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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 15, 2000
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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REGISTRATION STATEMENT ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
------------------------------
CELERITY SYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C>
DELAWARE 52-2050585
(State or jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
122 PERIMETER PARK DRIVE
KNOXVILLE, TENNESSEE 37922
(865) 539-5300
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
KENNETH D. VAN METER, PRESIDENT
122 PERIMETER PARK DRIVE
KNOXVILLE, TENNESSEE 37922
(865) 539-3601
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
------------------------------
COPIES TO:
DAVID GONZALEZ, ESQ.
BUTLER GONZALEZ, LLP
1000 STUYVESANT AVENUE
UNION, NEW JERSEY 07083
(908) 810-8588 / (908) 810-0973 (FAX)
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per share,
issuable upon conversion of the outstanding
principal amount of, and other amounts due
under, the Company's $110,000 principal
amount of 4% Convertible Debentures due
2002......................................... 143,000(1)(2) $2.00 $286,000 $76
Common Stock, par value $.001 per share,
issuable upon conversion of the outstanding
principal amount of, and other amounts due
under, the Company's $204,980 principal
amount of 8% Convertible Debentures due
2002......................................... 266,474(1)(2) $2.00 $532,948 $141
Common Stock, par value $.001 per share,
issuable upon conversion of outstanding
principal amount of, and other amounts due
under, the Company's $10,000 principal amount
of 8% Convertible Debentures due 2003........ 13,000(1)(2) $2.00 $26,000 $7
Common, stock, par value $.001 per share,
issuable upon conversion of the outstanding
principal amount of, and other amounts due
under, the Company's $5,000,000 principal
amount of 4% Convertible Debentures are due
2004, which are issued pursuant to a Line of
Credit Agreement............................. 899,037(1)(2) $2.00 $1,798,074 $475
Common Stock, par value $.001 per share,
issuable upon the exercise of certain
outstanding warrants issued September 30,
1999 and expiring on September 29, 2002...... 250,000(1) $2.00 $500,000 $132
Common Stock, par value $.001 per share...... 750,000(1) $2.00 $1,500,000 $396
Total Common Stock, par Value $.001 per
share........................................ 2,321,511 $2.00 $4,643,022 $1,226
</TABLE>
(1) Determined pursuant to Rule 457(C) under the Securities Act of 1933, as
amended, on the basis of fluctuating market prices, solely for the purpose
of calculating the registration fee.
(2) Pursuant to Rule 416 of the Securities Act of 1933, as amended, the
Registrant hereby registers such additional shares as may be issuable
pursuant to certain anti-dilution provisions of any of the Convertible
Debentures described above.
------------------------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
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SUBJECT TO COMPLETION DATED FEBRUARY 15, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS
2,321,511 SHARES OF COMMON STOCK
CELERITY SYSTEMS, INC.
122 PERIMETER PARK DRIVE
KNOXVILLE, TENNESSEE 37922
(865) 539-5300 (PHONE)
(865) 539-3502 (FAX)
---------------------
Certain stockholders of Celerity Systems, Inc. are offering and selling up
to 2,321,511 shares of the Company's common stock under this prospectus. Of such
shares, we are offering 899,037 shares of common stock that are or may be
issuable upon conversion of the outstanding principal amount of, and interest
and other amounts due under, our $5,000,000 principal amount of 4% Convertible
Debentures due 2004, which are to be issued pursuant to a Line of Credit
Agreement entered into by the Company; 143,000 shares of common stock that are
or may be issuable upon conversion of the outstanding principal amount of, and
interest and other amounts due under our $110,000 principal amount of 4%
Convertible Debentures due 2002; and 266,474 shares of common stock that are or
may be issusable upon conversion of the outstanding principal amount of, and
interest and other amounts due under our $204,980 principal amount of 8%
Convertible Debentures due 2002; 13,000 shares of common stock that are or may
be issuable upon conversion of the outstanding principal amount of, and interest
and other amounts due under our $10,000 principal amount of 8% Convertible
Debentures due 2003; and 250,000 shares of common stock that are or may be
issuable upon exercise of outstanding warrants of the Company issued
September 30, 1999 and expiring on September 29, 2002. See the "Plan of
Distribution" on Page 17.
The Company will not receive any proceeds from the sale of the common stock
by the selling stockholders or upon conversion of any of the Convertible
Debentures. The Company will receive $0.83 per share upon exercise of the
warrants.
Information concerning the selling stockholders may change from time to time
and will be set forth in supplements to this prospectus.
OTC Bulletin Board Symbol--"CLRT"
On February 9, 2000, the closing bid price of the common stock as reported
by the OTC Bulletin Board was $2.00.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
You should read all of this prospectus, especially the section "Risk
Factors" starting on page 3, and the current public information and audited
financial statements described in "Where You Can Find More Information" on page
22 of this prospectus, before deciding whether to purchase the common stock
offered in this prospectus.
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THE DATE OF THIS PROSPECTUS IS FEBRUARY 10, 2000.
SUMMARY OF THE OFFERING
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<S> <C>
Securities Offered........................ 2,321,511 shares of the Company's common stock. Of such
shares, the Company is also offering 899,037 shares of
common stock that are or may be issuable upon conversion
of the outstanding principal amount of, and interest and
other amounts due under, the Company's amount of
Convertible Debentures due 2004, which are to be issued
pursuant to a Line of Credit Agreement entered into by
the Company; 143,000 shares of common stock that are or
may be issuable upon conversion of the outstanding
principal amount of, and interest and other amounts due
under, the Company's principal amount of 4% Convertible
Debentures due 2002; 266,474 shares of common stock that
are or may be issuable upon conversion of the Company's
outstanding principal amount of, and interest and other
amounts due under, the principal amount of 8%
Convertible Debentures due 2002; 13,000 shares of common
stock that are or may be issuable upon conversion of the
outstanding principal amount of, and interests and other
amounts due under the Company's $10,000 principal amount
of 8% Convertible Debentures due 2003; and 250,000
shares of common stock that are or may be issuable upon
exercise of outstanding warrants of the Company issued
September 30, 1999 and expiring on September 29, 2002.
Use of Proceeds........................... The Company will not receive any of the proceeds from
the sale of the common stock offered by the Selling
Stockholders or upon conversion of any of the
Convertible Debentures described above. The Company will
receive $2.00 per share upon exercise of the warrants.
Risk Factors.............................. The securities offered hereby involve a high degree of
risk. See "RISK FACTORS" on page 3.
Offering Price............................ All or part of the shares of common stock offered hereby
may be sold from time to time in amounts and on terms to
be determined by the Selling Stockholders at the time of
sale.
OTC Bulletin Board Symbol................. "CLRT"
</TABLE>
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RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS IS
SUBJECT TO MANY RISKS. WE SUMMARIZE SOME OF THE MOST SERIOUS RISKS BELOW. THE
COMPANY IS ALSO SUBJECT TO MORE GENERAL RISKS DESCRIBED IN THE SECTION "SPECIAL
NOTE REGARDING FORWARD LOOKING STATEMENTS" BEGINNING ON PAGE 31. YOU SHOULD READ
AND UNDERSTAND ALL OF THE RISK FACTORS BEFORE MAKING A DECISION TO INVEST.
