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EXHIBIT 99.1
SUBSCRIPTION AGREEMENT
This Subscription Agreement (this "Agreement") dated as of June 16,
2000 is made between Celerity Systems, Inc., a Delaware corporation, with an
office at 122 Perimeter Park Drive, Knoxville, Tennessee 37932 (the "Company"),
and the Kidston Family Corporation, LLC (the "Subscriber"). The Subscriber is
subscribing for 1,500,000 shares (the "Shares") of the Company's common stock,
$.001 par value per share (the "Common Stock"), at a purchase price (the
"Purchase Price") of $1,020,000 or $0.68 per share.
WHEREAS, the Subscriber desires to subscribe for the Shares and the
Company desires to accept such subscription;
NOW, THEREFORE, in consideration of the premises and the agreements,
representations and warranties of the parties contained herein, the parties
hereby agree as follows:
1. AGREEMENT TO SUBSCRIBE. The Subscriber hereby irrevocably subscribes for and
agrees to purchase the Shares at the Purchase Price. The Subscriber is enclosing
with this Agreement a check (or checks) payable to the order of the Company in
the full amount of the Purchase Price.
2. ACCEPTANCE OF SUBSCRIPTION. Deposit and collection of any check tendered
herewith shall not be deemed an acceptance of the Subscriber's subscription. The
sole evidence of such acceptance shall be the delivery to the Subscriber of a
copy of this Agreement duly executed by an executive officer of the Company. The
Subscriber acknowledges that until such execution and delivery, this
subscription shall not have been accepted, and no sale of the Shares to the
Subscriber shall have occurred. Promptly following the date of the acceptance of
this Subscription (the "Closing Date"), the Company will mail to the Subscriber
an appropriately signed stock certificate representing the Shares, registered in
Subscriber's name and bearing the restrictive legend provided for in Section
6(c).
3. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER. The Subscriber represents,
warrants and agrees with the Company as follows:
a. In evaluating the suitability of an investment in the Company, the
Subscriber has only relied upon information provided to the Subscriber by the
Company specifically in connection with this Agreement and the Confidential
Private Placement Memorandum dated May 31, 2000, together with any supplements
or amendments thereto (the "Memorandum"). In addition, the Subscriber has
carefully read the Memorandum (including, without limitation, all Appendices
thereto) and is familiar with and understands the terms of the offering. With
respect to individual or other tax and other economic considerations involved in
this investment, the Subscriber is not relying on the Company (or any agent of
the Company) or any other person. The Subscriber has carefully considered and
has, to the extent the Subscriber believes such discussion necessary, discussed
with
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the Subscriber's professional legal, tax, accounting and financial advisers the
suitability of an investment in the Shares for the Subscriber's particular tax
and financial situation and has determined that the Shares being subscribed for
by the Subscriber are a suitable investment for the Subscriber.
b. The Subscriber acknowledges that all documents pertaining to this
investment have been made available for inspection by the Subscriber, the
Subscriber's attorney, accountant or adviser(s). The Subscriber and/or the
Subscriber's adviser(s) has/have had a reasonable opportunity to ask questions
of and receive answers from a person or persons acting on behalf of the Company
concerning the investment in the Shares, including, without limitation, the
risks inherent in such an investment, and all such questions have been answered
to the full satisfaction of the Subscriber.
c. The Subscriber is not subscribing for the Shares as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or meeting.
d. By reason of the business or financial experience, including
experience in investing in non-listed and non-registered securities, of the
Subscriber or the Subscriber's professional advisors, who are unaffiliated with
and who are not compensated by the Company or any affiliate of any of them,
directly or indirectly, the Subscriber and/or such professional advisors are
sophisticated investors and have the capacity to protect the Subscriber's
interests in connection with the investment in the Shares.
e. If the Subscriber is a natural person, the Subscriber has reached
the age of majority in the state in which the Subscriber resides, has adequate
means of providing for the Subscriber's current financial needs and
contingencies, is able to bear the substantial economic risks of an investment
in the Shares for an indefinite period of time, has no need for liquidity in
such investment and, at the present time, could afford a complete loss of such
investment. The Subscriber acknowledges that there is no public market for the
Shares, and there can be no assurance that any such market will ever develop.
