EXHIBIT 10.10
DELOS PAYMENT SYSTEMS, INC.
SUBSCRIPTION AGREEMENT
August 23, 2001
Delos Payment Systems, Inc.
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇:
By executing this Subscription Agreement (the "Agreement"), the
undersigned (the "Investor") hereby irrevocably subscribes to acquire from Delos
Payment Systems, Inc., a Delaware corporation (the "Company"), upon the terms
and conditions of this Agreement, (1) warrants to purchase shares of the
Company's Common Stock, par value $0.0001 per share (the "Common Stock"), at a
purchase price of $0.01 per share, pursuant to the terms and subject to the
conditions of a warrant in the form attached hereto as Exhibit A (the
"Warrant"), and (2) a $3,000,000 principal amount 10% secured convertible master
promissory note, between the Company and Investor, in the form attached hereto
as Exhibit B (the "Note"), which Note may, pursuant to the terms thereof, be
converted into the class of shares of the Company's capital stock issued in a
Qualified Equity Financing (as defined in the Note), which are anticipated to be
designated as Series B Convertible Preferred Stock, par value $0.0001 per share
(the "Series B Stock").
To secure the full and prompt repayment of the Note, upon execution of
this Agreement the Company shall execute and deliver to the Investor a security
agreement in the form attached as Exhibit C (the "Security Agreement").
REPRESENTATIONS AND WARRANTIES
The Investor makes representations and warranties in this Subscription
Agreement in order to permit the Company to determine the suitability of the
Note and the Warrant as an investment for the Investor and to determine the
availability of the exemptions relied upon by the Company from registration
under Section 5 of the United States Securities Act of 1933, as amended, and the
regulations promulgated thereunder (the "Securities Act"). The undersigned
understands and agrees that, although the Company will use its best efforts to
keep the information provided in the answers to this Agreement strictly
confidential, the Company may present this Agreement, and the information
provided in answers to it, to such parties as it deems advisable if called upon
to establish the availability under any federal or state securities laws of an
exemption from registration of a private placement or if the contents hereof are
relevant
to any issue in any investigation, action, suit or proceeding to which the
Company is a party or by which it is or may be bound.
1. Investor Representations, Warranties and Covenants. The Investor hereby
represents and warrants to the Company as follows:
(a) Legal Power; Due Authorization. The Investor has the requisite
legal power to enter into this Agreement, to purchase the securities of the
Company hereunder, to convert its Note and exercise its Warrant, and to carry
out and perform its obligations under the terms of this Agreement. This
Agreement has been duly authorized, executed and delivered by the Investor, and,
upon due execution and delivery by the Company, this Agreement will be a valid
and binding agreement of the Investor.
(b) Accredited Investor Status. The Investor represents that the
Investor is an "accredited investor" as such term is defined in Rule 501(a)
under the Securities Act.
(c) Investment Intention and Restrictions on Disposition. The
Investor represents and warrants that the Investor is acquiring the Warrant
being purchased by it and the Note being issued to it hereunder, and will
acquire the Series B Stock to be issued upon the conversion of the Note and the
shares of Common Stock to be issued upon the exercise of the Warrant and
conversion of the Series B Stock, solely for the Investor's own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof in any transaction or series of transactions that would be
in violation of the securities laws of the United States or any state thereof.
The Investor agrees that it will not, directly or indirectly, offer, transfer,
sell, pledge, hypothecate or otherwise dispose of any of those securities (or
solicit any offers to buy, purchase or otherwise acquire or take a pledge of any
of those securities or any interest therein or any rights relating thereto,
except in compliance with (i) the Securities Act and (ii) all applicable state
securities or "blue sky" laws. The Investor further understands, acknowledges
and agrees that the those securities or any economic or voting rights relating
thereto may not be transferred, sold, pledged, hypothecated or otherwise
disposed of unless such disposition is pursuant to an effective registration
statement under the Securities Act or an exemption therefrom and is exempt from
or in compliance with applicable state securities laws. The Investor has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the Note and Warrant and the condition of the Company's
business, including without limitation its financial condition. The Investor is
an experienced investor in securities and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in the Note and Warrant. The Investor
understands that all securities issued hereunder are characterized as
"restricted securities" under the federal securities laws inasmuch as 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 not be
resold without registration under the Securities Act and applicable state
securities laws, except in certain limited circumstances. In this connection,
the Investor represents that it is familiar with Rule 144 under the Securities
Act, as presently in effect, and understands the resale limitations imposed
thereby and by the Act. The
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Investor understands that no public market now exists for any of the Company's
equity securities and that it is uncertain whether a public market will ever
exist therefrom. Investor hereby acknowledges that the Note, the Warrant and the
underlying shares of Common Stock and Series B Stock shall bear such legends as
may be required by applicable federal and state securities laws, as determined
in the good faith judgment of the Company.
