EXHIBIT 99.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of October
6, 2005, by and among CELERITY SYSTEMS, INC., a Delaware corporation (the
"Company"), and the Buyers listed on Schedule I attached hereto (individually, a
"Buyer" or collectively "Buyers").
WITNESSETH:
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act");
WHEREAS, the Company has authorized the following series of its Preferred
Stock, $0.01 par value per share (the "Series F Preferred Stock") in accordance
with the terms of the Company Certificate of Designations, Preferences, and
Rights of the Series F Convertible Preferred Shares (the "Certificate of
Designation");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase One Million Dollars
($1,000,000) of Series F Preferred Stock (the "Series F Preferred Shares"),
which shall be funded on the fifth (5th) business day following the date hereof
(the "Closing"), for a total purchase price of One Million Dollars ($1,000,000),
(the "Purchase Price") in the respective amounts set forth opposite each
Buyer(s) name on Schedule I ( the "Subscription Amount"); and
WHEREAS, each installment will be funded by the Buyer(s) from an escrow
account pursuant to the terms of an Escrow Agreement (the "Escrow Agreement").
This Agreement, the Certificate of Designation and the Escrow Agreement are
collectively referred to herein as the "Transaction Documents."
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s) hereby agree
as follows:
1. PURCHASE AND SALE OF SERIES F PREFERRED STOCK .
(a) Purchase of Series F Preferred Stock. Subject to the
satisfaction (or waiver) of the terms and conditions of this Agreement, each
Buyer agrees, severally and not jointly, to purchase at Closing (as defined
herein below) and the Company agrees to sell and issue to each Buyer, severally
and not jointly, at Closing, Series F Preferred Stock in amounts corresponding
with the Subscription Amount set forth opposite each Buyer's name on Schedule I
hereto. Upon execution hereof by a Buyer, the Buyer shall wire transfer the
Subscription Amount set forth opposite his name on Schedule I in same-day funds
payable to "Xxxxx Xxxxxxxx, Esq., as Escrow Agent for Celerity Systems,
Inc./Cornell Capital Partners, LP," which Subscription Amount shall be held in
escrow pursuant to the terms of the Escrow Agreement (as hereinafter defined)
and disbursed in accordance therewith.
(b) Closing Date. The Closing of the purchase and sale of the Series
F Preferred Stock shall take place at 10:00 a.m. Eastern Standard Time on the
fifth (5th) business day following the date hereof, subject to notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
6 and 7 below (or such other date as is mutually agreed to by the Company and
the Buyer(s)) (the "Closing Date"). The Closing shall occur on the Closing Date
at the offices of Yorkville Advisors, LLC, 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx
Xxxx, Xxx Xxxxxx 00000 (or such other place as is mutually agreed to by the
Company and the Buyer(s)).
(c) Form of Payment. Subject to the satisfaction of the terms and
conditions of this Agreement, on the Closing Date, (i) the Escrow Agent shall,
upon receipt of funds from the Buyer(s) deliver to the Company in accordance
with the terms of the Escrow Agreement such aggregate proceeds for the Series F
Preferred Stock to be issued and sold to such Buyer(s) at the Closing minus the
discount of the Buyer(s) and the fees referenced in Section 4(d) herein by wire
transfer of immediately available funds in accordance with the Company's written
wire instructions, and (ii) the Company shall deliver to each Buyer Series F
Preferred Stock which such Buyer(s) is purchasing in amounts indicated opposite
such Buyer's name on Schedule I, duly executed on behalf of the Company.
(d) Right of Redemption. The Company shall have the right to redeem
upon three (3) calendar days prior written notice to the Buyer(s), all or any
part of the Series F Preferred Stock at a redemption price of one hundred twenty
five percent (125%) of the amount redeemed. The redemption price, in immediately
available funds, shall accompany the written notice.
(e) Conversion of Series F Preferred Stock. Upon the termination of
the Company's status as a "business development company" under the Investment
Company Act of 1940 the Series F Preferred Stock shall become convertible into
shares of the Company's Common Stock, at any time subsequent to the date
thereof, at a conversion price determined in accordance with the Certificate of
Designation.