NEED FOR ADDITIONAL FINANCING
As of September 30, 1999 we had a cash and cash equivalents of approximately
$760.00 and a negative working capital of approximately $1,225,000. Our cash and
working capital positions have declined since that date, and we are dependent
upon the receipt of additional financing in order to continue as a viable
entity.
In the first quarter of 1999, we sold $600,000 aggregate principal amount of
convertible debentures in a private offering. In addition, in the third quarter
of 1999, the we received approximately $550,000 in two debt offerings. Also in
the third quarter of 1999, effective September 30, 1999, we entered into a
$5,000,000 Line of Credit Agreement with GMF Holdings and the May Davis Group.
Pursuant to the Line of Credit Agreement we may issue and sell to GMF Holdings
up to $5,000,000 principal amount of 4% Convertible Debentures during a period
beginning on the effective date of a registration statement covering our common
stock underlying the Convertible Debentures and ending September 30, 2000. Also
in the fourth quarter of 1999 we sold $110,000 aggregate principal amount of 4%
Convertible Debentures and $204,980 aggregate principal amount of 8% Convertible
Debentures in a private offering. In the first quarter of 2000 we sold $10,000
aggregate principal amount of 8% Convertible Debentures in a private offering.
The net proceeds from such financings have been and are intended to be
applied to our outstanding obligations and working capital.
We will not be able to continue operations without additional financing. The
receipt of any additional net proceeds will be applied to our working capital
needs and outstanding obligations. We cannot assure you that such Additional
financing will be available when needed on acceptable terms, or at all.
HISTORY OF LOSSES AND ACCUMULATED DEFICIT
We had net losses of $8,675,000 for fiscal 1997, $6,955,800 for fiscal 1998
and $2,440,000 for the nine months ended September 30, 1999. We had an
accumulated deficit of approximately $14,472,100 at December 31, 1997,
$21,428,000 at December 31, 1998 and $23,871,619 at September 30, 1999. Losses
have continued since September 30, 1999. We cannot assure you that we will
continue as a going concern or ever operate profitably. We may experience
fluctuations in future operating results as a result of a number of factors,
including delays in digital video product enhancements and new product
introductions. We cannot assure you that we will be able to develop commercially
successful products or that we will recognize significant revenues from such
products.
ABILITY TO CONTINUE AS A GOING CONCERN
The report of our independent accountants with respect to our December 31,
1998 financial statements contains an explanatory paragraph regarding the
uncertainty resulting from our recurring losses, and cash flow and working
capital problems. we have also significantly scaled back our operations as a
result of these factors. The lack of sales or a significant financial commitment
raises substantial doubt about our ability to continue as a going concern or to
operate our business on a full-scale basis. There can
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be no assurance that we will ever receive the funds necessary for us to continue
as a going concern or to operate our business on a full-scale basis.
LIMITED SALES; LIMITED MARKETING AND SALES EXPERIENCE
We have limited resources and limited experience in marketing and selling
our products. Our sales efforts are currently being supervised by our President.
We cannot assure you that we will be able to establish and maintain adequate
marketing and sales opportunities or make arrangements with others to perform
such activities.
We have not received any material new orders, other than an order in
September 1998 for $96,000 and an order in January 1999 for $1,253,000 ($13,000
of which has been recognized through the third quarter of 1999), for interactive
video projects since June 1997. We have discontinued our CD-ROM segment of
operations, although we have received a number of orders for CD-ROM products in
the fourth quarter of 1998 and continue to receive orders in 1999.
Achieving market penetration will require significant efforts to create
awareness of, and demand for, our products. Accordingly, our ability to expand
our customer base will depend upon our marketing efforts, including our ability
to establish an effective internal sales organization or strategic marketing
arrangements with others. Our failure to successfully develop marketing and
sales opportunities will have a material adverse effect on our business.
Further, we cannot assure you that such development will lead to sales of our
current or proposed products.
LACK OF DIVIDENDS
We have never paid any dividends on our common stock. We anticipate that,
for the foreseeable future, any earnings that may be generated from operations
will be used to support internal growth and that dividends will not be paid to
stockholders.
NECESSITY OF ATTRACTING AND RETAINING EMPLOYEES
Upon consummation of our initial pubic offering in November 1997, we
intended, subject to the availability of funds, to hire approximately 50
employees (in addition to our more than 60 then current employees) for
engineering, product development and operations; sales and marketing; and
management and administrative staff. Due, in large measure, our inability to
realize sufficient cash flow from operations, we have been unable to implement
our hiring plans. We have reduced our workforce to approximately 5 employees,
which includes the departure of the Vice President of Sales and Marketing in
October 1998, the Controller in January 1999, the Vice President of Business
Development in June 1999 and the Vice President of Engineering in
September 1999.
In 1998, we hired approximately 30 additional staff, but based on the lack
of new sales in the interactive video area, and our heavy requirement for cash
related to the development and initial manufacture of the T 6000 digital set top
box, we were required to layoff of a small number of employees, and a larger
number left us voluntarily, especially during the final six months of the year,
resulting in a reduction of approximately 45 staff from its peak number in
July 1998.
We are in arrears in paying compensation to our employees and will not be
able to continue to retain them if we do not obtain additional funds to pay
them.
DEPENDENCE ON KEY PERSONNEL
Our success depends to a significant extent on the performance and continued
service of senior management, particularly Kenneth D. Van Meter and Dennis
Smith. In addition, senior officers (with the exception of Mr. West, who is on
an extended leave of absence) joined us in 1997 and 1998 and do not have
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long-standing relationship with us. Our failure to retain the services of key
personnel or to attract additional qualified employees could adversely affect
us.
We have entered into employment agreements with Messrs. Van Meter and West.
Mr. Van Meter's employment agreement expired on January 20, 2000. Mr. West's
employment agreement expires May 1, 2000, and has been amended to provide for a
voluntary leave of absence continuing through the end of the term of his
employment agreement. Mr. Smith's employment may be terminated by him or the us
at any time.
DELISTING FROM THE THE NASDAQ SMALLCAP MARKET; TRADING ON THE OTC BULLETIN
BOARD; PENNY STOCK
On October 25, 1999 we were notified by Nasdaq that our common stock was
delisted from trading on the Nasdaq SmallCap Market effective October 21, 1999.
The delisting followed a Nasdaq panel's determination that we did not meet the
$1.00 per share bid price and $2,000,000 net tangible assets requirements for
maintenance on the Nasdaq SmallCap Market. The panel also cited the explanatory
paragraph in our auditors report on our December 30, 1998 financial statements
regarding substantial doubt about our ability to continue as a going concern
going and determined that the our proposed merger with FutureTrak
International, Inc., (which has since been terminated) constituted a reverse
merger, requiring us to comply with more stringent initial listing requirements.
The panel was of the opinion that we failed to present a definitive plan for
continued listing on the Nasdaq SmallCap Market within a reasonable period and
to sustain compliance with those requirements over the long term.
As a result of the delisting, there may be a limited release of the market
prices of our common stock and limited news coverage of the Company. The
delisting may also restrict investors' interest in our securities and materially
adversely affect the trading market and prices for such securities and our
ability to issue additional securities or to secure additional financing.