f. The Subscriber or the Subscriber's purchaser representative, as the
case may be, has such knowledge and experience in financial, tax and business
matters so as to enable the Subscriber to utilize the information made available
to the Subscriber in connection with the investment in the Shares to evaluate
the merits and risks of an investment in the Shares, and to make an informed
investment decision with respect thereto.
g. None of the Shares has been registered under the Securities Act of
1933, as amended (the "Securities Act"), or under the securities laws of any
state. The Subscriber represents that the Subscriber is purchasing the Shares
for the Subscriber's own account, for investment and not with a view to resale
or distribution. The Subscriber has not offered or sold the Shares or any
portion thereof nor does the Subscriber have any present intention of dividing
such Shares with others or of selling, distributing or otherwise disposing of
any portion of such Shares either currently or after the passage of a fixed or
determinable period of time or upon the occurrence or non-occurrence of any
predetermined event or circumstance in violation of the Securities Act. The
Subscriber
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understands that it is the position of the Securities and Exchange Commission
(the "Commission") that the statutory basis for an exemption under the
Securities Act would not be present in connection with the issuance of the
Shares if the Subscriber's present intention were to purchase the Shares with an
intent to resell or to hold such securities for a short period, for a deferred
sale, for a market rise, or for any other fixed period. The Subscriber is aware
that an exemption from the registration requirements of the Securities Act
pursuant to Rule 144 promulgated thereunder is not presently available; and, the
Company has no obligation to register the Shares subscribed for hereunder or to
make available an exemption from the registration requirements pursuant to such
Rule 144 or any successor rule for resale of the Shares.
h. The Subscriber recognizes that investment in the Shares involves
substantial risks, including loss of the entire amount of such investment.
i. The Subscriber is an "accredited investor" as such term is defined
in Rule 501 of Regulation D promulgated under the Securities Act ("Regulation
D") and, if the Subscriber is an individual, the Subscriber (i) has an
individual net worth (or joint net worth with his spouse) in excess of
$1,000,000; (ii) has had an individual income in excess of $200,000 in each of
1998 and 1999 and reasonably expects an individual income in excess of $200,000
for 2000 or (iii) has had a joint income with his spouse in excess of $300,000
in each of 1998 and 1999 and reasonably expects a joint income with his spouse
in excess of $300,000 for 2000, unless the following box is checked to indicate
non-accredited investor status. / /
j. If this Agreement is executed and delivered on behalf of a
partnership, corporation, trust or estate: (i) such partnership, corporation,
trust or estate has the full legal right and power and all authority and
approval required (A) to execute and deliver, or authorize execution and
delivery of, this Agreement and all other instruments executed and delivered by
or on behalf of such partnership, corporation, trust or estate in connection
with the purchase of the Shares; and (B) to purchase and hold such Shares; (ii)
the signature of the party signing on behalf of such partnership, corporation,
trust or estate is binding upon such partnership, corporation, trust or estate;
and (iii) such partnership, corporation, trust or estate has not been formed for
the specific purpose of acquiring the Shares, unless each beneficial owner of
such entity is qualified as an accredited investor within the meaning of Rule
501 of Regulation D and has submitted information substantiating such individual
qualification. This Agreement constitutes a valid and binding obligation of the
Subscriber, enforceable in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium, and similar laws affecting
creditors rights generally and to general principles of equity.
k. If the Subscriber is a retirement plan or is investing on behalf of
a retirement plan, the Subscriber acknowledges that investment in the Shares
poses additional risks, including the inability to use losses generated by an
investment in the Shares to offset taxable income.
l. If the Subscriber is not a United States person (as defined by
Section 7701(a)(3) of the Internal Revenue Code of 1986, as amended, or any
successor provision), the Subscriber hereby represents that it has satisfied
itself as to the full observance of the laws of its jurisdiction in
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connection with any invitation to subscribe for the Shares or any use of this
Agreement, including (i) the legal requirements within its jurisdiction for the
purchase of the Shares, (ii) any foreign exchange restrictions applicable to
such purchase, (iii) any governmental or other consents that may need to be
obtained, and (iv) the income tax and other tax consequences, if any, that may
be relevant to the purchase, holding, redemption, sale, or transfer of the
Shares. The Subscriber's subscription and payment for and continued beneficial
ownership of the Shares, will not violate any applicable securities or other
laws of any applicable non-United States jurisdiction.