(f) Limitation on Conversion. No holder of the shares of Series F
Preferred Stock shall be entitled to convert the Series F Preferred Stock (i)
prior to the date the Company terminates its status as a business development
company under the Investment Company Act of 1940 and (ii) to the extent, but
only to the extent, that such conversion would, upon giving effect to such
conversion, cause the aggregate number of shares of Common Stock beneficially
owned by such holder to exceed 4.99% of the outstanding shares of Common Stock
following such conversion (which provision may be waived by such holder by
written notice from such holder to the Company, which notice shall be effective
61 days after the date of such notice).
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, severally and not jointly, that:
(a) Investment Purpose. Each Buyer is acquiring the Series F
Preferred Stock and, upon conversion of Series F Preferred Stock, for its own
account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act;
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(b) Accredited Investor Status. Each Buyer is an "Accredited
Investor" as that term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on Exemptions. Each Buyer understands that the Series F
Preferred Stock is being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire such securities.
(d) Information. Each Buyer and its advisors (and his or, its
counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information he deemed
material to making an informed investment decision regarding his purchase of the
Series F Preferred Stock, which have been requested by such Buyer. Each Buyer
and its advisors, if any, have been afforded the opportunity to ask questions of
the Company and its management. Neither such inquiries nor any other due
diligence investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on the
Company's representations and warranties contained in Section 3 below. Each
Buyer understands that its investment in the Series F Preferred Stock involves a
high degree of risk. Each Buyer is in a position regarding the Company, which,
based upon employment, family relationship or economic bargaining power, enabled
and enables such Buyer to obtain information from the Company in order to
evaluate the merits and risks of this investment. Each Buyer has sought such
accounting, legal and tax advice, as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Series F
Preferred Stock.
(e) No Governmental Review. Each Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Series F
Preferred, or the fairness or suitability of the investment in the Series F
Preferred Stock, nor have such authorities passed upon or endorsed the merits of
the offering of the Series F Preferred Stock.
(f) Transfer or Resale. Each Buyer understands that: (i) the Series
F Preferred Stock have not been and are not being registered under the 1933 Act
or any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, or (B) such Buyer
shall have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration requirements; (ii) any sale of such securities made in
reliance on Rule 144 under the 1933 Act (or a successor rule thereto) ("Rule
144") may be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of such securities under circumstances in
which the seller (or the person through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the 0000 Xxx) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC there under; and (iii) neither the Company nor any other
person is under any obligation to register such securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption there under. The Company reserves the right to place stop transfer
instructions against the shares and certificates.
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(g) Legends. Each Buyer understands that the certificates or other
instruments representing the Series F Preferred Stock shall bear a restrictive
legend in substantially the following form (and a stop transfer order may be
placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company within two (2)
business days shall issue a certificate without such legend to the holder of the
Series F Preferred Stock upon which it is stamped, if, unless otherwise required
by state securities laws, (i) in connection with a sale transaction, provided
the Series F Preferred Stock is registered under the 1933 Act or (ii) in
connection with a sale transaction, after such holder provides the Company with
an opinion of counsel, in form reasonably acceptable to the Company and its
counsel, to the effect that a public sale, assignment or transfer of the Series
F Preferred Stock may be made without registration under the 1933 Act.
(h) Authorization, Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with its
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
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(i) Receipt of Documents. Each Buyer and his or its counsel has
received and read in their entirety: (i) this Agreement and each representation,
warranty and covenant set forth herein and the Escrow Agreement; (ii) all due
diligence and other information necessary to verify the accuracy and
completeness of such representations, warranties and covenants; (iii) the
Company's Form 10-K for the fiscal year ended December 31, 2004; (iv) the
Company's Form 10-Q for the fiscal quarter ended June 30, 2004 and (v) answers
to all questions each Buyer submitted to the Company regarding an investment in
the Company; and each Buyer has relied on the information contained therein and
has not been furnished any other documents, literature, memorandum or
prospectus.
(j) Due Formation of Corporate and Other Buyers. If the Buyer(s) is
a corporation, trust, partnership or other entity that is not an individual
person, it has been formed and validly exists and has not been organized for the
specific purpose of purchasing the Series F Preferred Stock and is not
prohibited from doing so.