In addition low price stocks are subject to the additional risks of federal
and state regulatory requirements and the potential loss of effective trading
markets. In particular, as long as the trading price of our common stock is less
than $5.00 per share, which it currently is, the common stock is subject to
Rule 15g-9 under the Securities Exchange Act of 1934 which, among other things,
requires that broker/ dealers satisfy special sales practice requirements. These
requirements include making individualized written suitability determinations
and receiving purchasers' written consent, prior to any transaction.
If our securities are deemed penny stocks under the Securities Enforcement
and Penny Stock Reform Act of 1990, this would require additional disclosure in
connection with trades of our securities. Such disclosure includes the delivery
of a disclosure schedule explaining the nature and risks of the penny stock
market.
The foregoing requirements could severely limit the liquidity of our
securities and materially adversely affect our ability to issue additional
securities or to secure additional financing.
CONTROL BY MANAGEMENT
Our officers and directors beneficially own approximately 17.6% of the
outstanding common stock. As a result of such ownership, management may have the
ability to control both the election of the directors and the outcome of issues
submitted to a vote of stockholders.
LIMITATIONS ON LIABILITY OF OFFICERS AND DIRECTORS
Our Certificate of Incorporation includes provisions to eliminate, to the
extent permitted by law, the personal liability of directors for monetary
damages arising from a breach of their fiduciary duties as directors. Our
Certificate of Incorporation also includes provisions to the effect that
(subject to certain exceptions) we shall indemnify, and upon request shall
advance expenses to, any director in connection
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with any action related to such a breach of their fiduciary duties as directors
to the extent permitted by law. In addition, our Certificate of Incorporation
requires that we indemnify any director, officer, employee or agent of the
Company for acts which such person conducted in good faith.
As a result of such provisions, stockholders may be unable to recover
damages against the directors and officers for actions taken by them which
constitute negligence, gross negligence, or a violation of their fiduciary
duties. This may reduce the likelihood of stockholders instituting derivative
litigation against directors and officers. This may also discourage or deter
stockholders from suing directors, officers, employees, and agents of the
Company for breaches of their duty of care, even though such action, if
successful, might otherwise benefit the Company and stockholders.
SHARES ELIGIBLE FOR FUTURE SALE
Other than certain shares held by affiliates of the Company, substantially
all of our shares of common stock are freely transferable without restriction or
further registration under the Securities Act. The remaining shares are
"restricted securities" as that term is defined in Rule 144 under the Securities
Act. These restricted securities may be sold pursuant to Rule 144, other than
shares of common stock underlying certain options, warrants and convertible
securities which may be sold under Rule 144 pursuant to Rule 701 under the
Securities Act or if "cashless exercise" provisions are utilized in connection
with their exercise. The sale of a substantial number of shares of common stock
or the availability of common stock for sale could adversely affect the market
price of the common stock.
EFFECT OF PREVIOUSLY ISSUED OPTIONS, WARRANTS AND CONVERTIBLE DEBENTURES
As of September 30, 1999,options to purchase an aggregate of 24,500 shares
of common stock are outstanding under our 1995 stock option plan. These options
are all exercisable at $0.688 per share. In addition, options to purchase an
aggregate of 207,720 shares of common stock are outstanding under our 1997 stock
option plan. These options are exercisable at prices ranging from $0.688 to
$2.938 per share, although a majority of such options are exercisable at $0.688
per share. We also have additional outstanding options and warrants to purchase
approximately 207,720 shares of common stock.
The foregoing is in addition to the 2,321,511 shares which are being offered
for sale pursuant to this prospectus. Based on the market price of the common
stock on February 9,2000, 1,321,511 shares would be issuable upon conversion of
the Convertible Debentures described in this prospectus, of which some are
currently convertible at a 25% discount to the market price of the common stock,
and the remainder of which are currently convertible at the debenture holders
option of either a 35% discount to the to the highest bid price for the common
stock for five trading days preceding or at fixed price of $0.75 Cents per share
or $0.50 Cents per share and the 250,000 shares of common stock that are or may
be issuable upon exercise of outstanding warrants issued September 30, 1999 and
expiring September 29, 2002
Additional shares are issuable for interest and liquidated damages due on
the Convertible Debentures and as a result of the triggering of anti-dilution
provisions of other instruments and agreements.
The outstanding options, warrants and convertible debentures may hinder
future financings, since the holders of such securities may be expected to
exercise them at a time when we will otherwise be able to obtain equity capital
on more favorable terms. The existence or exercise of the outstanding options,
warrants and convertible debentures, and subsequent sale of the common stock
issuable upon such exercise could adversely affect the market price of our
securities.
OBLIGATIONS IN CONNECTION WITH THE ISSUANCE OF THE CONVERTIBLE DEBENTURES
We are obligated to register the underlying common stock issuable upon
conversion of the Convertible Debentures described in this prospectus under
various registration rights agreements. We did
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not timely fulfill our registration obligations in respect to some of the
Convertible Debentures. We will be required to pay liquidated damages in the
form of increased interest on the convertible debentures as a result of our
failure to timely file such registration statement and have it declared
effective by the Securities and Exchange Commission.
In addition, we have agreed to obtain (within 90 days following the issuance
of the Convertible Debentures) stockholder approval, for the possible issuance
upon conversion of the Convertible Debentures of shares of common stock
representing in excess of 19.99% of the outstanding shares of common stock on
the date the Convertible Debentures were issued. We will not timely obtain such
approval with respect to some of the Convertible Debentures. In addition,
although we believes that such approval will be obtained, we may be required to
pay liquidated damages in the form of increased interest on the Convertible
Debentures as a result of our failure to timely obtain stockholder approval.
RISKS APPLICABLE TO FOREIGN SALES
For the years ended December 31, 1996, 1997 and 1998, substantially all of
our interactive video revenues were derived from projects in foreign countries
from foreign sales. However, nearly all of our current proposals are for
projects in North America.
It may be difficult to enforce agreements against foreign-based customers.
We may also face difficulties in collecting payments from foreign customers.
Other risks applicable to foreign sales include the difficulty and expense of
maintaining foreign sales distribution channels, barriers to trade, potential
fluctuations in foreign currency exchange rates, political and economic
instability, unavailability of suitable export financing, tariff regulations,
quotas, shipping delays, foreign taxes, export restrictions, licensing
requirements, changes in duty rates, and other United States and foreign
regulations. In addition, we may experience additional difficulties in providing
prompt and cost effective service for our products in foreign countries.
Finally, we believe that potential sales opportunities have been adversely
affected by the current Asian general economic downturn. We do not carry
insurance against any of these risks.
SUBSTANTIAL UP-FRONT EXPENSES; LIQUIDATED DAMAGES PROVISIONS AND OTHER
PROJECT RISKS
A significant portion of our revenues have been, and are expected to
continue to be, derived from substantial long-term projects which require
significant up-front expense to the Company. There can be no assurance that
revenues will be realized until the projects are completed or certain
significant milestones are met. For example, suppliers and developers for
long-term interactive video projects, such as the Korean, Israeli, Taiwanese,
and Chinese projects in which we participated, are required to reach certain
milestones prior to the Company's receipt of significant payments. Our failure,
or any failure by a third-party with which we may contract, to perform services
or deliver interactive video products on a timely basis could result in a
substantial loss to the Company.