2. Representations, Warranties and Covenants of the Company. The
Company represents and warrants to the Investor that:
(a) the execution and delivery of this Agreement, the
Warrant and the Note, the performance of the Company's obligations hereunder and
thereunder, the consummation by it of the transactions contemplated hereby, the
issuance of the Common Stock upon the exercise of the Warrant, and the issuance
of the Series B Stock upon the conversion of the Note have been duly and validly
authorized by all requisite corporate action on the part of the Company (except
that the Series B Stock has not been authorized for issuance and approval of the
Company's board of directors and shareholders will be required for same);
(b) the Warrant, the Common Stock and the Series B Stock,
when issued and delivered in accordance with the terms hereof, the Warrant or
the Note, as the case may be, will be validly issued, fully paid and
non-assessable and free and clear of any liens or encumbrances other than those
created pursuant to this Agreement or otherwise in connection with the
transactions contemplated hereby and thereby;
(c) the Company is a corporation duly organized and
validly existing under the laws of the State of Delaware and in good standing
under such laws. The Company is qualified to do business as a foreign
corporation in every jurisdiction in which the failure to so qualify would have
a material adverse effect on its business, assets, results of operation and
prospects. The Company has the requisite corporate power and authority to own
and operate its properties and assets and to carry on its business as presently
conducted;
(d) the Company does not own or control, directly or
indirectly, any interest or investment in any corporation, partnership,
association or other form of business entity;
(e) the authorized capital stock of the Company consists
of 2,000,000 shares of Common Stock, of which 1,172,387 are issued and
outstanding, and 2,000,000 shares of Preferred Stock, of which 1,200,000 shares
have been designated Series A Junior Redeemable Preferred Stock, $0.0001 par
value per share ("Series A Stock"), of which 1,172,387 are issued and
outstanding. Additionally, the Company has granted no options or warrants to
purchase shares of Common Stock;
(f) subject in part to the accuracy of the Investor's
representations herein, the offer, sale and issuance of the Warrant and the Note
pursuant to the terms of this Agreement, the issuance of the Common Stock upon
exercise of the Warrant, and the issuance of the Series B Stock upon conversion
of the Note, constitute transactions exempt from the registration
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requirements of Section 5 of the Securities Act, as amended, and all applicable
state securities laws;
(g) the Company has good and marketable title to all of
the properties and assets which it owns, free and clear of any mortgage, pledge,
lien, lease, encumbrance or charge, other than liens for current taxes not yet
due and payable;
(h) the Company owns or possesses sufficient legal rights
to all patents, patent applications, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, know-how, concepts, computer programs and
software, technical data, proprietary rights, proprietary processes and other
information necessary for its business as presently conducted and as currently
contemplated to be conducted (each such item, the "Company Intellectual
Property") without any conflict with or infringement of the rights of others.
Except as set forth on Schedule 2(h), except for proprietary information
agreements with its employees, consultants, and independent contractors
substantially in the forms previously made available to the Investor, and except
for licenses or agreements entered into in the ordinary course of the Company's
business, consistent with past practices, there are no outstanding options,
licenses, or agreements of any kind relating to any of the Company Intellectual
Property, nor is the Company bound by or a party to any options, licenses, or
agreements of any kind with respect to the patents, patent applications,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
know-how, concepts, computer programs, technical data, proprietary rights,
proprietary processes and information of any other person or entity. All
employees, consultants, and independent contractors of the Company who created
or developed the Company Intellectual Property have assigned to the Company any
rights such employees, consultants, and independent contractors may have had in
the Company Intellectual Property. No person or entity has the right to purchase
or exclusively license any of the Company Intellectual Property;
(i) there are no actions, suits, proceedings, or
investigations pending or, to the Company's knowledge, threatened against the
Company or its properties before any court or governmental agency, and to the
Company's knowledge, no actions, suits, proceedings or investigations are
pending or threatened against its employees that may relate to their employment
with, or conduct on behalf of, the Company, or that question the validity of
this Agreement or any action taken or to be taken in connection herewith;
(j) the Company is not under any obligation and has not
granted any rights to register under the Securities Act any of its presently
outstanding securities or any of its securities that may subsequently be issued.