(k) No Legal Advice From the Company. Each Buyer acknowledges, that
it had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and investment
and tax advisors. Each Buyer is relying solely on such counsel and advisors and
not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that, except as
set forth in the SEC Documents (as defined herein):
(a) Organization and Qualification. The Company and its subsidiaries
are corporations duly organized and validly existing in good standing under the
laws of the jurisdiction in which they are incorporated, and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries taken as a whole.
(b) Authorization, Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Escrow Agreement and any related agreements, and
to issue the Series F Preferred Stock in accordance with the terms hereof and
thereof, (ii) the execution and delivery of this Agreement, the Escrow
Agreement, and any related agreements by the Company and the consummation by it
of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Series F Preferred Stock, has been duly
authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders, (iii) this Agreement, the Escrow Agreement, and any related
agreements have been duly executed and delivered by the Company, (iv) this
Agreement, the Escrow Agreement, and any related agreements constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
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(c) Capitalization. The authorized capital stock of the Company
consists of 5,000,000,000 shares of Common Stock, par value $0.001 per share and
3,000,000 shares of Preferred Stock. As of the date hereof the Company has
4,314,358,079 shares of Common Stock and no shares of Preferred Stock issued and
outstanding. Except as disclosed in the SEC Documents (as defined in Section
3(f)), no shares of Common Stock are subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the
Company. Except as disclosed in the SEC Documents, as of the date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, (ii) there are no outstanding debt securities and (iii) there are
no agreements or arrangements under which the Company or any of its subsidiaries
is obligated to register the sale of any of their securities under the 1933 Act
and (iv) there are no registration statements pending. There are no securities
or instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Series F Preferred Stock as described in this
Agreement. The Company has furnished to the Buyer true and correct copies of the
Company's Certificate of Incorporation, as amended and as in effect on the date
hereof (the "Certificate of Incorporation"), and the Company's By-laws, as in
effect on the date hereof (the "By-laws"), and the terms of all securities
convertible into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto other than stock options issued to employees
and consultants.
(d) Issuance of Securities. The Series F Preferred Stock is duly
authorized and, upon issuance in accordance with the terms hereof, shall be duly
issued, fully paid and nonassessable, are free from all taxes, liens and charges
with respect to the issue thereof.
(e) No Conflicts. Except as disclosed in the SEC Documents, the
execution, delivery and performance of this Agreement, and the Escrow Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Certificate of
Incorporation, any certificate of designations of any outstanding series of
preferred stock of the Company or the By-laws or (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 the Company or any of its subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of The National Association of Securities Dealers Inc.'s
Over-The-Counter Bulletin Board on which the Common Stock is quoted) 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. Except as disclosed
in the SEC Documents, neither the Company nor its subsidiaries is in violation
of any term of or in default under its Certificate of Incorporation or By-laws
or their organizational charter or by-laws, respectively, or any material
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its subsidiaries. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted in violation of any material law,
ordinance, or regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the 1933 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 or governmental agency in order for it to execute, deliver or perform any
of its obligations under or contemplated by this Agreement in accordance with
the terms hereof or thereof. Except as disclosed in the SEC Documents, 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. The Company and its subsidiaries are
unaware of any facts or circumstance, which might give rise to any of the
foregoing.
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(f) SEC Documents: Financial Statements. Since January 1, 2004, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC under the Securities Exchange Act of
1934, as amended (the "1934 Act") (all of the foregoing filed prior to the date
hereof or amended after the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein, being hereinafter referred to as the "SEC Documents"). The
Company has delivered to the Buyers or their representatives, or made available
through the SEC's website at xxxx://xxx.xxx.xxx., true and complete copies of
the SEC Documents. As of their respective dates, the financial statements of the
Company disclosed in the SEC Documents (the "Financial Statements") complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such Financial Statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and, fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer which is not included in the SEC Documents, including, without
limitation, information referred to in this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(g) 10(b)-5. The SEC Documents do not include any untrue statements
of material fact, nor do they omit to state any material fact required to be
stated therein necessary to make the statements made, in light of the
circumstances under which they were made, not misleading.