We have had difficulty in meeting delivery schedules, which has resulted in
customer dissatisfaction. In addition, difficulty in completing a project could
have a material adverse effect on our reputation, business, and results of
operations. In many instances, we are dependent on the efforts of third parties
to adequately complete our portion of a project and, even if our digital video
servers perform as required, a project may still fail due to other components of
the project supplied by third parties. As a result of liquidated damages and
"hold-back" provisions in customer contracts, we reserved approximately
$570,000, as of December 31, 1997 ($436,000 of which continues to be reserved as
of September 30, 1999), for potential uncollectible accounts receivable.
CONSEQUENCES OF FIXED PRICE CONTRACTS AND COMMITMENTS
We have entered into and may in the future enter into fixed price agreements
for the sale of our products and services. Pricing for such commitments is made
based upon estimates of development and
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production effort and estimates of future product costs. We bear the risk of
faulty estimates, cost overruns and inflation in connection with these
commitments. Therefore, any fixed price agreement can become unprofitable and
could materially adversely affect the Company.
We reserved approximately $673,000 for the year ended December 31, 1996 for
potential losses on uncompleted contracts. We Company completed our deliverables
on the contracts in the first quarter of 1998, exhausting the reserves
established in 1996 and incurring additional costs of approximately $190,000. We
cannot assure you that these type of risks will not continue to negatively
affect our margins and profitability.
COMPETITION
The interactive video industry is highly competitive. Many of the companies
with which we currently compete or may compete in the future have greater
financial, technical, marketing, sales and customer support resources, as well
as greater name recognition and better access to customers, than the ours. In
addition, certain of such competitors have entered into strategic alliances
which may provide them with certain competitive advantages. We can not assure
you that we will be able to compete successfully with existing or future
competitors.
UNCERTAIN MARKET ACCEPTANCE
We are engaged in the design and development of interactive video products.
As with any new technology, there is a substantial risk that the marketplace may
not accept the technology utilized in our products. Market acceptance of our
products will depend, in large part, upon our ability to demonstrate the
performance advantages and cost-effectiveness of their products over competing
products and the general acceptance of interactive video services. In
particular, the Company believes that widespread deployment of interactive video
systems will depend on a number of factors, including:
- decreases in the cost per subscriber;
- the "user-friendliness" of such systems, particularly set top boxes and
remote controls which are relatively easy to understand and use; and
- improvements in the quantity and quality of interactive services
available.
Although recent developments have reduced the cost per subscriber, and we
anticipate that such costs will continue to decrease as interactive video
systems are more widely deployed, the current cost per subscriber may make the
system too expensive for a number of potential network operators. We cannot
assure you that they will be able to market their technology successfully or
that any of their current or future products will be accepted in the
marketplace.
RISKS ASSOCIATED WITH CONTRACTS WITH EN KAY TELECOM CO., LTD.
In September 1996, we entered into an agreement with En Kay Telecom
Co., Ltd., a Korean company, pursuant to which the Company, as licensor, agreed
to design a digital set top box which would be manufactured and sold by En K in
the Republic of Korea. In February 1997, we entered into a second license
agreement with En K for the manufacture by En K of two models of our video
servers in Korea, as well as a license to sell those server models on an
exclusive basis in Korea (subject to an exception for another project) and on a
non-exclusive basis elsewhere.
We received $600,000 under the 1996 agreement. However, in April 1997,we
stopped production under the 1996 agreement pending settlement of disputes under
the 1997 agreement.
The 1997 agreement provided for the payment by En K to the Company of
$1,000,000 on each of February 21, 1997 and May 1, 1997, $4,000,000 during 1998,
and minimum annual purchases of $2,000,000
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over a five-year period. En K has failed to make the initial two payments under
the 1997 agreement, although En K did pay $200,000 in mid-May 1997.
We gave notice of default in April 1997, and placed En K in default in
May 1997, when En K failed to cure the payment default within the agreed
thirty-day period. To date, En K has not honored either of its agreements us. We
cannot assure you that they will prevail in any legal proceeding, or, if they do
prevail, that they will collect any amounts awarded. In addition, although we do
not believe there is any basis for such a course of action, it is possible that
En K may seek to recover amounts previously paid to us under the agreements.
NEED FOR STRATEGIC ALLIANCES
We believe that there are certain potential advantages to entering into one
or more strategic alliances with major interactive network or product providers.
Although we have entered into certain of such alliances, we are actively seeking
to enter into more of such alliances. Certain of our competitors and potential
strategic allies may have entered into or may enter into agreements which may
preclude such potential allies from entering into alliances with us. We cannot
assure you that we will be successful in entering into any such strategic
alliances on acceptable terms or, if any such strategic alliance is entered
into, that they will realize the anticipated benefits from such strategic
alliance.
DEPENDENCE ON SUPPLIERS; MANUFACTURING RISKS
We rely primarily on outside suppliers and subcontractors for substantially
all of our parts, components and manufacturing supplies. Certain materials are
currently available only from one supplier or a limited number of suppliers. We
do not maintain long-term supply contracts with our suppliers. The disruption or
termination of our supply or subcontractor arrangements could have a material
adverse effect on our and results of operations. Our reliance on third parties
involves significant risks, including reduced control over delivery schedules,
quality assurance, manufacturing yields and cost, the potential lack of adequate
capacity, and potential misappropriations of our Company's intellectual
property. In addition, vendor delays or quality problems could also result in
lengthy production delays.
To obtain manufacturing resources, we may contract for manufacturing by
third parties or may seek to enter into joint venture, sublicense, or other
arrangements with another party which has established manufacturing capability.
Alternatively, we may choose to pursue the commercialization of such products on
our own. We cannot assure you that, either on our own or through arrangements
with others, we will be able to obtain such arrangements on acceptable terms.
RELIANCE ON KEY CUSTOMERS
Our interactive video services revenues to date have been derived almost
exclusively from five telecommunications customers, none of whom have placed a
new order with us since June 1997. The lack of new projects and major customers
has had, and may continue to have, a material adverse effect on the Company.
LACK OF PATENT AND COPYRIGHT PROTECTION
Although we have filed a provisional patent application with respect to
certain technology, we hold no patents and have not generally filed patent
applications. Our methods of protecting our proprietary knowledge may not afford
adequate protection. We cannot assure you that any patents applied for will be
issued, or, if issued, that such patents would provide them with meaningful
protection from competition.
In Asia and third world countries, in which we do business and have had
license agreements, the unauthorized use of technology, whether protected
legally or not, is widespread. It is possible that our technology will be
subject to theft and infringement. Furthermore, in accordance with our current
business
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plan, it will be necessary for us to make our intellectual property available to
vendors, customers, and other companies in the industry, making it even more
difficult to protect our technology.