To the Company's knowledge, except as contemplated herein, no stockholder of the
Company is a party to any agreement with respect to the voting of the Company's
securities; and
(k) the copies of the minute books of the Company
provided to the Investor or its legal counsel in connection with this Agreement
contain minutes of all meetings of directors and shareholders and all actions by
written consent by the directors and shareholders and accurately reflect all
actions by the directors (and any committee of directors) and shareholders with
respect to all transactions referred to therein in all material respects.
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3. Tax Matters.
(a) Withholding. The Company shall have the right to
withhold or require the Investor to remit to the Company an amount, if any,
necessary to satisfy federal, state and local withholding tax requirements
incurred upon the purchase, ownership or disposition of the Warrant, the Common
Stock issued upon the exercise of the Warrant, or the Series B Stock issued upon
the conversion of the Note.
(b) Value. The parties hereto agree that the Warrant has
a nominal value (i.e. $100.00) as of the date hereof.
4. Stock Certificate Legends. The Warrant, as well as any shares
of Common Stock or Series A Stock issued in connection with the exercise thereof
or issued in connection with the conversion of the Note, shall bear a legend
substantially as follows:
"THE ISSUANCE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND
MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE
SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION PROVISIONS OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE, IN
PART, ON PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE GEORGIA
SECURITIES ACT OF 1973, AS AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER
SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH
ACT."
5. Indemnification. Investor hereby indemnifies and holds
harmless the Company, and its directors, officers and affiliates from
and against all damages, losses, costs and expenses (including
reasonable attorney's fees) which they may incur by reason of any
factual statements made by Investor that result in (a) the failure of
Investor to fulfill any of the material terms or conditions of this
Agreement or (b) any material breach of the representations and
warranties made by Investor herein. The Company hereby indemnifies and
holds harmless the Investor and its affiliates from and against all
damages, losses, costs and expenses (including reasonable attorney's
fees) which they may incur by reason of the failure of the Company to
fulfill any of
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the material terms and conditions of this Agreement or by reason of any material
breach of the representations and warranties made by the Company herein.
MISCELLANEOUS
1. Agreement to Lend, Issuance of Note. Investor agrees to lend to the
Company the amount of up to Three Million Dollars ($3,000,000) (the "Loan"). The
Loan will be advanced in installments (each, an "Advance"), as evidenced by and
subject to the conditions set forth in the Note and in this Agreement. Investor
agrees to lend to the Company the Loan, and the Company agrees to issue to
Investor the Note in the aggregate principal amount of the Loan, and the Warrant
subject to the terms and conditions of this Agreement.
2. Initial Closing. The closing of the first Advance contemplated by
this Agreement (the "Initial Closing") will take place at the offices of
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ at 11:30
a.m., on the date hereof (the "Initial Closing Date") or at such other place or
different time or day as may be mutually acceptable to Investor and the Company.
At the Initial Closing, the Company will deliver to Investor the Warrant dated
as of the Initial Closing Date, together with the Note dated as of the Initial
Closing Date, and the Security Agreement dated as of the Initial Closing Date,
against payment to the Company by Investor, by certified check or wire transfer,
of the first Advance in the amount of $1,500,000; and the Company shall repay in
full the principal and interest outstanding under the Promissory Note dated July
27, 2001, and the Promissory Note dated August 13, 2001, both in favor of
Investor (collectively, the "Matured Notes").