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(h) Absence of Litigation. Except as disclosed in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a material adverse effect on the transactions contemplated hereby, (ii)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a material adverse effect on the business, operations,
properties, financial condition or results of operation of the Company and its
subsidiaries taken as a whole.
(i) Acknowledgment Regarding Buyer's Purchase of the Series F
Preferred Stock . The Company acknowledges and agrees that the Buyer(s) is
acting solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that the Buyer(s) is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by the Buyer(s) or any
of their respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is merely incidental to such Buyer's
purchase of the Series F Preferred Stock. The Company further represents to the
Buyer that the Company's decision to enter into this Agreement has been based
solely on the independent evaluation by the Company and its representatives.
(j) No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Series F Preferred Stock.
(k) 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 of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Series F Preferred Stock under the 1933 Act or cause this offering of the Series
F Preferred Stock to be integrated with prior offerings by the Company for
purposes of the 1933 Act.
(l) Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.
(m) Intellectual Property Rights. The Company and its subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service xxxx registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service xxxx registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
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(n) Environmental Laws. The Company and its subsidiaries are (i) in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
(o) Title. Any real property and facilities held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries.
(p) Insurance. The Company does not maintain any insurance.
(q) Regulatory Permits. The Company and its subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
(r) Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, and (iii) the recorded amounts for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(s) No Material Adverse Breaches, etc. Except as set forth in the
SEC Documents, neither the Company nor any of its subsidiaries is subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation which in the judgment of the Company's officers has or is
expected in the future to have a material adverse effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries. Except as set forth in the SEC Documents,
neither the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company's officers, has or is
expected to have a material adverse effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.
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(t) Tax Status. The Company and each of its subsidiaries has made
and filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject and (unless and
only to the extent that the Company and each of its subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) has 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 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 know of no basis for any such claim.
(u) Certain Transactions. Except as set forth in the SEC Documents,
and except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed in the SEC Documents, none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(v) Rights of First Refusal. The Company is not obligated to offer
the securities offered hereunder on a right of first refusal basis or otherwise
to any third parties including, but not limited to, current or former
shareholders of the Company, underwriters, brokers, agents or other third
parties.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
(b) Reporting Status. Until (i) the date as of which the Buyer(s)
shall have sold all of the Series F Preferred Stock are outstanding (the
"Registration Period"), the Company shall file in a timely manner all reports
required to be filed with the SEC pursuant to the 1934 Act and the regulations
of the SEC there under, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations there under would otherwise permit such termination.
(c) Use of Proceeds. The Company will use the proceeds from the sale
of the Series F Preferred Stock for general corporate and working capital
purposes.
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(d) Fees and Expenses. Each of the Company and the Buyer(s) shall
pay all costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery of this
Agreement, and the Escrow Agreement. The Buyer(s) shall be entitled to a ten
percent (10%) discount on the Purchase Price.
In addition, the Company shall pay to Yorkville Advisors Management,
LLC a structuring fee of Fifteen Thousand Dollars ($15,000), which shall be paid
and deducted from the gross proceeds of the Closing. This fee shall be deemed
fully earned on the date hereof. The Company shall also pay a non-refundable due
diligence fee of Five Thousand Dollars ($5,000).
(e) Corporate Existence. So long as any of the Series F Preferred
Stock remain outstanding, the Company shall not directly or indirectly
consummate any merger, reorganization, restructuring, consolidation, sale of all
or substantially all of the Company's assets or any similar transaction or
related transactions (each such transaction, a "Sale of the Company") unless,
prior to the consummation of a Sale of the Company, the Company makes
appropriate provision to insure that, upon the consummation of such Sale of the
Company, each of the holders of the Series F Preferred Stock will thereafter
have the right to acquire and receive such shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for the number of
shares of Common Stock immediately theretofore acquirable and receivable had
such Sale of the Company not taken place. In any such case, the Company will
make appropriate provision with respect to such holders' rights and interests to
insure that the provisions of this Section 4(e) will thereafter be applicable to
the Series F Preferred Stock.