RISK OF THIRD PARTY CLAIMS OF INFRINGEMENT
Technology-based industries, such as ours, is characterized by an increasing
number of patents and frequent litigation based on allegations of patent
infringement. From time to time, third parties may assert patent, copyright and
other intellectual property rights to technologies that are important to the
Company. While there currently are no outstanding infringement claims pending by
or against us, we cannot assure you that third parties will not assert
infringement claims against us in the future, that assertions by such parties
will not result in costly litigation, or that they will prevail in any such
litigation. In addition, we cannot assure you that we will be able to license
any valid and infringed patents from third parties on commercially reasonable
terms or, alternatively, be able to redesign products on a cost-effective basis
to avoid infringement. Any infringement claim or other litigation against or by
us could have a material adverse effect on the Company.
NO ASSURANCE OF TECHNOLOGICAL SUCCESS
Our ability to commercialize their products is dependent on the advancement
of our existing technology. In order to obtain and maintain a significant market
share we will continually be required to make advances in technology. We cannot
assure you that our research and development efforts will result in the
development of such technology on a timely basis or at all. Any failures in such
research and development efforts could result in significant delays in product
development and have a material adverse effect on the Company. We cannot assure
you that we will not encounter unanticipated technological obstacles which
either delay or prevent us from completing the development of our products.
We believe there are certain technological obstacles to be overcome in order
to develop future products. These obstacles include the lack of an electronic
data interchange server interface (used for real-time exchange of data between
servers) and enhancements in the ability to access and utilize information
stored on remote servers. In certain cases, we will be dependent upon
technological advances which must be made by third parties. We cannot assure you
that they or such third parties will not encounter technological obstacles which
either delay or prevent us from completing the development of our future
products. Such obstacles could have a material adverse effect on the Company.
PRODUCT OBSOLESCENCE; TECHNOLOGICAL CHANGE
The industries in which we operate is characterized by unpredictable and
rapid technological changes and evolving industry standards. We will be
substantially dependent on our ability to identify emerging markets and develop
products that satisfy such markets. We cannot assure you that we will be able to
accurately identify emerging markets or that any products we have or will
develop will not be rendered obsolete as a result of technological developments.
We believe that competition in our business may intensify as technological
advances in the field are made and become more widely known. Many companies with
substantially greater resources than ours are engaged in the development of
products similar to those proposed to be sold by the Company. Commercial
availability of such products could render our products obsolete, which would
have a material adverse effect on the Company.
From time to time, we may announce new products or technologies that have
the potential to replace our existing products offerings. We cannot assure you
that the announcement or expectation of new product offerings by us or others
will not cause customers to defer purchases of existing Company products, which
could materially adversely affect the Company.
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EFFECT OF INDUSTRY STANDARDS AND COMPATIBILITY WITH EQUIPMENT AND SOFTWARE
The interactive video industry is currently characterized by emerging
technological standards. Widespread commercial deployment of our products will
depend on determinations by the industry as to whether such products will be
compatible with the infrastructure equipment and software which comprise those
standards. Failure to comply substantially with industry standards in a timely
manner, either as they exist at a given time or as they may evolve in the
future, could have a material adverse effect on the Company. In some cases, to
be compatible with industry standards, we may need to obtain the cooperation of
its suppliers, partners, and competitors, which we cannot assure.
ERRORS AND OMISSIONS; SOFTWARE AND HARDWARE BUGS
Certain of our products consist of internally developed software and
hardware component sets, purchased software from third parties and purchased
hardware components. Additionally, we outsource substantially all of the
manufacturing of our products, including the installation and configuration of
certain hardware and software components. There is a substantial risk that these
components will have or could develop certain errors, omissions or bugs that may
render our products unfit for the purposes for which they were intended. While
there are no such known errors, omissions or bugs, we cannot assure you that
such errors, omissions or bugs do not currently exist or will not develop in our
current or future products. Any such error, omission or bug found in our
products could lead to delays in shipments, recalls of previously shipped
products, damage to the Company's reputation, and other related problems which
would have a material adverse effect on the Company.
GOVERNMENT REGULATION
The Federal Communications Commission and certain state agencies regulate
certain of our products and services and certain of the users of such products
and services. We are also subject to regulations applicable to businesses
generally, including regulations relating to manufacturing. In addition,
regulatory authorities in foreign countries in which we sell or may sell our
products may impose similar or more extensive governmental regulations.
We rely upon, and contemplate that they will continue to rely upon, our
corporate partners or interactive video system sponsors to comply with
applicable regulatory requirements. We cannot assure you that such regulations
will not materially adversely affect us by jeopardizing the projects in which we
are participating, by imposing burdensome regulations on the users of the
products, by imposing sanctions that directly affect us, or otherwise. Changes
in the regulatory environment relating to the industries in which we compete
could have an adverse effect on the Company. We cannot predict the effect that
future regulation or regulatory changes may have on our business.
PRODUCT LIABILITY AND AVAILABILITY OF INSURANCE
The manufacture and sale of our products entail the risk of product
liability claims. In addition, many of the telephone, cable, and other large
companies with which we do or may do business may require financial assurances
of product reliability. At the present time we do not maintain product liability
insurance.
VARIABILITY OF QUARTERLY OPERATING RESULTS
Variations in our revenues and operating results occur from time to time as
a result of a number of factors, such as the number of interactive video
projects in which we are engaged, the completion of work or achievement of
milestones on long-term projects, and the timing and progress of our product
development efforts. The timing and realization of revenues is difficult to
forecast, in part, because our
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sales and product development cycles for interactive video products can be
relatively long and may depend on factors such as the size and scope of our
projects.
We have not received material new orders, other than an order in
September 1998 for $96,000 and an order in January 1999 for $1,253,000 ($13,200
of which has been recognized through the third quarter of 1999) for interactive
video projects since June 1997, although we received a number of orders for
CD-ROM products in the fourth quarter of 1998. Furthermore, as a result of a
variety of other factors, including the introduction of new products and
services by competitors, and pricing pressures and economic conditions in
various geographic areas where our customers and potential customers do
business, our sales and operating results may vary substantially from year to
year and from quarter to quarter.
The variation in sales and operating results may be expected to increase as
a result of the scaling back of our CD-ROM operations. In addition, the timing
of revenue recognition for revenue received from long term projects under our
accounting policies may also contribute to significant variations in our
operating results from quarter to quarter.
ANTI-TAKEOVER EFFECTS ASSOCIATED WITH THE ISSUANCE OF "BLANK CHECK"
PREFERRED STOCK AND DELAWARE LAW
Our Certificate of Incorporation authorizes our Board of Directors to issue
up to 3,000,000 shares of "blank check" preferred stock. The Board of Directors,
without stockholder approval, may fix all the rights of the preferred stock. The
issuance of such stock could, among other results, negatively affect the voting
power of the holders of common stock.
Under certain circumstances, the issuance of the preferred stock would make
it more difficult for a third party to gain control of the Company, discourage
bids for the common stock at a premium, or otherwise adversely affect the market
price of the common stock. Such provisions may discourage attempts to acquire
the Company. In addition, certain provisions of Delaware law may also discourage
third party attempts to acquire control of the Company.
We have no current arrangement, commitment or understanding with respect to
the issuance of our preferred stock. We cannot assure you, however, that we will
not, in the future, issue shares of preferred stock.