m. The Subscriber has not engaged any "finder," broker or other
financial intermediary in connection with the purchase and sale of the Shares.
n. The execution and delivery by the Subscriber of this Agreement, its
consummation of the transaction contemplated hereby, and its compliance with the
provisions hereof, will not (i) if the Subscriber is a corporation or other
entity, violate or conflict with its Certificate of Incorporation or By-laws or
other constituent or organizational documents, (ii) violate, conflict with, or
give rise to any right of termination, cancellation, or acceleration under any
agreement or instrument to which the Subscriber is a party, (iii) result in the
imposition of any Encumbrance on any asset of the Subscriber, (iv) violate or
conflict with any laws or regulations applicable to the Subscriber, or (v)
require any consent or approval of, notice to, or filing with any entity or
person, except for any notice or filing which will be made on a timely basis.
For purposes of this Agreement, "Encumbrance" means any security interest,
mortgage, lien, pledge or charge.
4. ACKNOWLEDGMENTS OF THE SUBSCRIBER. The Subscriber understands, acknowledges
and agrees with the Company as follows:
a. Except as set forth in Sections 1 and 2 above, the Subscriber hereby
acknowledges and agrees that the subscription hereunder is irrevocable by the
Subscriber, that, except as required by law, the Subscriber is not entitled to
cancel, terminate or revoke this Agreement or any agreements of the Subscriber
hereunder. If the Subscriber is more than one person, the obligations of the
Subscriber hereunder shall be joint and several and the agreements,
representations, warranties and acknowledgments herein contained shall be deemed
to be made by and be binding upon each such person and such person's heirs,
executors, administrators, successors, legal representatives and permitted
assigns.
b. No federal or state agency has made any finding or determination as
to the accuracy or adequacy of the information contained in the Business Plan or
otherwise or as to the fairness of the terms of the purchase and sale of the
Shares for investment nor any recommendation or endorsement of the investment in
the Shares.
c. The purchase and sale of the Shares is intended to be exempt from
registration under the Securities Act by virtue of Section 4(2) or 3(b) of the
Securities Act, and, if applicable, in the sole judgment of the Company, the
provisions of Regulation D thereunder, which is in part dependent upon the
truth, completeness and accuracy of the statements made by the Subscriber herein
and in any other documents furnished by the Subscriber to the Company.
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d. It is understood that in order not to jeopardize the exempt status
under Section 4(2) or 3(b) of the Securities Act of the purchase and sale of the
Shares and, if applicable, in the sole judgment of the Company, Regulation D
thereunder, any transferee of the Shares (if such transfer is otherwise
permitted hereunder) may be required to fulfill the investor suitability
requirements thereunder.
e. The representations, warranties and agreements of the Subscriber
contained herein and in any other writing delivered in connection with the
transactions contemplated hereby shall be true and correct in all respects on
and as of the date of the sale of the Shares as if made on and as of such date
and shall survive the execution and delivery of this Agreement and the purchase
of the Shares.
f. Insofar as indemnification for liabilities under the Securities Act
may be permitted to directors, officers or controlling persons of the Company,
the Company has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable to such extent.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents,
warrants and agrees with the Subscriber as follows:
a. The Company is a corporation duly organized and validly existing
under the laws of the State of Delaware and has full corporate power and
authority to execute this Agreement and to consummate the transactions herein
described.
b. The Shares, when issued in accordance with all of the provisions
hereof, will be fully-paid and non-assessable.
c. The Company has taken all corporate action necessary to authorize
its execution and delivery of this Agreement, the performance of its obligations
hereunder, and its consummation of the transaction contemplated hereby. This
Agreement has been executed and delivered by an officer of the Company in
accordance with such authorization. This Agreement constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms,
subject to applicable bankruptcy, reorganization, insolvency, moratorium, and
similar laws affecting creditors rights generally and to general principles of
equity.