(f) Transactions With Affiliates. So long as any Series F Preferred
Stock is outstanding, the Company shall not, and shall cause each of its
subsidiaries not to, enter into, amend, modify or supplement, or permit any
subsidiary to enter into, amend, modify or supplement any agreement,
transaction, commitment, or arrangement with any of its or any subsidiary's
officers, directors, person who were officers or directors at any time during
the previous two (2) years, stockholders who beneficially own five percent (5%)
or more of the Common Stock, or Affiliates (as defined below) or with any
individual related by blood, marriage, or adoption to any such individual or
with any entity in which any such entity or individual owns a five percent (5%)
or more beneficial interest (each a "Related Party"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b) any
investment in an Affiliate of the Company, (c) any agreement, transaction,
commitment, or arrangement on an arms-length basis on terms no less favorable
than terms which would have been obtainable from a person other than such
Related Party, (d) any agreement transaction, commitment, or arrangement which
is approved by a majority of the disinterested directors of the Company, for
purposes hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment, or arrangement. "Affiliate" for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. "Control" or "controls"
for purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity.
11
(g) Restriction on Issuance of Common Stock or Preferred Stock. So
long as any Series F Preferred Stock is outstanding, the Company shall not,
without the prior written consent of the Buyer(s), (i) issue or sell shares of
Common Stock or Preferred Stock with or without consideration, (ii) issue any
warrant, option, right, contract, call, or other security instrument granting
the holder thereof, the right to acquire Common Stock with or without
consideration, (iii) enter into any security instrument granting the holder a
security interest in any and all assets of the Company, or (iv) file any
registration statement on Form S-8. The foregoing restriction shall not apply to
any issuances C. Xxxxxx XxXxxxxx, employees, advisory committee members or
directors under a stock option plan that will be authorized to issue no more
than Eight Hundred Sixty Million (860,000,000) shares of Common Stock.
(h) Increase the Authorized Shares of Common Stock. The Board of
Directors and officers of the Company shall recommend for and vote for approval
of the increase of the number of authorized shares of Common Stock of the
Company to 20 billion shares.
5. INTENTIONALLY NOT USED.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Series F
Preferred Stock to the Buyer(s) 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 the Company's sole benefit and may be waived by
the Company at any time in its sole discretion:
(a) Each Buyer shall have executed this Agreement and the Escrow
Agreement and delivered the same to the Company.
(b) The Buyer(s) shall have delivered to the Escrow Agent the
Purchase Price for the Series F Preferred Stock in respective amounts as set
forth next to each Buyer as outlined on Schedule I attached hereto and the
Escrow Agent shall have delivered such funds to the Company by wire transfer of
immediately available U.S. funds pursuant to the wire instructions provided by
the Company.
(c) The representations and warranties of the Buyer(s) shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer(s) shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer(s) at or prior to the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer(s) hereunder to purchase the Series F
Preferred Stock 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 the Buyer's sole benefit and may be waived by the Buyer(s) at
any time in its sole discretion:
12
(a) The Company shall have executed the Transaction Documents, and
delivered the same to the Buyer(s).
(b) The Common Stock shall be authorized for quotation on The
National Association of Securities Dealers Inc.'s Over-The-Counter Bulletin
Board, trading in the Common Stock shall not have been suspended for any reason.
(c) The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate, executed by the President of the Company, dated as
of the Closing Date, to the foregoing effect and as to such other matters as may
be reasonably requested by the Buyer including, without limitation an update as
of the Closing Date regarding the representation contained in Section 3(c)
above.
(d) The Company shall have delivered to the Buyer(s) the Series F
Preferred Stock in the respective amounts set forth opposite each Buyer(s) name
on Schedule I attached hereto.
(e) The Buyer(s) shall have received an opinion of counsel from
Counsel to the Company in a form satisfactory to the Buyer(s).
(f) The Company shall have provided to the Buyer(s) a certificate of
good standing from the Secretary of State of Delaware.
(g) The Company shall have obtained the approval of its board of
directors to adopt the Certificate of Designation of Series F Preferred Stock.
(h) The Company shall have filed the Certificate of Designation with
the Secretary of the State of Delaware and shall have delivered the filed copy
to the Buyer.