NON-CASH CHARGES
As a result of our issuance of the Convertible Debentures and Warrants
described in this prospectus, in the first and fourth quarters of fiscal 1999,
we were required to reflect the difference between the aggregate conversion
price of all of the Convertible Debentures and the current fair market value (on
the date of issuance of the convertible debentures) of the shares underlying the
Convertible Debentures as a discount on the Convertible Debentures and as
additional paid in capital. The amount and additional paid in capital is being
amortized as a non-cash interest expense over a 90-day period (the period
between the date of issuance of the Convertible Debentures and the date the
Convertible Debentures first become exercisable).
As a result of our issuance of certain warrants in July 1997, as well as the
repayment of notes issued in July 1997, we had an aggregate amount of non-cash
interest expense and loss on extinguishments of debt of approximately
$1,440,000. We also incurred a charge of approximately $306,834 related to the
write-off of financing costs previously capitalized in connection with our
private placements in 1996 and 1997. In addition, we incurred significant
non-cash compensation expenses in 1997 related to the difference between the
exercise price of certain options granted and the deemed fair value of the
common stock underlying such options amounting to approximately $2,544,755.
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GENERAL ECONOMIC CONDITIONS
The industry in which we compete relies in part upon consumer confidence and
the availability of discretionary income. Both of these can be adversely
affected during a general economic downturn. In addition, potential customers
may not be willing or able to commit funds to interactive video projects during
such a downturn.
POSSIBLE VOLATILITY OF STOCK PRICE
The market prices of equity securities of computer technology and software
companies have experienced extreme price volatility in recent years for reasons
not necessarily related to the individual performance of specific companies.
Accordingly, the market price of the common stock may be highly volatile. The
market price of the common stock may be significantly affected or may fluctuate
substantially due to factors such as the following:
-- announcements by the Company or its competitors concerning products,
patents, technology and governmental regulatory actions;
-- other events affecting computer technology and software companies
generally; and
-- general market and economic conditions.
THE COMPANY
We were incorporated in Tennessee in 1993 and were reincorporated in
Delaware in August 1997. We design, develop, integrate, install, operate, and
support interactive video services hardware and software. In the interactive
video services area, we seeks to provide solutions, including products and
services developed by us and by strategic partners, that enable interactive
video programming and applications to be provided to a wide variety of market
niches. We have installed 15 digital video servers in five countries (China,
Korea, Israel, Taiwan and Canada), on each of the major types of networks
accommodating interactive video services. We believe that we have demonstrated
the ability to deploy and operate interactive video systems over each of the
major network types.
RECENT DEVELOPMENTS
As of September 30, 1999, we had cash and cash equivalents of approximately
$760 Since December 31, 1998, we have used funds from private financings and
operations for working capital purposes to pay certain outstanding obligations.
Our cash position continues to be uncertain and its working capital has declined
since year-end. We will not be able to continue as a going concern unless we
receive substantial funds from financings, operations or other sources. We are
continuing to seek to arrange financing, including possible strategic investment
or opportunities to sell some or all of our assets and business. We also
continue to seek buyers for all (or portions) of our CD-ROM division, either the
Mediator or WorkWare segments, or both. We are taking additional steps to
collect accounts receivable. There can be no assurance that we will be able to
obtain any such required additional funds on a timely basis, on favorable terms,
or at all.
We entered into a written lease agreement with Centerpoint Plaza, L.P.,
dated November 25, 1997, which was amended on April 1, 1998. The lease was
terminated by the landlord as a result of our breach, effective January 29,
1999. Pursuant to an agreement between the Company and the landlord, we
acknowledged breach of the lease due to our failure to pay the required rental
amount, and the landlord agreed to forego its right to immediate possession of
the premises until February 20, 1999 if we performed certain acts. The agreement
provided that any time after February 20, 1999, the landlord could cause its
counsel to (a) file a detainer warrant or complaint and (b) submit the answers
and agreed judgments executed by the Company if the parties did not enter into a
written agreement regarding the portion of the
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previously leased premises currently occupied by the Company. We are still in
negotiations with the Landlord. No assurance can be given as to the successful
conclusion of these negotiations.
We have reduced our workforce to approximately 5 employees, due, in large
measure, to our inability to realize sufficient cash flow from operations. We
are in arrears in paying compensation to such employees. We will not be able to
continue to retain such employees if we do not obtain additional funds to
compensate them.
On August 10, 1999 we entered into an Amended and Restated Agreement and
Plan of Merger with FutureTrak International, Inc., and FutureTrak Merger Corp.,
our wholly owned subsidiary. Pursuant to the Amended and Restated Agreement and
Plan of Merger our wholly owned subsidiary would have merged into FutureTrak
International, Inc., with the result that FutureTrak International would have
become our wholly owned subsidiary and our name would have become FutureTrak
Systems, Inc. Furthermore, each share of common stock of FutureTrak
International outstanding at the time of the merger would have been converted
into one share of the common stock the newly formed company. We originally
determined to merge with FutureTrak International because FutureTrak
International planned to focus on the business of providing satellite television
and other services to multihousing unit projects and we believed that FutureTrak
International's technology was well suited for such projects.
On December 7, 1999, the Company, FutureTrak Merger Corp., and FutureTrak
International terminated the Amended and Restated Agreement and Plan of Merger
prior to the completion of the merger. The Agreement was terminated primarily
because efforts to obtain necessary funding for the planned activities of the
merged companies did not prove successful. The Company and FutureTrak have
therefore determined to pursue their separate businesses. Pursuant to the
Termination Agreement dated December 7, 1999 our obligations to FutureTrak
International and third parties with respect to money borrowed are not material.
SELLING STOCKHOLDERS
The following table sets forth information concerning shares beneficially
owned by the Selling Stockholders as of January 5, 2000.
GMF Holdings, John Bridges, John P. Faure, Loni Spurkeland, Robert E.
Dettle, Michael Genta, Lennart Dallgren, Richard T. Garrett, W. David McCoy,
Dominick Chirarisi, Gilda A. Chirarisi, Joseph C. Cardella, Carl Hoehner, and
John Bolliger are offering shares of common stock issuable upon conversion of
the Convertible Debentures. Each of the holders of the Convertible Debentures
has also entered into a subscription agreement and a registration rights
agreement with the Company. See "Plan of Distribution" on page 23.
May Davis Group, Inc., serves as a financial and investment banking
consultant to the Company. As a result of services rendered by May Davis
Group, Inc., warrants to purchase a total of 250,000 shares of common stock at a
price of 0.586 cents per share as well as 250,000 shares of common stock were
issued to May Davis Group, Inc., Cornelius Max Rockwell, Mark Anthony Angelo,
Hunter Scott Singer, and Joseph W. Donohue.
Squadron, Ellenoff, Plesent & Sheinfeld, LLP serves as counsel to the
Company. The Company has granted Squadron, Ellenoff a security interest in its
personal property to secure payment of amounts due that firm. The Company has
issued 263,129 shares of common stock to Squadron, Ellenoff for nominal
consideration (of which 213,129 shares have been sold). To the extent that any
accounts receivable are due it from the Company at any time when any such shares
are sold by Squadron, Ellenoff, such accounts receivable shall be reduced by an
amount equal to the net proceeds of such sale. Under certain circumstances,
Squadron, Ellenoff may also apply a portion of the proceeds of such sale as a
credit against amounts due Squadron, Ellenoff for certain legal services.
