A-1(b)(4), or shall be treated as separation pay under Treasury Regulation §1.409A-1(b)(9)(iii) or §1.409A-1(b)(9)(v)). If paid in installments, the first payment that can be made shall include the cumulative amount of any amounts that could not be paid during such six-month period. In addition, interest will accrue at the 10-year T-bill rate (as in effect as of the first business day of the calendar year in which the separation from service occurs) on such lump sum amount or installment payments, as applicable, not paid to the Executive prior to the first business day after the sixth month anniversary of his separation from service that otherwise would have been paid during such six-month period had this delay provision not applied to the Executive and shall be paid at the same time at which the lump sum payment or the first installment payment, as applicable, is made after such six-month period. Notwithstanding the foregoing, a payment delayed pursuant to the preceding three sentences shall commence earlier in the event of the Executive's death prior to the end of the six-month period. Upon the termination of employment with the Company for Good Reason by the Executive or upon the involuntary termination of employment with the Company of the Executive for any reason other than death, Disability or Cause, in either case within two years after the occurrence of a Change in Control, the Company (or the then former Company subsidiary employing the Executive), or the consolidated, surviving or transferee person in the event of a Change in Control pursuant to a consolidation, merger or sale of assets, shall also provide, for the period of two consecutive years commencing on the date of such termination of employment, medical, dental, life and disability insurance coverage for the Executive and the members of his family which is not less favorable to the Executive than the group medical, dental, life and disability insurance coverage carried by the Company for the Executive and the members of his family at the time of termination.

 

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(c)          For purposes of this Agreement, “ Change in Control ” means:

 

(i) any person or entity becoming the beneficial owner, directly or indirectly, of securities of the Company representing fifty percent (50%) of the total voting power of all its then outstanding voting securities;

 

(ii) a merger or consolidation of the Company in which its voting securities immediately prior to the merger or consolidation do not represent, or are not converted into securities that represent, a majority of the voting power of all voting securities of the surviving entity immediately after the merger or consolidation; or

 

(iii) a sale of substantially all of the assets of the Company or a liquidation or dissolution of the Company.

 

(d) Any payment made under this Section 11(d) shall be credited against any severance payment that Executive may otherwise be entitled to under the Mexican Labor Code or any other applicable law.

 

14.          ASSIGNMENT . This Agreement shall be binding upon and inure to the benefit of the Executive and the Executive’s heirs, executors, personal representatives, assigns, administrators and legal representatives. Because of the unique and personal nature of the Executive’s duties under this Agreement, neither this Agreement nor any rights or obligations under this Agreement shall be assignable by the Executive. This Agreement shall be binding upon and inure to the benefit of the Company and its successors, assigns and legal representatives. Any such successor or assign of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company.

 

15.          NOTICE . For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given: (a) on the date of delivery if delivered by hand; (b) on the date of transmission, if delivered by confirmed facsimile; (c) on the first business day following the date of deposit if delivered by guaranteed overnight delivery service; or (d) on the fourth business day following the date delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

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If to the Company:

 

QPAGOS Corporation

Paseo de la Reforma 404 Piso 15 PH

Col. Juárez, Del. Cuauhtémoc, México, D.F. C.P. 06600

Attention: Andrey Novikov

 

and a copy (which shall not constitute notice) shall also be sent to:

 

Gracin & Marlow, LLP

The Chrysler Building

405 Lexington Avenue, 26 th Floor

New York, New York 10174

Facsimile: (212) 208-4657

Attention: Leslie Marlow, Esq.

 

If to the Executive:

 

To the most recent address of the Executive set forth in the personnel records of the Company or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

 

16.          SECTION HEADINGS; INCONSISTENCY . The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement. If there is any inconsistency between this Agreement and any other agreement (including but not limited to any option, stock, long-term incentive or other equity award agreement), plan, program, policy or practice (collectively, “ Other Provision ”) of the Company the terms of this Agreement shall control over such Other Provision.

 

17.          SEVERABILITY . The provisions of this Agreement shall be deemed severable and the invalidity of unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

 

18.          COUNTERPARTS . This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instruments. One or more counterparts of this Agreement may be delivered by facsimile, with the intention that delivery by such means shall have the same effect as delivery of an original counterpart thereof.

 

19.          REPRESENTATIONS . The Executive represents and warrants to the Company that the Executive has the legal right to enter into this Agreement and to perform all of the obligations on the Executive’s part to be performed hereunder in accordance with its terms and that the Executive is not a party to any agreement or understanding, written or oral, which could prevent the Executive from entering into this Agreement or performing all of the Executive’s obligations hereunder. The Executive further represents and warrants that he has been advised to consult with an attorney and that he has been represented by the attorney of his choosing during the negotiation of this Agreement, that he has consulted with his attorney before executing this Agreement, that he has carefully read and fully understand all of the provisions of this Agreement and that he is voluntarily entering into this Agreement.

 

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20.          WITHHOLDING . The Company may withhold from any and all amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

 

21.          SURVIVAL . The respective obligations of, and benefits afforded to, the Company and the Executive which by their express terms or clear intent survive termination of the Executive’s employment with the Company, including, without limitation, the provisions of Sections 8 through 29, inclusive of this Agreement, will survive termination of the Executive’s employment with the Company, and will remain in full force and effect according to their terms.

 

22.          AGREEMENT OF THE PARTIES . The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party hereto. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. Neither the Executive nor the Company shall be entitled to any presumption in connection with any determination made hereunder in connection with any arbitration, judicial or administrative proceeding relating to or arising under this Agreement.

 

23.          INTEGRATION . This Agreement, together with the Confidentiality Agreement, contains the complete, final and exclusive agreement of the parties relating to the terms and conditions of the Executive’s employment and the termination of the Executive’s employment, and supersedes all prior and contemporaneous oral and written employment agreements or arrangements between the parties

 

24.          AMENDMENT. This Agreement cannot be amended or modified except by a written agreement signed by the Executive and a duly authorized officer of the Company.

 

25.          WAIVER. No term, covenant or condition of this Agreement or any breach thereof shall be deemed waived, except with the written consent of the party against whom the wavier is claimed, and any waiver or any such term, covenant, condition or breach shall not be deemed to be a waiver of any preceding or succeeding breach of the same or any other term, covenant, condition or breach.

 

26.          CHOICE OF LAW . This Agreement shall be construed and interpreted in accordance with the laws of Mexico the State of Delaware without regard to its conflict of laws principles.

 

27.          DISPUTE RESOLUTION . To ensure the rapid and economical resolution of disputes that may arise in connection with the Executive’s employment with the Company, the Executive and the Company both agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this Agreement, the Executive’s employment with the Company, or the termination of the Executive’s employment from the Company, will be resolved pursuant to the American Arbitration Association’s International Centre for Dispute Resolution (“ ICDR ”) in accordance with and under the ICDR Arbitration rules. The place of arbitration shall be New York, New York and the language shall be English. Unless otherwise agreed by the Parties in writing, the arbitration shall be conducted by a single arbitrator (the “ Sole Arbitrator ”) appointed or designated jointly by the Parties, who in each case shall be a neutral and impartial person having experience and expertise Mexican corporate and employment matters. If the Parties are unable to agree upon or jointly designate a Sole Arbitrator within thirty (30) calendar days after the date on which a written request for arbitration has been received by the ICDR, the ICDR shall appoint the Sole Arbitrator, who in each case shall be a neutral and impartial person having experience and expertise in corporate employment matters. Any order or award of the Sole Arbitrator (or tribunal), including an award of the costs and expenses of the arbitration, shall be final, conclusive and binding on the parties thereto, and any right of application or appeal to the courts in connection with any question of law or fact arising in the arbitration or in connection with any award or decision made by the Sole Arbitrator (or tribunal) is and shall be, so far as lawfully possible, waived and excluded (except as may be necessary to enforce such award or decision). The decision or award of the arbitrator(s) shall be in writing and shall state his/her/their detailed reasoning for the award and shall be final and binding.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, effective as of the date first written above.

 

  QPAGOS CORPORATION
   
  By: /s/ Andrey Novikov
    Name: Andrey Novikov
    Title: Chief Operating Officer
     
  Date: May 1, 2015
     
  /s/ Gaston Pereria
  Gaston Pereria
     
  Date: May 1, 2015

 

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Exhibit 10.4

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “ Agreement ”) between QPAGOS Corporation, a Delaware corporation (the “ Company ”), and Andrey Novikov (the “ Executive ”) is effective as of May 18, 2015 (the “ Effective Date ”).

 

WITNESSETH:

 

WHEREAS , the Executive has served as the Chief Operating Officer and Secretary of the Company’s subsidiaries and the Company desires to employ the Executive as its Chief Operating Officer and Secretary and the Executive desires to accept such employment, on the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE , in consideration of the promises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

 

1.            EMPLOYMENT TERM. The Company hereby offers to employ the Executive, and the Executive hereby accepts continued employment by the Company, upon the terms and conditions set forth in this Agreement, for a term of three (3) years unless there is an earlier termination in accordance with Section 11 below (the “ Employment Term ”).

 

2.            POSITION & DUTIES . During the Employment Term, the Executive shall serve as the Company’s Chief Operating Officer and Secretary. As Chief Operating Officer and Secretary, the Executive shall have such duties, authorities and responsibilities commensurate with the duties, authorities and responsibilities of persons in similar capacities in similarly sized companies and such other duties and responsibilities as the Company’s Chief Executive Officer and Board of Directors (the “ Board ”) shall designate that are consistent with the Executive’s position as Chief Operating Officer and Secretary.   Executive may not serve on the board of directors or as a general partner or manager of any entity other than the Company during the Employment Term without the prior written approval of the Board.  Executive, however, shall be permitted to retain any compensation received for approved service as a board member, general partner or manager to any such unaffiliated entity. During the Employment Term, the Executive shall, if requested by the Board, also serve, without additional compensation, as a member of the Board and in such other executive-level positions or capacities at the Company and/or its subsidiaries as may, from time to time, be reasonably requested by the Board.

 

3.            LOCATION . During the Employment Term, the Executive’s principal place of business for performance of the services under this Agreement shall be at the Company’s offices in Mexico City, Mexico.

 

4.            BASE SALARY . The Company agrees to pay the Executive a base salary (the “ Base Salary ”) at an annual rate of US$180,000, payable in accordance with the regular payroll practices of the Company. The Executive’s Base Salary shall be subject to review and adjustment from time to time by the Board (or a committee thereof) in its sole discretion, but may not be decreased.

 

  

 

 

5.            ANNUAL BONUS . With respect to each calendar year during the Employment Term (beginning in the year of the Effective Date), the Executive will be eligible to earn an annual performance bonus (the “ Annual Bonus ”). Beginning in the 2015 calendar year and for each full calendar year thereafter, the Executive will be eligible for an Annual Bonus of up to fifty percent (50%) of the Base Salary. The Annual Bonus will be based upon the Board’s assessment of the Executive’s performance and the Company’s attainment of targeted goals as set by the Board in its sole discretion. The Annual Bonus, if any, will be subject to applicable payroll deductions and withholdings. Following the close of each calendar year, the Board will determine whether the Executive has earned the Annual Bonus, and the amount of any Annual Bonus, based on the set criteria. No amount of the Annual Bonus is guaranteed, and the Executive must be an employee in good standing through the end of the applicable calendar year to be eligible to receive an Annual Bonus; no partial or prorated bonuses will be provided. The Annual Bonus, if earned, will be paid on or about December 1, but no later than December 31, of the applicable calendar year for which the Annual Bonus is being measured. The Executive’s eligibility for an Annual Bonus is subject to change in the discretion of the Board (or any authorized committee thereof).

 

6.            EQUITY . Upon approval of the Board of Directors of the Company, the Executive shall be issued Seven Hundred Twenty Thousand (720,000) shares of the Company’s common stock in accordance with the terms of a Restricted Stock Agreement to be entered into between the Company and the Executive that, among other things, will provide for the stock to vest on the one year anniversary of the date of issuance.

 

7.            EMPLOYEE BENEFITS .

 

(a)           BENEFIT PLANS . The Executive shall, in accordance with Company policy and the terms of the applicable Company benefit plan documents, be eligible to participate in any benefit plan or arrangement, including health, life and disability insurance, retirement plans and the like, that may be in effect from time to time and made available to the Company’s senior management. All matters of eligibility for coverage or benefits under any benefit plan shall be determined in accordance with the provisions of such plan. The Company reserves the right to change, alter, or terminate any benefit plan in its sole discretion. Notwithstanding the foregoing, in the event that the terms of this Agreement differ from or are in conflict with the Company’s general employment policies or practices, this Agreement shall control.

 

(b)           VACATION . The Executive shall be entitled to up to four (4) weeks paid vacation, holiday and sick leave per year in accordance with the Company’s policies and shall be entitled to accrue 10 days of vacation time during the Employment Term in accordance with the Company’s vacation policy. Vacation is to be taken at such intervals as shall be appropriate and consistent with the proper performance of the Executive’s duties hereunder.

 

(c)           RELOCATION AND HOUSING . Commencing on the Effective Date, the Company agrees to pay Executive a temporary housing allowance of $2,000 per month, payable to Executive on or before the 10 th day of each calendar month, for the purpose of assisting Executive in paying the costs associated with housing or living quarters in Mexico City. This monthly housing allowance will end or expire upon the expiration of the Employment Term. In addition thereto, the Company agrees to reimburse Executive for all reasonable and verifiable moving expenses that are incurred and paid by Executive in moving furniture, personal effects and vehicles to any temporary or permanent housing or living quarters that Executive may secure in Mexico City, in an amount not exceeding, in the aggregate, the sum of $15,000. Until the time of Executive’s relocation to Mexico City, the Company agrees to reimburse Executive for the airfare for one round trip from Mexico to Russia every three months during the Employment Term.

 

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(d)           GENERAL EXPENSE REIMBURSEMENTS . The Company will reimburse the Executive for all usual, reasonable and necessary business expenses, including travel, computer and cellular phone costs that the Executive incurs in performing the services hereunder pursuant to the Company’s usual expense reimbursement policies and practices, following submission by the Executive of reasonable documentation thereof. . All reimbursements provided under this Agreement shall be made in accordance with the requirements of Section 409A (as defined below) to the extent that such reimbursements are subject to Section 409A, including, as applicable, the requirements that: (i) any reimbursement is for expenses incurred during the Employment Term; (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year; (iii) the reimbursement of an eligible expense shall be made on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (iv) the right to reimbursement is not subject to liquidation or exchange for any other benefit.

 

8 .             CONFIDENTIALITY AND POST-EMPLOYMENT OBLIGATIONS .

 

(a)           Executive agrees that during the course of his employment or at any time thereafter, he will not disclose or make accessible to any other person, the Company’s products, services and technology, both current and under development, promotion and marketing programs, lists, trade secrets and other confidential and proprietary business information of the Company or any affiliates or any of their clients. Executive agrees: (i) not to use any such information for himself or others, and (ii) not to take any such material or reproductions thereof from the Company’s facilities at any time during his employment by the Company other than to perform his duties hereunder. Executive agrees immediately to return all such material and reproductions thereof in his possession to the Company upon request and in any event upon termination of employment.

 

(b)           Except with prior written authorization by the Company, Executive agrees not to disclose or publish any of the confidential, technical or business information or material of the Company, its clients or any other party to whom the Company owes an obligation of confidence, at any time during or after his employment with the Company.

 

(c)           In the event that Executive breaches any provisions of this Section 8 or there is a threatened breach, then, in addition to any other rights which the Company may have, the Company shall be entitled, without the posting of a bond or other security, to injunctive relief to enforce the restrictions contained herein. In the event that an actual proceeding is brought in equity to enforce the provisions of this Section 8, Executive shall not urge as a defense that there is an adequate remedy at law, nor shall the Company be prevented from seeking any other remedies which may be available. In addition, Executive agrees that in the event that he breaches the covenants in this Section 8, in addition to any other rights that the Company may have, Executive shall be required to pay to the Company any amounts he receives in connection with such breach.

 

(d)           Executive recognizes that in the course of his duties hereunder, he may receive from the Company or others information which may be considered “material, non-public information” concerning a public company that is subject to the reporting requirements of the United States Securities and Exchange Act of 1934, as amended. Executive agrees not to:

 

(i)           Buy or sell any security, option, bond or warrant while in possession of relevant material, non-public information received from the Company or others in connection herewith, and

 

(ii)           Provide the Company with information with respect to any public company that may be considered material, non-public information, unless first specifically agreed to in writing by the Company.

 

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9.             INVENTIONS DISCOVERED BY EXECUTIVE

 

(a)          Executive shall promptly disclose to the Company any invention, improvement, discovery, process, formula, or method or other intellectual property, whether or not patentable or copyrightable (collectively, “ Inventions ”), conceived or first reduced to practice by Executive, either alone or jointly with others, while performing services hereunder (or, if based on any Confidential Information, within one (1) year after the Term): (i) which pertain to any line of business activity of the Company, whether then conducted or then being actively planned by the Company, with which Executive was or is involved, (ii) which is developed using time, material or facilities of the Company, whether or not during working hours or on the Company premises, or (iii) which directly relates to any of Executive’s work during the Employment Term, whether or not during normal working hours. Executive hereby assigns to the Company all of Executive’s right, title and interest in and to any such Inventions. During and after the Employment Term, Executive shall execute any documents necessary to perfect the assignment of such Inventions to the Company and to enable the Company to apply for, obtain and enforce patents, trademarks and copyrights in any and all countries on such Inventions, including, without limitation, the execution of any instruments and the giving of evidence and testimony, without further compensation beyond Executive’s agreed compensation during the course of Executive’s employment. All such acts shall be done without cost or expense to Executive. Executive shall be compensated for the giving of evidence or testimony after the term of Executive’s employment at the rate of $1,000/day. Without limiting the foregoing, Executive further acknowledges that all original works of authorship by Executive, whether created alone or jointly with others, related to Executive’s employment with the Company and which are protectable by copyright, are "works made for hire" within the meaning of the United States Copyright Act, 17 U.S .C. (S) 101, as amended, and the copyright of which shall be owned solely, completely and exclusively by the Company. If any Invention is considered to be work not included in the categories of work covered by the United States Copyright Act, 17 U. S. C. (S) 101, as amended, such work is hereby assigned or transferred completely and exclusively to the Company. Executive hereby irrevocably designates counsel to the Company as Executive's agent and attorney-in-fact to do all lawful acts necessary to apply for and obtain patents and copyrights and to enforce the Company’s rights under this Section. This Section 9 shall survive the termination of this Agreement. Any assignment of copyright hereunder includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as "moral rights" (collectively “ Moral Rights ”). To the extent such Moral Rights cannot be assigned under applicable law and to the extent the following is allowed by the laws in the various countries where Moral Rights exist, Executive hereby waives such Moral Rights and consents to any action of the Company that would violate such Moral Rights in the absence of such consent. Executive agrees to confirm any such waivers and consents from time to time as requested by the Company.

 

10.           OUTSIDE ACTIVITIES DURING EMPLOYMENT .

 

(a)           NO ADVERSE INTERESTS . The Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by him to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise during the Employment Term without the consent of the Board. Except with the prior written consent of the Board, during the Employment Term the Executive will not undertake or engage in any other employment, occupation or business enterprise. Notwithstanding the foregoing, nothing shall not prevent the Executive from participating in charitable, civic, educational, professional, community or industry affairs or, with prior approval of the Board, serving on the board of directors or advisory boards of other companies; provided that such activities or services do not (i) create a conflict with his employment hereunder; (ii) materially interfere with the performance of his duties; or (iii) violate the terms of Section 8.

 

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(b)           NON-COMPETITION . Other than as permitted by Section 10(a), during the Employment Term and for the one year period thereafter (the “ Non-Competition Period ”), except on behalf of the Company, the Executive will not directly or indirectly, whether as an officer, director, stockholder, partner, proprietor, associate, representative, consultant, or in any capacity whatsoever engage in, become financially interested in, participate in, be employed by or have any business connection with any other person, corporation, firm, partnership or other entity whatsoever which competes with the Company, anywhere throughout the world, in any line of business engaged in (or planned to be engaged in) by the Company or that is directly competitive with the business of the Company other than de minimis stock holdings in public companies; provided, however, that anything above to the contrary notwithstanding, he may own, as a passive investor, securities of any competitor corporation, so long as his direct holdings in any one such corporation shall not in the aggregate constitute more than five percent (5%) of the voting stock of such corporation, and provided that the Executive promptly discloses to the Board any such participation, other than such de minimis stock holdings.

 

(c)           NON-SOLICITATION . During the Non-Competition Period, Executive shall not, directly or indirectly: (i) induce or attempt to induce or aid others in inducing anyone working at or for the Company to cease working at or for the Company, or in any way interfere with the relationship between the Company and anyone working at or for the Company except in the proper exercise of Executive’s authority; or (ii) in any way interfere with the relationship between the Company and any customer, supplier, licensee or other business relation of the Company)

 

(d)           NON-DISPARAGEMENT . Executive agrees that at all times during the Employment Term and for a period of three (3) years following any cessation of employment with the Company:

 

(i)          He will not knowingly or intentionally perform any act or make any statement that will or may impair, damage or destroy the goodwill and esteem for the Company held by its suppliers, employees, patrons, customers and others that may at any time be employed by or engaged in conducting business with the Company or by the public at large or any segment thereof; and

 

(ii)         He will not knowingly or intentionally engage in any activity or conduct or perform or omit to perform any act or thing that is detrimental to the Company or its business or that is inconsistent with or in violation of the fiduciary duties owed by Executive to the Company and its Stockholders, including without limitation the duty of loyalty.

 

(e)           SCOPE .  If, at the time of enforcement of this Section 10, a court shall hold that the duration, scope, area or other restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope, area or other restrictions reasonable under such circumstances shall be substituted for the stated duration, scope, area or other restrictions.

 

(e)           INDEPENDENT AGREEMENT .  The covenants made in this Section 10 shall be construed as an agreement independent of any other provisions of this Agreement, and shall survive the termination of this Agreement.  Moreover, the existence of any claim or cause of action of Executive against the Company or any of its affiliates, whether or not predicated upon the terms of this Agreement, shall not constitute a defense to the enforcement of these covenants.

 

(f)           SURVIVAL . The provisions of paragraphs (a) and (b) of this Section 10 shall survive termination of this Agreement.

 

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11.            TERMINATION . The Executive’s employment and the Employment Term shall terminate on the first of the following to occur: 

 

(a)           DISABILITY . Upon the 30 th day following the Executive’s receipt of notice of the Company’s termination due to Disability (as defined in this Section); provided that , the Executive has not returned to full-time performance of his duties within thirty (30) days after receipt of such notice. If the Company determines in good faith that the Executive’s Disability has occurred during the Employment Term, it will give the Executive written notice of its intention to terminate his employment.  For purposes of this Agreement, “ Disability ” shall occur when the Board determines that the Executive has become physically or mentally incapable of performing the essential functions of his job duties under this Agreement with or without reasonable accommodation, for ninety (90) consecutive days or one hundred twenty (120) nonconsecutive days in any twelve (12) month period. For purposes of this Section, at the Company’s request, the Executive agrees to make himself available and to cooperate in a reasonable examination by an independent qualified physician selected by the Board. The written medical opinion of such physician shall be conclusive and binding upon each of the parties hereto as to whether a Disability exists and the date when such Disability arose. If the Executive refuses to submit to appropriate examinations by such physician at the request of the Company, the determination of the Executive’s Disability by the Company in good faith will be conclusive as to whether such Disability exists

 

(b)           DEATH . Automatically on the date of death of the Executive.

 

(c)           CAUSE . Immediately upon written notice by the Company to the Executive of a termination for Cause. For purposes of this Agreement, “ Cause ” shall mean the occurrence of any of the following events, as determined by the Board in its sole and absolute discretion: (i) Executive's conviction (which, through lapse of time or otherwise, is not subject to appeal) of any crime or offense involving money or other property of the Company or its subsidiaries or which constitutes a felony in the jurisdiction involved; (ii) Executive's performance of any act or his failure to act, for which if he were prosecuted and convicted, a crime or offense involving money or property of the Company or its subsidiaries, or which would constitute a felony in the jurisdiction involved would have occurred; (iii) Executive's breach of any of the representations, warranties or covenants set forth in this Agreement; or (iv) Executive's continuing, repeated, willful failure or refusal to perform his duties required by this Agreement, provided that Executive shall have first received written notice from the Company stating with specificity the nature of such failure and refusal and affording Executive an opportunity, as soon as practicable, to correct the acts or omissions complained of.

 

(d)           WITHOUT CAUSE . Upon written notice by the Company to the Executive of an involuntary termination without Cause and other than due to death or Disability.

 

(e)           WITH GOOD REASON . Upon the Executive’s notice following the end of the Cure Period (as defined in this Section). For purposes of this Agreement, “ Good Reason ” for the Executive to terminate his employment hereunder shall mean the occurrence of any of the following events without the Executive’s consent: (i) a material reduction in the Executive’s Base Salary (other than an across-the-board decrease in base salary applicable to all executive officers of the Company); (ii) a material breach of this Agreement by the Company; (iii) a material reduction in the Executive’s duties, authority and responsibilities relative to the Executive’s duties, authority, and responsibilities in effect immediately prior to such reduction; or (iv) the relocation of the Executive’s principal place of employment, without the Executive’s consent, in a manner that lengthens his one-way commute distance by fifty (50) or more miles from his then-current principal place of employment immediately prior to such relocation; provided, however, that, any such termination by the Executive shall only be deemed for Good Reason pursuant to this definition if: (1) the Executive gives the Company written notice of his intent to terminate for Good Reason within thirty (30) days following the first occurrence of the condition(s) that he believes constitute(s) Good Reason, which notice shall describe such condition(s); (2) the Company fails to remedy such condition(s) within thirty (30) days following receipt of the written notice (the “ Cure Period ”); and (3) the Executive voluntarily terminates his employment within thirty (30) days following the end of the Cure Period.

 

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(f)           WITHOUT GOOD REASON . Upon the expiration of the Transition Period (as defined in this Section) unless otherwise provided by the Company as provided herein. The Executive shall provide thirty (30) days’ prior written notice (the “ Transition Period ”) to the Company of the Executive’s intended termination of employment without Good Reason. During the Transition Period, the Executive shall assist and advise the Company in any transition of business, customers, prospects, projects and strategic planning, and the Company shall continue to pay Executive’s Base Salary and benefits through the end of the Transition Period. The Company may, in its sole discretion, upon five (5) days prior written notice to the Executive, make such termination of employment effective earlier than the expiration of the Transition Period, but it shall pay the Executive’s Base Salary and benefits through the earlier of: the end of the Transition Period, or the date that the Executive accepts full-time employment or a full-time consulting engagement from a third party.

 

11.           CONSEQUENCES OF TERMINATION . Any termination payments made and benefits provided under this Agreement to the Executive shall be in lieu of any termination or severance payments or benefits for which the Executive may be eligible under any of the plans, policies or programs of the Company or its affiliates as may be in effect from time to time. Subject to satisfaction of each of the conditions set forth in Section 12, the following amounts and benefits shall be due to the Executive. Any Accrued Amounts (as defined in Section 11(a)) shall be payable on the next regularly scheduled Company payroll date following the date of termination or earlier if required by applicable law.

 

(a)           DISABILITY . Upon employment termination due to Disability, the Company shall pay or provide the Executive: (i) any unpaid Base Salary through the date of termination and any accrued vacation; (ii) any unpaid Annual Bonus earned with respect to any calendar year ending on or preceding the date of termination; (iii) reimbursement for any unreimbursed expenses incurred through the date of termination; and (iv) all other payments and benefits to which the Executive may be entitled under the terms of any applicable compensation arrangement or benefit, equity or perquisite plan or program or grant or this Agreement, including but not limited to any applicable insurance benefits (collectively, “ Accrued Amounts ”). In addition, upon the Executive’s termination due to Disability, the Executive shall be entitled to exercise any vested equity award(s) granted to the Executive for a period equal to the shorter of: (i) six months after termination, or (ii) remaining term of the award(s).

