Exhibit 10.2
CORNELL CAPITAL PARTNERS, LP
000 XXXXXX XXXXXX, XXXXX 0000
XXXXXX XXXX, XXX XXXXXX 00000
August 29, 2005
SEDA
PERSONAL AND CONFIDENTIAL
On the terms and subject to the conditions set forth below, Cornell
Capital Partners, LP (the "Investor") will commit to purchase up to $50.0
million of common stock of 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 Common Stock
Commitment Amount The Investor shall commit to purchase up
to $50,000,000 of Common Stock of the
Issuer over the course of 24 months after
an effective registration of the Common
Stock. The Issuer shall have the right,
but not the obligation, to sell Common
Stock to the Investor. Each right to sell
Common Stock is called an "Advance." Each
Advance may be up to $1,000,000.
Advance Notice In order to request an Advance, the Issuer
will submit a written notice (an "Advance
Notice") to the Investor. The Advance
Notice will specify the amount of the
Advance. Advance Notices may be delivered
to the Investor every 7 trading days after
the Common Stock is registered with the
Securities and Exchange Commission. The
date the Advance Notice is delivered to
the Investor is called an "Advance Notice
Date."
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Purchase Price The Issuer will sell to the Investor the
Common Stock at a purchase price equal to
98% of the Market Price. The "Market
Price" is the lowest closing bid price
("VWAP") of the Common Stock during the
five consecutive trading days after the
Advance Notice Date (the "Pricing Period").
Advance Date The Advance Date is the date on which the
sale of the Common Stock and the payment
of the Purchase Price are completed. Each
Advance Date will be on the first trading
day after the end of the relevant Pricing
Period. On each Advance Date, the Issuer
will cause the delivery of whole shares of
common stock to the Investor or its
designees via DWAC, against payment
therefore to the Issuer's designated
account by wire transfer of immediately
available funds (provided that the shares
of stock are received by the Investor no
later than 1:00 pm EST) or next day
available funds if the shares are received
thereafter.
No Short Sales The Investor will not, and that it will
cause its affiliates not to, engage in any
short sales with respect to the Common
Stock.
Registration Rights The Issuer shall file a registration
statement with the Securities and Exchange
Commission to register the shares of
common stock to be issued to the
Investor. The Issuer shall use its best
effort to get the registration statement
effective. The Issuer shall continuously
maintain the effectiveness of the
registration statement for a period of 24
months after the effective date. The
Issuer shall pay all offering expenses in
connection with the registration.
The Issuer shall pay the Investor a
Structuring Fee structuring fee in connection with this
transaction of $10,000 upon closing. The
Issuer shall be responsible for all of its
own fees and expenses incurred in
connection with the documentation and
closing of this transaction.
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Commitment Fee Upon closing, the Issuer shall issue to
the Investor restricted shares and/or
warrants of the Issuer's common stock in
an amount equal to 2% of the Commitment
Amount based on a share price of $0.001
per share. The day of closing is the day
the definitive documents are signed by
both parties. These shares and warrants
shall have "piggy-back" and demand
registration rights.
The number of restricted shares issued
will be limited to less than 4.9% of the
total outstanding shares of the Issuer at
closing. To the extent that the
Commitment Fee exceeds the value of the
restricted shares, the difference will be
issued in the form of warrants with a
strike price of $0.001 per share. The
number of warrants will be determined by
dividing the remaining portion of the
Commitment Fee by the difference between
closing bid price on the day prior to the
Closing Date and $0.001 per share.
Commission Upon each Advance, the Investor shall
receive directly from escrow cash
compensation equal to five percent (5%) of
the gross proceeds of such Advance.
Condition Issuer will agree to exchange
approximately 800 million shares of common
stock owned by Investor for convertible
preferred stock that is convertible into
800 million shares of common stock with
registration rights. The preferred stock
will be subject to a cap whereby at no
time will the Investor be able to convert
into greater than 9.9% of the outstanding
common stock of the Issuer.
Issuer will terminate its status as a
business development company under the
Investment Company Act of 1940.
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 to the Issuer,
the Investor and their respective legal
advisors.
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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. 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
By: Yorkville Advisors Management, LLC
Its: General Partner
AGREED TO AND ACCEPTED:
Celerity Systems Inc.
By: _______________________________
Name: Xxx Xxxxxxxx
Title: CEO
Dated: August ___, 2005