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<PAGE>
The Company hired David Hultquist as a consultant for debt reorganization
pursuant to an agreement dated December 18, 1999. The Company issued 200,000
shares of common stock at a price of $0.20 cents per share to Mr. Hultquist
under the terms of that Agreement.
The Company hired Mark Bergman as a consultant to the Company for investment
public relations services pursuant to an agreement dated December 30, 1999.
Pursuant to the agreement the Company issued Mr. Bergman 250,000 shares of
common stock.
Other than the relationship described above and the ownership of the
Company's securities by the selling stockholders, none of the selling
stockholders has had any material relationship with the Company within the past
three years. The table has been prepared based on information furnished to the
Company by or on behalf of the selling stockholders.
Any or all of the shares listed below may be offered for sale by the selling
stockholders from time to time and, therefore, no estimate can be given as to
the number of shares that will be held by the selling stockholders upon
termination of this offering. Except as otherwise indicated, the selling
stockholders listed in the table have sole voting and investment powers with
respect to the shares indicated.
BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
STOCKHOLDER OFFERED PRIOR TO SALE AFTER SALE
- ----------- -------- ------------- ----------
<S> <C> <C> <C>
GMF Holdings....................................... 899,037(1)(5) 0 0(7)
John Bridges....................................... 8,093(2)(5) 0 0(7)
John P. Faure...................................... 16,185(2)(5) 0 0(7)
Loni Spurkeland.................................... 5,395(2)(5) 0 0(7)
Robert E. Dettle................................... 13,488(2)(5) 0 0(7)
Michael Genta...................................... 5,395(2)(5) 0 0(7)
Lennart Dallgren................................... 10,790(2)(5) 0 0(7)
Richard T. Garrett................................. 53,950(3)(5) 0 0(7)
W. David McCoy..................................... 16,185(3)(5) 0 0(7)
Dominick & Gilda Chirarisi......................... 8,093(3)(5) 0 0(7)
Joseph C. Cardella................................. 5,395(3)(5) 0 0(7)
Carl Hoehner....................................... 26,964(3)(5) 0 0(7)
John Bolliger...................................... 5,395(4) 0 0(7)
Squadron, Ellenoff, Plesent & Sheinfeld, LLP....... 50,000 0 0(7)
David Hultquist.................................... 200,000 215,000 15,000(7)
Mark Bergman....................................... 250,000 0 0(7)
May Davis Group, Inc............................... 64,000(6) 74,000 10,000(7)
Cornelius Max Rockwell............................. 100,000(6) 116,250 16,250(7)
Mark Anthony Angelo................................ 100,000(6) 116,250 16,250(7)
Hunter Scott Singer................................ 100,000(6) 116,250 16,250(7)
Joseph W. Donahue.................................. 100,000(6) 116,250 16,250(7)
</TABLE>
- ------------------------
(1) Consists of shares of the Company's common stock issuable upon conversion of
the outstanding principal amount of, and interest and other amounts due
under, the Convertible Debentures. The Company may not issue to the holders
of the Convertible Debentures shares of common stock issuable upon the
conversion of the Convertible Debentures representing in the aggregate more
than 19.99% of the number of shares of common stock outstanding on the date
the Convertible Debentures were purchased by the holders (or an aggregate of
899,037 shares) unless the stockholders of the Company approve the issuance
of a greater number of shares of common stock. Such approval has not
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<PAGE>
been obtained. See "Risk Factors--Obligations in Connection with the
Issuance of the Convertible Debentures" on page 6.
(2) Consists of shares of the Company's common stock issuable upon conversion of
the outstanding principal amount of, and interest and other amounts due
under, the Convertible Debentures. The Company may not issue to the holders
of the Convertible Debentures shares of common stock issuable upon the
conversion of the Convertible Debentures representing in the aggregate more
than 19.99% of the number of shares of common stock outstanding on the date
the Convertible Debentures were purchased by the holders (or an aggregate of
907,035 shares) unless the stockholders of the Company approve the issuance
of a greater number of shares of common stock. Such approval has not been
obtained. See "Risk Factors--Obligations in Connection with the Issuance of
the Convertible Debentures" on page 6.
(3) Consists of shares of the Company's common stock issuable upon conversion of
the outstanding principal amount of, and interest and other amounts due
under, the Convertible Debentures. The Company may not issue to the holders
of the Convertible Debentures shares of common stock issuable upon the
conversion of the Convertible Debentures representing in the aggregate more
than 19.99% of the number of shares of common stock outstanding on the date
the Convertible Debentures were purchased by the holders (or an aggregate of
921,164 shares) unless the stockholders of the Company approve the issuance
of a greater number of shares of common stock. Such approval has not been
obtained. See "Risk Factors--Obligations in Connection with the Issuance of
the Convertible Debentures" on page 6.
(4) Consists of shares of the Company's common stock issuable upon conversion of
the outstanding principal amount of, and interest and other amounts due
under, the Convertible Debentures. The Company may not issue to the holders
of the Convertible Debentures shares of common stock issuable upon the
conversion of the Convertible Debentures representing in the aggregate more
than 19.99% of the number of shares of common stock outstanding on the date
the Convertible Debentures were purchased by the holders (or an aggregate of
1,137,412 shares) unless the stockholders of the Company approve the
issuance of a greater number of shares of common stock. Such approval has
not been obtained. See "Risk Factors--Obligations in Connection with the
Issuance of the Convertible Debentures" on page 6.
(5) 1,068,970 shares of the Company's common stock are issuable as of
January 10, 2000 upon conversion of the Convertible Debentures held by such
selling stockholders in the aggregate, including shares issuable as
liquidated damages in respect of the Convertible Debentures. See "Risk
Factors--Obligations in Connection with the Issuance of the Convertible
Debentures" on page 6.
(6) These shares of the Company's common stock are or may be issuable upon
exercise of outstanding warrants (14,000 warrants issued to the May Davis
Group, Inc, 50,000 warrants issued to Cornelius Max Rockwell, 50,000
warrants to Mark Anthony Angelo, 50,000 warrants to Hunter Scott Singer, and
50,000 warrants to Joseph W. Donahue)and shares of the Company's common
stock of the Company issued for financial services rendered.(50,000 shares
issued to the May Davis Group, Inc, 50,000 shares issued to Cornelius Max
Rockwell, 50,000 shares to Mark Anthony Angelo, 50,000 shares to Hunter
Scott Singer, and 50,000 shares issued to Joseph W. Donahue)
(7) Assuming all of the shares of common stock offered for sale on behalf of the
Selling Stockholders are sold.
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USE OF PROCEEDS
We will not receive any proceeds from any sale of the shares offered hereby
or upon conversion of the Convertible Debentures.