 

(b)           DEATH . In the event the Employment Term ends on account of the Executive’s death, the Executive’s estate (or to the extent a beneficiary has been designated in accordance with a program, the beneficiary under such program) shall be entitled to any Accrued Amounts, including but not limited to proceeds from any Company sponsored life insurance programs. In addition, upon the Executive’s death, the Company will extend the time period that the Executive’s estate (or to the extent a beneficiary has been designated in accordance with a program, the beneficiary under such program) shall be entitled to exercise any vested equity award(s) granted to the Executive for a period equal to the shorter of: (i) six (6) months after termination, or (ii) remaining term of the award(s).

 

(c)           TERMINATION FOR CAUSE OR WITHOUT GOOD REASON . If the Executive’s employment should be terminated (i) by the Company for Cause, or (ii) by the Executive without Good Reason, the Company shall pay to the Executive any Accrued Amounts only, and shall not be obligated to make any additional payments to the Executive.

 

(d)           TERMINATION WITHOUT CAUSE OR FOR GOOD REASON . If the Executive’s employment by the Company is terminated by the Company without Cause (and not due to Disability or death) or by the Executive for Good Reason, then the Company shall pay or provide the Executive with the Accrued Amounts and subject to compliance with Section 12:

 

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(i)          continue payment of the Executive’s Base Salary as in effect immediately preceding the last day of the Employment Term (ignoring any decrease in Base Salary that forms the basis for Good Reason), for a period of twelve (12) months following the termination date (the “ Severance Period ”) on the Company’s regular payroll dates; provided, however, that any payments otherwise scheduled to be made prior to the effective date of the General Release (namely, the date it can no longer be revoked) shall accrue and be paid in the first payroll date that follows such effective date with subsequent payments occurring on each subsequent Company payroll date;

 

(ii)         continue payment of any Company paid health insurance plans currently in effect for the benefit of Executive at the time of termination until the earliest of (i) twelve (12) months following the termination date; or (ii) the date when the Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment; and

 

(iii)        All unvested equity awards shall immediately vest and Executive shall be entitled to exercise all vested equity award(s) granted to the Executive for a period equal to the shorter of: (i) twelve (12) months after termination; or (ii) the remaining term of the award(s).

 

(iv)        Any payment made under this Section 11(d) shall be credited against any severance payment that Executive may otherwise be entitled to under the Mexican Labor Code or any other applicable law.

 

12.           CONDITIONS . Any payments or benefits made or provided pursuant to Section 11 (other than Accrued Amounts) are subject to the Executive’s (or, in the event of the Executive’s death, the beneficiary’s or estate’s, or in the event of the Executive’s Disability, the guardian’s):

 

(a)          compliance with the provisions of Section 8 hereof;

 

(b)          delivery to the Company of an executed waiver and general release of any and all known and unknown claims, and other provisions and covenants, in the form acceptable to the Company (which shall be delivered to the Executive within five (5) business days following the termination date) (the “ General Release ”) within 21 days of presentation thereof by the Company to the Executive (or a longer period of time if required by law), and permitting the General Release to become effective in accordance with its terms; and

 

(c)          delivery to the Company of a resignation from all offices, directorships and fiduciary positions with the Company, its affiliates and employee benefit plans effective as of the termination date.

 

Notwithstanding the due date of any post-employment payments, any amounts due following a termination under this Agreement (other than Accrued Amounts) shall not be due until after the expiration of any revocation period applicable to the General Release without the Executive having revoked such General Release, and any such amounts shall be paid or commence being paid to the Executive within fifteen (15) days of the expiration of such revocation period without the occurrence of a revocation by the Executive (or such later date as may be required under Section 19 of this Agreement). Nevertheless (and regardless of whether the General Release has been executed by the Executive), upon any termination of the Executive’s employment, the Executive shall be entitled to receive any Accrued Amounts, payable after the date of termination in accordance with the Company’s applicable plan, program, policy or payroll procedures. Notwithstanding anything to the contrary in this Agreement, if any severance pay or benefits are deferred compensation under Section 409A (as defined below), and the period during which the Executive may sign the General Release begins in one calendar year and the first payroll date following the period during which the Executive may sign the General Release occurs in the following calendar year, then the severance pay or benefit shall not be paid or the first payment shall not occur until the later calendar year.

 

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13.           CONSEQUENCES OF A CHANGE IN CONTROL .

 

(a)          Upon the closing of a Change in Control (as defined below), the time period that the Executive shall have to exercise all vested stock options and other awards that the Executive may have under the Plan (including the Initial Grant) or any successor equity compensation plan as may be in place from time to time shall be equal to the shorter of: (i) twelve (12) months days after termination, or (ii) the remaining term of the award(s).

 

(b)          If within one year after the occurrence of a Change in Control, the Executive terminates his employment with the Company for Good Reason or the Company terminates the Executive's employment for any reason other than death, Disability or Cause, the Company (or the then former Company subsidiary employing the Executive), or the consolidated, surviving or transferee person in the event of a Change in Control pursuant to a consolidation, merger or sale of assets shall pay and the Executive shall be entitled to receive from the Company (i) the portion of the Base Salary for periods prior to the effective date of termination accrued but unpaid (if any); (ii) all unreimbursed expenses (if any), subject to Section 7(b); (iii) an aggregate amount (the “ Change in Control Severance Amount ”) equal to two times the sum of the Base Salary plus an amount equal to the bonus that would be payable if the “target” level performance were achieved under the Company's annual bonus plan (if any) in respect of the fiscal year during which the termination occurs (or the prior fiscal year if bonus levels have not yet been established for the year of termination); and (iv) the payment or provision of any Other Benefits. The Change in Control Severance Amount shall be paid in a lump sum, if the Change in Control event constitutes a “change in the ownership” or a “change in the effective control” of the Company or a “change in the ownership of a substantial portion of a corporation's assets” (each within the meaning of Section 409A), or in 48 substantially equal payments, if the Change in Control event does not so comply with Section 409A. The lump sum amount shall be paid, or the installment payments shall commence, as applicable, on the first scheduled payroll date (in accordance with the Company's payroll schedule in effect for the Executive immediately prior to such termination) that occurs on or following the date that is 30 days after the Executive's termination of employment; provided, however , that the payment of such severance amount is subject to the Executive's compliance with the requirement to deliver the General Release contemplated pursuant to Section 12(b). Any such installment payment shall be treated as a separate payment as defined under Treasury Regulation §1.409A-2 (b)(2). If the Executive is a “specified employee” (as determined under the Company's policy for identifying specified employees) on the date of his “separation from service” (within the meaning of Section 409A) and if any portion of the severance amount described in clause (iii) would be considered “deferred compensation” under Section 409A, such severance amount shall not be paid or commence to be paid on any date prior to the first business day after the date that is six months following the Executive's separation from service (unless any such payment(s) shall satisfy the short-term deferral rule, as defined in Treasury Regulation §1.409A-1(b)(4), or shall be treated as separation pay under Treasury Regulation §1.409A-1(b)(9)(iii) or §1.409A-1(b)(9)(v)). If paid in installments, the first payment that can be made shall include the cumulative amount of any amounts that could not be paid during such six-month period. In addition, interest will accrue at the 10-year T-bill rate (as in effect as of the first business day of the calendar year in which the separation from service occurs) on such lump sum amount or installment payments, as applicable, not paid to the Executive prior to the first business day after the sixth month anniversary of his separation from service that otherwise would have been paid during such six-month period had this delay provision not applied to the Executive and shall be paid at the same time at which the lump sum payment or the first installment payment, as applicable, is made after such six-month period. Notwithstanding the foregoing, a payment delayed pursuant to the preceding three sentences shall commence earlier in the event of the Executive's death prior to the end of the six-month period. Upon the termination of employment with the Company for Good Reason by the Executive or upon the involuntary termination of employment with the Company of the Executive for any reason other than death, Disability or Cause, in either case within two years after the occurrence of a Change in Control, the Company (or the then former Company subsidiary employing the Executive), or the consolidated, surviving or transferee person in the event of a Change in Control pursuant to a consolidation, merger or sale of assets, shall also provide, for the period of two consecutive years commencing on the date of such termination of employment, medical, dental, life and disability insurance coverage for the Executive and the members of his family which is not less favorable to the Executive than the group medical, dental, life and disability insurance coverage carried by the Company for the Executive and the members of his family at the time of termination.

 

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(c) For purposes of this Agreement, “ Change in Control ” means:

 

(i) any person or entity becoming the beneficial owner, directly or indirectly, of securities of the Company representing fifty percent (50%) of the total voting power of all its then outstanding voting securities;

 

(ii) a merger or consolidation of the Company in which its voting securities immediately prior to the merger or consolidation do not represent, or are not converted into securities that represent, a majority of the voting power of all voting securities of the surviving entity immediately after the merger or consolidation; or

 

(iii) a sale of substantially all of the assets of the Company or a liquidation or dissolution of the Company.

 

(d)       Any payment made under this Section 11(d) shall be credited against any severance payment that Executive may otherwise be entitled to under the Mexican Labor Code or any other applicable law.

 

14.           ASSIGNMENT . This Agreement shall be binding upon and inure to the benefit of the Executive and the Executive’s heirs, executors, personal representatives, assigns, administrators and legal representatives. Because of the unique and personal nature of the Executive’s duties under this Agreement, neither this Agreement nor any rights or obligations under this Agreement shall be assignable by the Executive. This Agreement shall be binding upon and inure to the benefit of the Company and its successors, assigns and legal representatives. Any such successor or assign of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company.

 

15.           NOTICE . For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given: (a) on the date of delivery if delivered by hand; (b) on the date of transmission, if delivered by confirmed facsimile; (c) on the first business day following the date of deposit if delivered by guaranteed overnight delivery service; or (d) on the fourth business day following the date delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

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If to the Company:

 

QPAGOS Corporation

Paseo de la Reforma 404 Piso 15 PH

Col. Juárez, Del. Cuauhtémoc, México, D.F. C.P. 06600

Attention: Andrey Novikov

 

and a copy (which shall not constitute notice) shall also be sent to:

 

Gracin & Marlow, LLP

The Chrysler Building

405 Lexington Avenue, 26 th Floor

New York, New York 10174

Facsimile: (212) 208-4657

Attention: Leslie Marlow, Esq.

 

If to the Executive:

 

To the most recent address of the Executive set forth in the personnel records of the Company or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

 

16.           SECTION HEADINGS; INCONSISTENCY . The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement. If there is any inconsistency between this Agreement and any other agreement (including but not limited to any option, stock, long-term incentive or other equity award agreement), plan, program, policy or practice (collectively, “ Other Provision ”) of the Company the terms of this Agreement shall control over such Other Provision.

 

17.           SEVERABILITY . The provisions of this Agreement shall be deemed severable and the invalidity of unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

 

18.           COUNTERPARTS . This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instruments. One or more counterparts of this Agreement may be delivered by facsimile, with the intention that delivery by such means shall have the same effect as delivery of an original counterpart thereof.

 

19.           REPRESENTATIONS . The Executive represents and warrants to the Company that the Executive has the legal right to enter into this Agreement and to perform all of the obligations on the Executive’s part to be performed hereunder in accordance with its terms and that the Executive is not a party to any agreement or understanding, written or oral, which could prevent the Executive from entering into this Agreement or performing all of the Executive’s obligations hereunder. The Executive further represents and warrants that he has been advised to consult with an attorney and that he has been represented by the attorney of his choosing during the negotiation of this Agreement, that he has consulted with his attorney before executing this Agreement, that he has carefully read and fully understand all of the provisions of this Agreement and that he is voluntarily entering into this Agreement.

 

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20.           WITHHOLDING . The Company may withhold from any and all amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

 

21.           SURVIVAL . The respective obligations of, and benefits afforded to, the Company and the Executive which by their express terms or clear intent survive termination of the Executive’s employment with the Company, including, without limitation, the provisions of Sections 8 through 29, inclusive of this Agreement, will survive termination of the Executive’s employment with the Company, and will remain in full force and effect according to their terms.

 

22.           AGREEMENT OF THE PARTIES . The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party hereto. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. Neither the Executive nor the Company shall be entitled to any presumption in connection with any determination made hereunder in connection with any arbitration, judicial or administrative proceeding relating to or arising under this Agreement.

 

23.           INTEGRATION . This Agreement, together with the Confidentiality Agreement, contains the complete, final and exclusive agreement of the parties relating to the terms and conditions of the Executive’s employment and the termination of the Executive’s employment, and supersedes all prior and contemporaneous oral and written employment agreements or arrangements between the parties

 

24.           AMENDMENT. This Agreement cannot be amended or modified except by a written agreement signed by the Executive and a duly authorized officer of the Company.

 

25.           WAIVER. No term, covenant or condition of this Agreement or any breach thereof shall be deemed waived, except with the written consent of the party against whom the wavier is claimed, and any waiver or any such term, covenant, condition or breach shall not be deemed to be a waiver of any preceding or succeeding breach of the same or any other term, covenant, condition or breach.

 

26.           CHOICE OF LAW . This Agreement shall be construed and interpreted in accordance with the laws of Mexico the State of Delaware without regard to its conflict of laws principles.

 

27.           DISPUTE RESOLUTION . To ensure the rapid and economical resolution of disputes that may arise in connection with the Executive’s employment with the Company, the Executive and the Company both agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this Agreement, the Executive’s employment with the Company, or the termination of the Executive’s employment from the Company, will be resolved pursuant to the American Arbitration Association’s International Centre for Dispute Resolution (“ ICDR ”) in accordance with and under the ICDR Arbitration rules. The place of arbitration shall be New York, New York and the language shall be English. Unless otherwise agreed by the Parties in writing, the arbitration shall be conducted by a single arbitrator (the “ Sole Arbitrator ”) appointed or designated jointly by the Parties, who in each case shall be a neutral and impartial person having experience and expertise Mexican corporate and employment matters. If the Parties are unable to agree upon or jointly designate a Sole Arbitrator within thirty (30) calendar days after the date on which a written request for arbitration has been received by the ICDR, the ICDR shall appoint the Sole Arbitrator, who in each case shall be a neutral and impartial person having experience and expertise in corporate employment matters. Any order or award of the Sole Arbitrator (or tribunal), including an award of the costs and expenses of the arbitration, shall be final, conclusive and binding on the parties thereto, and any right of application or appeal to the courts in connection with any question of law or fact arising in the arbitration or in connection with any award or decision made by the Sole Arbitrator (or tribunal) is and shall be, so far as lawfully possible, waived and excluded (except as may be necessary to enforce such award or decision). The decision or award of the arbitrator(s) shall be in writing and shall state his/her/their detailed reasoning for the award and shall be final and binding.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, effective as of the date first written above.

 

  QPAGOS CORPORATION
   
  By:   /s/ Gaston Periera
  Name: Gaston Periera
  Title: Chief Executive Officer
   
  Date: May 1, 2015
   
  /s/ Andrey Novikov
  Andrey Novikov
   
  Date: May 1, 2015

 

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Exhibit 10.5

 

QPAGOS CORPORATION

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into as of May __, 2015, by and between QPAGOS Corporation, a Delaware corporation (the “ Company ”), and the investors set forth on the signature pages affixed hereto (each, an “ Investor ” and, collectively, the “ Investors ”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to exemptions from registration under the Securities Act (as defined below), the Company desires to issue and sell to each Investor, and each Investor, severally and not jointly, desires to purchase from the Company, a minimum of 400,000 Units (the “ Units ”) (aggregate gross proceeds of $500,000) up to a maximum of an aggregate of 4,000,000 Units (aggregate gross proceeds of $5,000,000), each Unit being offered at a price of $1.25 per Unit and each Unit consisting of one share of the Company’s common stock, par value $.001 (the “ Common Stock ”) and a five year warrant (the “ Warrant ”) to purchase one share of the Company’s Common Stock at an exercise price of $1.25 per share (the Shares and the Warrants comprising the Units being hereinafter collectively referred to as the “ Securities ”), upon the terms and conditions set forth in this Agreement; and

 

WHEREAS, in connection with the Investors’ purchase of the Units, the Investors will be subject to certain restrictions on the transfer of the Securities, all as more fully set forth in this Agreement.

 

NOW, THEREFORE , in consideration of the mutual terms, conditions and other agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree to the sale and purchase of the Units as set forth herein.

 

1.           Definitions .

 

For purposes of this Agreement, the terms set forth below shall have the corresponding meanings provided below.

 

Affiliate ” shall mean, with respect to any specified Person (as defined below), (i) if such Person is an individual, the spouse, heirs, executors, or legal representatives of such individual, or any trusts for the benefit of such individual or such individual’s spouse and/or lineal descendants, or (ii) otherwise, another Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Person specified. As used in this definition, “control” shall mean the possession, directly or indirectly, of the sole and unilateral power to cause the direction of the management and policies of a Person, whether through the ownership of voting securities or by contract or other written instrument.

 

Business Day ” shall mean any day on which banks located in New York City are not required or authorized by law to remain closed.

 

Claims ” as defined in Section 5.1 hereof.

 

Closing ” and “ Closing Date ” as defined in Section 2.2 (c) hereof.

 

Common Stock ” as defined in the recitals above.

 

Company Financial Statements ” as defined in Section 4.5(a) hereof.

 

 

 

 

Company’s Knowledge ” shall mean the actual knowledge of the Chief Executive Officer (as defined in Rule 405 under the Securities Act).

 

Company’s Permits ” as defined in Section 4.6 hereof.

 

Escrow Account ,” “ Escrow Agent ” and “ Escrow Agreement ”) shall mean the escrow account established by the Company with Signature Bank, New York, New York serving as escrow agent, which escrow (as more particularly described in Section 2.3 hereof) shall be conducted pursuant to the terms of an escrow agreement entered into by the Company, the escrow agent and the Placement Agent.

 

Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

 

First Closing ” and “ First Closing Date ” as defined in Section 2.2(a) hereof.

 

Indemnified Person” as defined in Section 5.2 hereof.

 

Intellectual Property Rights ” as defined in Section 4.14 hereof.

 

Investor Questionnaire ” shall mean the questionnaire required to be completed by all Investors.

 

Liens ” shall mean any mortgage, lien, title claim, assignment, encumbrance, security interest, adverse claim, contract of sale, restriction on use or transfer or other defect of title of any kind.

 

Material Adverse Effect ” means a material adverse effect on (i) the assets, liabilities, results of operations, condition (financial or otherwise), business, or prospects of the Company and its Subsidiaries taken as a whole; (ii) the transactions contemplated hereby or in any of the Transaction Documents; or (iii) the ability of the Company to perform its obligations under the Transaction Documents (as defined below).

 

Person ” shall mean an individual, entity, corporation, partnership, association, limited liability company, limited liability partnership, joint-stock company, trust or unincorporated organization.

 

Placement Agent ” shall mean Paulson Investment Company, LLC, an Oregon limited liability company.

 

Purchase Price ” shall mean up to $5,000,000.

 

Purchaser Party ” as defined in Section 5.1 hereof.

 

Registrable Securities ” shall mean: (i) the shares of common stock underlying the Units; (ii) any shares of Common Stock issued as a dividend on the Common Stock; (iii) the Warrant Shares; and (iv) the shares of Common Stock issuable upon exercise of the warrants issuable to the Placement Agent in partial payment of its services rendered in offering of the Units and theWarrant Shares issuable upon exercise of the Warrants included in the Units; provided , that a security shall cease to be a Registrable Security upon (A) sale pursuant to a Registration Statement or Rule 144 under the Securities Act or (B) such security becoming eligible for sale by the holder thereof without any restriction pursuant to Rule 144 (including, without limitation, volume restrictions) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable).

 

Registration Rights Agreement ” shall mean the agreement to be entered into between the Company and the Investors for filing by the Company of a registration statement under the Securities Act that covers the resale of any of the Registrable Securities.

 

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Regulation D ” as defined in Section 3.7 hereof.

 

Regulation S ” as defined in Section 6.1(e) hereof.

 

Rule 144 ” as defined in Section 6.1(c) hereof.

 

Securities Act ” shall mean the Securities Act of 1933, as amended.

 

Subsequent Closing ” and “ Subsequent Closing Date ” as defined in Section 2.2(b) hereof.

 

Subsidiaries ” shall mean any corporation or other entity or organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest or otherwise controls through contract or otherwise.

 

Transaction Documents ” shall mean this Agreement, the Escrow Agreement and the Registration Rights Agreement.

 

Units ” as defined in the recitals above.

 

Warrant ” as defined in the recitals above.

 

Warrant Shares ” shall mean any shares of Common Stock underlying the Warrants.

 

2.           Sale and Purchase of Units .

 

2.1.           Subscription for Units by Investors . Subject to the terms and conditions of this Agreement, on the Closing Date (as hereinafter defined) each of the Investors shall severally, and not jointly, purchase, and the Company shall sell and issue to the Investors, in exchange for the portion of the Purchase Price to be paid by each of them, the Units, in the respective amounts set forth on the signature pages attached hereto.

 

2.2            Closings .

 

(a)           First Closing . Subject to the terms and conditions set forth in this Agreement, the Company shall issue and sell to each Investor participating in the First Closing (as defined below), and each such Investor shall, severally and not jointly, purchase from the Company on the First Closing Date, such number of Units set forth on the signature pages attached hereto(the “ First Closing ”); provided , however, that the First Closing shall not occur until subscriptions for gross proceeds of at least $500,000 have been received from Investors by the Company, and such subscription funds shall have been received by the Escrow Agent and are available for distribution pursuant to joint escrow instructions signed by the Company and the Placement Agent. The date of the First Closing is hereinafter referred to as the “ First Closing Date .” If the minimum amount of $500,000 is raised by July 31, 2015, then the offering will remain open until the earlier of the receipt and acceptance of subscriptions for $5,000,000 in gross proceeds orSeptember 30, 2015, unless extended an additional 30 days at the election of the Company and the Placement Agent. If the minimum amount of $500,000 is not raised by July 31, 2015, then the offering will terminate on July 31, 2015, and all funds received in escrow will be returned to the Investors without interest thereon.

 

(b)          Subsequent Closing(s) . The Company agrees to issue and sell to each Investor listed on the Subsequent Closing Schedule of Investors, and each Investor agrees, severally and not jointly, to purchase from the Company on such Subsequent Closing Date such number of Units set forth on the signature pages attached hereto (a “ Subsequent Closing ”). There may be more than one Subsequent Closing; provided , however , that the last Subsequent Closing shall be held no later than September 30, 2015 (subject to the right of the Company and the Placement Agent to extend the offering for an additional 30 days without notice to or consent of the Investors). The date of any Subsequent Closing is hereinafter referred to as a “ Subsequent Closing Date .” Notwithstanding the foregoing, the maximum number of Units to be sold at the First Closing and all Subsequent Closings shall not exceed 4,000,000 in the aggregate.

 

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(c)           Closing . The First Closing and any applicable Subsequent Closings are each referred to in this Agreement as a “ Closing .” The First Closing Date and any Subsequent Closing Dates are sometimes referred to herein as a “ Closing Date .” All Closings shall occur at the offices of Gracin & Marlow, LLP, counsel to the Company, at The Chrysler Building, 405 Lexington Avenue, 26 th Floor, New York, New York 10174, or remotely via the exchange of documents and signatures.

 

2.3.          Closing Deliveries . At each Closing, the Company shall deliver to the Investors, against delivery by the Investor of the Purchase Price (as provided below): (i) duly issued certificates representing the Common Stock and Warrants comprising the purchased Units, unless, at the Placement Agent’s request, the physical delivery of the Common Stock and Warrants so purchased is deferred until the final Closing; (ii) this Agreement duly executed by the Company; and (iii) the Registration Rights Agreement duly executed by the Company. At each Closing, each Investor shall deliver or cause to be delivered to the Company: (w) this Agreement duly executed by the Investor; (x) the Registration Rights Agreement duly executed by the Investor; (y) a fully completed and duly executed Investor Questionnaire; and (z) the Purchase Price set forth in its counterpart signature page annexed hereto by paying United States dollars via bank, certified or personal check which has cleared prior to the applicable Closing Date or in immediately available funds, by wire transfer to the following escrow account:

 

3.           Representations, Warranties and Acknowledgments of the Investors .

 

Each Investor, severally and not jointly, represents and warrants to the Company as to such Investor that:

 

3.1            Authorization . The execution, delivery and performance by the Investor of the Transaction Documents and the Investor Questionnaire to which such Investor is a party or has executed have been duly authorized and will each constitute the valid and legally binding obligation of such Investor, enforceable against such Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally. The execution, delivery and performance by the Investor of this Agreement and the Registration Rights Agreement and the consummation by the Investor of the transactions contemplated hereby and thereby will not: (i) result in a violation of the organizational documents of the Investor, if the Investor is an entity; (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Investor is a party; or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to such Investor, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Investor to perform its obligations hereunder.

 

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3.2            Purchase Entirely for Own Account . The Investor understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law. The Securities to be received by each Investor hereunder will be acquired for such Investor’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Securities Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the Securities Act, without prejudice, however, to such Investor’s right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws . Nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Securities for any period of time. Such Investor is not a broker-dealer registered with the Securities and Exchange Commission under the Exchange Act or an entity engaged in a business that would require it to be so registered. Such Investor is acquiring the Securities hereunder in the ordinary course of its business. The Investor understands that he, she or it may not be able to sell any of the Securities without prior registration of the Common Stock that is issued as part of the Unit or the shares of common stock underlying the Warrants under the Securities Act or the existence of an exemption from such registration requirement.

 

3.3.           Investment Experience . The Investor acknowledges that the purchase of the Units is a highly speculative investment and that he, she or it can bear the economic risk and complete loss of his, hers or its investment in the Units and has such knowledge and experience in financial or business matters such that he, she or it is capable of evaluating the merits and risks of the investment therein as contemplated hereby.

 

3.4           Disclosure of Information . The Investor has had an opportunity to receive all information related to the Company and the Securities requested by it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Units. Neither such inquiries nor any other due diligence investigation conducted by such Investor shall modify, amend or affect such Investor’s right to rely on the Company’s representations and warranties contained in this Agreement. The Investor acknowledges that it has reviewed the Company’s Private Placement Memorandum in evaluating the investment in the Units. Without limiting the generality of the foregoing, the Investor acknowledges that it has reviewed the risk factors in the Private Placement Memorandum.

 

3.5            Dilution . The Investor acknowledges that there may be future substantial dilution to holders of the Company’s Common Stock when additional equity or convertible debt securities are sold.

 

3.6            Restricted Securities . The Investor understands that the Units, and the components thereof, are characterized as “restricted securities” under the U.S. federal securities laws since they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances.

 

3.7            Legends . It is understood that, except as provided below, certificates evidencing the Securities may bear the following or any similar legend:

 

(a)         “The securities represented hereby may not be transferred unless (i) such securities have been registered for sale pursuant to the Securities Act of 1933, as amended; (ii) such securities may be sold pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act; or (iii) the Company has received an opinion of counsel reasonably satisfactory to it that such transfer may lawfully be made without registration under the Securities Act of 1933 or qualification under applicable state securities laws.”

 

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(b)          If required by the authorities of any state in connection with the issuance of sale of the Securities, the legend required by such state authority.

 

3.8            Investor Status . The Investor acknowledges that the Securities are being offered only to investors who are “ Accredited Investors ” as defined in Rule 501(a) of Regulation D, as amended, under the Securities Act (“ Regulation D ”). The Investor hereby confirms that it is an Accredited Investor and is not a “bad actor” as defined in Rule 506(d) of Regulation D. Further, the Investor has completed and returned the Investor Questionnaire accompanying this Agreement providing evidence of such qualification. The Investor is not a registered broker dealer registered under Section 15(a) of the Exchange Act, or a member of the Financial Industry Regulatory Authority Inc. (“ FINRA ”), or an entity engaged in the business of being a broker-dealer.