d. The execution and delivery by the Company of this Agreement, its
consummation of the transaction contemplated hereby, and its compliance with the
provisions hereof, will not, except to the extent that any of the matters
described in clause (ii), (iii), (iv) or (v) would not have a material adverse
effect upon the Company, (i) violate or conflict with its Certificate of
Incorporation or By-laws, (ii) violate, conflict with, or give rise to any right
of termination, cancellation, or acceleration under any agreement or instrument
to which the Company is a party, (iii) result in the imposition of any
Encumbrance on any asset of the Company, (iv) violate or conflict with any laws
or regulations applicable to the Company, or (v) require any consent or approval
of, notice to, or filing with any entity or person, except for any notice or
filing which will be made on a timely basis.
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e. Assuming the accuracy of representations and warranties of
Subscriber contained in this Agreement (which are based, in part, on the
information supplied to Subscriber by the Company), the sale of the Shares
contemplated hereby is exempt from registration under the Securities Act.
f. The Company has not engaged any "finder," broker or other financial
intermediary in connection with the purchase and sale of the Shares.
6. TRANSFERS OF SHARES.
a. Neither the Subscriber nor any other person or entity shall,
directly or indirectly, sell, transfer, assign, pledge, bequeath, hypothecate,
mortgage, grant any proxy with respect to, or in any other way encumber or
otherwise dispose of (collectively, "transfer") the whole or any part of his or
its Shares or any interest therein, except as permitted under the Securities Act
and applicable state securities laws, pursuant to registration thereunder or
exemption therefrom. Unless the Shares are so registered, the Company shall have
received a written opinion of counsel, which counsel and opinion are reasonably
satisfactory to counsel for the Company, to the effect that such disposition is
exempt from the registration requirements of the Securities Act and any other
applicable securities laws, together with such other documentation, executed by
the Subscriber and/or the transferee, as the Company may require. The
undersigned hereby consents to the placement by the Company of stop transfer
orders with respect to the Shares with any transfer agent, transfer clerk or
other agent at any time acting for the Company.
b. The Subscriber further agrees that each certificate representing any
of the Shares shall be stamped or otherwise imprinted with a legend
substantially in the following form:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or any state securities laws and
neither the securities nor any interest therein may be offered, sold,
transferred, pledged or otherwise disposed of except pursuant to an
effective registration statement under such act or such laws or an
exemption from registration under such act and such laws, which is
available, in the opinion of counsel for the holder, which counsel and
opinion are reasonably satisfactory to counsel for this corporation."
7. REGISTRATION. The Company agrees to file a Registration Statement covering
the resale of the Shares within ninety (90) days from the Closing Date.
Furthermore, the Company shall apply commercially reasonable efforts to the aim
of having the Registration Statement declared effective within one hundred
ninety-five (195) days from the Closing Date. In the event that the Registration
Statement is not declared effective within one hundred ninety-five (195) days,
the Company will pay damages to the Subscriber in the amount of two percent (2%)
of the Purchase Price of the Shares then outstanding, payable in cash or stock
at the Company's option, each month until the Registration Statement is declared
effective or the Shares may be sold by the Subscriber pursuant to Rule 144
promulgated under the Securities Act.
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8. USE OF PROCEEDS. The proceeds received by the Company from the sale of the
Shares shall be used to advance the corporate purposes of the Company and for
other working capital purposes in accordance with Exhibit A.
9. CONFIDENTIALITY. The Subscriber acknowledges and agrees that all information
disclosed and materials distributed in connection with the transactions
contemplated by this Agreement or during any meeting of the Company's Board of
Directors is confidential information and that it will not disclose or
distribute to any person or use for its own account any such confidential
information. The Subscriber agrees further with respect to all such confidential
information, that (a) such confidential information shall remain the property of
the Company, (b) unless otherwise authorized by the Company or required by law,
the Subscriber shall use the confidential information solely in connection with
the transactions contemplated hereby (a "Designated Purpose"), (c) the
Subscriber shall not disclose such confidential information to anyone except (i)
those of its officers, directors, agents, employees and advisors with a need to
know in connection with the Designated Purpose, and shall notify each individual
who is permitted access to the confidential information that such disclosure has
been made in confidence, or (ii) as may be required by law or any legal process,
and (d) the Subscriber shall not copy or reproduce any confidential information
except to the extent necessary for its permitted use.