8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Series F Preferred Stock hereunder, and in addition
to all of the Company's other obligations under this Agreement, the Company
shall defend, protect, indemnify and hold harmless the Buyer(s) and each other
holder of the Series F Preferred Stock, and all of their officers, directors,
employees and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the "Buyer Indemnitees") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Buyer
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Buyer Indemnitees or any of them as
a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement,
the Escrow Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, the Escrow Agreement or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim brought or made against such Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement or any other instrument, document or agreement
executed pursuant hereto by any of the Indemnitees, any transaction financed or
to be financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Series F Preferred Stock or the status of the Buyer or
holder of the Series F Preferred Stock, as a Buyer of Series F Preferred Stock
in the Company. To the extent that the foregoing undertaking by the Company may
be unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
13
(b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Buyer's other obligations under this
Agreement, the Buyer shall defend, protect, indemnify and hold harmless the
Company and all of its officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Company Indemnitees") from
and against any and all Indemnified Liabilities incurred by the Indemnitees or
any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Buyer(s) in this Agreement, or any certificate, instrument or document
contemplated hereby or thereby executed by the Buyer, (b) any breach of any
covenant, agreement or obligation of the Buyer(s) contained in this Agreement or
any other certificate, instrument or document contemplated hereby or thereby
executed by the Buyer, or (c) any cause of action, suit or claim brought or made
against such Company Indemnitee based on material misrepresentations or due to a
material breach and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other instrument, document
or agreement executed pursuant hereto by any of the Company Indemnitees. To the
extent that the foregoing undertaking by each Buyer may be unenforceable for any
reason, each Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
9. GOVERNING LAW: MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New Jersey without
regard to the principles of conflict of laws. The parties further agree that any
action between them shall be heard in Xxxxxx County, New Jersey, and expressly
consent to the jurisdiction and venue of the Superior Court of New Jersey,
sitting in Xxxxxx County and the United States District Court for the District
of New Jersey sitting in Newark, New Jersey for the adjudication of any civil
action asserted pursuant to this Paragraph.
(b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which 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. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
14
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(e) Entire Agreement, Amendments. This Agreement supersedes all
other prior oral or written agreements between the Buyer(s), the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
(f) Notices. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon confirmation of receipt, when sent by facsimile;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company, to: Celerity Systems, Inc.
0000 Xxxxx Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: C. Xxxxxx XxXxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000 0000
With a copy to: Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx, LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Investor: At the address listed on Schedule I.
15
With Copy to: Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx -Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxx, Esq.
Senior Vice-President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer(s), to its address and facsimile number on Schedule I,
with copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party
hereto.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(i) Survival. Unless this Agreement is terminated under Section
11(l), the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4 and 10, and the indemnification provisions set forth in Section 8,
shall survive the Closing for a period of one (1) year following the date on
which the Series F Preferred Stock are converted in full. The Buyer(s) shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
(j) Publicity. The Company and the Buyer(s) shall have the right to
approve, before issuance any press release or any other public statement with
respect to the transactions contemplated hereby made by any party; provided,
however, that the Company shall be entitled, without the prior approval of the
Buyer(s), to issue any press release or other public disclosure with respect to
such transactions required under applicable securities or other laws or
regulations (the Company shall use its best efforts to consult the Buyer(s) in
connection with any such press release or other public disclosure prior to its
release and Buyer(s) shall be provided with a copy thereof upon release
thereof).
(k) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Termination. In the event that the Closing shall not have
occurred with respect to the Buyers on or before five (5) business days from the
date hereof due to the Company's or the Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the non-breaching party's
failure to waive such unsatisfied condition(s)), the non-breaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party.
16
(m) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
17
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY:
CELERITY SYSTEMS, INC.
By: /s/ C. Xxxxxx XxXxxxxx
----------------------------------
Name: C. Xxxxxx XxXxxxxx
Title: Chief Executive Officer
18
SCHEDULE I
SCHEDULE OF BUYERS
Address/Facsimile Amount of
Name Signature Number of Buyer Subscription
--------------------------- --------------------------------- ---------------------------------- ---------------------------
Cornell Capital Partners,LP By: Yorkville Advisors, LLC 000 Xxxxxx Xxxxxx - Xxxxx 0000 $1,000,000.00
Its: General Partner Xxxxxx Xxxx, XX 00000
Facsimile:(000)000-0000
By: /s/ Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Its: Portfolio Manager