 

3.9            No General Solicitation . The Investor did not learn of the investment in the Securities as a result of any public advertising or general solicitation.

 

3.10          Brokers and Finders . No Investor will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company, any Subsidiary or any other Investor, for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Investor.

 

3.11          Residency . The Investor’s residence (if an individual) or office in which its investment decision with respect to the Units was made (if an entity) are located at the address immediately below such Investor’s name on its signature page hereto.

 

3.12          Disclosure; Material Non-public Information .

 

(a)          The Investor, by executing this Securities Purchase Agreement, acknowledges that the undersigned has read the following investor notice:

 

NO OFFERING LITERATURE OR ADVERTISING, IN WHATEVER FORM, MAY BE RELIED ON BY INVESTORS IN EVALUATING THE OFFERING OF THESE SECURITIES OTHER THAN THE PRIVATE PLACEMENT MEMORANDUM DATED MAY 1, 2015 SUPPLIED BY THE COMPANY AND THE COMPANY’S REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN. NO INFORMATION PROVIDED TO PROSPECTIVE INVESTORS IN ANY OTHER FORMAT OR THROUGH ANY OTHER FORUM, INCLUDING, WITHOUT LIMITATION, ANY WEBINAR, POWERPOINT PRESENTATION, EXECUTIVE SUMMARY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, PROJECTIONS, SHALL BE CONSIDERED PART OF THE TRANSACTION DOCUMENTS AND IS NOT TO BE RELIED UPON IN CONNECTION WITH ANY INVESTMENT DECISION. NO PERSON HAS BEEN AUTHORIZED TO MAKE REPRESENTATIONS, OR GIVE ANY INFORMATION, WITH RESPECT TO THESE SECURITIES, EXCEPT THE INFORMATION CONTAINED IN THE TRANSACTION DOCUMENTS, AND ANY INFORMATION OTHER THAN THAT CONTAINED THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF ITS REPRESENTATIVES OR AFFILIATES.

 

(b)          The Investor, by executing a copy of this Agreement, also acknowledges the following:

 

THE UNDERSIGNED AGREES WITH THE COMPANY TO NOT, DIRECTLY OR INDIRECTLY THROUGH AFFILIATES OR OTHERWISE, PURCHASE OR SELL ANY SHARES OF THE COMPANY’S COMMON STOCK OR SECURITIES CONVERTIBLE INTO COMMON STOCK AT ANY TIME THAT THE UNDERSIGNED POSSESSES MATERIAL NON-PUBLIC INFORMATION CONCERNING THE COMPANY .

 

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(c)         No aspect of this offering has been reviewed by the United States Securities and Exchange Commission or the securities regulatory authorities of any state and that none of the offering materials nor any other written materials furnished by the Company and used in connection with this offering has been reviewed by any federal or state securities regulatory bodies or authority.

 

4.          Representations and Warranties of the Company .

 

The Company represents, warrants and covenants to the Investors that:

 

4.1.           Organization; Execution, Delivery and Performance .

 

(a) The Company and each of its Subsidiaries, is a corporation or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated or organized, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.

 

(b)(i)          The Company has all requisite corporate power and authority to enter into and perform the Transaction Documents to be entered into by the Company and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof; (ii) the execution and delivery of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Securities) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its stockholders, is required; (iii) each of the Transaction Documents has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is a true and official representative with authority to sign each such document and the other documents or certificates executed in connection herewith and bind the Company accordingly; and (iv) each of the Transaction Documents constitutes, and upon execution and delivery thereof by the Company will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and general principles of equity that restrict the availability of equitable or legal remedies.

 

4.2.          Securities Duly Authorized . The shares of Common Stock to be issued to each such Investor pursuant to this Agreement, when issued and delivered in accordance with the terms of this Agreement, will be duly and validly issued and will be fully paid and non-assessable and free from all taxes or liens with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of stockholders of the Company. The Warrants to be issued to each such Investor, when issued in accordance with the terms of this Agreement, will be legal, valid and binding obligations of the Company enforceable in accordance with their terms. The shares of Common Stock issuable upon exercise of the Warrants in accordance with their terms will be duly and validly issued and fully paid and non-assessable. Subject to the accuracy of the representations and warranties of the Investors to this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the Securities Act.

 

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4.3            No Conflicts . The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not: (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws; or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, except for possible violations, conflicts or defaults as would not, individually or in the aggregate, have a Material Adverse Effect; or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected. Neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, or for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries are not being conducted in violation of any law, rule, ordinance or regulation of any governmental entity, except for possible violations which would not, individually or in the aggregate, have a Material Adverse Effect. Except as required under the Securities Act, the Exchange Act, and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement or to issue and sell the Securities in accordance with the terms hereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.

 

4.4.           Capitalization . As of May 15, 2015, the authorized capital stock of the Company consists of (i) 50,000,000 shares of Common Stock, of which 20,000,000 shares are outstanding, 10,000,000 shares of Preferred Stock, of which no shares are outsanding. In the offering contemplated by this Agreement, up to 4,000,000 shares of Common Stock may be issued and Warrants exercisable for up to 4,000,000 shares of Common Stock may be issued (exclusive of any securities to be issued to the Placement Agent). The Company has reserved, and at all times will keep reserved, a sufficient number of shares of Common Stock for issuance upon the exercise of the Warrants. Except as described in the Private Placement Memorandum: (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of Common Stock of the Company or any of its Subsidiaries; (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the Securities Act (except for the registration rights provisions contained herein and in the Registration Rights Agreement); and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Securities. All of such outstanding shares of Common Stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of Common Stock of the Company are subject to preemptive rights or any other similar rights of the stockholders of the Company or any Lien imposed through the actions or failure to act of the Company.

 

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4.5.           Permits; Compliance . The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “ Company Permits ”), and there is no action pending or, to the Company’s Knowledge, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Since May 10, 2015, neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

 

4.6          Litigation . There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the Company’s knowledge or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their respective businesses, properties or assets or their officers or directors in their capacity as such, that would have a Material Adverse Effect. The Company is unaware of any facts or circumstances which might give rise to any of the foregoing.

 

4.7           No Material Changes .

 

Since May 10, 2015, except as set forth in the Private Placement Memorandum, there has not been:

 

(a)          Any material adverse change in the operations or business of the Company from that described in the Memorandum, or any material transaction or commitment effected or entered into by the Company outside of the ordinary course of business;

 

(b)          Any effect, change or circumstance which has had, or could reasonably be expected to have, a Material Adverse Effect;

 

(c)          Any incurrence of any material liability outside of the ordinary course of business; or

 

(d)          Any possible effect, change or circumstance which would likely have or could reasonably be expected to have, a substantial dilutive effect on the Common Stock, except forcertain highly confidential discussions which the Company is currently engaged in regarding a possible significant transaction involving a substantial monetary investment in the Company at a substantial discount which, if consummated, would likely result in substantial dilution to the Investor.

 

4.8          No General Solicitation . Neither the Company nor any Person participating on the Company’s behalf in the transactions contemplated hereby has conducted any “general solicitation,” as such term is defined in Regulation D promulgated under the Securities Act, with respect to the Units being offered hereby.

 

4.9          No Integrated Offering . Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the Securities Act of the issuance of the Securities to the Investors. The issuance of the Securities to the Investors will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any stockholder approval provisions applicable to the Company or its securities.

 

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4.10          No Brokers . Other than the Placement Agent, the Company has taken no action that would give rise to any claim by any Person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

 

4.11          Form D; Blue Sky Laws . The Company agrees to file a Form D with respect to the Securities as required under Regulation D within 15 days after the first funds are received in escrow. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Investors at the applicable Closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification).

 

4.12          Disclosure . All disclosure provided to the Investors regarding the Company and its Subsidiaries, their businesses and the transactions contemplated hereby, including the schedules to this Agreement, furnished by or on behalf of the Company or any of its Subsidiaries is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Each press release issued by the Company or any of its Subsidiaries during the 12 months preceding the date of this Agreement did not at the time of release contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, liabilities, results of operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure at or before the date hereof or announcement by the Company but which has not been so publicly disclosed.

 

4.13          Intellectual Property Rights . The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, original works, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and registrations therefor ( Intellectual Property Rights ) necessary to conduct their respective businesses as now conducted and as presently proposed to be conducted. None of the Company’s or its Subsidiaries’ Intellectual Property Rights have expired, terminated or been abandoned, or are expected to expire, terminate or be abandoned, within two years from the date of this Agreement. To the Company’s Knowledge, there has not been any infringement by the Company or any of its Subsidiaries of Intellectual Property Rights of others. Except as set forth in the Private Placement Memorndum, there is no claim, action or proceeding being made or brought, or to the Company’s Knowledge, being threatened, against the Company or any of its Subsidiaries regarding their Intellectual Property Rights. The Company is not aware of any facts or circumstances which might give rise to any of the foregoing infringements or Claims. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights, except where failure to take such measures would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

4.14          Tax Status . Except for occurrences that would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, the Company and each of its Subsidiaries (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject; (ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith; and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company and its Subsidiaries know of no basis for any such claim.

 

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4.15          Investment Company Act Status . The Company and its Subsidiaries are not, and after giving effect to the offering and sale of the Units and the application of the proceeds thereof will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.

 

4.16          No Bad Actor Disqualification or Disclosure . Except as may be disclosed in the PPM, neither the Company nor any predecessor of the Company, any Company director, executive officer or beneficial owner of 20% or more of the Company’s outstanding voting equity securities is a “bad actor” as that term is defined in Rule 506(d) of Regulation D.

 

5.           Indemnification .

 

5.1            Indemnification by the Company . (a) In addition to the indemnity provided in the Registration Rights Agreement, the Company will indemnify and hold each Investor and, if applicable, its directors, officers, stockholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Investor (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, stockholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling person (each, a “ Purchaser Party ”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation (“ Claims ”) that any such Purchaser Party may suffer or incur as a result of any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents. The Company will not be liable to any Purchaser Party under this Agreement to the extent, but only to the extent that a Claim is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents; provided that such a claim for indemnification relating to any breach of any of the representations or warranties made by the Company in this Agreement is made within one year from the Closing.

 

5.2         Promptly after receipt by any Person (the “ Indemnified Person ”) of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 5.1 , such Indemnified Person shall promptly notify the Company in writing, and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all fees and expenses; provided , however , that the failure of any Indemnified Person so to notify the Company shall not relieve the Company of its obligations hereunder except to the extent that the Company is actually and materially and adversely prejudiced by such failure to notify. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Company and the Indemnified Person shall have mutually agreed to the retention of such counsel; (ii) the Company shall have failed promptly to assume the defense of such proceeding and to employ counsel reasonably satisfactory to such Indemnified Person in such proceeding; or (iii) in the reasonable judgment of counsel to such Indemnified Person, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties. The Company shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, delayed or conditioned. Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld, delayed or conditioned, the Company shall not effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such proceeding.

 

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6.           Transfer Restrictions .

 

6.1.           Transfer or Resale . Each Investor understands that:

 

Except as provided in the Registration Rights Agreement, the sale or resale of all or any portion of the Securities has not been and is not being registered under the Securities Act or any applicable state securities laws, and all or any portion of the Securities may not be transferred unless:

 

(a)          the Securities are sold pursuant to an effective registration statement under the Securities Act;

 

(b)          the Investor shall have delivered to the Company a customary opinion of counsel that shall be in form, substance and scope reasonably acceptable to the Company, to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration;

 

(c)         the Securities are sold or transferred to an “ affiliate ” (as defined in Rule 144 (or any successor rule) as promulgated under the Securities Act (“ Rule 144 ”)) of the Investor who agrees to sell or otherwise transfer the Securities only in accordance with this Section 6.1 and who is an Accredited Investor;

 

(d)         the Securities are sold pursuant to Rule 144; or

 

(e)         the Securities are sold pursuant to Regulation S (or any successor rule) as promulgated under the Securities Act (“ Regulation S ”);

 

and, in each case, the Investor shall have delivered to the Company, at the cost of the Investor, a customary opinion of counsel, in form, substance and scope reasonably acceptable to the Company. Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

 

7.           Conditions to Closing of the Investors .

 

The obligation of each Investor hereunder to purchase the Units at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Investor’s sole benefit and may be waived by such Investor at any time in its sole discretion by providing the Company with prior written notice thereof:

 

7.1          Representations, Warranties and Covenants . The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such date), and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the Closing Date.

 

7.2            Consents . The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Securities.

 

7.3          Delivery by Company . The Company shall have duly executed and delivered to each Investor (a) each of the other Transaction Documents; (b)a certificate evidencing the number of shares of Common Stock as is set forth on the signature page hereby being purchased by such Investor at the Closing pursuant to this Agreement; and (c) the Warrants relating to such shares ( i.e. , a Warrant for one share of the Company’s Common Stock for every share of Common Stock purchased in the offering). The foregoing notwithstanding, the Investor acknowledges that no Securities will be issued until the final Closing.

 

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7.5            No Material Adverse Effect . Since the date of first execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result in a Material Adverse Effect.

 

7.6            No Prohibition . No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.

 

7.7            Other Documents . The Company shall have delivered to such Investor such other documents, instruments or certificates relating to the transactions contemplated by this Agreement as the Placement Agent, such Investor or its counsel may reasonably request.

 

8.              Conditions to Closing of the Company .

 

The obligations of the Company to effect the transactions contemplated by this Agreement with each Investor are subject to the fulfillment at or prior to each Closing Date of the conditions listed below.

 

8.1.          Representations and Warranties . The representations and warranties made by such Investor in Section 3 shall be true and correct in all material respects at the time of Closing as if made on and as of such date, and the Investor shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required to be performed, satisfied or complied with by the Investor at or prior to the Closing Date.

 

8.2            Corporate Proceedings . If the Investor is an entity, all corporate and other proceedings required to be undertaken by such Investor in connection with the transactions contemplated hereby shall have occurred and all documents and instruments incident to such proceedings shall be reasonably satisfactory in substance and form to the Company.

 

8.3            Delivery by the Investor . The Investor shall have duly executed and delivered to the Company (a) each of the other Transaction Documents and the Investor Questionnaire and (b) the purchase price.

 

8.4            No Prohibition . No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.

 

8.5          Other Documents . The Investor shall have delivered to the Company such other documents, instruments or certificates relating to the transactions contemplated by this Agreement as the Company or its counsel may reasonably request.

 

9               Miscellaneous .

 

9.1.           Compensation of Placement Agent . Each Investor acknowledges that it is aware that the Placement Agent will receive from the Company, in consideration for its services as financial advisor and placement agent in respect of the transactions contemplated hereby: (a) a commission success fee equal to 10% of the Purchase Price of the Units sold at each Closing, payable in cash; (b) a non-accountable expense allowance equal to 3% of the Purchase Price of the Units sold at each Closing, less the $20,000 advance previously delivered by the Company in respect of same, payable in cash; and (c) five-year warrants to purchase such number of units equal to 15% of the number of Units sold in this offering, at an exercise price equal to the $1.25 per unit. In addition, the Placement Agent received a right of first refusal to participate as placement agent or managing underwriter in any subsequent financings of equity or debt securities by the Company (if a placement agent or underwriter is to be used in such financing) for 12 months following the last Closing hereunder if the Placement Agent raises at least $3,000,000 in this offering from investors first introduced to the Company by the Placement Agent. The executed placement agent agreement between the Company and the Placement Agent, a copy of which is available to the Investor upon request, contains additional rights and terms not enumerated herein.

 

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9.2.           Rule 506(e) of Regulation D Disclosure . Each Investor acknowledges that it is aware that the Managing Partner in the Paulson Investment Company, LLC’s New York office, Robert J. Setteducati, entered into a final settlement with the Massachusetts Securities Division in 2001 pursuant to which he agreed, among other things, never to seek to register with the Massachusetts Securities Division in any capacity. The settlement resolved allegations by the Massachusetts Securities Division that Mr. Setteducati failed to adequately supervise employees at a prior brokerage firm.

 

9.3            Notices . All notices, requests, demands and other communications provided in connection with this Agreement shall be in writing and shall be deemed to have been duly given at the time when hand delivered, delivered by express courier, or sent by facsimile (with receipt confirmed by the sender’s transmitting device) in accordance with the contact information provided below or such other contact information as the parties may have duly provided by notice.

 

The Company :

With a copy to:

 

   
QPAGOS Corporation Gracin & Marlow, LLP
Paseo de la Reforma 404 Piso 15 PH 405 Lexington Avenue, 26 th Floor
Col. Juárez, Del. Cuauhtémoc New York, New York 10174
México, D.F. C.P. 06600 Attention: Leslie Marlow, Esq.
Attention: Gaston Pereira Telephone: (212) 907-6457
Telephone: Facsimile: (212) 208-4657
Facsimile:  

 

The Investors :

 

As per the contact information provided on the signature pages hereof.

 

The Placement Agent With a copy to:
   
Paulson Investment Company, LLC Murphy & Weiner, P.C.
1001 SW 5 th Avenue, Suite 1460 430 Cambridge Avenue, Suite 100
Portland, OR 97204 Palo Alto, CA 94306
Telephone: (503) 243-6000 Attention: Debra K. Weiner, Esq.
Facsimile: (503) 248-2391 Telephone: (650) 218-9818
  Facsimile: (650) 323-1108

 

9.4          Survival of Representations and Warranties . Each party hereto covenants and agrees that the representations and warranties of such party contained in this Agreement shall survive the Closing. Each Investor shall be responsible only for its own representations, warranties, agreements and covenants hereunder.

 

9.5          Confidentiality After the Date Hereof . Each Investor, severally and not jointly with the other Investors, covenants that until such time as the transactions contemplated by this Agreement and such other material non-public information related to the Company in possession of the Investor are publicly disclosed by the Company, such Investor will maintain the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).

 

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9.6            Entire Agreement . This Agreement contains the entire agreement between the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter contained herein.

 

9.7            Third Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and, except for: (i) Persons entitled to indemnification pursuant to Section 5.1; (ii) the Placement Agent and its designees, successors and assigns; and (iii) other registered broker-dealers, if any, who are specifically agreed to be and acknowledged by each party as third party beneficiaries hereof, is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

9.8            Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor any Investor shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other.

 

Notwithstanding the foregoing, but subject to the provisions of Section 6.1 hereof, any Investor may, without the consent of the Company, assign its rights hereunder to any Person that purchases Units or the shares or warrants included therein or issuable upon exercise thereof in a private transaction from an Investor or to any of its “affiliates,” as that term is defined under the Exchange Act or any subsequent Person acquiring such Units or shares in accordance herewith.

 

9.9          Binding Effect; Benefits . This Agreement and all the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; nothing in this Agreement, expressed or implied, is intended to confer on any Persons other than the parties hereto or their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

9.10          Amendment; Waivers . All modifications, amendments or waivers to this Agreement shall require the written consent of each of (i) the Company and (ii) a majority-in-interest of the Investors (based on the number of Units purchased hereunder).

 

9.11          Applicable Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to the conflict of law provisions thereof, and the parties hereto.

 

9.12          Arbitration . Each Investor and the Company agree that they shall resolve all disputes, controversies and differences which may arise between them, out of or in relation to or in connection with this Agreement, after discussion in good faith attempting to reach an amicable solution. Provided that such disputes, controversies and differences remain unsettled after discussion between the parties, both parties agree that those unsettled matter(s) shall be finally settled by arbitration in New York, New York in accordance with the latest Rules of the American Arbitration Association. Such arbitration shall be conducted by three arbitrators appointed as follows: each party will appoint one arbitrator and the appointed arbitrators shall appoint a third arbitrator. If within 30 days after confirmation of the last appointed arbitrator, such arbitrators have failed to agree upon a chairman, then the chairman will be appointed by the American Arbitration Association. The decision of the tribunal shall be final and may not be appealed. The arbitral tribunal may, in its discretion award fees and costs as part of its award. Judgment on the arbitral award may be entered by any court of competent jurisdiction, including any court that has jurisdiction over either party or any of their assets. At the request of any party, the arbitration proceeding shall be conducted in the utmost secrecy subject to a requirement of law to disclose. In such case, all documents, testimony and records shall be received, heard and maintained by the arbitrators in secrecy, available for inspection only by any party and by their attorneys and experts who shall agree, in advance and in writing, to receive all such information in secrecy.

 

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9.13          Further Assurances . Each party hereto shall do and perform or cause to be done and performed all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

9.14          Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. This Agreement may also be executed via facsimile, which shall be deemed an original.

 

IN WITNESS WHEREOF , the undersigned Investors and the Company have caused this Securities Purchase Agreement to be duly executed as of the date first above written.

 

  QPAGOS CORPORATION  
       
  By:    
  Name: Gaston Pereira  
  Title: President and Chief Executive Officer  

 

INVESTORS:

 

The Investors executing the Signature Page in the form attached hereto as Annex A and delivering the same to the Company or its agents shall be deemed to have executed this Agreement and agreed to the terms hereof.

 

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Annex A
Securities Purchase Agreement
Investor Counterpart Signature Page

 

The undersigned, desiring to: (i) enter into this Securities Purchase Agreement dated as of May __, 2015 (the “ Agreement ”), with the undersigned, QPAGOS Corporation, a Delaware corporation (the “ Company ”), in or substantially in the form furnished to the undersigned and (ii) purchase the number of Units as set forth below, hereby agrees to purchase the Units from the Company as of the Closing and further agrees to join the Agreement as a party thereto, with all the rights and privileges appertaining thereto, and to be bound in all respects by the terms and conditions thereof. The undersigned specifically acknowledges having read the representations in the Agreement section entitled “Representations, Warranties and Acknowledgments of the Investors,” and hereby represents that the statements contained therein are complete and accurate with respect to the undersigned as an Investor.

 

All Investors: Name of Investor:
     
Address:   If an entity:

 

  Print Name of Entity:
   
   
  By:
  Name:
  Title:

 

    If an individual:
Telephone No.:      
    Print Name:  
Facsimile No.:      
    Signature:  
       
Email Address:   If joint individuals:
     
    Print Name:  
       
    Signature:  

 

The Investor hereby elects to purchase ____________ Units (each Unit consisting of one share of Common Stock and one five-year Warrant exercisable at an exercise price of $1.25 per share entitling the holder to purchase one share of Common Stock ) at a purchase price of $1.25 per Unit under the Securities Purchase Agreement for a total Purchase Price of $__________ (to be completed by Investor).

 

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Exhibit 10.6

 

PLACEMENT AGENT AGREEMENT

 

April 10, 2015

 

This Placement Agent Agreement is made by and between QPagos, S.A.P.I. DE C.V., a company duly incorporated in Mexico City, Mexico, registration number QPA 131 106 6H7 (“QPagos” or the “ Company ”), and Paulson Investment Company, LLC, an Oregon limited liability company (the “ Placement Agent ”), as of the date first above written. The Company hereby engages the Placement Agent to assist the Company as its exclusive Placement Agent in obtaining $_______ in financing through a private placement of its units of its common stock (“Common Stock”) and warrants to purchase shares of Common on terms to be agreed upon between the Company and the Placement Agent (the “ Financing ”), as described in and pursuant to the terms and conditions described in definitive transaction documents to be prepared by the Company with the assistance of the Placement Agent. The Placement Agent shall have the right to engage one or more sub-agents as provided herein. For purposes of this Agreement, the “Company” shall refer to QPagos or its successor entity following the anticipated merger of QPagos into a private U.S. company.

 

NOW THEREFORE, the parties hereto based on the foregoing and the mutual covenants set forth below and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, do hereby agree as follows:

 

1.     Services .

 

(a)   The Placement Agent shall offer participation in the Financing to its clients and other persons with whom the Placement Agent or the Company or any of its respective officers, directors, employees or affiliates has a pre-existing business relationship and that the Placement Agent reasonably believes are “accredited investors” as defined by Regulation D promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”), which persons are collectively referred to herein as “ Qualified Investors ”). Qualified Investors who purchase Units in the Financing are sometimes referred to herein as the “ Purchasers .” The Placement Agent shall be responsible for (i) the initial distribution to the Qualified Investors of the Company’s confidential private placement memorandum and other offering documents (the “ Memorandum ”), which shall be created by the Company, with the assistance of the Placement Agent , and shall include a brief summary of the Company and its business, risk factors, capitalization and current financial information, as well as the relevant subscription documents (collectively, with the Memorandum, the “ Offering Materials ”); with respect to such distribution of the Offering Materials, the Placement Agent shall not be required to print hard copies, but may use electronic documents for distribution; (ii) organizing, obtaining facilities for, and conducting one or more investor presentations; and (iii) providing other services reasonably related to serving as the Placement Agent for the Company in connection with the Financing. The Placement Agent acknowledges that (i) the Company may determine, in its sole discretion, whether to accept an offer of subscription to the Financing by a Qualified Investor and (ii) the Company is not obligated to compensate the Placement Agent for such offered subscriptions to the Company that the Company does not accept. Notwithstanding the foregoing, unless the Company has a specific objection to any particular Qualified Investor being a stockholder of the Company (for example, the proposed investor competes with the Company or is affiliated with a competitor of the Company, is not accredited, does not satisfactorily complete a purchaser questionnaire or subscription agreement, is known to be disreputable or dishonest, or for other, legitimate investor-specific reasons), the Company shall accept such offer of subscription from such Qualified Investors.

 

  

 

 

(b)  The Company shall make members of management and other employees available to the Placement Agent as the Placement Agent shall reasonably request for purposes of satisfying the Placement Agent’s due diligence requirements and consummating the Financing, shall make its Chief Executive Officer, Chief Financial Officer and other key management members available to attend a reasonable number of investor presentations, as recommended by the Placement Agent and shall commit such time and other resources as are reasonably necessary or appropriate to support the Placement Agent in its efforts to secure the reasonable and timely success of the Financing. The Company shall cooperate with the Placement Agent in connection with, and shall make available to the Placement Agent such documents and other information as the Placement Agent shall reasonably request in order to satisfy its due diligence requirements, subject to any applicable confidentiality requirements.

 

(c)  The Placement Agent acknowledges that (i) the Company may determine, in its sole discretion, whether to accept an offer of subscription to the Financing by a Qualified Investor and (ii) the Company is not obligated to compensate the Placement Agent for such offered subscriptions to the Company that the Company does not accept. Notwithstanding the foregoing, unless the Company has a specific objection to any particular Qualified Investor being a stockholder of the Company (for example, the investor competes with the Company or is affiliated with a competitor of the Company, is not accredited, does not satisfactorily complete a purchaser questionnaire or subscription agreement, is known to be disreputable or dishonest or for other, legitimate investor-specific reasons), the Company shall accept such offer of subscription from such Qualified Investors.

 

2.     Compensation and Expenses Payable to the Placement Agent .

 

(a)  The Company shall, at each closing of the Financing (each a “ Closing ”), as compensation for the services provided by the Placement Agent hereunder, pay the Placement Agent a cash commission equal to 10% of the gross proceeds of the Financing closed on that closing date (the “ Cash Fee ”). Such Cash Fee shall be paid on the gross cash proceeds invested by the Placement Agent and its affiliates, if any, as well as any Qualified Investor in the Financing.