10. NOTICES. Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered,
delivered by recognized national courier service or sent by registered or
certified mail, return receipt requested, addressed: (i) if to the Company, at
the address set forth in the preamble hereto and to the attention of its
President, with a copy to Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551
Fifth Avenue, New York, NY 10176, attention: Shalom Leaf or (ii) if to the
Subscriber, at the address set forth on the signature page hereto, or at such
other address as may have been specified by written notice given in accordance
with this Section 11; provided that the Subscriber agrees that in no event shall
the Company be required to furnish any notice hereunder to more than one person
(together with a copy to one counsel) on behalf of Subscriber.
11. GOVERNING LAW; JURISDICTION. This Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of New York,
as such laws are applied by New York courts to agreements entered into and
wholly to be performed in New York by and between residents of New York. The
parties agree that any and all claims arising under this Agreement or relating
thereto shall be heard and determined either in the United States District Court
for the Southern District of New York or in the courts of the State of New York
located in the City and County of New York. The parties agree to submit
themselves to the personal jurisdiction of those courts and not to raise any
objection to venue being had in those courts.
12. MISCELLANEOUS. If any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any
provision hereof that may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision hereof. This
Agreement may not be assigned by
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the Subscriber, in whole or in part, without the prior written consent of the
Company. This Agreement shall be binding upon the Subscriber, the Subscriber's
heirs, estate, legal representatives, successors and assigns and shall inure to
the benefit of the Company, its successors and assigns. This Agreement
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements, oral or written. This
Agreement may be amended or modified only by a writing executed by both parties
hereto, and no provision hereof may be waived, except in a writing executed by
the waiving party. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
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The Subscriber has read this Agreement carefully and fully understands
its provisions.
IN WITNESS WHEREOF, the Subscriber has executed this Agreement as of
the 16th day of June, 2000.
Signature of individual Subscriber(s):
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Signature of Corporation,
partnership, trust, or estate Subscriber: Kidston Family Companies
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(Name of Entity)
By: /s/ Edward A. Kidston
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Name: Edward A. Kidston
Title: President
Tax Identification No. of Subscriber
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The terms of the foregoing, including the subscription described
therein, are agreed to and accepted on this 20th day of June, 2000.
CELERITY SYSTEMS, INC.
By: /s/ Kenneth D. Van Meter
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Kenneth D. Van Meter, President
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EXHIBIT A
USE OF PROCEEDS
The following is an estimate of the use of proceeds. However, depending
on business obtained and other factors, these amounts may vary significantly.
As of June 14, 2000
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Engineering, operations and product development: 40%
Sales and marketing: 20%
Rent and other facilities costs: 15%
Management, legal, accounting, etc.: 25%
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The Company will not use more than 25% of the Purchase Price to pay any
prior creditors, except as may be required by a court or other relevant
authority. Furthermore, none of the amounts will be used to repay loans to
insiders. The current intention of the Company is to use the funds to pay normal
operating expenses of the Company, including hiring and retaining staff, so as
to further, to the extent possible, the current and future business activities
of the Company. In some cases, this will involve the payment of past due
balances to some current and former vendors.
Based on the current cash position of the Company, and without assuming
revenue from operations, the Company anticipates that its existing capital
resources, together with the proceeds received from the Subscriber, will enable
it to maintain its operations for approximately nine months. However, the
Company may obtain revenue or cash from other sources, thereby extending such
period. The Subscriber understands that the statements contained in this Exhibit
A constitute forward-looking statements and information and that such
forward-looking statements and information (i) are based upon a variety of
assumptions and estimates and (ii) are uncertain, in part because of the known
and unknown risks, uncertainties and other factors inherent in the realization
by the Company of its business plan.
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