3. Subsequent Advances. After the Initial Closing and prior to December
31, 2001, the Company may request additional advances which, when added to the
first Advance, do not exceed $3,000,000. Each request for an advance shall be in
an amount not to exceed $500,000 and shall be accompanied by a written
statement, signed by the Chief Executive Officer of the Company, stating that
the Company is in full compliance with all terms, conditions and covenants of
this Agreement, the Warrant, the Note and the Security Agreement. The Investor
shall fund each qualified advance within three days of each request up to an
aggregate maximum of $1,500,000 in principal amount. For requests by the Company
for advances in excess of the first Advance and up to $3,000,000, the Investor
shall have no obligation whatsoever to fund such additional advances, and shall
make such additional advances, if any, in its sole discretion.
4. Use of Proceeds. The proceeds of the Loan shall be used for
repayment of the Matured Notes, the payment of expenses and the pursuit of
activities outlined in the budget dated July 25, 2001 presented to the Investor.
5. Subsequent Corporate Action Concerning Series B Stock. Not later
than the closing of a Qualified Equity Financing, as defined in the Note, the
Company shall have taken such steps, as may be necessary to permit the issuance
of the Series B Stock to the Investor upon the conversion of the Note.
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6. Notices. All notices and other communications required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been given if delivered personally or by telecopy or sent by certified mail,
return receipt requested, postage prepaid, or by Federal Express or other
similar courier service to the parties to this Agreement at the following
addresses or to such other address as the party to this Agreement whose address
it is shall specify by notice to the other: (a) if to the Investor, to the
Investor at the address set forth under the Investor's name on the signature
page hereto; and (b) if to the Company, to it at ▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇ with a copy to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
7. Binding Effect; Benefits. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
heirs, successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties to this
Agreement and their respective heirs or successors or permitted assigns any
legal or equitable right, remedy or claim under or in respect of any agreement
or any provision contained herein.
8. Waiver; Amendment. No action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of either
party, shall be deemed to constitute a waiver by such party taking such action
of compliance by the other party with any representations, warranties, covenants
or agreements contained herein. The waiver by either party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any preceding or succeeding breach and no failure by either party to exercise
any right or privilege hereunder shall be deemed a waiver of such party's rights
or privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder. Neither this
Agreement nor any terms or provision hereof may be amended, modified, waived or
supplemented orally, but only by a written instrument executed by the Company
and the Investor.
9. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company without the prior written consent of the Investor,
which consent shall not be unreasonably withheld, or by the Investor without the
prior written consent of the Company, which consent shall not be unreasonably
withheld; provided that Investor may assign this Agreement to any of its
affiliates or any successor entity without the consent of the Company.
Notwithstanding the foregoing, the Investor shall not assign this Agreement to a
competitor of the Company without the prior written consent of the Company.
10. Applicable Law. This Agreement shall be governed by and construed
in accordance with the law of the State of Georgia, regardless of the law that
might be applied under principles of conflicts of law.
11. Section and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
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12. Attorneys Fees. Investor shall be entitled to recover from the
Company all attorneys' fees, costs and expenses incurred in connection with the
acquisition of the Warrant and the Note.
13. 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
together shall be deemed to be one and the same instrument.
14. Pronouns. Any use of masculine pronouns herein shall be deemed to
include the feminine and neuter cases, and vice versa, as applicable.
15. Entire Agreement. This Agreement, the Warrant, the Note, the
Security Agreement and any written documents referenced herein or therein, along
with any other written agreements that have been or are subsequently executed by
and between the Company and Investor and that relate to the subject matter of
this Agreement, shall constitute the entire agreement of the parties hereto with
respect to the subject matter hereof. This Agreement may be amended or modified
only by a writing executed by the party to be bound thereby.
16. Severability. In case any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, the validity and enforceability of
the remaining provisions shall not in any way be affected thereby.
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IN WITNESS WHEREOF, Investor has duly executed and delivered this
Agreement as of the date first written above.
INTELLIGENT SYSTEMS CORPORATION
By:
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▇▇▇▇▇▇ ▇▇▇▇▇▇
Vice President
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Accepted this 23 day of August, 2001
DELOS PAYMENT SYSTEMS, INC.
By:
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▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
NOTE: EXHIBITS AND SCHEDULES TO THIS AGREEMENT ARE NOT FILED HEREWITH.
THEY WILL BE SUPPLIED SUPPLEMENTALLY UPON THE REQUEST OF THE SECURITIES AND
EXCHANGE COMMISSION.
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