 

(b)  As of the date of the final Closing, the Placement Agent shall be issued Placement Agent Warrants (the “ Placement Agent Warrants ”). The Placement Agent Warrants shall be exercisable to purchase up to 15% of the total number of Units sold in the Financing, exercisable for five years at an exercise price per Unit equal to the purchase price per Unit paid by the Purchasers in the Financing. By way of example, if 1,000,000 Units are sold in the Financing (including any Units purchased by the Placement Agent or any of its affiliates or employees), the number of Units issuable upon exercise of the Placement Agent Warrant will equal 1,000,000 x 15%, or 150,000 Units, which will be exercisable at the same price as the Units sold to the Purchasers. The Placement Agent Warrants shall have standard terms, including cashless exercise rights and rights to assign such warrants to affiliates and employees of the Placement Agent who are “accredited investors.” In addition, the shares of Common Stock (and the shares underlying the exercise of the warrant component of the Units) into which the Placement Agent Warrants are exercisable will, subject to limitations as may be imposed by regulatory authorities, have registration rights identical to those of granted to the Purchasers. The Company shall prepare, execute and deliver the Placement Agent Warrants in such form as shall be provided to the Company and in such names and amounts as shall be directed by the Placement Agent.

 

(c)  The Company shall, at each Closing, pay the Placement Agent a “non-accountable expense allowance equal to three percent of the gross proceeds of the Financing for such Closing Date (the “ Expense Allowance ”)..

 

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(d)  In the event the Financing is not consummated because of any refusal, inability or failure on the part of the Company to perform any agreement herein or to comply with any provision hereof, the Placement Agent shall be entitled to be reimbursed for its reasonable accountable expenses incurred in connection with the Financing that are pre-approved by the Company. The Placement Agent shall provide the Company with a written accounting therefor in reasonable detail (but without the need to include underlying statements or evidence of payment) in order to retain the $20,000 advance or portion thereof and/or to receive additional reimbursement of its accountable expenses.

 

(e)  .

 

3.    Term .

 

(a)  Unless earlier terminated as set forth herein, this Agreement will continue in full force and effect until the earlier of 120 days from the execution of this Agreement or the final Closing of the Financing as determined by the Company (the amount of which may be increased at the Company’s discretion), unless extended by mutual agreement of the Company and the Placement Agent for up to an additional 30 days without notice or consent of the Purchasers or such longer extension if agreed to by the Company and the Placement Agent (the “ Term ”).

 

(b)  Prior to the end of the Term, (i) the Company may terminate this Agreement immediately and without notice in the event of a material breach of this Agreement by the Placement Agent, and (ii) either party may terminate this Agreement upon 15 days prior written notice to the other party for any reason, other than material breach of this Agreement by the Placement Agent. In the event the Company terminates this Agreement, the Placement Agent will be entitled to all applicable cash fees and Placement Agent Warrants provided for in Section 2 hereof, earned prior to such termination, as well as any unpaid Expense Allowance as provided in Section 2(c) or its reasonable accountable expenses, as provided in Section 2(d), whichever is applicable.

 

(c)  Upon termination of this Agreement (whether following completion of the Financing or otherwise, other than in the case of a material breach of this Agreement by the Placement Agent), the Placement Agent shall prepare and deliver to the Company a definitive list of Qualified Investors contacted by such Placement Agent in connection with the Financing with whom the Company was first introduced to by the Placement Agent and with whom the Company had discussions during the Term of this Agreement regarding the specific terms of a financing for the Company (the “ Listed Investors ”). The Company shall have ten days after receipt of the Listed Investors to dispute any name listed on such list and any name disputed shall be removed from the list. In the event that the Company consummates a sale of any of its debt securities, equity securities or securities convertible into or exercisable in exchange for equity securities to any Listed Investor, or any debt securities held by Listed Investors are converted to equity securities within a period of 6 months following the date of termination of this Agreement (the “ Tail Period ”), then at each closing thereof, the Company shall pay to the Placement Agent the cash compensation, expense allowance and placement agent warrants set forth in Section 2 in amounts equal to what the Placement Agent would have earned from such sales had the Company closed on such investments under the terms of this Agreement.

 

(d)  Without regard to whether the Financing is closed or not, if, during the 6-month period from the date of termination of the Financing efforts or the final Closing of the Financing, whichever is applicable, the Company obtains a debt facility, whether that be a credit facility or revolver or any other form of loan transaction (regardless whether such transaction is consummated with a commercial lending institution, other entity or an individual or group of individuals), which lender has been introduced to the Company by the Placement Agent, the Placement Agent shall be entitled to a commission equal to one percent of the maximum principal amount of the loan or credit facility, which shall be payable on the closing date of such debt financing.

 

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4.    Performance . In connection with the performance of its duties under this Agreement, the Placement Agent agrees as follows:

 

(a)  The Placement Agent shall act in a manner consistent with the instructions of the Company and comply with all applicable laws, whether foreign or domestic, of each jurisdiction in which the Placement Agent proposes to carry on the business contemplated by this Agreement. The Placement Agent shall not take any action or omit to take any action that would cause the Company to violate any law or any applicable exemption from registration under the Securities Act or the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”). The Placement Agent is a member firm of Financial Industry Regulatory Authority, Inc. (“ FINRA ”) and has all authority and approvals needed to engage in securities trading and brokerage activities, as well as providing investment banking and financial advisory services. The Placement Agent represents, warrants and agrees that it shall at all times provide its services under this Agreement in compliance with applicable law, including but not limited to, conducting the Financing in a manner intended to qualify it as exempt from the registration requirements of the Securities Act and any applicable state and foreign laws and regulations, including, without limitation, not taking any action in connection with the Financing or other possible financing that would constitute a general solicitation or general advertising and not making any offers to any potential investor that it does not reasonably believe to be an “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated the Securities Act.

 

(b)  The Placement Agent shall keep a record of when and to whom each Memorandum is provided. The Placement Agent may comply with this Section 4(b) by maintaining a file that confirms who has viewed or been sent the Memorandum and on which date.

 

(c)  The Placement Agent shall provide information regarding the Company only that is contained in the Memorandum or is expressly provided by the Company to the Placement Agent for dissemination to potential investors (such as a Power Point presentation) or that is available generally to the public (such as public securities filings, press releases or published articles) and shall not make any additional statements that contain an untrue statement of a material fact or omit to state any fact necessary to make any statement made by the Placement Agent not misleading in light of the circumstances in which such statements are made.

 

(d)  The Placement Agent shall not provide the Memorandum or any other information about the Company to any person or firm that, to the knowledge of the Placement Agent, is a competitor of the Company.

 

(e)  The Placement Agent shall not engage in any form of general solicitation or general advertising with respect to the Financing.

 

(f)   Before mentioning or sending any material related to the Company to any potential investor, the Placement Agent shall, on the basis of the Placement Agent’s prior relationship with the potential offeree, reasonably believe that the potential offeree is: (x) an “accredited investor” and, if applicable, satisfies any private placement requirements or laws or regulations associated with the Financing applicable in any non-U.S. jurisdiction and (y) so sophisticated and knowledgeable in business and financial matters that the potential offeree is capable of evaluating the merits and risks of an investment in the Company. In furtherance thereof, the Placement Agent shall obtain from each Qualified Investor an accredited investor questionnaire before a subscription to purchase Units is accepted.

 

(g)  The Placement Agent shall use its best efforts to cause its officers, directors, employees and affiliates to comply with all of the foregoing provisions of this Section 4.

 

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5.      Representations and Warranties of the Parties .

 

(a)          The Company represents and warrants to the Placement Agent as follows, which representations and warranties shall be true as of the date of each closing:

 

(i)          On the date of the Memorandum and at each Closing Date, the Memorandum will comply in all material respects with the disclosure requirements of Regulation D under the Securities Act and will neither contain an untrue statement of a material fact or omit to state a material fact required to be stated therein in light of the circumstances under which they are made, or necessary to make the statements therein not misleading; provided, however , that the representations and warranties in this subsection shall not apply to statements in or omissions from the Memorandum made in reliance upon and in conformity with information furnished to the Company in writing by the Placement Agent expressly for use in the Memorandum.

 

(ii)         The financial statements included in the Memorandum, if any, present fairly in all material respects the financial position of the Company as of the dates indicated and the results of its operations for the periods specified.

 

(iii)        The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it was formed, with corporate power and authority to own, lease and operate its properties and conduct its business in all material respects as described in the Memorandum; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which the conduct of its business and/or its ownership of property requires such qualification except for such jurisdictions in which the failure to qualify in the aggregate would not have a material and adverse effect on the results of operations or financial conditions of the Company.

 

(iv)        Except as disclosed in the Memorandum, the Company does not have any subsidiaries and does not own any interest in any other corporation, partnership, joint venture or other entity.

 

(v)         Prior to the commencement of the Financing, the issued and outstanding capital shares of the Company, consisting solely of shares of Common Stock, which will be as more fully described in the Memorandum; the issued and outstanding shares of Common Stock described therein have been duly authorized and validly issued and are fully paid and non-assessable; the Units and underlying Common Stock and Warrants have been duly authorized for issuance and sale in accordance with this Agreement when issued and delivered by the Company pursuant to this Agreement and the Subscription Agreement or Securities Purchase Agreement, whichever is applicable, against payment therefor, will be validly issued, fully paid and non-assessable; the shares of Common Stock and Warrants conform in all material respects to all the statements relating thereto contained in the Memorandum; there are no outstanding options, warrants or other rights to purchase shares of preferred stock or shares of Common Stock or any understanding or agreement concerning any options, warrants or rights to purchase shares of preferred stock, except as set forth in the Memorandum.

 

(vi)        This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement, enforceable in accordance with its terms, except as enforceability of any indemnification provision may be limited under federal securities laws and except as enforceability of such agreements may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights, except that any remedy in the nature of equitable relief is in the discretion of the Court.

 

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(vii)       On the date of the Memorandum and at each Closing Date, the Company owns good and marketable title to all properties and assets described in the Memorandum as owned by it, free and clear of all liens, charges, encumbrances or restrictions, except such as are described or referred to in the Memorandum or are not materially significant or important in relation to the business of the Company.

 

(viii)      Except as disclosed in or contemplated by the Memorandum, the Company is not in violation of its Articles of Incorporation or its bylaws, either as currently amended and in effect, or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any material bond, debenture, note or other evidence of indebtedness or in any material contract, indenture, mortgage, loan agreement, lease, joint venture or other agreement or instrument to which the Company is a party or by which it or any of its properties are bound; and the execution and delivery of this Agreement, the incurrence of the obligations herein set forth and the consummation of the transactions herein contemplated will not conflict in any material respect with, or result in a breach of any of the material terms, conditions or provisions of, or constitute a material default under, the Articles of Incorporation or bylaws of the Company, or any material bond, debenture, note or other evidence of indebtedness or any material contract, indenture, mortgage, loan agreement, lease, joint venture or other agreement or instrument to which the Company is a party or by which it or any of its properties are bound.

 

(ix)         Except as disclosed in or contemplated by the Memorandum, there is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened against or affecting the Company, which might result in any material and adverse change in the condition (financial or otherwise), business or prospects of the Company.

 

(x)          Except as disclosed in or contemplated by the Memorandum, each material contract to which the Company is a party is in full force and effect or has terminated in accordance with its terms or as set forth in the Memorandum; and no party to any such contract has given notice of the cancellation of, or to the knowledge of the Company has the intention to, cancel any such material contract.

 

(xi)         Except as disclosed in or contemplated by the Memorandum and the fees and disbursements payable to the Placement Agent pursuant to this Agreement, there are no outstanding claims for services either in the nature of a finder's fee, brokerage fee or other similar fee with respect to the Financing for which the Company or the Placement Agent may be responsible.

 

(b)         Any certificate signed by any officer of the Company and delivered to the Placement Agent shall be deemed a representation and warranty by the Company to the Placement Agent as to the matters covered thereby.

 

(c)         The Placement Agent represents and warrants to the Company as follows, which representations and warranties shall be true as of the date of each closing:

 

(i)          The Placement Agent is a limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was formed, and it has all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder. The Placement Agent is duly qualified as a foreign company in those jurisdictions wherein the failure to so qualify would have a material adverse effect on its business or properties.

 

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(ii)         This Agreement has been duly authorized, executed and delivered by the Placement Agent and on its behalf and constitutes a valid and legally binding obligation enforceable against the Placement Agent in accordance with its terms.

 

(iii)        The execution and delivery of this Agreement, the observance and performance hereof and the consummation of the transactions contemplated hereby and by the Memorandum do not and will not result in any breach of, or default under, any instrument or agreement by which the Placement Agent is bound or violate any law or order directed to the Placement Agent of any court or any federal or state regulatory body or administrative agency having jurisdiction over the Placement Agent or over its property.

 

(iv)        The Placement Agent is duly registered as a broker-dealer with the Securities and Exchange Commission (the “ Commission ”) pursuant to the Exchange Act, and no proceeding has been initiated to revoke any of such registrations; the Placement Agent is a member in good standing of FINRA; the Placement Agent is duly registered as a broker-dealer under the applicable statutes, if any, in each state in which the Placement Agent proposes to offer or sell the Securities where such registration is required; the Placement Agent shall be responsible for payment of compensation owed to any sub-agent, if any, which sub-agent, if any, must be a member in good standing of FINRA and registered in each state where Qualified Investors identified by such sub-agent reside.

 

(v)         The Placement Agent shall maintain all broker-dealer registrations, referred to above in paragraph (iv), throughout the period in which Securities are offered and sold; the Placement Agent has complied and will comply with all broker-dealer requirements applicable to this transaction; the Placement Agent is not in violation of any order of any court or regulatory authority applicable to it with respect to the sale of the Securities.

 

(vi)        Pursuant to the Placement Agent's appointment made herein, the Placement Agent will conduct the Financing in compliance with the requirements of Regulation D and or Regulation S and, in this regard, the Placement Agent will have during the course of the Financing, and to the extent any representations other than those set forth in the Memorandum are made, refrained from making any untrue statement of a material fact and not have omitted to state a material fact required to be stated or necessary to make any statement made not misleading concerning the Financing or any matters set forth in or contemplated by the Memorandum. The Placement Agent will have refrained from offering for sale or selling the Units by means of: (a) any advertisement or other communication mentioning the Units published in any newspaper, magazine or similar medium or broadcast over television or radio; or (b) any seminar or meeting announced by means of any kind of general solicitation or general advertising; or (c) any letter, circular, notice or other written communication, unless the Placement Agent has reasonable grounds to believe and, in fact, does believe that each person to whom the communication is directed is qualified pursuant to the financial suitability requirements set forth in the Memorandum and the communication is accompanied or preceded by the Memorandum or contains an undertaking to provide the Memorandum upon request. Prior to the sale of any of the Units, the Placement Agent will have reasonably believed and have a reasonable basis and evidence to believe that each subscriber and his duly appointed purchaser representative, if any, met the suitability and other investor standards set forth in the Memorandum, and the Placement Agent will maintain appropriate records substantiating the foregoing. In the event that the Placement Agent utilized any sales materials other than the Memorandum, the Placement Agent will have refrained from providing any such materials to any offeree of the Units or his purchaser representative unless such materials are accompanied or preceded by the Memorandum and were permitted for use in connection with the Financing under applicable federal and state securities laws and not represented in any such materials or otherwise that any such materials have been approved or authorized by the Company. The Placement Agent will have provided each offeree with a copy of the Memorandum and the exhibits thereto during the course of the Financing. Until the final Closing Date, if any event affecting the Company or the Placement Agent should occur that the Company or its counsel, or the Placement Agent or its counsel, believe should be set forth in a supplement or amendment to the Memorandum, the Placement Agent will have promptly distributed such supplement or amendment to persons who have previously received a copy of the Memorandum from the Placement Agent and who continue to be interested in the Financing and further included such supplement or amendment in all further deliveries of the Memorandum. The Company shall at its own expense prepare and furnish the Placement Agent with a reasonable number of copies of such supplement or amendment for such distribution; however, such distribution may, at the Placement Agent’s discretion, be made electronically in lieu of physical delivery of the Offering Materials. During the course of the Financing, the Placement Agent will have accounted for each copy of the Memorandum distributed during the course of the Financing by maintaining a record of each person to whom it has delivered a copy of the Memorandum and any amendment or supplement thereof.

 

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(vii)       Neither the Placement Agent nor any of its representatives is authorized to make any representation on behalf of the Company other than those contained in the Memorandum or any additional information provided by the Company nor is the Placement Agent or any of its representatives authorized to act as the agent or representative of the Company in any capacity, except as expressly set forth herein.

 

(viii)      In the event that, on or before any Closing Date, the Placement Agent becomes aware of any false statement of a fact or representation by any subscriber in the Memorandum, the Placement Agent shall promptly inform the Company of such false statement of fact, unless at the time it becomes aware of such false statement the subscriber has communicated to the Placement Agent or the Company its intent to correct such false statement prior to the Closing Date.

 

(ix)         The Placement Agent and each of its registered representative’s participation in its solicitation efforts will comply with the prohibition against “general solicitations” and “general advertising” imposed by Rule 502(c) of Regulation D.

 

(x)          The Placement Agent shall inform the Company of each date on which it first receives any subscription from prospective investors in each state where the Units are offered and shall not offer the Units for sale in any state in which the offer or sale requires prior notice or clearance from any state securities commission, bureau or agency thereon.

 

6.      Indemnification .

 

(a)   The Company agrees to indemnify and hold harmless each Placement Agent, its officers, directors, employees, agents, legal counsel and any of its affiliates (each, a “ Placement Agent’s Indemnified Party ”) against any and all losses, claims, damages, liabilities, joint or several, and expenses (including all legal or other expenses reasonably incurred by a Placement Agent’s Indemnified Party) caused by or arising out of any misrepresentation or untrue statement or alleged misrepresentation or untrue statement of a material fact contained in the Memorandum or any other document furnished by the Company to the Placement Agent for delivery to or review by the Qualified Investors, or the omission or the alleged omission to state in such documents furnished to the Qualified Investors a material fact necessary in order to make the statements therein not misleading in light of the circumstances under which they were made, to the extent such misstatements or omissions are made in reliance upon and in conformity with written information furnished by the Company for use in the documents furnished to the Qualified Investors, including the Memorandum (except to the extent such misrepresentations, untrue statements or omissions are based on information provided to the Company by the Placement Agent). The Company agrees to reimburse the Placement Agent’s Indemnified Party for any reasonable expenses (including reasonable fees and expenses of counsel) incurred as a result of producing documents, presenting testimony or evidence, or preparing to present testimony or evidence (based upon time expended by the Placement Agent’s Indemnified Party at its then current time charges or if such person shall have no established time charges, then based upon reasonable charges), in connection with any court or administrative proceeding (including any investigation which may be preliminary thereto) arising out of or relating to the performance by the Placement Agent’s Indemnified Party of any obligation hereunder and relating to a matter for which the Company must provide indemnity to or hold harmless such Placement Agent’s Indemnified Party pursuant to the provisions of this subsection 6(a). In the event the Company shall be obligated to indemnify a Placement Agent’s Indemnified Party in connection with any such proceeding, the Company shall be entitled to assume the defense of such proceeding, with counsel approved by the Placement Agent’s Indemnified Party (which shall not be unreasonably withheld), upon the delivery to the Placement Agent’s Indemnified Party of written notice of the Company’s election to do so.

 

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(b)   The Placement Agent agrees to indemnify and hold harmless the Company, its officers, directors, employees, agents, legal counsel and its affiliates (each, a “ Company Indemnified Party ”) against any and all losses, claims, damages and liabilities, joint or several, and expenses (including all legal or other expenses reasonably incurred by a Company Indemnified Party) caused by or arising out of any misrepresentation or untrue statement or alleged misrepresentation or untrue statement of a material fact made by the Placement Agent to the Qualified Investors, or the Placement Agent’s omission or the alleged omission to state to the Qualified Investors a material fact necessary in order to make statements made not misleading in light of the circumstances under which they were made (except to the extent such misrepresentations, untrue statements or omissions are based on information provided to the Placement Agent by the Company, including the Memorandum or any other document furnished by the Company to the Placement Agent for delivery to or review by the Qualified Investors), in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Memorandum or other document furnished to the Placement Agent for delivery to or review by the Qualified Investors, in reliance upon and in conformity with written information furnished to the Company by the Placement Agent expressly for use therein. The Placement Agent agrees to reimburse the Company Indemnified Party for any reasonable expenses (including reasonable fees and expenses of counsel) incurred as a result of producing documents, presenting testimony or evidence, or preparing to present testimony or evidence (based upon time expended by the Company Indemnified Party at its then current time charges or if such person shall have no established time charges, then based upon reasonable charges), in connection with any court or administrative proceeding (including any investigation which may be preliminary thereto) arising out of or relating to the performance by the Company Indemnified Party of any obligation hereunder and relating to a matter for which the Company must provide indemnity to or hold harmless such Company Indemnified Party pursuant to the provisions of this subsection 6(b). The Placement Agent’s obligations under this Section 6(b) shall be limited to the net amount of Cash Fees paid or payable by the Company to the Placement Agent, other than in the case of fraud, intentional misrepresentation or willful breach. In the event the Placement Agent shall be obligated to indemnify a Company Indemnified Party in connection with any such proceeding, the Placement Agent shall be entitled to assume the defense of such proceeding, with counsel approved by the Company Indemnified Party (which shall not be unreasonably withheld), upon the delivery to the Company Indemnified Party of written notice of the Placement Agent’s election to do so.

 

(c)   In order to provide for just and equitable contribution under the Securities Act in any case in which (i) any person entitled to indemnification under this Section 6 makes claim for indemnification pursuant hereto but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 6 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such person in circumstances for which indemnification is provided under this Section 6, then, and in each such case, the Company and the Placement Agent shall contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after any contribution from others) in such proportion so that the Placement Agent is responsible for the proportion that the amount of commissions appearing in the Memorandum bears to the price appearing therein, and the Company is responsible for the remaining portion; provided , that, in any such case, no person guilty of a fraudulent misrepresentation or omission (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

 

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(d)   The respective indemnity agreements between the Placement Agent and the Company contained in Sections 6(a) and (b) of this Agreement, and the representations and warranties of the Company set forth in Section 5(b) or elsewhere in this Agreement, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Placement Agent or by or on behalf of any controlling person of the Placement Agent or the Company or any such officer or director or any controlling person of the Company, and shall survive the delivery of the Units, and any successor of the Company, and the Placement Agent, or of any controlling person of the Placement Agent, as the case may be, shall be entitled to the benefit of the respective indemnity agreements. The representations and warranties in Section 5 of this Agreement (but not the indemnities contained in Section 6 hereof) shall terminate six months after the final Closing under this Agreement.

 

7.      Covenants

 

(a)          The Company covenants with the Placement Agent as follows:

 

(i)          The Company will provide the Placement Agent with copies of its “bad actor” questionnaire completed and executed by itself, its officers, directors and holders of 20% or more of its outstanding securities prior to the Financing;

 

(ii)         The Company will notify the Placement Agent promptly, and confirm the notice in writing, of the initiation by the Commission or any state securities commission of any proceeding against the Company.

 

(iii)        The Company will give the Placement Agent notice of its intention to amend or supplement the Memorandum.

 

(iv)        If any event shall occur as a result of which it is necessary, in the reasonable opinion of both the Placement Agent and the Company, to amend or supplement the Memorandum in order to make the Memorandum not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, the Company will forthwith amend or supplement the Memorandum by preparing and furnishing to the Placement Agent a reasonable number of copies of an amendment or amendments of, or a supplement or supplements to (or electronic versions thereof in lieu of physical copies, if the Placement Agent so directs), the Memorandum in form and substance satisfactory to the Placement Agent, so that, as so amended or supplemented, the Memorandum will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading.

 

(v)         The Company will endeavor, in cooperation with the Placement Agent, to qualify or perfect an exemption for the Units for offering and sale under the applicable securities laws of such states and other jurisdictions of the United States as the Placement Agent and the Company agree to offer and sell the Units, and will maintain such qualifications in effect for so long as may be required for the distribution of the Units.

 

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(vi)        The Company will apply the net proceeds from the sale of the Units sold by it hereunder substantially as contemplated by the Memorandum.

 

(vii)       The Company will comply with the prohibition against general advertising and general solicitations imposed by Rule 502(c) of Regulation D.

 

(viii)      The Company shall not initiate communication directly with any of the Placement Agent’s brokers or known clients (until such time as such clients are stockholders of the Company) without the prior consent of the Placement Agent. The provisions of this Section 7(a) shall not apply to clients of the Placement Agent who are also stockholders of the Company

 

(b)          The Placement Agent covenants and agrees that:

 

(i)          It will not give any information or make any representation in connection with the offering of Units that is not contained in the Memorandum or such other material as may be provided by the Company for use in connection with the Financing.

 

(ii)         In communicating any offer of Units, the Placement Agent agrees that it will comply with the provisions of the Securities Act and the Exchange Act and the securities laws of each state, and that it and its authorized agents will offer to sell, or solicit offers to subscribe for or buy, the Units only in those states and other jurisdictions in the United States in which such solicitations can be made in accordance with an applicable exemption from registration or qualification and in which the Placement Agent is qualified to so act. Nothing contained herein shall limit the Placement Agent from offering to sell the Units outside the United States.

 

8.      Conditions to Parties’ Obligation to Close.

 

(a)          The obligations of the Placement Agent hereunder are subject to the performance by the Company of its obligations hereunder, to the condition that during the Term, no proceedings shall be initiated or threatened by the Commission or any state securities commission or similar body against the Company and to the following additional conditions:

 

(i)          The Placement Agent shall not have disclosed in writing to the Company that the Memorandum or any amendment or supplement thereto contains an untrue statement of a fact which is material, or omits to state a fact which is material and is required to be stated therein, or is necessary to make the statements therein, in light of the circumstances under which they are made, not misleading.

 

(ii)         Between the date hereof and each Closing Date, the Company shall not have sustained any loss on account of fire, explosion, flood, accident, calamity or other cause, of such character as materially adversely affects its business or property, whether or not such loss is covered by insurance.

 

(iii)        Between the date hereof and each Closing Date, except as disclosed in or contemplated by the Memorandum, there shall be no material litigation instituted or threatened against the Company and there shall be no proceeding instituted or threatened against the Company before or by any federal or state commission, regulatory body or administrative agency or other governmental body, domestic or foreign, wherein an unfavorable ruling, decision or finding would materially adversely affect the business, franchises, licenses, permits, operations or financial condition or operating results of the Company.

 

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(iv)        Except as contemplated herein or as set forth in or contemplated by the Memorandum or supplement or amendment thereto, during the period subsequent to the date of the Memorandum and prior to each Closing Date, (i) the Company (A) shall have conducted its business in all material respects in the usual and ordinary manner as the same was being conducted on the date of the filing of the Memorandum, and (B) except in the ordinary course of its business, the Company shall not have incurred any material liabilities or obligations (direct or contingent), or disposed of any of its material assets, or entered into any material transaction or suffered or experienced any substantially adverse change in its condition, financial or otherwise.

 

(v)         The authorization of the Units, the underlying shares of Common Stock and Warrants, the Placement Agent Warrants and underlying shares of Common Stock issuable upon exercise of the Warrants and Placement Agent Warrants, the Memorandum and all corporate proceedings and other legal matters incident thereto and to this Agreement, shall be reasonably satisfactory to the Placement Agent and shall have been completed.

 

(vi)        Upon the express request of the Placement Agent, the Company shall have furnished to the Placement Agent a certificate of the Chief Executive Officer and Chief Financial Officer of the Company, dated as of each Closing Date, to the effect that:

 

(A)         The representations and warranties of the Company in this Agreement are true and correct in all material respects at and as of such Closing Date, and the Company has complied in all material respects with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date;

 

(B)         The respective officers have each carefully examined the Memorandum and any amendments and supplements thereto, and to the best of their knowledge the Memorandum and any amendments and supplements thereto and all statements contained therein are true and correct in all material respects, and neither the Memorandum nor any amendment or supplement thereto includes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading and, since the effective date of the Memorandum, there has occurred no event required to be set forth in an amended or supplemented Memorandum which has not been so set forth.

 

(C)         Except as set forth in or contemplated by the Memorandum since the respective dates as of which or periods for which information is given in the Memorandum and prior to the date of such certificate (1) there has not been any material adverse change, financial or otherwise, in the affairs or condition of the Company and (2) the Company has not incurred any material liabilities, direct or contingent, or entered into any material transactions, otherwise than in the ordinary course of business.

