Exhibit 10.1
CORNELL CAPITAL PARTNERS, LP
000 XXXXXX XXXXXX, XXXXX 0000
XXXXXX XXXX, XXX XXXXXX 00000
August 29, 2005
PREFERRED STOCK
PERSONAL AND CONFIDENTIAL
On the terms and subject to the conditions set forth below, Cornell
Capital Partners, LP (the "Investor") will commit to purchase $1.0 million of
preferred stock from Celerity Systems Inc. (the "Issuer") on the principal terms
set forth below. This letter is binding and the parties will enter into formal
agreements setting forth their respective rights and obligations. Such
agreements will contain customary representations, warranties and
indemnifications. The material terms of the offering are set forth below:
Issuer Celerity Systems Inc. (CESY)
Investor Cornell Capital Partners, LP
Securities Preferred Stock ("Preferred")
Amount $1,000,000 ("Commitment Amount") which
will be disbursed on the Closing Date
Dividend Rate 0% per annum although if the outstanding
shares of the company become less than 4
billion shares prior to conversion, the
Preferred will accrue a dividend at 12%
per annum.
Liquidation Preference $100,000
Closing Date The closing date will be the date on which
definitive documents are signed by and
between the Issuer and Investor ("Closing
Date"). It is estimated that the Closing
Date shall take place within a reasonable
amount of time from the execution of this
term sheet, notwithstanding any and all
due diligence and documentation issues
that can arise.
August 31, 2005
Page 2 of 4
Redemption The Issuer shall have the right to redeem
the Preferred upon three (3) business days
prior written notice, any or
all-outstanding Preferred remaining in its
sole discretion. The redemption price
shall be one hundred twenty-five percent
(125%) of the face amount redeemed plus
accrued dividends.
Conversion Upon termination of the Issuer's status as
a business development company under the
Investment Company Act of 1940, the
Preferred will become convertible. At
such time, the Investor shall have the
right to convert the Preferred including
accrued dividends, at its sole option and
at any time, into Common Stock of the
Issuer at a fixed conversion price equal
to $0.001 per share ("Conversion Price").
In no event shall the number of shares
issuable to the Investor cause the
aggregate number of shares of common stock
beneficially owned by the Investor and its
affiliates exceed four and 9/10 percent
(4.9%) of the then outstanding common
stock of the company.
Registration Rights Promptly, but no later than forty-five
(45) calendar days from the Closing Date,
the Issuer shall file a registration
statement with the United States
Securities & Exchange Commission ("SEC")
for the Preferred and Warrants (see below)
and use its best efforts to ensure that
such registration statement is declared
effective within one hundred twenty (120)
calendar days from the Closing Date. In
the event the registration statement is
not declared effective within one hundred
twenty (120) calendar days, then the
Issuer shall pay to the Investors a cash
amount within 3 business days of the end
of the month equal to two percent (2.0%)
per month of the Liquidation Value of the
Preferred outstanding as liquidated
damages and not as a penalty. The Issuer
shall keep the registration statement
"Evergreen" for the life of the
Convertible. The Issuer shall use a
recommended law firm to file the
registration statement.
Due Diligence Fee The Issuer shall pay the Investor at
closing a due diligence fee of $5,000 in
connection with this transaction.
August 31, 2005
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Structuring Fee The Issuer shall pay the Investor at
closing a structuring fee of $15,000 in
connection with this transaction. The
Issuer shall be responsible for all of its
own fees and expenses incurred in
connection with the documentation and
closing of this transaction.
Banker Fee For its services, the Issuer shall pay the
Investor a commitment fee of 10% of the
Commitment Amount, which shall be paid
proportionally upon each disbursement.
Share Issuance
At all times, the Issuer shall keep
available Common Stock duly authorized for
issuance against the Preferred including
the Escrow Shares. If at any time, the
Issuer does not have available an amount
of authorized and non-issued Common Stock
necessary to satisfy issuance of the
Escrow Shares, the Issuer shall call and
hold a special meeting within thirty (30)
days of such occurrence, for the sole
purpose of increasing the number of shares
of Common Stock authorized. Management of
the Issuer shall recommend to shareholders
to vote in favor of increasing the number
of Common Stock authorized. Management
shall also vote all of its shares in favor
of increasing the number of Common Stock
authorized.
Short Selling
Neither the Investor nor its affiliates
has an open short position in the Common
Stock of the Issuer, and the Investor
agrees that it will not, and that it will
cause its affiliates not to, engage in any
short sales of, or hedging transactions
with respect to the Common Stock.
Confidentiality The existence of this term sheet and the
individual terms and conditions are of a
confidential nature and shall not be
disclosed to anyone, except the Issuer,
the Issuer's management and its Board of
Directors and its legal and accounting
advisors.
August 31, 2005
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If the terms and conditions contained herein are satisfactory, please sign
as indicated below. We appreciate this opportunity to work with you on this
investment. We look forward to an expeditious and successful closing of this
transaction.
Sincerely,
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors Management, LLC
Its: General Partner
By: _________________________________
Name: Xxxx Xxxxxx
Title: Portfolio Manager
AGREED TO AND ACCEPTED:
Celerity Systems Inc.
By: _________________________________
Name: Xxx Xxxxxxxx
Title: CEO
Dated: August ___, 2005