 

(vii)       Upon the express request of the Placement Agent, the Company shall have furnished to the Placement Agent at each Closing Date, such other certificates and/or additional customary closing documents, as the Placement Agent may have reasonably requested as to (A) the accuracy and completeness, in all material respects, of (i) any statement in the Memorandum, or in any amendment or supplement thereto; or (ii) the representations and warranties of the Company herein; (B) the performance by the Company in all material respects of its obligations hereunder, or (C) the fulfillment of the conditions concurrent and precedent to its obligations hereunder, which are required to be performed or fulfilled on or prior to each Closing Date.

 

All the letters, certificates and evidence mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to the Placement Agent, whose approval shall not be unreasonably withheld. The Placement Agent reserves the right to waive any of the conditions herein set forth. If a condition specified in this Section shall not have been fulfilled in any material respect when and as required to be fulfilled, this Agreement may be terminated by the Placement Agent by written notice to the Company at any time at or prior to the Closing, and such termination shall be without liability of any party to any other party except as provided in Section 2.

 

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(b)          The obligations of the Company shall be subject to the continuing accuracy throughout the Term of the representations, warranties, covenants and agreements contained in Sections 5 and 7 hereof and to the performance by the Placement Agent of its obligations hereunder.

 

9.     Investors’ Registration Rights .

 

(a)          No later than six months following (i) the closing of the Company’s initial public offering in which its securities are listed for trading on Nasdaq or such other stock exchange in the United States as the Company may select or (ii) the commencement of trading of the Company’s Common Stock in the over-the-counter market, whichever first occurs, the Company shall prepare for filing with the Commission a Form S-1 Registration Statement to register the resale of all of the Common Stock underlying the Units sold in the Financing and the shares of Common Stock issuable upon exercise thereof and all shares of Common Stock issuable upon exercise of the Placement Agent Warrants, including the shares issuable upon exercise of the underlying Warrant component of the Units (the “ Registrable Securities ”) described herein (the “ Registration Statement ”) and use its reasonable best efforts to obtain effectiveness of the Registration Statement as soon as practicable thereafter. Upon effectiveness, the Company will seek to maintain a current Registration Statement for a period of at least two years or until all Purchasers may freely sell the Registrable Securities without registration, whichever event occurs first. The Company shall be responsible for all costs incurred in connection with filing said Registration Statement, except that each seller shall be responsible for all its own personal legal and other professional fees incurred, as well as sales commissions and other costs of sale. Notwithstanding the registration obligation set forth in this Section 9(a), in the event the Commission or the Company’s legal counsel advises the Company that all of the securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly (i) inform the holders of the Registrable Securities and use its commercially reasonable efforts to file such amendments to the initial registration statement (the “ Initial Registration Statement ”) as may be required by the Commission and/or (ii) withdraw the Initial Registration Statement and file a new registration statement (a “ New Registration Statement ”), in either case covering the maximum number of Registrable Securities permitted to be registered by the Commission on Form S-1 (or on such other form available to register the Securities for resale as a secondary offering). Notwithstanding any other provision of this Agreement, if any guidance published or otherwise issued by the Commission sets forth a limitation of the number of securities permitted to be registered on a particular Registration Statement as a secondary offering, or in the event the Commission Staff seeks to characterize any offering pursuant to a Registration Statement filed pursuant to this Section 9 as constituting an offering of securities by or on behalf of the Company such that (x) Rule 415 is not available to the Company to register the resale of such securities and (y) as a result, the Commission does not permit the Initial Registration Statement to become effective and be used for resales in a manner that permits the continuous resale at the market (or as otherwise may be acceptable to each holder) without being named therein as an “underwriter,” unless otherwise directed in writing by each holder as to its Registrable Securities, the number of Registrable Securities to be registered on behalf of the selling stockholders on such Initial Registration Statement will be reduced on a pro rata basis, taking into account all of the securities of the selling stockholders included in the Initial Registration Statement (including securities that are not sold in the Financing, if any). In the event the Company amends the Initial Registration Statement or files a New Registration Statement, as the case may be, under clauses (i) or (ii) above, the Company will use its commercially reasonable efforts to file with the Commission, as promptly as allowed by Commission or Commission guidance provided to the Company or registrants of securities in general, one or more registration statements on Form S-1 or such other form available to register for resale those securities that were not registered for resale on the Initial Registration Statement, as amended, or the New Registration Statement.

 

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(b)          The foregoing provisions and other customary terms and conditions relating to registration rights shall be incorporated into a registration rights agreement to be executed by the Purchasers and the Company.

 

10.      Confidentiality . Except in keeping with its obligations under this Agreement, the Placement Agent will maintain in confidence and will use only for the purpose of fulfilling its obligations hereunder and will not use for its own benefit any inventions, confidential know-how, trade secrets, financial information and other non-public information and data disclosed to it by the Company, and it will not divulge the same to any other persons until such time as the information becomes a matter of public knowledge. The Placement Agent will use its best efforts to prevent any unauthorized disclosure described above by others. This Section 10 will survive expiration or termination of this Agreement indefinitely.

 

11.      Expenses of the Financing .

 

(a)          The Company shall pay the Placement Agent the Expense Allowance or the accountable expense reimbursement described in Section 2 above, whichever is applicable.

 

(b)          The Company shall pay all of its expenses incident to the performance of its obligations under this Agreement including but not limited to its legal and accounting fees and shall be responsible for payment of all federal, state “blue sky” and other filings pertaining to the Financing.

 

(c)          Section 9 of this Agreement contains certain registration rights provided to the Purchasers and the Placement Agent. The Company shall also be responsible for all costs pertaining to the filing of the Form S-1 Registration Statement to register the resale of the Registrable Securities, including the shares underlying the Placement Agent Warrants in accordance with the terms set forth in Section 9 herein. In this respect, the Company shall also be responsible to pay FINRA the filing fees that are required in connection with the Placement Agent providing the Registration Statement and amendments thereto to FINRA. It is agreed that the Company shall not request acceleration of effectiveness of the S-1 Registration Statement without the Placement Agent first receiving said “no objection” letter, if such a letter is required by FINRA under the circumstances of the filing.

 

12.      Independent Contractor . The Placement Agent will perform its services hereunder as an independent contractor, and nothing in this Agreement will in any way be construed to constitute the Placement Agent the agent, employee or representative of the Company. Neither the Placement Agent nor any agent acting on behalf of the Placement Agent will enter into any agreement or incur any obligations on the Company’s behalf or commit the Company in any manner or make any representations, warranties or promises on the Company’s behalf or hold itself (or allow itself to be held) as having any authority whatsoever to bind the Company without the Company’s prior written consent, or attempt to do any of the foregoing.

 

13.      Subsequent Offerings . The Company agrees that in the event that it plans to engage a placement agent in connection with a financing transaction involving the offer and sale of its equity or debt securities within 12 months of consummation of the Financing and if the Company raises at least $3,000,000 in the Financing from investors first introduced to it by the Placement Agent (a “ Subsequent Offering ”), the Placement Agent will have a right of first refusal to be the exclusive Placement Agent or managing underwriter for such offering. In such case, the Company shall offer in writing to the Placement Agent the opportunity to act as exclusive Placement Agent or managing underwriter for the Subsequent Offering, and such offer will remain open for 15 calendar days, at which time it will have been deemed to have been rejected by the Placement Agent if not accepted in writing prior to the expiration of such period.

 

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14.      Participation of the Placement Agent in the Financing . The Placement Agent, its affiliates and/or its employees may purchase Units in the Financing, provided , that in no event may the Placement Agent, its affiliates or its employees subscribe to purchase Units until the minimum offering (as set forth in the Memorandum) has been subscribed and accepted by the Company. In the event of any such purchase, the Placement Agent shall be entitled to the compensation it would otherwise receive if such purchase had been made by any other investor.

 

15.      General .

 

(a)           Reimbursement . If any future financial dispute, discrepancy or controversy arises between or among the Company, its stockholders and/or the Placement Agent and results in the Placement Agent causing an audit or accounting of the Company’s books and records, the Company shall reimburse the Placement Agent for the reasonable and documented expenses relating to such audit or accounting.

 

(b)           Arbitration . The parties hereto agree that any dispute or controversy arising out of, relating to or concerning any interpretation, construction, performance or breach of this Agreement, shall be subject to the laws of the State of Oregon without giving effect to its conflicts of laws provisions. Any disputes will be settled in binding arbitration in Portland, Oregon under the auspices of FINRA dispute resolution. The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator will be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction. The Company and the Placement Agent shall each pay one-half of the costs and expenses of such arbitration, and each shall separately pay its counsel fees and expenses.

 

(c)           Covenant against Assignment . This Agreement is personal to the parties hereto, and accordingly, except for the right to enforce the obligations under Sections 6 and 7 hereunder (which right shall inure to the benefit of the successors and assigns of the aggrieved party), neither this Agreement nor any right hereunder or interest herein may be assigned or transferred or charged by either party without the express written consent of the other. The foregoing notwithstanding, the parties hereto expect that QPagos will merge into a newly-created private U.S. corporation prior to the closing of the Financing, and it is the intention of the parties hereto that this Agreement shall be assigned to such newly-created entity and its terms and conditions shall be binding upon and enforceable against such newly-created entity.

 

(d)           Entire Agreement; Amendment . This Agreement and the attached exhibits constitute the entire contract between the parties with respect to the subject matter hereof and supersede any prior agreements between the parties. This Agreement may not be amended, nor may any obligation hereunder be waived, except by an agreement in writing executed by, in the case of an amendment, each of the parties hereto, and, in the case of a waiver, by the party waiving performance.

 

(e)           No Waiver . The failure or delay by a party to enforce any provision of this Agreement will not in any way be construed as a waiver of any such provision or prevent that party from thereafter enforcing any other provision of this Agreement. The rights granted the parties hereunder are cumulative and will not constitute a waiver of either party’s right to assert any other legal remedy available to it.

 

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(f)           Severability . Should any provision of this Agreement be found to be illegal or unenforceable, the other provisions will nevertheless remain effective and will remain enforceable to the greatest extent permitted by law.

 

(g)           Notices . Any notice, demand, offer, request or other communication required or permitted to be given by either the Company or the Placement Agent pursuant to the terms of this Agreement must be in writing and will be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one business day after being delivered by facsimile (with receipt of appropriate confirmation) to the number provided to the other party or such other number as a party may request by notifying the other in writing, (iv) one business day after being deposited with an overnight courier service or (v) four days after being deposited in the U.S. mail, First Class with postage prepaid, and addressed to the party at the address previously provided to the other party or such other address as a party may request by notifying the other in writing.

 

(h)           Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same agreement. Facsimile copies of signed signature pages will be deemed binding originals.

 

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The parties have executed this Placement Agent Agreement as of the date first written above.

 

  QPAGOS, S.A.P.I. DE C.V.
   
  By: /s/ Gaston Pereira 
    Gaston Pereira
    Chief Executive Officer
   
  PAULSON INVESTMENT COMPANY, LLC
   
  By: /s/ Lorraine Maxfield 
    Lorraine Maxfield, CFA
    Senior Vice President, Corporate Finance

 

Signature Page to Placement Agent Agreement

 

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Exhibit 10.7

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “ Agreement ”) is made and entered into as of May , 2015 between QPAGOS Corporation, a Delaware corporation (the “ Company ”) and each of the several Investors signatory hereto (each such Investor, an “ Investor ” and, collectively, the “ Investors ”).

 

This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof, between the Company and each Investor (the “ Purchase Agreement ”).

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each of the Holders agree as follows:

 

1.            Definitions . Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

 

415 Cutback Shares ” has the meaning set forth in Section 2(a).

 

Advice ” has the meaning set forth in Section 6(c).

 

Affiliate ” means, with respect to any person, any other person which directly or indirectly controls, is controlled by, or is under common control with, such person.

 

Agreement ” has the meaning set forth in the Preamble.

 

Closing ” has the meaning set forth in the Purchase Agreement.

 

Closing Date ” has the meaning set forth in the Purchase Agreement.

 

Commission ” means the Securities and Exchange Commission.

 

Common Stock ” means the common stock of the Company, par value $0.001 per share, and any securities into which such common stock may hereinafter be reclassified.

 

Company ” has the meaning set forth in the Preamble.

 

Effective Date ” means each date that the Registration Statement filed pursuant to Section 2(a) and any post-effective amendment thereto is declared effective by the Commission.

 

Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

Filing Deadline ” means, with respect to the Initial Registration Statement required to be filed pursuant to Section 2(a), the (i) 90 th calendar day following the date the Common Stock begins trading on an exchange or in the over-the-counter market in the United States or (ii) if the Company’s fiscal year end falls within such 90-day period, the 30th calendar day following the date on which the Company would be required to file its Annual Report on Form 10-K, whichever deadline is applicable; provided , however , that if the Filing Deadline falls on a Saturday, Sunday or other day that the Commission is closed for business, the Filing Deadline shall be extended to the next business day on which the Commission is open for business.

 

 

 

  

Holder ” or “ Holders ” means the holder or holders, as the case may be, from time to time of Registrable Securities.

 

Indemnified Party ” has the meaning set forth in Section 5(c).

 

Indemnifying Party ” has the meaning set forth in Section 5(c).

 

Initial Registration Statement ” means the initial Registration Statement filed pursuant to this Agreement.

 

Losses ” has the meaning set forth in Section 5(a).

 

 “ Prospectus ” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

 

Registrable Securities ” means (i) all shares of Common Stock issued to the Holder and all other purchasers of Units pursuant to the terms of the Purchase Agreement; (ii) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; and (iii) the shares of Common Stock underlying the Warrants issued to the Holder and all other purchasers pursuant to the terms of the Securities Purchase Agreement, provided , that the Holder has completed and delivered to the Company a Selling Shareholder Questionnaire. Notwithstanding the foregoing, the Securities will cease to be Registrable Securities of a particular Holder upon the earliest of (v) when they have been effectively registered under the Securities Act and disposed of in accordance with a Registration Statement covering them, (w) when they have been sold to the public pursuant to Rule 144 (or by similar provision under the Securities Act) (in which case, only such securities sold by the Holder shall cease to be a Registrable Security), or (x) when they are otherwise transferred and such securities may be resold without subsequent registration under the Securities Act. “Registrable Securities” shall also mean the shares of Common Stock issuable upon exercise of the Placement Agent Warrants (as defined in the Placement Agent Agreement between the Company and Paulson Investment Company, LLC, the placement agent of the offering) and the shares of Common Stock issuable upon exercise of the warrants underlying the units issuable upon exercise of the Placement Agent Warrants.

 

Registration Statement ” means any one or more registration statements of the Company filed under the Securities Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement (including, without limitation, the Initial Registration Statement, the New Registration Statement and any Remainder Registration Statements), including (in each case) the amendments and supplements to such Registration Statements, including pre- and post-effective amendments thereto, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such Registration Statements.

 

Remainder Registration Statement ” has the meaning set forth in Section 2(a).

 

Rule 144 ” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

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Rule 415 ” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

Rule 424 ” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

Selling Shareholder Questionnaire ” has the meaning set forth in Section 2(c).

 

SEC Guidance ” means (i) any publicly-available written or oral guidance, comments, requirements or requests of the Staff and (ii) the Securities Act.

 

Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

Staff ” means the staff of the Commission.

 

Trading Day ” means (i) a day on which the Common Stock is listed or quoted and traded on its Principal Market (other than the NYSE MKT), or (ii) if the Common Stock is not listed on a Trading Market), a day on which the Common Stock is traded in the over-the-counter market, or (iii) if the Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported in the “pink sheets” by Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided , that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

 

Trading Market ” means whichever of the NYSE, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

 

2.             Required Registration

 

(a)      On or prior to the Filing Deadline, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all of the Registrable Securities not already covered by an existing and effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 or, if Rule 415 is not available for offers and sales of the Registrable Securities, by such other means of distribution of Registrable Securities as the Holders may reasonably specify (the “ Initial Registration Statement ”). The Initial Registration Statement shall be on Form S-1 (or such other form available to register for resale the Registrable Securities as a secondary offering). Notwithstanding the registration obligations set forth in this Section 2 , in the event the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly (i) inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the Initial Registration Statement as required by the Commission and/or (ii) withdraw the Initial Registration Statement and file a new registration statement (a “ New Registration Statement ”), in either case covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-1 or such other form available to register for resale the Registrable Securities as a secondary offering. Notwithstanding any other provision of this Agreement, if any SEC Guidance sets forth a limitation of the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used commercially reasonable efforts to advocate with the Commission for the registration of all or a greater number of Registrable Securities), or in the event the Staff seeks to characterize any offering pursuant to a Registration Statement filed pursuant to this Agreement as constituting an offering of securities by or on behalf of the Company such that Rule 415 is not available to the Company to register the resale of such Registrable Securities and as a result the Staff or the SEC does not permit such Registration Statement to become effective and used for resales in a manner that permits the continuous resale at the market by the Holders participating therein (or as otherwise may be acceptable to each Holder) without being named therein as an “underwriter,” unless otherwise directed in writing by a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced on a pro rata basis based on the total number of unregistered Registrable Securities held by such Holders (such reduced Registrable Securities, the “415 Cutback Shares”). In the event the Company amends the Initial Registration Statement or files a New Registration Statement, as the case may be, under clauses (i) or (ii) above, the Company will use its commercially reasonable efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-1 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement, as amended, or the New Registration Statement, including the 415 Cutback Shares (the “ Remainder Registration Statements ”). No Holder shall be named as an “underwriter” in any Registration Statement without such Holder’s prior written consent.

 

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(b)      The Company shall use its commercially reasonable efforts to cause each Registration Statement or any post-effective amendment thereto to be declared effective by the Commission as soon as practicable (including, with respect to the Initial Registration Statement or the New Registration Statement, as applicable, filing with the Commission a request for acceleration of effectiveness in accordance with Rule 461 promulgated under the Securities Act within five Business Days after the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed,” or not be subject to further review and the effectiveness of such Registration Statement may be accelerated), shall use its commercially reasonable efforts to keep each Registration Statement continuously effective under the Securities Act until the earlier of (i) such time as all of the Registrable Securities covered by such Registration Statement have been publicly sold by the Holders or (ii) the date that is one year following the Closing Date (the “ Effectiveness Period ”). The Company shall promptly notify the Holders via facsimile or electronic mail of the effectiveness of a Registration Statement or any post-effective amendment thereto on or before the first Trading Day after the date that the Company telephonically confirms effectiveness with the Commission.

 

(c)    Each Holder agrees to furnish to the Company a completed Selling Shareholder Questionnaire in the form attached to this Agreement as Annex A or in a form mutually agreeable between the Parties. At least five Trading Days prior to the first anticipated filing date of a Registration Statement for any registration under this Agreement, the Company will notify each Holder of the information the Company requires from that Holder other than the information contained in the Selling Shareholder Questionnaire, if any, which shall be completed and delivered to the Company promptly upon request and, in any event, within three Trading Days prior to the applicable anticipated filing date.  Each Holder further agrees that it shall not be entitled to be named as a Selling Shareholder in the Registration Statement or use the Prospectus for offers and resales of Registrable Securities at any time, unless such Holder has returned to the Company a completed and signed Selling Shareholder Questionnaire and a response to any requests for further information as described in the previous sentence. If a Holder of Registrable Securities returns a Selling Shareholder Questionnaire or a request for further information, in either case, after its respective deadline, the Company shall use its commercially reasonable efforts at the expense of the Holder who failed to return the Selling Shareholder Questionnaire or to respond for further information to take such actions as are required to name such Holder as a selling security holder in the Registration Statement or any pre-effective or post-effective amendment thereto and to include (to the extent not theretofore included) in the Registration Statement the Registrable Securities identified in such late Selling Shareholder Questionnaire or request for further information. Each Holder acknowledges and agrees that the information in the Selling Shareholder Questionnaire or request for further information as described in this Section 2(c) will be used by the Company in the preparation of the Registration Statement and hereby consents to the inclusion of such information in the Registration Statement.

 

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(d)     Notwithstanding anything to the contrary herein, at any time after any Registration Statement has been declared effective by the Commission, the Company may delay the disclosure of material non-public information concerning the Company if the disclosure of such information at the time is not, in the good faith judgment of the Company, in the best interests of the Company (a “ Grace Period ”); provided , however , the Company shall promptly (i) notify the Holders in writing (including via facsimile or other electronic transmission) of the existence of material non-public information giving rise to a Grace Period (provided that the Company shall not disclose the content of such material non-public information to the Holders) or the need to file a supplement or post-effective amendment, as applicable, and the date on which such Grace Period will begin, and (ii) notify the Holders in writing (including via facsimile or other electronic transmission) of the date on which the Grace Period ends; provided , further , that no single Grace Period shall exceed 30 consecutive days, and during any 365 day period, the aggregate of all Grace Periods shall not exceed an aggregate of 60 days (each Grace Period complying with this provision being an “ Allowable Grace Period ”). For purposes of determining the length of a Grace Period, the Grace Period shall be deemed to begin on and include the date the Holders receive the notice referred to in clause (i) above and shall end on and include the later of the date the Holders receive the notice referred to in clause (ii) above and the date referred to in such notice; provided , however , that no Grace Period shall be longer than an Allowable Grace Period.

 

3.             R egistration Procedures . In connection with the Company’s registration obligations hereunder, the Company shall:

 

(a)         (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities (except during an Allowable Grace Period); (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424 (except during an Allowable Grace Period); (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to the Holders true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that the Company may excise any information contained therein which would constitute material non-public information concerning the Company); and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented; provided , however , that each Investor shall be responsible for the delivery of the Prospectus to the Persons to whom such Investor sells any of the Shares (including in accordance with Rule 172 under the Securities Act), and each Investor agrees to dispose of Registrable Securities in compliance with the plan of distribution described in the Registration Statement and otherwise in compliance with applicable federal and state securities laws.

 

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(b)          Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (i) through (iii) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than one Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing (including via facsimile or other electronic transmission) no later than one Trading Day following the day (i) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (ii) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and (iii) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus, provided that any and all of such information shall be kept confidential by each Holder until such information otherwise becomes public, unless disclosure by a Holder is required by law; provided , further , that notwithstanding each Holder’s agreement to keep such information confidential, each such Holder makes no acknowledgement that any such information is material, non-public information.

 

(c)           Use its commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

 

(d)        The Company may require each selling Holder to furnish to the Company a certified statement as to (i) the number of shares of Common Stock beneficially owned by such Holder and any Affiliate thereof, (ii) any Financial Industry Regulatory Authority, Inc. (“FINRA”) affiliations, (iii) any natural persons who have the power to vote or dispose of the common stock and (iv) any other information as may be requested by the Commission, FINRA or any state securities commission.

 

(e)         Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(b).

 

(f)        Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, would subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

 

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(h)       If requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement and applicable state and Federal laws, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request.

 

(i)          If the Company notifies the Holders to suspend the use of any Prospectus until a requisite changes to such Prospectus has been made, then the Holders shall suspend use of such Prospectus. The Company will use its commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company shall be entitled to exercise its right under this Section 3(i) to suspend the availability of a Registration Statement and Prospectus, for a period not to exceed 60 calendar days (which need not be consecutive days) in any 12-month period.

 

(j)            Comply in all material respects with all applicable rules and regulations of the Commission.

  

4.            Registration Expenses . All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation: (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and auditors) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities) and (D) if not previously paid by the Company in connection with an Issuer filing, with respect to any filing that may be required to be made by any broker through which a Holder intends to make sales of Registrable Securities with the FINRA pursuant to FINRA Rule 5110, so long as the broker is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any underwriting, broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

 

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5.             Indemnification .

 

(a)            Indemnification by the Company . The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, shareholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “ Losses ”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are in reliance upon, and in conformity with, information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(d)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(c). The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware.

 

(b)             Indemnification by Holders . Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with the prospectus delivery requirements of the Securities Act or (y) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in such Registration Statement or such Prospectus or (ii) to the extent that such information relates to such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or in any amendment or supplement thereto or (iii) in the case of an occurrence of an event of the type specified in Section 3(b)(i)-(iii), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(c). In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

 

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(c)             Conduct of Indemnification Proceedings . If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “ Indemnified Party ”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “ Indemnifying Party ”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have prejudiced the Indemnifying Party.

 

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless:  (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding affected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

 

Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within 20 Trading Days of written notice thereof to the Indemnifying Party; provided, that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses previously disbursed and that are applicable to such actions for which such Indemnified Party is judicially determined to be not entitled to indemnification hereunder.

 

(d)              Contribution . If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.

 

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The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

 

The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

 

6.             Miscellaneous .

 

(a)            Remedies . Subject to the limitations set forth in this Agreement, in the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.

 

(b)            Compliance . Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to a Registration Statement.

 

(c)             Discontinued Disposition . By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(d)(ii), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “ Advice ”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company will use its commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.

 

(d)           Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of a majority of the then outstanding Registrable Securities. If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of some Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of all of the Registrable Securities to which such waiver or consent relates; provided , however , that in the event the Company shall deliver written notice to a Holder with respect to a requested waiver or amendment, such Holder shall be deemed to have consented and agreed to such amendment or waiver if such Holder does not provide written notice to the Company indicating such Holder’s non-consent within ten calendar days of delivery by the Company of such written notice; provided , further , that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first  sentence of this Section 6(d).

 

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(e)              Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.

 

(f)            Successors and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. The Company may not assign its rights (except by merger or in connection with another entity acquiring all or substantially all of the Company’s assets) or obligations hereunder without the prior written consent of all the Holders of the then outstanding Registrable Securities. Each Holder may assign its respective rights with respect to any or all of its Shares, hereunder in the manner and to the Persons as permitted under the Purchase Agreement; provided in each case that (i) the Holder agrees in writing with the transferee or assignee to assign such rights and related obligations under this Agreement, and for the transferee or assignee to assume such obligations, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being transferred or assigned, (iii) at or before the time the Company received the written notice contemplated by clause (ii) of this sentence, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein and (iv) the transferee is an “accredited investor,” as that term is defined in Rule 501 of Regulation D and completes any required documentation requested by the Company to confirm the foregoing.

 

(g)            No Inconsistent Agreements . Except as set forth in the Purchase Agreement, neither the Company nor any of its subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full.

 

(h)            Execution and Counterparts . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or other electronic transmission of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

(i)               Governing Law . All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Securities Purchase Agreement.

 

(j)            Cumulative Remedies . The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.

 

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(k)             Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

(l)            Headings . The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

(m)           Independent Nature of Holders’ Obligations and Rights . The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Investor acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no Investor will be acting as agent of such Investor in connection with monitoring its investment in the Shares or enforcing its rights under the Purchase Agreement or any other agreement entered into in connection with the Purchase Agreement. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose.

 

********************

 

[ Signature pages follow ]

 

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

 

  QPAGOS CORPORATION
   
  By:     
    Name:
    Title:

 

[SIGNATURE PAGE OF INVESTORS FOLLOWS]

 

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INVESTOR SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT

 

Name of Investor:  

 

Signature of Authorized Signatory of Investor  

 

Name of Authorized Signatory:   

 

Title of Authorized Signatory:   

 

Address for Notice of Investor:

 

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ANNEX A

 

QPAGOS CORPORATION

 

Purchaser Information Request

 

The undersigned beneficial owner of common stock (the “ Registrable Securities ”) of QPAGOS Corporation, a Delaware corporation (the “ Company ”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “ Commission ”) a registration statement (the “ Registration Statement ”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “ Securities Act ”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “ Registration Rights Agreement ”) to which this document is annexed. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

 

Certain legal consequences arise from being named as a selling Shareholder in the Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling Shareholder in the Registration Statement and the related prospectus.

 

The undersigned beneficial owner (the “ Selling Shareholder ”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration Statement.

 

The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:

 

1. Name.

 

  (a) Full Legal Name of Selling Shareholder
     

 

  (b) Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities are held:
     

 

  (c) Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by the questionnaire):
     

 

 

 

 

2. Broker-Dealer Status:

 

  (a) Are you a broker-dealer?

 

Yes ¨             No ¨

 

  (b) If “yes” to Section 3(a), did you receive your Registrable Securities as compensation for investment banking services to the Company?

 

Yes ¨             No ¨

 

Note:    If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

  (c) Are you an affiliate of a broker-dealer?

 

Yes ¨             No ¨

 

  (d) If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?

 

Yes ¨             No ¨

 

Note:    If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

3. Beneficial Ownership of Securities of the Company Owned by the Selling Shareholder.

 

Except as set forth below in this Item 4, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable pursuant to the Purchase Agreement.

 

  (a) Type and Amount of other securities beneficially owned by the Selling Shareholder:
     
     
     

 

4. Relationships with the Company:

 

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.

 

State any exceptions here:

 

 
 

 

The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Registration Statement remains effective.

 

 

 

  

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 5 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus.

 

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

 

Dated:     Beneficial Owner:  

 

    By:  
      Name:
      Title:

 

 

Exhibit 10.8

 

CONSULTING AGREEMENT

 

This Consulting Agreement (the “ Agreement ”), effective as of this 11 th day of February, 2016 (the “ Effective Date ”) is entered into by and between QPAGOS Corporation (herein referred to as the “ Consultant ”) and Yogipay Corporation (herein referred to as the “ Company ”).

 

RECITALS

 

WHEREAS , Company desires to engage the services of Consultant to consult, assist with and advise the Company on certain strategic and tactical financial matters;

 

NOW THEREFORE , in consideration of the promises and the mutual covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows:

 

1. Term . Company hereby agrees to retain the Consultant to act in a consulting capacity to the Company, and the Consultant hereby agrees to provide services to the Company commencing on the Effective Date and terminating 180 days thereafter unless terminated pursuant to Section 8 of this Agreement.

 

2. Services. During the term of this Agreement, Consultant’s services shall include, but will not necessarily be limited to, providing the following services on behalf of and for the benefit of the Company:

 

2.1 Corporate Planning

 

a. Develop an in-depth familiarization with the Company’s business objectives, proposed clinical trials and product development activities and bring to its attention potential or actual opportunities which meet the Company’s business objectives or logical extensions thereof.

 

b. Alert the Corporation to new or emerging high potential forms of production and distribution which could either be acquired or developed internally.

 

c. Comment on the Corporation’s corporate development including such factors as position in competitive environment, financial performances vs. competition, strategies, operational viability, etc.

 

d. Identify prospective suitable acquisition partners for the Corporation, perform appropriate diligence investigations with respect thereto, advise the Corporation with respect to the desirability of pursuing such prospects, and assist the Corporation in any negotiations which may ensue therefrom.

 

2.2 Business Strategies

 

a. Evaluate business strategies, assist the Company in its operational and product development activities and recommend changes where appropriate.

 

 

 

 

b. Critically evaluate the Corporation’s performance in view of its corporate planning and business objectives.

 

3. Allocation of Time and Energies . Consultant hereby promises to perform and discharge faithfully the responsibilities which may be assigned to the Consultant from time to time by the officers and duly authorized representatives of the Company under this Agreement. Consultant shall diligently and thoroughly provide the consulting services required hereunder. Although no specific hours-per-day requirement will be required, Consultant and the Company agree that Consultant will perform the duties set forth herein above in a diligent and professional manner.

 

4. Remuneration . As full and complete compensation for services described in this Agreement, the Company shall compensate Consultant as follows:

 

4.1 For undertaking this engagement and for other good and valuable consideration, the Company agrees to cause to be delivered to the Consultant, as a single one-time payment, Three Million (3,000,000) shares of the Company’s restricted common stock. Consultant acknowledges that the shares issued to it involve a high degree of risk and further acknowledges that it and each of its equity owners, is an accredited investor (as defined under Rule 501 of the Securities Act of 1933, as amended) and can bear the economic risk of receiving the shares, which may include the total loss of, and each of its equity owners, is an accredited investor (as defined under Rule 501 of the Securities Act of 1933, as amended) and compensation. Consultant is not an underwriter of, or dealer in, the common stock of the Company, nor is Consultant participating, pursuant to a contractual agreement or otherwise, in the distribution of the Company’s common shares.

 

4.2 The Company shall be responsible for, and shall bear, all expenses directly and necessarily incurred in connection with Consultant’s delivery of Services described in Paragraph 2. All expenses shall be pre-approved in writing by the Company.  

 

5. Secrets . The Consultant agrees that any trade secrets or any other like information of value relating to the business of the Company or any of its affiliates, or of any corporation or other legal entity in which the Company or any of its affiliates has an ownership interest of more than twenty-five percent (25%), including but not limited to, information relating to inventions, disclosures, processes, systems, methods, formulae, patents, patent applications, machinery, materials, research activities and plans, costs of production, contract forms, prices volume of sales, promotional methods, list of names or classes of customers, which it has heretofore acquired during its engagement by the Company or any of its affiliates or which it may hereafter acquire while delivering Services hereunder as the result of any disclosures to it or any of its representatives or agents, or in any other way, shall be regarded as held by the Consultant in a fiduciary capacity solely for the benefit of the Company, its successors or assigns, and shall not at any time, either during the term of this Agreement or thereafter, be disclosed, divulged, furnished, or made accessible by the Consultant to anyone, or be otherwise used by it or its representatives or agents except in the regular course of business of the Company or its affiliates. This covenant shall survive the termination of this Agreement.

 

6. Assignment . This Agreement may be assigned by the Company as part of the sale of substantially all of its business, provided, however, that the purchaser shall expressly assume all obligations of the Company under this Agreement. Further, this Agreement may be assigned by the Company to an affiliate, provided that any such affiliate shall expressly assume all obligations of the Company under this Agreement, and provided further that the Company shall then fully guarantee the performance of the Agreement by such affiliate. Consultant agrees that if this Agreement is so assigned, all the terms and conditions of this Agreement shall be between assignee and himself with the same force and effect as if said Agreement had been made with such assignee in the first instance. This Agreement shall not be assigned by the Consultant without the express written consent of the Company.

 

 

 

 

7. Notices .

 

7.1 Any notices or other communications under this Agreement shall be in writing and shall be deemed to have been given: when delivered personally against receipt therefore; one day after being sent by Federal Express or similar overnight delivery; or three day after being mailed by registered or certified mail, postage prepaid, to a party hereto at the address set forth below, or to such other address as such party shall give by notice hereunder to the other party to this Agreement.

 

7.2 Any notice to the Company or to any assignee of the Company shall be addressed as follows:

 

Yogipay Corporation

9855 Warren H. Abernathy Highway

Spartanburg, South Carolina 29301

Attention: Sarmad Harake

 

7.3 Any notice to Consultant shall be addressed as follows:

 

QPAGOS Corporation

1900 Glades Road, Suite 265

Boca Raton, FL 33431

Attention: Gaston Pereira

 

7.4 Either party may change the address to which notice to it is to be addressed, by notice as provided herein.

 

8. Applicable Law . This Agreement shall be interpreted and enforced in accordance with the laws of Delaware.

 

 

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

 

YOGIPAY CORPORATION

 

By:    /s/ Robert F. Skaff           

Name: Robert F. Skaff

Title: Chief Executive Officer

 

QPAGOS CORPORATION

 

 

By:      /s/ Gaston Pereira             

Name: Gaston Pereira

Title: Chief Executive Officer

 

 

Exhibit 10.9  

 

CONSULTING AGREEMENT

 

This Consulting Agreement (the “ Agreement ”), effective as of this 11th day of February, 2016 (the “ Effective Date ”) is entered into by and between Eurosa Inc. (herein referred to as the “ Consultant ”) and QPAGOS Corporation (herein referred to as the “ Company ”).

 

RECITALS

 

WHEREAS , Company desires to engage the services of Consultant to consult, assist with and advise the Company on certain strategic and tactical financial matters;

 

NOW THEREFORE , in consideration of the promises and the mutual covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows:

 

1. Term . Company hereby agrees to retain the Consultant to act in a consulting capacity to the Company, and the Consultant hereby agrees to provide services to the Company commencing on the Effective Date and terminating 180 days thereafter unless terminated pursuant to Section 8 of this Agreement.

 

2. Services. During the term of this Agreement, Consultant’s services shall include, but will not necessarily be limited to, providing the following services on behalf of and for the benefit of the Company:

 

2.1. Analyze Company’s corporate awareness needs;

 

2.2 Consult, assist and advise the Company on financial strategy and corporate awareness;

 

2.3 Consult and assist the Company in developing and implementing appropriate plans and material for

presenting the Company, its business plan, strategy, and personnel to the financial community;

 

2.5 Otherwise perform as the Company’s consultant in development of corporate awareness, financial

strategy and implementation; and

 

2.6 Assist with and advise the Company on relations with analysts and other investment professionals.

 

3. Allocation of Time and Energies . Consultant hereby promises to perform and discharge faithfully the responsibilities which may be assigned to the Consultant from time to time by the officers and duly authorized representatives of the Company under this Agreement. Consultant shall diligently and thoroughly provide the consulting services required hereunder. Although no specific hours-per-day requirement will be required, Consultant and the Company agree that Consultant will perform the duties set forth herein above in a diligent and professional manner.

 

4. Remuneration . As full and complete compensation for services described in this Agreement, the Company shall compensate Consultant as follows:

 

4.1 For undertaking this engagement and for other good and valuable consideration, the Company agrees to cause to be delivered to Consultant, as a single one-time payment, Nine Hundred Sixty Thousand (960,000) shares of the Company’s restricted common stock. Consultant acknowledges that the shares issued to it involve a high degree of risk and further acknowledges that it and each of its equity owners, is an accredited investor (as defined under Rule 501 of the Securities Act of 1933, as amended) and can bear the economic risk of receiving the shares, which may include the total loss thereof, and each of its equity owners, is an accredited investor (as defined under Rule 501 of the Securities Act of 1933, as amended). Consultant is not acquiring the shares with a view toward distribution and is not an underwriter of, or dealer in, the common stock of the Company, nor is Consultant participating, pursuant to a contractual agreement or otherwise, in the distribution of the Company’s common shares. The Consultant is not and has not been subject to a “Bad Actor” Disqualification” under Section 506 of the Securities Act of 1933, as amended.

 

 

 

 

4.2 The Company shall be responsible for, and shall bear, all expenses directly and necessarily incurred in connection with Consultant’s delivery of Services described in Paragraph 2. All expenses shall be pre-approved in writing by the Company.  

 

5. Secrets . The Consultant agrees that any trade secrets or any other like information of value relating to the business of the Company or any of its affiliates, or of any corporation or other legal entity in which the Company or any of its affiliates has an ownership interest of more than twenty-five percent (25%), including but not limited to, information relating to inventions, disclosures, processes, systems, methods, formulae, patents, patent applications, machinery, materials, research activities and plans, costs of production, contract forms, prices volume of sales, promotional methods, list of names or classes of customers, which it has heretofore acquired during its engagement by the Company or any of its affiliates or which it may hereafter acquire while delivering Services hereunder as the result of any disclosures to it or any of its representatives or agents, or in any other way, shall be regarded as held by the Consultant in a fiduciary capacity solely for the benefit of the Company, its successors or assigns, and shall not at any time, either during the term of this Agreement or thereafter, be disclosed, divulged, furnished, or made accessible by the Consultant to anyone, or be otherwise used by it or its representatives or agents except in the regular course of business of the Company or its affiliates. Notwithstanding the foregoing, this covenant shall not be applicable to information that: (i) is or becomes part of the public domain without breach of this Agreement; (ii) was known to Consultant on a non-confidential basis prior to disclosure hereunder as evidenced by written documentation; (iii) is independently developed by the Consultant. This covenant shall survive the termination of this Agreement.

 

6. Assignment . This Agreement shall not be assigned by either party without the express written consent of the other party.

 

7. Notices .

 

7.1 Any notices or other communications under this Agreement shall be in writing and shall be deemed to have been given: when delivered personally against receipt therefore; one day after being sent by Federal Express or similar overnight delivery; or three day after being mailed by registered or certified mail, postage prepaid, to a party hereto at the address set forth below, or to such other address as such party shall give by notice hereunder to the other party to this Agreement.

 

7.2 Any notice to the Company or to any assignee of the Company shall be addressed as follows:

 

7.3 Any notice to Consultant shall be addressed as follows:

 

QPAGOS Corporation

1900 Glades Road, Suite 265

Boca Raton, FL 33431

Attention: Gaston Pereira

 

 

 

 

Any notice to Consultant shall be addressed as follows:

 

Eurosa Inc.

193 Walton Road, Suite 5

Seabrook, NH 03874

Attention: Sarmad Harake

7.4 Either party may change the address to which notice to it is to be addressed, by notice as provided herein.

 

 

8. Applicable Law . This Agreement shall be interpreted and enforced in accordance with the laws of Delaware.

 

 

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

 

QPAGOS CORPORATION

 

 

By:    /s/ Gaston Pereira            

Name: Gaston Pereira

Title: Chief Executive Officer

 

EUROSA INC.

 

By:    /s/ Sarmad Harake           

Name: Sarmad Harake

Title: President

 

 

Exhibit 14.1

 

 

QPAGOS Corporation

 

Code of Conduct and Ethics

 

The Board of Directors of QPAGOS Corporation, a Delaware corporation (the “Company”) has adopted this Code of Conduct and Ethics (this “Code”) to:

 

1. Promote honest and ethical conduct, including fair dealing and the ethical handling of conflicts of interest;

 

2. Promote full, fair, accurate, timely and understandable disclosure;

 

3. Promote compliance with applicable laws and governmental rules and regulations;

 

4. Ensure the protection of the Company’s legitimate business interests, including corporate opportunities, assets and confidential information; and

 

5. Deter wrong doing.

 

All directors, officers and employees of the Company are expected to be familiar with this Code and to adhere to those principles and procedures set forth in this Code that apply to them. The policies and procedures set forth in the Company’s Code of Ethics for Financial Management and the Company’s Employee Manual are separate requirements and are not part of this Code. For purposes of this Code, the Code of Ethics and Conduct Contact Person is the Chairperson of the Board of Directors.

 

From time to time, the Company may waive some provisions of this Code. Any waiver for executive officers or directors of the Company, however, may be made only by the Board of Directors.

 

I. Honest and Candid Conduct

 

Each director, officer and employee owes a duty to the Company to act with integrity. Integrity requires, among other things, being honest and candid. Deceit and subordination of principle are inconsistent with integrity.

 

Each director, officer and employee must:

 

· Act with integrity, including being honest and candid while still maintaining the confidentiality of information where required or consistent with the Company’s policies;

 

· Observe both the form and spirit of laws and governmental rules and regulations, accounting standards and Company policies; and

 

· Adhere to a high standard of business ethics.

 

  1  

 

 

II. Conflicts of Interest

 

A conflict of interest occurs when an individual’s private interest interferes or appears to interfere with the interests of the Company. A conflict of interest can arise when a director, officer or employee takes actions or has interests that may make it difficult to perform his or her Company work objectively and effectively. For example, a conflict of interest would arise if a director, officer or employee, or a member of his or her family, receives improper personal benefits as a result of his or her position in the Company. Any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest should be discussed with the director of human resources.

 

In particular, clear conflict of interest situations involving directors, executive officers and other employees who occupy supervisory positions or who have discretionary authority in dealing with third parties may include the following:

 

1. Any significant ownership interest in any supplier or customer;

 

2. Any consulting or employment relationship with any supplier, customer or competitor;

 

3. Any outside business activity that detracts from an individual’s ability to devote appropriate time and attention to his or her responsibilities with the Company;

 

4. The receipt of non-nominal gifts or excessive entertainment from any company with which the Company has current or prospective business dealings;

 

5. Being in the position of supervising, reviewing or having any influence on the job evaluation, pay or benefit of any immediate family member; and

 

6. Selling anything to the Company or buying anything from the Company, except on the same terms and conditions as unrelated third parties are permitted to so purchase or sell.

 

Such situations, if material, should always be discussed with the Secretary of the Company. Service to the Company should never be subordinated to personal gain and advantage. Conflicts of interest should, whenever possible, be avoided. Anything that would present a conflict for a director, officer or employee would likely also present a conflict if it is related to a member of his or her family.

 

III. Disclosure

 

Each director, officer or employee involved in the Company’s disclosure process is required to be familiar with and comply with the Company’s disclosure controls and procedures and internal control over financial reporting, to the extent relevant to his or her area of responsibility, so that the Company’s public reports and documents filed with the Securities and Exchange Commission (“SEC”) comply in all material respects with the applicable federal securities laws and SEC rules.

 

  2  

 

 

In addition, each such person having direct or supervisory authority regarding these SEC filings or the Company’s other public communications concerning its general business, results, financial condition and prospects should, to the extent appropriate within his or her area of responsibility, consult with other Company officers and employees and take other appropriate steps regarding these disclosures with the goal of making full, fair, accurate, timely and understandable disclosure.

 

Each director, officer or employee who is involved in the Company’s disclosure process must:

 

1. Familiarize himself or herself with the disclosure requirements applicable to the Company as well as the business and financial operations of the Company;

 

2. Not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company’s independent auditors, governmental regulators and self-regulatory organizations; and

 

3. Properly review and critically analyze proposed disclosure for accuracy and completeness (or, where appropriate, delegate this task to others).

 

IV. Compliance

 

It is the Company’s policy to comply with all applicable laws, rules and regulations. It is the personal responsibility of each employee, officer and director to adhere to the standards and restrictions imposed by those laws, rules and regulations.

 

It is against Company policy and in many circumstances illegal for a director, officer or employee to profit from undisclosed information relating to the Company or any other company. Any director, officer or employee may not purchase or sell any of the Company’s securities while in possession of material nonpublic information relating to the Company. Also, any director, officer or employee may not purchase or sell securities of any other company while in possession of any material nonpublic information relating to that company.

 

Any director, officer or employee who is uncertain about the legal rules involving a purchase or sale of any Company securities or any securities in companies that he or she is familiar with by virtue of his or her work for the Company, should consult with the Company’s Chief Financial Officer.

 

In addition, the Company and its employees in all countries must comply with the U.S. Foreign Corrupt Practices Act (the “FCPA”).  In general, the FCPA prohibits improper payments to government officials for the purpose of obtaining or keeping business or improperly influencing government action.  The anti-bribery prohibition applies to corrupt payments made directly or indirectly, through a third party.  In addition to the FCPA, the Company and its employees are required to comply with anti-bribery laws in other parts of the world, such as the UK Bribery Act, which have international jurisdiction and prohibit the giving of bribes to any government official as well as private entities and individuals. 

 

  3  

 

 

V. Reporting and Accountability

 

The Board of Directors is responsible for applying this Code to specific situations in which questions are presented to it and has the authority to interpret this Code in any particular situation. Any director, officer or employee who becomes aware of any existing or potential violation of this Code is required to notify the Code of Ethics and Conduct Contact Person promptly. Failure to do so itself is a violation of this Code.

 

Any questions relating to how this Code should be interpreted or applied should be addressed to the Code of Ethics and Conduct Contact Person. A director, officer or employee who is unsure of whether a situation violates this Code should discuss the situation with the Code of Ethics and Conduct Contact Person to prevent possible misunderstandings and embarrassment at a later date.

 

Each director, officer or employee must:

 

1. Notify the Code of Ethics and Conduct Contact Person promptly of any existing or potential violation of this Code; and

 

2. Not retaliate against any other director, officer or employee for reports of potential violations that are made in good faith.

 

The Board of Directors shall take all action they consider appropriate to investigate any violations reported to them. If a violation has occurred, the Company will take such disciplinary or preventive action as it deems appropriate.

 

VI. Corporate Opportunities

 

Directors, officers and employees owe a duty to the Company to advance the Company’s business interests when the opportunity to do so arises. Directors, officers, and employees are prohibited from taking (or directing to a third party) a business opportunity that is discovered through the use of corporate property, information or position, unless the Company has already been offered the opportunity and turned it down. More generally, directors, officers and employees are prohibited from using corporate property, information or position for personal gain and from competing with the Company.

 

Sometimes the line between personal and Company benefits is difficult to draw, and sometimes there are both personal and Company benefits in certain activities. Directors, officers and employees who intend to make use of Company property or services in a manner not solely for the benefit of the Company should consult beforehand with the Code of Ethics and Conduct Contact Person.

 

  4  

 

  

VII. Confidentiality

 

In carrying out the Company’s business, directors, officers and employees often learn confidential or proprietary information about the Company, its customers, and suppliers. Directors, officers and employees must maintain the confidentiality of all information so entrusted to them, except when disclosure is authorized or legally mandated. Confidential or proprietary information of the Company, and of other companies, includes any non-public information that would be harmful to the relevant company or useful or helpful to competitors if disclosed.

 

VIII. Fair Dealing

 

We have a history of succeeding through honest business competition. We do not seek competitive advantages through illegal or unethical business practices. Each director, officer and employee should endeavor to deal fairly with the Company’s customers, service providers, suppliers, competitors and employees. No director, officer or employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair dealing practice.

 

IX. Protection and Proper Use of Company Assets

 

All directors, officers and employees should protect the Company’s assets and ensure their efficient use. All Company assets should be used only for legitimate business purposes.

 

  5  

 

 

 

 

May 12, 2016

 

Securities and Exchange Commission

Washington, D.C. 20549

 

 

Ladies and Gentlemen:

 

Asiya Pearls, Inc. (the “Company”) provided to us a copy of the Company’s response to Item 4.01 of Form 8-K, dated May 12, 2016. We have read the Company’s statements included under Item 4.01 of its Form 8-K and we agree with such statements insofar as they relate to our firm.

 

Very truly yours,

 

/s/ LBB & Associates Ltd., LLP

 

LBB & Associates Ltd., LLP

 

 

Exhibit 99.1

 

QPAGOS CORPORATION

 

TABLE OF CONTENTS

 

Report of the Independent, Registered Public Accounting Firm   F-1
     
Consolidated Balance Sheets as of December 31, 2015 and December 31, 2014   F-2
     
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2015 and December 31, 2014   F-3
     
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2015 and December 31, 2014   F-4
     
Consolidated Statements of Cash Flows for the years ended December 31, 2015 and December 31, 2014   F-5
     
Notes to the Consolidated Financial Statements   F-6 to F-25

 

 

 

 

805 Third Avenue

New York, NY 10022

212.838.5100

212.838.2676/ Fax

www.rbsmllp.com

 

Report of the Independent Registered Public Accounting Firm

 

To the Board of Directors and shareholders

Qpagos Corporation

 

We have audited the accompanying consolidated balance sheets of Qpagos Corporation (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive loss, stockholders’ equity and cash flows for the years ended December 31, 2015 and 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, an audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

  

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years ended December 31, 2015 and 2014, in conformity with generally accepted accounting principles in the United States.

 

The accompanying consolidated financial statements have been prepared assuming that Qpagos Corporation will continue as a going concern.  As more fully described in Note 3 to the consolidated financial statements, the Company has incurred recurring operating losses and may have to obtain additional capital to sustain operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in regards to these matters are also described in Note 3.  The consolidated financial statements do not include any adjustments to reflect the possible effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. 

   

/s/RBSM LLP

 

New York, NY

May 13, 2016

 

F- 1  

 

 

QPAGOS CORPORATION

CONSOLIDATED BALANCE SHEETS

 

    December 31,     December 31,  
    2015     2014  
Assets                
                 
Current Assets                
Cash   $ 832,159     $ 173,828  
Accounts receivable     242,075       15,914  
Inventory     668,567       646,986  
Recoverable IVA taxes and credits     412,143       171,200  
Other current assets     20,509       50,000  
Total Current Assets     2,175,453       1,057,928  
                 
Non-Current Assets                
Plant and equipment, net     70,537       99,985  
Intangibles, net     211,417       -  
Other assets     11,712       6,192  
Total Non-Current Assets     293,666       106,177  
Total Assets   $ 2,469,119     $ 1,164,105  
                 
Liabilities and Stockholders' Equity (Deficit)                
                 
Current Liabilities                
Accounts payable   $ 38,372     $ 102,501  
Notes payable     103,320       2,324,422  
IVA and other taxes payable     181,946       8,625  
Advances from customers     1,986       3,092  
Total Current Liabilities     325,624       2,438,640  
                 
Total Liabilities     325,624       2,438,640  
                 
Stockholders' Equity (Deficit)                
Common stock, $0.001 par value; 50,000,000 shares authorized, 22,392,000 and 4,619,314 shares issued and outstanding as of December 31, 2015 and 2014, respectively.     22,392       4,619  
Additional paid-in-capital     5,717,947       58,282  
Accumulated deficit     (4,019,428 )     (1,490,185 )
Accumulated other comprehensive income     422,584       152,749  
Total stockholder's equity (deficit) - controlling interest     2,143,495       (1,274,535 )
Non-controlling interest     -       -  
Total Stockholders' Equity (Deficit)     2,143,495       (1,274,535 )
Total Liabilities and Stockholders' Equity (Deficit)   $ 2,469,119     $ 1,164,105  

 

See notes to consolidated financial statements

 

F- 2  

 

 

QPAGOS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

    Year Ended     Year Ended  
    December 31,     December 31,  
    2015     2014  
             
Net Revenue   $ 1,510,369     $ 137,250  
                 
Cost of Goods Sold     1,521,128       132,988  
                 
Gross (Loss) Profit     (10,759 )     4,262  
                 
General and administrative     2,000,714       1,264,535  
Depreciation and amortization     37,810       30,600  
Total Expense     2,038,524       1,295,135  
Loss from Operations     (2,049,283 )     (1,290,873 )
                 
Other (expense) income     (9,991 )     2,419  
Interest expense, net     (3,319 )     11  
Foreign currency loss     (466,920 )     (200,875 )
Loss before Provision for Income Taxes     (2,529,513 )     (1,489,318 )
                 
Provision for Income Taxes     -       -  
                 
Net Loss     (2,529,513 )     (1,489,318 )
                 
Net loss attributable to non-controlling interest     -       -  
                 
Net Loss Attributable to Controlling Interest   $ (2,529,513 )   $ (1,489,318 )
                 
Net Loss Per Share -  Basic and Diluted   $ (0.20 )   $ (0.61 )
                 
Weighted Average Number of Shares Outstanding -  Basic and Diluted     12,849,373       2,459,314  
                 
Other Comprehensive Loss                
Foreign currency translation adjustment     269,835       147,167  
                 
Total Comprehensive loss     (2,259,678 )     (1,342,151 )
                 
Comprehensive loss attributable to non-controlling interest     -       -  
                 
Comprehensive Loss Attributable to Controlling Interest   $ (2,259,678 )   $ (1,342,151 )

 

See notes to consolidated financial statements

 

F- 3  

 

 

QPAGOS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE PERIOD JANUARY 1, 2014 TO DECEMBER 31, 2015

 

                                  Total              
                                  Stockholders'              
                            Accumulated     Equity           Total  
                Additional           Other     (Deficit)     Non-     Stockholders'  
    Common Stock     Paid-in     Accumulated     Comprehensive     Controlling     Controlling     Equity  
    Shares     Amount     Capital     Deficit     Income     Interest     Interest     (Deficit)  
Balance as of January 1, 2014     4,619,314     $ 4,619     $ 58,282     $ (867 )   $ 5,582     $ 67,616     $ -     $ 67,616  
                                                                 
Translation adjustment     -       -       -       -       147,167       147,167       -       147,167  
                                                                 
Net loss     -       -       -       (1,489,318 )     -       (1,489,318 )     -       (1,489,318 )
Balance as of December 31, 2014     4,619,314       4,619       58,282       (1,490,185 )     152,749       (1,274,535 )     -       (1,274,535 )
                                                                 
Withholding tax adjustment at foreign subsidiary     -       -       -       270               270       -       270  
                                                                 
Shares issued for services     833,575       834       165,881       -               166,715       -       166,715  
                                                                 
Issuance of shares of common stock     2,392,000       2,392       2,987,608       -               2,990,000       -       2,990,000  
                                                                 
Share issuance expense     -       -       (388,700 )                     (388,700 )     -       (388,700 )
                                                                 
Conversion of debt to equity     14,547,111       14,547       2,894,876       -               2,909,423       -       2,909,423  
                                                                 
Translation adjustment     -       -       -       -       269,835       269,835       -       269,835  
                                                                 
Net loss     -       -       -       (2,529,513 )             (2,529,513 )     -       (2,529,513 )
                                                                 
Balance as of December 31, 2015     22,392,000     $ 22,392     $ 5,717,947     $ (4,019,428 )   $ 422,584     $ 2,143,495     $ -     $ 2,143,495  

 

See notes to consolidated financial statements

 

F- 4  

 

 

QPAGOS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    Year Ended     Year Ended  
    December 31,     December 31,  
    2015     2014  
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss attributable to the company   $ (2,529,513 )   $ (1,489,318 )
Less: loss attributable to non-controlling interest     -       -  
Net loss     (2,529,513 )     (1,489,318 )
Adjustment to reconcile net loss to net cash used in operating activities:                
Depreciation expense     34,227       31,668  
Amortization expense     3,583       518  
Equity based compensation charge     166,715       -  
Changes in Assets and Liabilities                
Accounts receivable     (226,161 )     (13,301 )
Inventory     (21,581 )     (646,986 )
Recoverable IVA taxes and credits     (240,943 )     (161,984 )
Other current assets     29,491       (50,000 )
Other assets     (5,520 )     762  
Accounts payable and accrued expenses     (64,129 )     50,082  
IVA and other taxes payable     173,591       4,609  
Advances from customers     (1,106 )     3,092  
Interest accruals     3,320       -  
CASH USED IN OPERATING ACTIVITIES     (2,678,026 )     (2,270,858 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchase of property and equipment     (4,779 )     (132,171 )
Intangible assets     (215,000 )     -  
NET CASH USED IN INVESTING ACTIVITIES     (219,779 )     (132,171 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds on common stock issued, net of expenses     2,601,300       -  
Capital contribution     -       53,203  
Proceeds from loans payable     685,001       2,324,422  
NET CASH PROVIDED BY FINANCING ACTIVITIES     3,286,301       2,377,625  
                 
Effect of exchange rate changes on cash and cash equivalents     269,835       147,167  
                 
NET INCREASE IN CASH     658,332       121,763  
CASH AT BEGINNING OF YEAR     173,828       52,065  
CASH AT END OF YEAR   $ 832,159     $ 173,828  
                 
CASH PAID FOR INTEREST AND TAXES:                
Cash paid for income taxes   $ -     $ -  
Cash paid for interest   $ -     $ -  
                 
NON-CASH INVESTING AND FINANCING ACTIVITIES                
Conversion of debt to equity   $ 2,909,423     $ -  

 

See notes to consolidated financial statements

 

F- 5  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1 ORGANIZATION AND DESCRIPTION OF BUSINESS

 

a) Organization

 

QPAGOS Corporation (“the Company”) was incorporated on May 1, 2015 under the laws of the state of Delaware to effectuate a reverse merger transaction with Qpagos, S.A.P.I. de C.V. (Qpagos) and Redpag Electrónicos S.A.P.I. de C.V. (Redpag). Each of the entities were incorporated in November 2013 in Mexico. Qpagos was formed to process payment transactions for service providers it contracts with, and Redpag was formed to deploy and operate kiosks as an agent of Qpagos.

 

On August 31, 2015, QPAGOS Corporation entered into various agreements with the shareholders of Qpagos and Redpag to effect a reverse merger transaction (the "Reverse Merger''). Pursuant to the Reverse Merger, the majority of the shareholders of Qpagos and Redpag, agreed to exchange 99.996% and 99.990% of the outstanding shares, respectively, and QPAGOS Corporation agreed to acquire aforementioned shares of Qpagos and Redpag. The Reverse Merger closed on August 31, 2015. Upon the close of the Reverse Merger, QPAGOS Corporation became the parent of Qpagos and Redpag and assumed the operations of these two companies as its sole business. The transactions contemplated by the Reverse Merger were intended to be a "tax-free" transaction pursuant to the Internal Revenue Code.

 

For financial accounting purposes, the Reverse Merger was treated as a reverse acquisition by Qpagos and Redpag, and resulted in a recapitalization with Qpagos and Redpag being the accounting acquirer. Accordingly, the Company's historical financial statements have been prepared to give retroactive effect to the reverse acquisition completed on August 31, 2015, and represent the operations of Qpagos and Redpag from January 1, 2014 and for QPAGOS Corporation, from the period September 1, 2015 to December 31, 2015.

 

QPAGOS Corporation and its subsidiaries Qpagos and Redpag will be referred to hereafter as “the Company”.

 

b) Description of the business

 

QPAGOS Corporation, through its subsidiaries Qpagos and Redpag, provide physical and virtual payment services to the Mexican market. The Company provides an integrated network of kiosks, terminals and payment channels that enable consumers in Mexico to deposit cash, convert it into a digital form and remit the funds to any merchant in our network quickly and securely. The Company helps consumers and merchants connect more efficiently in markets and consumer segments, such as Mexico, that are largely cash-based and lack convenient alternatives for consumers to pay for goods and services in physical, online and mobile environments. For example, our licensed technology can be used to pay bills, add minutes to mobile phones, purchase transportation and tickets, shop online or at a retail store, buy digital services or send money to a friend or relative.

 

2 ACCOUNTING POLICIES AND ESTIMATES

 

a) Basis of Presentation

The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

 

On August 31, 2015, the QPAGOS Corporation completed the Reverse Merger with Qpagos and Redpag. The results of operations for Qpagos and Redpag have been combined from January 1, 2014 to December 31, 2014 in these consolidated financial statements.

 

All amounts referred to in the notes to the financial statements are in United States Dollars ($) unless stated otherwise.

 

F- 6  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

2 ACCOUNTING POLICIES AND ESTIMATES (continued)

 

b) Principles of Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiary in which it has a majority voting interest. All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements. The entities included in these consolidated financial statements are as follows:

 

Qpagos Corporation – Parent Company

Qpagos, S.A. P.I de C.V., a Mexican entity (99.996% owned)

Redpag Electrónicos, S.A. P.I. de C.V., a Mexican entity (99.990% owned)

 

c) Mexican Operations

The financial statements of the Company’s Mexican operations are measured using local currencies as their functional currencies.

 

The Company translates the assets and liabilities of its Mexican subsidiaries at the exchange rates in effect at year end and the results of operations at the average rate throughout the year. The translation adjustments are recorded directly as a separate component of stockholders’ equity, while transaction gains (losses) are included in net income (loss). All sales to customers are in Mexico.

 

d) Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, which are evaluated on an ongoing basis, that affect the amounts reported in the consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and judgments. In particular, significant estimates and judgments include those related to: the estimated useful lives for plant and equipment, the fair value of warrants and stock options granted for services or compensation, estimates of the probability and potential magnitude of contingent liabilities, derivative liabilities, the valuation allowance for deferred tax assets due to continuing operating losses, those related to revenue recognition and the allowance for doubtful accounts.

 

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.

 

e) Contingencies

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.

 

F- 7  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

2 ACCOUNTING POLICIES AND ESTIMATES (continued)

 

f) Fair Value of Financial Instruments

The Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

The carrying amounts reported in the balance sheets for cash, accounts receivable, other current assets, other assets, accounts payable, accrued liabilities, and notes payable, approximate fair value due to the relatively short period to maturity for these instruments. The Company did not identify any other assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with the accounting guidance.

 

ASC 825-10 “ Financial Instruments ” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.

 

g) Risks and Uncertainties

 

The Company's operations will be subject to significant risk and uncertainties including financial, operational, regulatory and other risks associated, including the potential risk of business failure. The recent global economic crisis has caused a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, and extreme volatility in credit, equity and fixed income markets. These conditions not only limit the Company’s access to capital, but also make it difficult for its customers, vendors and the Company to accurately forecast and plan future business activities.

 

The Company’s operations are carried out in Mexico. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in Mexico and by the general state of those economy. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.

 

h) Recent Accounting Pronouncements

 

In April 2015, FASB issued Accounting Standards Update (“ASU”) No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs , to simplify presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The ASU does not affect the recognition and measurement guidance for debt issuance costs. For public companies, the ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition.

 

F- 8  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

2 ACCOUNTING POLICIES AND ESTIMATES (continued)

 

h) Recent Accounting Pronouncements (continued)

 

In August 2015, FASB issued Accounting Standards Update (“ASU”) No.2015-14, “ Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” defers the effective date ASU No. 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU No. 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in Update 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in ASU No. 2014-09. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

In January 2016 , the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) No. 2016 – 01 “Recognition and Measurement of Financial Assets and Financial Liabilities “ intended to improve the recognition and measurement of financial instruments. The ASU affects public and private companies, not-for-profit organizations, and employee benefit plans that hold financial assets or owe financial liabilities. The new guidance makes targeted improvements to existing GAAP by: Requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; Eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities; Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, and; Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The ASU on recognition and measurement will take effect for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For private companies, not-for-profit organizations, and employee benefit plans, the standard becomes effective for fiscal years beginning after December 15, 2018, and for interim periods within fiscal years beginning after December 15, 2019. The ASU permits early adoption of the own credit provision (referenced above). Additionally, it permits early adoption of the provision that exempts private companies and not-for-profit organizations from having to disclose fair value information about financial instruments measured at amortized cost.

 

F- 9  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

2 ACCOUNTING POLICIES AND ESTIMATES (continued)

 

h) Recent Accounting Pronouncements (continued)

 

In February 2016 , the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) No. 2016 – 02, “Leases” intended to improve financial reporting about leasing transactions. The ASU affects all companies and other organizations that lease assets such as real estate, office equipment and manufacturing equipment. The ASU will require organizations that lease assets—referred to as “lessees”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current Generally Accepted Accounting Principles (GAAP), the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP—which requires only capital leases to be recognized on the balance sheet—the new ASU will require both types of leases to be recognized on the balance sheet. The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The accounting by organizations that own the assets leased by the lessee—also known as lessor accounting—will remain largely unchanged from current GAAP. However, the ASU contains some targeted improvements that are intended to align, where necessary, lessor accounting with the lessee accounting model and with the updated revenue recognition guidance issued in 2014. The ASU on leases will take effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other organizations, the ASU on leases will take effect for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020.

 

In March 2016 , the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) No. 2016 – 09 “Improvements to Employee Share-Based Payment Accounting” which is intended to improve the accounting for employee share-based payments. The ASU affects all organizations that issue share-based payment awards to their employees. The ASU, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, simplifies several aspects of the accounting for share-based payment award transactions, including; the income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. The ASU simplifies two areas specific to private companies, with regards to the expected term and intrinsic value measurements. The ASU simplifies the following areas to private and public companies; (a) tax benefits and tax deficiencies with regards to the differences between book and tax deductions, (b) changes in the excess tax benefits classification in the statement of cash flows, (c) make an entity wide accounting policy election for accrual of vested awards verses individual awards, (d) changes in the amount qualifying as an equity award classification subject to statutory tax withholdings, (e) clarification in the classification of shares withheld for statutory tax withholdings on the statement of cash flows. For public companies, the amendments in this ASU are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For private companies, the amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any organization in any interim or annual period.

 

In April 2016 , the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) No. 2016 – 10 “Revenue from Contract with Customers (Topic 606): identifying Performance Obligations and Licensing “ . The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Topic 606 includes implementation guidance on (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended render more detailed implementation guidance with the expectation to reduce the degree of judgement necessary to comply with Topic 606. The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by Update 2014-09). Accounting Standards Update 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year.

 

Any new accounting standards, not disclosed above, that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

 

F- 10  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

2 ACCOUNTING POLICIES AND ESTIMATES (continued)

 

i) Reporting by Segment

No segmental information is required as the Company currently only has one segment of business, providing physical and virtual payment services in the Mexican Market.

 

j) Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. At December 31, 2015 and December 31, 2014, respectively, the Company had no cash equivalents.

 

The Company minimizes credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution in the United States. The balance at times may exceed federally insured limits. At December 31, 2015, the Company had cash balances in the United States, which exceeded the federally insured limits by $531,238. At December 31, 2014, the balance did not exceed the federally insured limit.

 

k) Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are reported at realizable value, net of allowances for doubtful accounts, which is estimated and recorded in the period the related revenue is recorded. The Company has a standardized approach to estimate and review the collectability of its receivables based on a number of factors, including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral part of the estimation process related to allowances for doubtful accounts. In addition, the Company regularly assesses the state of its billing operations in order to identify issues, which may impact the collectability of these receivables or reserve estimates. Revisions to the allowance for doubtful accounts estimates are recorded as an adjustment to bad debt expense. Receivables deemed uncollectible are charged against the allowance for doubtful accounts at the time such receivables are written-off. Recoveries of receivables previously written-off are recorded as credits to the allowance for doubtful accounts. There were no recoveries during the period ended December 31, 2015 and 2014.

 

l) Inventory

The Company primarily values inventories at the lower of cost or market applied on a first-in, first-out basis. The Company identifies and writes down its excess and obsolete inventories to net realizable value based on usage forecasts, order volume and inventory aging. With the development of new products, the Company also rationalizes its product offerings and will write-down discontinued product to the lower of cost or net realizable value.

 

m) Plant and Equipment

Plant and equipment is stated at cost, less accumulated depreciation. Plant and equipment with costs greater than $1,000 are capitalized and depreciated. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of the assets are as follows:

 

Description   Estimated Useful Life
Computer equipment   3 years
Leasehold improvements   Lesser of estimated useful life or life of lease
Office equipment   10 years

 

The cost of repairs and maintenance is expensed as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition.

 

F- 11  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

2 ACCOUNTING POLICIES AND ESTIMATES (continued)

 

n) Intangibles

All of our intangible assets are subject to amortization. We evaluate the recoverability of intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired. Where intangibles are deemed to be impaired we recognize an impairment loss measured as the difference between the estimated fair value of the intangible and its book value.

 

i) License Agreements

License agreements acquired by the Company are reported at acquisition value less accumulated amortization and impairments.

 

ii) Amortization

Amortization is reported in the income statement on a straight-line basis over the estimated useful life of the intangible assets, unless the useful life is indefinite. Amortizable intangible assets are amortized from the date that they are available for use. The estimated useful life of the license agreement is five years which is the expected period for which we expect to derive a benefit from the underlying license agreements.

 

o) Long-Term  Assets

Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

 

p) Revenue Recognition

The Company’s revenue recognition policy is consistent with the requirements of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 605, Revenue Recognition (ASC 605). In general, the Company records revenue when it is realized, or realizable and earned. The Company considers revenue to be realized, or realizable and earned when, persuasive evidence of an arrangement exists, the products or services have been approved by the customer after delivery and/or installation acceptance or performance of services; the sales price is fixed or determinable within the contract; and collectability is reasonably assured.

 

q) Share-Based Payment Arrangements

Generally, all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based payments is recorded in operating expenses in the consolidated statement of operations.

 

r) Income Taxes

The Company’s primary operations are based in Mexico and currently enacted tax laws in Mexico are used in the calculation of income taxes, the holding company is based in the US and currently enacted US tax laws are used in the calculation of income taxes.

 

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A full valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of December 31, 2015 and 2014, there have been no interest or penalties incurred on income taxes.

 

F- 12  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

2 ACCOUNTING POLICIES AND ESTIMATES (continued)

 

s) Net Loss per Share

Basic net loss per share is computed on the basis of the weighted average number of common shares outstanding during the period.

 

Diluted net loss per share is computed on the basis of the weighted average number of common shares and common share equivalents outstanding. Dilutive securities having an anti-dilutive effect on diluted net loss per share are excluded from the calculation (See Note 12, below).

 

Dilution is computed by applying the treasury stock method for options and warrants. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common shares at the average market price during the period.

 

Dilution is computed by applying the if-converted method for convertible preferred shares. Under this method, convertible preferred stock is assumed to be converted at the beginning of the period (or at the time of issuance, if later), and preferred dividends (if any) will be added back to determine income applicable to common stock. The shares issuable upon conversion will be added to weighted average number of common shares outstanding. Conversion will be assumed only if it reduces earnings per share (or increases loss per share).

 

Any common shares issued as a result of the issue of stock options and warrants would come from newly issued common shares from our remaining authorized shares.

 

t) Comprehensive income

Comprehensive income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. For the Company, comprehensive income for the periods presented includes translation adjustment and net loss.

 

3 GOING CONCERN

 

These financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred a loss since inception resulting in an accumulated deficit of $4,019,428 as of December 31, 2015 and has not generated sufficient revenue to cover its operating expenditure, raising substantial doubt about the Company's ability to continue as a going concern. In addition to operational expenses, as the Company executes its business plan, additional capital resources will be required. The Company will need to raise capital in the near term in order to continue operating and executing its business plan. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company’s plan is to expand its market penetration by deploying more kiosks through various channels, thereby increasing revenues, in addition, the Company intends to raise additional equity or loan funds to meet its short term working capital needs. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

4 ACQUISITION

 

On August 27, 2015, the Company entered into a series of agreements which completed the Reverse Merger with Qpagos and Redpag. As part of the merger, 1,500 Series A shares and 1,548,480 Series B shares outstanding of Qpagos and 1,500 Series A Shares and 2,238,245 Series B shares of Redpag was acquired by QPAGOS. The original shareholders of Qpagos and Redpag were effectively issued 4,619,314 common shares of QPAGOS resulting in control of QPAGOS, effectuating the reverse merger transaction.

 

The acquisition of Qpagos and Redpag by QPAGOS Corporation has been accounted for as a reverse acquisition for financial accounting purposes. The Reverse Merger is deemed a capital transaction and the net assets of Qpagos and Redpag (the accounting acquirers) are carried forward to QPAGOS Corporation (the legal acquirer) at their carrying value before the combination. The acquisition process utilizes the capital structure of QPAGOS Corporation and the assets and liabilities of Qpagos and Redpag are recorded at historical cost. The financials statements of Qpagos, Redpag and QPAGOS Corporation are being combined for the period from January 1, 2014 through December 31, 2015. In these financial statements, Qpagos and Redpag are the operating entities for financial reporting purposes and the financial statements for all periods presented represent the combined financial position and results of operations of Qpagos and Redpag. The equity of Qpagos and Redpag is the historical equity of QPAGOS Corporation, presented retroactively to reflect the number of shares issued in the transaction.

 

F- 13  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

5 INVENTORY

 

Inventory consisted of the following as of December 31, 2015 and December 31, 2014:

 

 

    December 31, 2015     December 31, 2014  
             
Kiosks and spare parts in transit   $ -     $ 405,568  
Kiosks     668,567       106,047  
Spare parts     -       135,371  
    $ 668,567     $ 646,985  

 

6 PLANT AND EQUIPMENT

 

Plant and Equipment consisted of the following as of December 31, 2015 and December 31, 2014:

 

    December 31, 2015     December 31, 2014  
             
Computer equipment   $ 107,929     $ 105,509  
Office equipment     14,712       14,712  
Leasehold improvement     12,375       10,364  
Total cost     135,017       130,585  
Less: accumulated depreciation and amortization     (64,479 )     (30,600 )
Property and equipment, net   $ 70,537     $ 99,985  

 

Depreciation and amortization expense totaled $37,810 and $30,600 for the years ended December 31, 2015 and 2014, respectively.

 

7 INTANGIBLES

 

License

 

Localization and implementation of the different software and technology modules is supported through a Localization Agreement. Under this agreement, at a cost of $215,000, the Licensor allocated engineering and programming resources to the Company. The cost is being amortized over years 5 years.

 

On May 1, 2015, the Company entered into a ten-year license with the Licensor for the non-exclusive right to license technology to provide payment services. Subsequently, on November 1, 2015, the Company and the Licensor concluded an Additional amendment to the License Agreement by which the Licensor agreed to the exclusivity to the Mexican market subject to the payment of $20,000 per year payable in quarterly installments, the first two such installments payable December 1, 2015. The agreement may be terminated early by the Licensor if the Company fails to comply with its terms and conditions

 

F- 14  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

7 INTANGIBLES (continued)

 

License (continued)

 

Our license with the Licensor is a license for the rights to use three software programs (the “Programs”): RG Switch Payment (designed to transfer payments to providers of services), RG Processing (designed processing and counting of payments) and RG Kiosk (designed for performance of payments through payment collection equipment functioning in the self-service kiosks) to be used in Mexico.

 

Under this agreement the Licensor is obligated to provide the Company with rights to use software updates developed by the Licensor. The ten-year term commences on the date of full payment of the localization contract. The Licensor retains exclusive rights to any intellectual property, including any addition, alteration, program updating, derivative or composed creation, obtained in the process of usage of the programs. The payment for the rights granted under the license is a total of $1,000, payable in annual payments of $100 per year over ten years and is in addition to the payments that we make under the Localization Agreement. The agreement provides, among other things, that we will pay the fee, ensure confidentiality of commercial and technical information received when performing the agreement and inform the Licensor of any changes in its structure. The Licensor has a right to terminate the agreement if we breach the terms of the agreement or do not properly perform or if we do not cure any breach or nonperformance within 30 days of receipt of notice of termination. If the Licensor suffers any damages, they are entitled to request compensation from the Company. The rights to use the Programs terminate upon termination of the Agreement.

 

Intangibles consisted of the following as of December 31, 2015 and 2014, respectively:

 

    December 31,
2015
    December 31,
2014
 
             
Software license   $ 215,000     $ -  
                 
Total cost     215,000          
Less: accumulated amortization     (3,583 )     -  
Intangibles, net   $ 211,417     $    

 

Amortization expense was $3,583 and $0 for the year ended December 31, 2015 and 2014, respectively.

 

F- 15  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

8 NOTES PAYABLE

 

Notes payable consisted of the following as of December 31, 2015 and 2014, respectively:

 

Description   Interest
Rate
    Maturity   December 31,
2015
    December
31,
2014
 
                       
Panatrade Business Ltd     5%     February 3, 2019   $ -     $ 916,500  
                             

Huppay Global Corp

    5%     12 June 2019     -       596,543  
                             
Newvello Limited     5%     July 18, 2019     -       400,000  
                             
Satellite Development     11%     March 31, 2015     -       211,379  
                             
Clive Kabatznik     12%    

December 31, 2014,

extended by lender

    -       25,000  
                             
Strategic IR, Inc.     12%    

December 31, 2014,

Extended by lender

    -       75,000  
                             
Joseph W & Patricia G Family Trust     12%    

December 31, 2014,

extended by lender

    -       100,000  
                             
Alberto Pereira Bunster     12%    

June 30, 2015,

extended by lender

    -       -  
                             
Dimitri Kurganov     5%     April 1, 2016     -       -  
                             
Alex Pereira     12%     June 30, 2015     -       -  
                             
Delinvest Commercial Limited     5%     May 11, 2015     -       -  
                             
Evgeny Simonov     12%     February 3, 2019     -       -  
                             
Igor Moiseev     5%     July 18, 2019     -       -  
                             
Irina Galikhanova     5%     February 3, 2019     -       -  
                             
Olga Akhmetova     5%     February 3, 2019     -       -  
                             
YP Holdings LLC     12%     December 31, 2015     103,320       -  
                             
Total Short term notes payable                $ 103,320     $ 2,324,422  

 

No interest was accrued on any of the notes, which were all converted into equity at the principal amount of the note outstanding, except the note payable to YP Holdings LLC, which note accrued interest at 12% per annum and is included in the note payable balance.

 

F- 16  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

8 NOTES PAYABLE (continued)

 

Panatrade Business Ltd

 

On February 3, 2014, Qpagos entered into a $500,000 unsecured loan agreement, bearing interest at 5% per annum with Panatrade Business Limited (“Panatrade”), the agreement provided for the loan to be granted in several tranches. The loans advanced and any unpaid accrued interest thereon is due sixty (60) months after the first disbursement made by the lender. Interest is payable yearly starting from February 2015. $154,500 was advanced to Qpagos during the year ended December 31, 2014 and a further $35,021 was advanced during the year ended December 31, 2015.

 

On February 3, 2014, Redpag entered into a $1,500,000 unsecured loan agreement, bearing interest at 5% per annum with Panatrade Business Limited, the agreement provided for the loan to be granted in several tranches. The loans advanced and any accrued interest thereon is due sixty (60) months after the first disbursement made by the lender. Interest is to be paid yearly starting from February 2015. $762,000 was advanced to Redpag during the year ended December 31, 2014.

 

On August 31, 2015, in terms of various assignment agreements entered into, a loan of $116,258 was assigned from Satellite Development to Panatrade and Panatrade assigned a total of $876,945 to various other parties. The balance of $190,834 remaining after these assignments was converted, in terms of an exchange agreement entered into with the Company, into 954,168 common shares at an issue price of $0.20 per share.

 

Huppay Global Corp.

 

On June 12, 2014, Qpagos borrowed $199,130, $203,320 and $194,093 under three separate unsecured loan agreements, bearing interest at 5% per annum with Huppay Global Corp. Each loan agreement has the same terms and conditions. The loans advanced and any unpaid accrued interest thereon is due sixty (60) months after the first disbursement made by the lender. Interest is payable yearly starting from February 2015.

 

On August 31, 2015, the total balance outstanding of $596,543 was converted, in terms of an exchange agreement entered into with the Company, into 2,982,715 common shares at an issue price of $0.20 per share.

 

Newvello Limited

 

On July 18, 2014, Qpagos entered into a $400,000 unsecured loan agreement, bearing interest at 5% per annum with Newvello Limited. The loan advanced and any unpaid accrued interest is due sixty (60) months after the first disbursement made by the lender. Interest is payable yearly starting from February 2015.

 

On August 31, 2015, in terms of an assignment agreement entered into, $80,000 of the loan was assigned to an individual. The balance of $320,000 was converted in terms of an exchange agreement entered into with the Company, into 1,600,000 common shares at an issue price of $0.20 per share.

 

Satellite Development

 

On December 10, 2014, Qpagos entered into a $211,379 unsecured loan agreement, bearing interest at 5% per annum with Satellite development. The loan advanced and any unpaid accrued interest is due sixty (60) months after the first disbursement made by the lender. Interest is payable yearly starting from February 2015.

 

On August 31, 2015, in terms of various assignment agreements entered into, the total loan balance of $211,379 was assigned as follows to Panatrade in the amount of $116,258 and to Delinvest Commercial Limited, in the amount of $95,121.

 

F- 17  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

8 NOTES PAYABLE (continued)

 

Clive Kabatznik

 

On November 26, 2014, Qpagos entered into a $25,000 unsecured loan agreement, bearing interest at 12% per annum with Clive Kabatznik. The loan advanced and any unpaid accrued interest was due on December 31, 2014, subject to the lender having the right to extend the maturity date of the loan until payment is demanded or until such date as a private placement raising $1,000,000 in gross proceeds is consummated, in addition, the loan, or any portion thereof, may be converted into common stock of the Company at the lowest per share price at which the founders’ of the Company shall have converted any of their debt into common stock of the Company.

 

On August 31, 2015, the total balance outstanding of $25,000 was converted, in terms of an exchange agreement entered into with the Company, into 125,000 common shares at an issue price of $0.20 per share.

 

Strategic IR, Inc.

 

On November 26, 2014, Qpagos entered into a $75,000 unsecured loan agreement, bearing interest at 12% per annum with Strategic IR, Inc. The loan advanced and any unpaid accrued interest was due on December 31, 2014, subject to the lender having the right to extend the maturity date of the loan until payment is demanded or until such date as a private placement raising $1,000,000 in gross proceeds is consummated, in addition, the loan, or any portion thereof, may be converted into common stock of the Company at the lowest per share price at which the founders’ of the Company shall have converted any of their debt into common stock of the Company.

 

On August 31, 2015, in terms of an assignment agreement entered into, $50,000 of the Panatrade loan was assigned to Strategic IR. The total balance of the loan outstanding of $125,000 was converted in terms of an exchange agreement entered into with the Company, into 625,000 common shares at an issue price of $0.20 per share.

 

Joseph W & Patricia G Family Trust

 

On August 6, 2014 and November 26, 2014, Qpagos entered into two equal $50,000 unsecured loan agreements, bearing interest at 12% per annum with Joseph W & Patricia G Family trust. The loans advanced and any unpaid accrued interest was due on December 31, 2014, subject to the lender having the right to extend the maturity date of the loans until payment is demanded or until such date as a private placement raising $1,000,000 in gross proceeds is consummated, in addition, the loan, or any portion thereof, may be converted into common stock of the Company at the lowest per share price at which the founders’ of the Company shall have converted any of their debt into common stock of the Company.

 

On August 31, 2015, the total balance outstanding of $100,000 was converted, in terms of an exchange agreement entered into with the Company, into 500,000 common shares at an issue price of $0.20 per share.

 

Alberto Pereira Bunster

 

On April 10, 2015, Qpagos entered into a $75,000 unsecured loan agreement, bearing interest at 12% per annum with Alberto Pereira Bunster. The loan advanced and any unpaid accrued interest was due on June 30, 2015, subject to the lender having the right to extend the maturity date of the loan until payment is demanded or until such date as a private placement raising $1,000,000 in gross proceeds is consummated, in addition, the loan, or any portion thereof, may be converted into common stock of the Company at the lowest per share price at which the founders’ of the Company shall have converted any of their debt into common stock of the Company.

 

On August 31, 2015, the total balance outstanding of $75,000 was converted, in terms of an exchange agreement entered into with the Company, into 375,000 common shares at an issue price of $0.20 per share.

 

F- 18  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

8 NOTES PAYABLE (continued)

 

Dimitri Kurganov

 

On March 31, 2015, Qpagos entered into a $75,000 unsecured loan agreement, bearing interest at 5% per annum with Dimitri Kurganov. The loan advanced and any unpaid accrued interest was due on April 1, 2016, subject to the lender having the right to extend the maturity date of the loan until payment is demanded or until such date as a private placement raising $1,000,000 in gross proceeds is consummated, in addition, the loan, or any portion thereof, may be converted into common stock of the Company at the lowest per share price at which the founders’ of the Company shall have converted any of their debt into common stock of the Company.

 

On August 31, 2015, the total balance outstanding of $75,000 was converted, in terms of an exchange agreement entered into with the Company, into 375,000 common shares at an issue price of $0.20 per share.

 

Alex Pereira

 

On April 10, 2015, Qpagos entered into a $75,000 unsecured loan agreement, bearing interest at 12% per annum with Alex Pereira. The loan advanced and any unpaid accrued interest was due on June 30, 2015, subject to the lender having the right to extend the maturity date of the loan until payment is demanded or until such date as a private placement raising $1,000,000 in gross proceeds is consummated, in addition, the loan, or any portion thereof, may be converted into common stock of the Company at the lowest per share price at which the founders’ of the Company shall have converted any of their debt into common stock of the Company.

 

On August 31, 2015, the total balance outstanding of $75,000 was converted, in terms of an exchange agreement entered into with the Company, into 375,000 common shares at an issue price of $0.20 per share.

 

Delinvest Commercial Limited

 

On February 11, 2015, Qpagos entered into a $300,000 unsecured loan agreement, bearing interest at 5% per annum with Delinvest Commercial limited (“Delinvest”). The loan advanced and any unpaid accrued interest was due three months after the funds were advanced. Interest is payable yearly starting from February 2015. A further $24,980 was advanced to the Company under this loan agreement subsequent to February 11, 2015.

 

On August 31, 2015, in terms of various assignment agreements entered into, a loan of $95,121 was assigned from Satellite Development to Delinvest and Delinvest assigned a total of $162,000 to various other parties. The balance of $258,101 remaining after these assignments was converted, in terms of an exchange agreement entered into with the Company, into 1,290,504 common shares at an issue price of $0.20 per share.

 

Evgeny Simonov

 

On August 31, 2015, in terms of various assignment agreements entered into, a loan of $220,000 was assigned from Panatrade to Evgeny Simonov. The balance of $220,000 was converted, in terms of an exchange agreement entered into with the Company, into 1,100,000 common shares at an issue price of $0.20 per share.

 

Igor Moiseev

 

On August 31, 2015, in terms of various assignment agreements entered into, a loan of $80,000 was assigned from Newvello Limited to Igor Moiseev. The balance of $80,000 was converted, in terms of an exchange agreement entered into with the Company, into 400,000 common shares at an issue price of $0.20 per share.

 

F- 19  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

8 NOTES PAYABLE (continued)

 

Irina Galikhanova

 

On August 31, 2015, in terms of various assignment agreements entered into, a loan of $380,000 was assigned from Panatrade to Irina Galikhanova. The balance of $380,000 was converted, in terms of an exchange agreement entered into with the Company, into 1,900,000 common shares at an issue price of $0.20 per share.

 

Olga Akhmetova

 

On August 31, 2015, in terms of various assignment agreements entered into, a loan of $388,945 was assigned from Panatrade to Olga Akhmetova. The balance of $388,945 was converted, in terms of an exchange agreement entered into with the Company, into 1,944,724 common shares at an issue price of $0.20 per share.

 

YP Holdings LLC

 

On September 21, 2015, Qpagos borrowed $100,000 from YP Holdings LLC, pursuant to an unsecured loan agreement. The unpaid balance and any accrued interest is due on December 31, 2015 bears interest at a rate of 12%. The debt remains outstanding as of the date of this report. The Company is expected to settle this debt in 2016.

 

9 STOCKHOLDERS’ EQUITY

 

a. Common Stock

 

The Company has authorized 50,000,000 common shares with a par value of $0.001 each, and issued and has outstanding 22,392,000 shares of common stock as of December 31, 2015.

 

The following common shares were issued by the Company during the year ended December 31, 2015:

 

i. In terms of a private placement agreement entered into on May 18, 2015 between the Company and a placement agent (“the Placement Agent”), the Placement Agent agreed to assist the Company in raising financing. The financing is in the form of equity. The Placement Agent received a fee of 10% of the gross proceeds raised together with a 3% expense recovery fee. In addition, to this the Placement Agent was issued warrants equal to 15% of the total number of shares issued to the investors, on the same terms and conditions of those units issued to investors.

 

During the period June 2015 to December 2015, pursuant to the private placement agreement and individual Securities Purchase Agreements entered into, new, qualified investors, acquired 2,392,000 common units of the Company at a price of $1.25 per unit, each unit consisting of one share of Common Stock and a five year warrant exercisable for one share of common stock at an exercise price of $1.25 per share, for net proceeds of $2,601,300 after deducting placement agent fees and other share issue expenses of $388,700. The placement agent was also issued five year warrants to purchase 538,200 units to purchase shares of common stock at an exercise price of $1.25 per unit.

 

ii. an aggregate of 3,292,889 Common shares issued to consultants and advisors for services at an issue price of $0.20 per share, the market value of our common stock when the shares were issued.

 

iii. an aggregate of 14,547,111 Common shares issued to debt holders in a debt for equity swap at an issue price of $0.20 per share.

 

F- 20  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

9 STOCKHOLDERS’ EQUITY (continued)

 

a) Common Stock (continued)

 

iv. Restricted stock awards

 

(a) An aggregate of 1,440,000 shares of restricted common stock were issued to our Chief Executive Officer in terms of an employment agreement entered into with him. These shares are restricted and vest October 29, 2016. These restricted shares were valued at the closing price of the common stock on October 19, 2015.

 

(b) An aggregate of 720,000 shares of restricted common stock were issued to our Chief Operating Officer in terms of an employment agreement entered into with him. These shares are restricted and vest October 29, 2016. These restricted shares were valued at the closing price of the common stock on October 19, 2015.

 

The restricted stock granted and exercisable at December 31, 2015 is as follows:

 

      Restricted Stock Granted     Restricted Stock Vested  
Grant date Price     Number
Granted
    Weighted
Average
Fair Value per Share
    Number
Vested
    Weighted
Average
Fair Value per Share
 
$ 0.20       1,440,000     $ 0.20       -     $ -  
$ 0.20       720,000     $ 0.20       -     $ -  
          2,160,000     $ 0.20       -     $ -  

 

The Company has recorded an expense of $288,000 and $0 for the year ended December 31, 2015 and 2014, relating to the restricted stock awards. There will be no further expense, related to these restricted shares.

 

b) Preferred Stock

 

The Company has authorized 10,000,000 common shares with a par value of $0.001 each, no preferred stock is issued and outstanding as of December 31, 2015.

 

(c) Warrants

 

During the period June 2015 to December 2015, pursuant to the private placement agreement and individual Securities Purchase Agreements entered into, new, qualified investors, acquired 2,392,000 common units of the Company at a price of $1.25 per unit, each unit consisting of one share of Common Stock and a five year warrant exercisable for one share of common stock at an exercise price of $1.25 per share.

 

The placement agent was also issued, in terms of a placement agent agreement, five year warrants to purchase 358,800 units at $1.25 per unit, each consisting of one share of Common stock and a five year warrant exercisable for 358,800 shares of Common Stock at an exercise price of $1.25 per share.

 

F- 21  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

9 STOCKHOLDERS’ EQUITY (continued)

 

(c) Warrants (continued)

 

A summary of all of our warrant activity during the period January 1, 2014 to December 31, 2015 is as follows:

 

   

Shares Underlying

Warrants

    Exercise
price per
share
    Weighted
average
exercise
price
 
Outstanding January 1, 2014     -     $ -     $ -  
Granted     -       -       -  
Forfeited/Cancelled     -       -       -  
Exercised     -       -       -  
Outstanding December 31, 2014     -     $ -     $ -  
Granted     3,109,600       1.25       1.25  
Forfeited/Cancelled     -       -       -  
Exercised     -       -       -  
Outstanding December 31, 2015     3,109,600     $ 1.25     $ 1.25  

 

The warrants outstanding and exercisable at December 31, 2015 are as follows:

 

      Warrants Outstanding     Warrants Exercisable  
Exercise
Price
    Number
Outstanding
    Weighted
Average
Remaining
Contractual
life in years
    Weighted
Average
Exercise
Price
    Number
Exercisable
    Weighted
Average
Exercise
Price
    Weighted
Average
Remaining
Contractual
life in years
 
$ 1.25       3,109,600       4.76     $ 1.25       3,109,600     $ 1.25       4.76  
                                                     
          3,109,600             $         3,109,600     $            

 

The warrants outstanding have an intrinsic value of $0 and $0 as of December 31, 2015 and 2014, respectively.

 

(d) Conversion of Notes Payable to Equity

 

In 2015, the Company, in a debt for equity transaction, settled $2,909,423 in notes payable in exchange for 14,547,111 shares of common stock. Of the notes payable converted to equity, $2,324,422 is included in Notes Payable on the balance sheet at December 31, 2014.

 

(e) Reverse merger transaction

 

On August 27, 2015, the Company entered into a series of agreements which completed the Reverse Merger with Qpagos and Redpag. As part of the merger, the original shareholders of Qpagos and Redpag were effectively issued 2,459,314 common shares of QPAGOS, in terms of the consulting agreements disclosed in (a)(ii) above and 2,160,000 common shares disclosed in (a)(iv) above, resulting in a total of 4,619,314 common shares issued which have been retroactively reflected as the stockholder’s equity of the combined operations of the merged operations.

 

F- 22  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

10 INCOME TAXES

 

The provision for income taxes consists of the following:

 

    Year ended
December 31, 2015
    Year ended
December 31, 2014
 
             
Current                
Federal   $ -     $ -  
State     -       -  
Foreign     -       -  
    $ -     $ -  
                 
Deferred                
Federal   $ -     $ -  
State     -       -  
Foreign     -       -  
    $ -     $ -  

  

A reconciliation of the U.S. Federal statutory income tax to the effective income tax is as follows:

 

    Year ended
December 31, 2015
    Year ended
December 31, 2014
 
             
Tax expense at the federal statutory rate   $ (1,081,228 )   $ (522,457 )
State tax expense, net of federal tax effect     -       -  
Effect of foreign operations     89,178       69,514  
Permanent timing differences     62,082       35,858  
Deferred income tax asset valuation allowance     929,968       417,085  
    $ -     $ -  

 

Significant components of the Company’s deferred income tax assets are as follows:

 

    December 31, 2015     December 31, 2014  
Depreciation and amortization   $ (74,219 )   $ 3  
Other     (26,989 )     -  
Net operating losses     1,031,176       417,082  
Valuation allowance     (929,968 )     (417,085 )
Net deferred income tax assets   $ -     $ -  

 

The valuation allowance for deferred income tax assets as of December 31, 2015 and December 31, 2014 was $929,968 and $417,085, respectively. The net change in the deferred income tax assets valuation allowance was an increase of $512,883 for 2015 and a decrease of $452,029 for 2014, respectively.

 

F- 23  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

10 INCOME TAXES (continued)

 

As of December 31, 2015, the prior three years remain open for examination by the federal or state regulatory agencies for purposes of an audit for tax purposes.

 

The Company’s net operating loss carry-forwards of $7,488,342 begin to expire in 2023 through 2035. In assessing the realizability of deferred income tax assets, management considers whether or not it is more likely than not that some portion or all deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the projected future taxable income and tax planning strategies in making this assessment.

 

The Company’s ability to utilize the operating loss carry-forwards may be subject to an annual limitation in future periods pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, if future changes in ownership occur.

 

11 EQUITY BASED COMPENSATION

 

Equity based compensation is made up of the following:

 

    Year ended
December 31, 2015
    Year ended
December 31, 2014
 
             
Stock issued for services rendered     166,715       -  
    $ 166,715     $ -  

 

12 NET LOSS PER SHARE

 

Basic loss per share is based on the weighted-average number of common shares outstanding during each period. Diluted loss per share is based on basic shares as determined above plus common stock equivalents. The computation of diluted net loss per share does not assume the issuance of common shares that have an anti-dilutive effect on net loss per share. For the year ended December 31, 2015 and 2014, all unvested restricted stock awards and warrants, were excluded from the computation of diluted net loss per share. Dilutive shares which could exist pursuant to the exercise of outstanding stock instruments and which were not included in the calculation because their affect would have been anti-dilutive are as follows:

 

    Year ended
December 31, 2015
(Shares)
    Year ended
December 31, 2014
(Shares)
 
             
Restricted stock awards – unvested     2,160,000       2,160,000  
Warrants to purchase shares of common stock     3,109,600       -  
      5,269,600       2,160,000  

 

13 COMMITMENTS AND CONTINGENCIES

 

The Company operates from an office facility in Mexico. The office is leased under a three (3) year non-cancellable operating lease, which ends on December 15, 2016. The lease calls for monthly rental payment, including maintenance, of $3,425 in 2014 and $2,929 in 2015, as adjusted for exchange rate changes.

 

The future minimum lease installments under this agreement as of December 31, 2015 to December 16, 2016 is approximately $32,748.

 

F- 24  

 

 

QPAGOS CORPORATION

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

14 SUBSEQUENT EVENTS

 

Subsequent to year end, on February 1, 2016, the Company entered into a consulting agreement with a newly formed Delaware corporation, Yogipay Corporation (“Yogipay”), in terms of the consulting agreement the Company will provide access to its considerable expertise in the payments services business to Yogipay in exchange for 3,000,000 shares of the newly formed entity which represents a 15% ownership interest in Yogipay at the date of entering into the agreement.

 

On February 16, 2016, the Company entered into consulting agreements with Gibbs Investment Holdings, Gibbs international, Eurosa, Inc. and Robert Skaff, in terms of which the parties have provided consulting services to the Company and continue to provide such services and were issued a total of 2,572,500 common shares of the Company at an issue price of $1.25 per share

 

On May 12, 2016, the Company entered into an Agreement and Plan of Merger (the “ Merger Agreement ”) with Qpagos Merge, Inc., a Delaware corporation and wholly owned subsidiary of a listed shell company, Asiya Pearls, Inc. (“ Merger Sub ”). Pursuant to the Merger Agreement, Merger Sub merged with and into the Company with the Company surviving the Merger as Asiya Pearls, Inc. (“Asiya”) wholly owned subsidiary (the “ Merger ”). Each shareholder of the Company received two shares of the common stock of Asiya for each share of common stock owned by such shareholder. Asiya also assumed all of the warrants issued and outstanding immediately prior to the Merger, which are now exercisable for approximately 6,219,200 shares of Common Stock. Immediately after the merger, the shareholders of the Company own approximately 91% of the merged entity,

 

The acquisition of the Company by Asiya has been accounted for as a reverse acquisition for financial accounting purposes. The Reverse Merger is deemed a capital transaction and the net assets of Asiya (the accounting acquirer) is carried forward to the Company (the legal acquirer) at their carrying value before the merger. The acquisition process utilizes the capital structure of Asiya and the assets and liabilities of the Company are recorded at historical cost. The financials statements of Asiya and the Company are being combined and the Company is the operating entity for financial reporting purposes and the financial statements for all periods presented represent the combined financial position and results of operations of the Company. The equity of the Company is the historical equity of Asiya, presented retroactively to reflect the number of shares issued in the transaction.

 

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2015 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements.

 

F- 25  

   

 

Exhibit 99.3

 

Unaudited Pro Forma Condensed Combined Financial Statements

 

Pro forma Condensed Combined Balance Sheets as of December 31, 2015. 1
   
Pro forma Condensed Combined Statements of Operations for the year ended December 31, 2015. 2
   
Notes to Unaudited Pro Forma Condensed Combined Financial Statements. 3

 

 

 

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

Asiya Pearls, Inc.

and

Qpagos Corporation

Pro Forma Condensed Combined Balance Sheet

as of January 31, 2016

(Unaudited)

 

   

Qpagos

Corporation

    Asiya Pearls, Inc.                    
    as of     as of                    
    December 31,     January 31,                    
    2015     2016     Adjustments     Notes     Pro Forma  
ASSETS                                        
                                         
Current Assets                                        
Cash   $ 832,159     $ 1,453                     $ 833,612  
Accounts receivable     242,075       -                       242,075  
Inventory     668,567       -                       668,567  
Recoverable IVA taxes and credits     412,143       -                       412,143  
Other current assets     20,509       -                       20,509  
Total Current Assets     2,175,453       1,453                       2,176,906  
                                         
Non-Current Assets                                        
Plant and equipment, net     70,537       -                       70,537  
Intangibles, net     211,417       -                       211,417  
Other assets     11,712       -                       11,712  
Total Non-Current Assets     293,666       -                       293,666  
Total Assets   $ 2,469,119     $ 1,453                     $ 2,470,572  
                                         
LIABILITIES AND STOCKHOLDER'S EQUITY                                        
                                         
Current Liabilities                                        
Accounts payable   $ 38,372     $ 3,000                     $ 41,372  
Notes payable     103,320       -                       103,320  
IVA and other taxes payable     181,946       -                       181,946  
Advances from customers     1,986       -                       1,986  
Total Current Liabilities     325,624       3,000                       328,624  
                                         
Total Liabilities     325,624       3,000                       328,624  
                                         
Stockholders' Equity                                        
Preferred stock     -       -                       -  
Common stock     22,392       1,000       (17,896 )     3(A)     5,496  
Additional paid-in-capital     5,717,947       74,000       (58,651 )     3(A) 3(B)       5,733,296  
Accumulated deficit     (4,019,428 )     (76,547 )     76,547       3(B)     (4,019,428 )
Accumulated other comprehensive income     422,584       -                       422,584  
Total stockholder's equity (deficit) - controlling interest     2,143,495       (1,547 )                     2,141,948  
Non-controlling interest     -       -                       -  
Total Stockholders' Equity     2,143,495       (1,547 )                     2,141,948  
Total Liabilities and Stockholders' Equity   $ 2,469,119     $ 1,453                     $ 2,470,572  

 

See accompanying notes to these unaudited pro forma condensed combined financial statements

 

1

 

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

Asiya Pearls, Inc.

and

Qpagos Corporation

Pro Forma Condensed Combined Statement of operations

For the year ended December 31, 2015

(Unaudited)

  

    Qpagos
Corporation
    Asiya Pearls, Inc.        
    for the year ended     for the year ended        
    December 31,     October 31,        
    2015
(Historical)
    2015
(Historical)
    Pro Forma  
                   
Net Revenue   $ 1,510,369     $ -     $ 1,510,369  
                         
Cost of Goods Sold     1,521,128       -       1,521,128  
                         
Gross (Loss) Profit     (10,759 )     -       (10,759 )
                         
General and administrative     2,000,713       27,234       2,027,947  
Depreciation and amortization     37,810       -       37,810  
Total Expense     2,038,523       27,234       2,065,757  
Loss from Operations     (2,049,282 )     (27,234 )     (2,076,516 )
                         
Other (expense) income     (9,991 )     -       (9,991 )
Interest expense, net     (3,319 )     -       (3,319 )
Foreign currency loss     (466,920 )     -       (466,920 )
Loss before Provision for Income Taxes     (2,529,512 )     (27,234 )     (2,556,746 )
                         
Provision for Income Taxes     -       -       -  
                         
Net Loss     (2,529,512 )     (27,234 )     (2,556,746 )
                         
Net loss attributable to non-controlling interest     -       -       -  
                         
Net Loss Attributable to Controlling Interest     (2,529,512 )   $ (27,234 )   $ (2,556,746 )
                         
Net Loss Per Share -  Basic and Diluted   $ (0.20 )   $ (0.00 )   $ (0.05 )
                         
Weighted Average Number of Shares Outstanding -  Basic and Diluted     12,849,373       10,000,000       54,954,000  
                         
Other Comprehensive Loss                        
Foreign currency translation adjustment     269,835       -       269,835  
                         
Total Comprehensive loss     (2,259,677 )     (27,234 )     (2,286,911 )
                         
Comprehensive loss attributable to non-controlling interest     -       -       -  
                         
Comprehensive Loss Attributable to Controlling Interest   $ (2,259,677 )   $ (27,234 )   $ (2,286,911 )

 

See accompanying notes to these unaudited pro forma condensed combined financial statements

 

2

 

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

Asiya Pearls, Inc.

and

Qpagos Corporation

 

Notes to Unaudited Pro Forma Condensed Combined Information

 

Note 1. Description of the Proposed Transaction and Basis of Presentation

 

Description of the Proposed Transaction

 

The Merger Agreement provides for the combination of Asiya Pearls, Inc. (“Asiya”) and Qpagos Corporation (“Qpagos”) through a merger of Qpagos Merge, Inc. (a newly formed wholly subsidiary of Asiya) with and into Asiya, whereby Qpagos will become a wholly owned subsidiary of Asiya. As a result of the Merger, former equity holders of Qpagos will become shareholders of Asiya.

 

Pursuant to the Merger Agreement, upon the effectiveness for the Merger, all shares of common stock of Qpagos held by accredited equity holders of Qpagos, along with all outstanding warrants will be converted into the right to receive Asiya common stock. The aggregate number of Asiya common stock shares to be issued at closing is based on an exchange ratio of two (2) Asiya shares for every one (1) share of Qpagos. We currently expect that at the closing, we will issue approximately 49,929,000 Asiya common stock shares to the accredited Qpagos equity holders pursuant to the terms of the Merger Agreement.

 

Basis of Presentation

 

Asiya, a Nevada corporation, had a fiscal year ended October 31, 2015 during the periods presented. The most recent financial information available for Asiya is for the three months ended January 31, 2016. There has been minimal operating activity in Asiya after October 31, 2015. As a result, the information presented for Asiya as of October 31, 2015 is deemed to be current for these unaudited pro forma condensed combined financial statements. Qpagos, a Delaware corporation reports on a calendar year basis and is utilizing financial statements as of December 31, 2015for these pro forma condensed combined financial statements.

 

The unaudited pro forma condensed combined financial statements were prepared in accordance with regulations of the Securities and Exchange Commission and are intended to show how the Merger might affect the historical financial statements if the transaction had been completed on January 31, 2016 for the purposes of the balance sheet and December 31, 2015 for the purposes of the statement of operations. The pro forma adjustments reflecting the completion of the transactions are based upon the accounting rules for reverse capitalizations.

 

Based on the terms of the Merger Agreement, Qpagos is deemed to be the accounting acquirer because the former Qpagos shareholders, board of directors and management will have voting control and operating control of the combined company. The Merger will be accounted for as a capital transaction accompanied by a recapitalization with no goodwill or other intangibles recorded.

 

The historical financial data has been adjusted to give pro forma effects to events that are (i) directly attributable to the Merger (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial statements do not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the transactions. The unaudited pro forma condensed combined financial data also do not include any integration costs. The unaudited pro forma condensed combined financial statements have been prepared for illustrative purposes only and are not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had the Merger occurred prior to the specified period.

 

3

 

  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

Asiya Pearls, Inc.

and

Qpagos Corporation

 

Notes to Unaudited Pro Forma Condensed Combined Information

 

Note 2. Reverse Merger Transaction

 

On May 10, 2016, Asiya, Qpagos and shareholders of Qpagos who collectively own 100% of Qpagos entered into and consummated transactions pursuant to a Merger Agreement, whereby Asiya will issue to the Qpagos shareholders an aggregate of approximately 49,929,000 shares of its common stock, par value $0.001, in exchange for 100% of equity interests of Qpagos held by the Qpagos shareholders. The shares of Asiya common stock received by the Qpagos shareholders in the Merger constitutes approximately 90.9% of our issued and outstanding Asiya common stock giving effect to the issuance of shares pursuant to the Merger Agreement. As a result of the Merger, Qpagos became a wholly owned subsidiary of Asiya.

 

For financial reporting purposes, the transaction will be accounted for as a “reverse merger” rather than a business combination, because the sellers of Qpagos effectively control the combined companies immediately following the transaction. As such, Qpagos is deemed to be the accounting acquirer in the transaction and, consequently, the transaction is being treated as a reverse acquisition by Asiya. Accordingly, the assets and liabilities and the historical operations that will be reflected in Asiya’s ongoing financial statements will be those of Qpagos and will be recorded at the historical cost basis of Qpagos. The historical financial statements of Asiya before the transaction will be replaced with the historical financial statements of Qpagos before the transaction and in all future filings with the SEC. The Merger is intended to be treated as a tax-free exchange under Section 368(a) of the Internal Revenue Code of 1986, as amended.

 

Note 3. Adjustments to Unaudited Pro Forma Combined Financial Statements

 

The pro forma adjustments in the unaudited pro forma condensed combined balance sheet as of January 31, 2016 and statement of operations for the twelve months ended October 31, 2015 are as follows:

 

A. To reflect the cancellation of 4,975,000 shares of Asiya restricted stock upon consummation of the merger agreement and the elimination of the difference in par values of common stock as a result of the share exchange with Asiya.

  

  B. To eliminate the deficit accumulated since inception for Asiya as going forward the operations of Qpagos will be the surviving operating entity.

 

Note 4. Earnings Per Share

 

The pro forma weighted-average shares outstanding gives effect to the issuance of 49,929,000 shares of common stock and the cancellation of 4,975,000 shares of Asiya common stock (resulting in Asiya shareholders retaining 5,025,000 shares) in connection with the merger as if they occurred at the beginning of the period presented.

 

The effect of any potentially dilutive instruments including warrants were anti-dilutive. Therefore, dilutive earnings per share are equivalent to basic earnings per share.

 

4