PLAN OF DISTRIBUTION
The shares offered hereby may be offered and sold from time to time by the
selling stockholders, or by pledgees, donees, transferees or other successors in
interest. Such offers and sales may be made through the OTC Bulletin Board or
otherwise, at prices and on terms then prevailing or at prices related to the
then-current market price, or in negotiated transactions. The methods by which
the shares may be sold may include, but not be limited to, the following: a
block trade in which the broker or dealer so engaged will attempt to sell the
shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; purchases by a broker or dealer as principal and
resale by such broker or dealer for its account; an exchange distribution in
accordance with the rules of such exchange; ordinary brokerage transactions and
transactions in which the broker solicits purchasers; privately negotiated
transactions; short sales; and a combination of any such methods of sale. In
effecting sales, brokers or dealers engaged by the selling stockholders may
receive commissions or discounts from the selling stockholders or from the
purchasers in amounts to be negotiated immediately prior to the sale. The
selling stockholders may also sell such shares in accordance with Rule 144 under
the Securities Act.
In order to comply with certain state securities laws, if applicable, the
shares will be sold in such jurisdictions only through registered or licensed
brokers or dealers. In certain states, the shares may not be sold unless such
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the shares may not simultaneously engage in
market-making activities with respect to such shares for a period of one or five
business days prior to the commencement of such distribution. In addition to,
and without limiting, the foregoing, each of the selling stockholders and any
other person participating in a distribution will be subject to the applicable
provisions of the Exchange Act and the rules and regulations there under,
including, without limitation, Regulation M, which provisions may limit the
timing of purchases and sales of any of the shares by the selling stockholders
or any such other person. All of the foregoing may affect the marketability of
the shares.
We have entered into a registration rights agreement with the holders of the
Convertible Debentures. Under such agreement, we have agreed to use our best
efforts to maintain the effectiveness of the registration of the shares offered
hereby until the earliest of the date two years after the closing date of
receipt of funds for the convertible debentures, the date upon which all of the
shares offered hereby are no longer owned by the holders or the date when the
holder may sell the shares offered hereby under Rule 144. We have also agreed to
bear all reasonable expenses relating to the registration of the shares,
including the fees and expenses of one counsel to the holders of the Convertible
Debentures. Any underwriting or broker's discounts, commissions and fees and
transfer taxes incurred in connection with the registration of the shares will
be borne by the selling stockholders.
The registration rights agreement also provides that we will indemnify and
hold harmless the holders of the Convertible Debentures, any directors or
officers of such holders or any person who controls such holders against any
losses, claims, damages, liabilities or expenses (joint or several) that arise
out of or are based upon certain statements, omissions or violations of this
registration statement, unless any of the foregoing arise out of information
furnished in writing to the Company by such persons. In such case, such persons
shall indemnify the Company, its officers, directors and agents (including
counsel) against any claims arising out of or based upon such furnished
information. To the extent any indemnification is prohibited or limited by law,
the indemnifying party has agreed to make the maximum contribution with respect
to any amounts for which it would otherwise be liable, subject to certain
exceptions.
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Pursuant to the Convertible Debentures, we are not required to issue more
than 19.99% of the number of shares of Common Stock outstanding on the date the
Convertible Debentures were purchased by the holders, unless the shareholders of
the Company approve the issuance of additional common stock (or Nasdaq waives
the requirement). We have agreed to use commercially reasonable efforts to
obtain such approval or waiver.
The selling stockholders and any brokers participating in such sales may be
deemed to be underwriters within the meaning of the Securities Act. There can be
no assurances that the selling stockholders will sell any or all of the shares
offered hereby.
Any commissions paid or any discounts or concessions allowed to any broker,
dealer, underwriter, agent or market maker and, if any such broker, dealer,
underwriter, agent or market maker purchases any of the shares as principal, any
profits received on the resale of such shares, may be deemed to be underwriting
commissions or discounts under the Securities Act.
DESCRIPTION OF SECURITIES TO BE REGISTERED
The 143,000 shares issuable upon conversion of the Convertible Debentures
described in this prospectus, are currently convertible at any time beginning
ninety (90) days following the date of closing, into shares of Common Stock at a
price equal to the following Conversion: at the Debenture holders option,
either, 65% of the average closing Bid Price for the five (5) trading days
immediately preceding conversion, or, $0.75 Cents per share. In lieu of any
fractional share to which the Debenture holder would otherwise be entitled, the
Company will pay the balance in cash.
The Company shall have the right to redeem in part or in full any
outstanding Debentures at 135% percent of the Principal plus accrued interest.
The interest so payable will be paid at the time of Conversion to the person
in whose name this Debenture is registered. At the time such interest is
payable, the Company, in its sole discretion, may elect to pay interest in cash
(via wire transfer or certified funds) or in the form of Common Stock. If paid
in the form of Common Stock, the amount of stock to be issued will be calculated
as follows: the value of the stock shall be the Bid Price on: (i) the date the
interest payment is due; or (ii) if the interest payment is not made when due,
the date the interest payment is made. A number of shares of Common Stock with a
value equal to the amount of interest due shall be issued. No fractional shares
will be issued; therefore, in the event that the value of the Common Stock per
share does not equal the total interest due, the Company will pay the balance in
cash.
The Convertible Debenture and all payments, including principal or interest,
shall be subordinate and junior in right of payment to all Company Debt (as
defined hereinafter), but only to the extent set forth as follows:
(i) upon the maturity of any Company Debt, or any installment thereof
then due by lapse of time, acceleration or otherwise, all Company Debt then
due shall first be paid in full (or provision made for payment in full
thereof) before any additional payment on account of principal or interest
is made on this Debenture; and
(ii) in the event of any insolvency or bankruptcy proceedings affecting
the Company, or any receivership, liquidation, reorganization or other
similar proceedings affecting the Company, and, in the event of any
proceedings for voluntary liquidation, dissolution or other winding up of
the Company, whether or not involving insolvency or bankruptcy, then the
holders of Company Debt shall be entitled to receive payment in full of all
principal of and interest on all Company Debt before the holder of the
Convertible Debenture is entitled to receive any payment on account of
principal, interest or premium on the Convertible Debenture.
18
<PAGE>
The Convertible Debenture may be amended with the consent of the Debenture
holder. Without the consent of the Debenture holder, the Convertible Debenture
may be amended to cure any ambiguity, defect or inconsistency, to provide for
assumption of the Company obligations to the Debenture holder or to make any
change that does not adversely affect the rights of the Debenture holder.
An Event of Default is defined as follows: failure by the Company to pay
amounts due within two (2) days of the Maturity Date failure by the Company to
advise its transfer agent to issue Common Stock to the Debenture holder within
two (2) business days of the Company's receipt of the Notice of Conversion from
Debenture holder; or failure by the Company for thirty (30) days after notice to
it to comply with any of its other agreements in the Debenture; and events of
bankruptcy or insolvency. The Debenture holder may not enforce the Debenture
except as provided.
If a successor corporation assumes all the obligations of this predecessor,
Celerity Systems, Inc., the predecessor corporation will be released from those
obligations under the Debenture.
A director, officer, employee or stockholders, as such, of the Company shall
not have any liability for any obligations of the Company under the Debenture or
for any claim based on, in respect of, or by reason of such obligations or their
creation. The Debenture holder, by accepting a Debenture waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Convertible Debenture.
When the Debenture holder elects to convert a part of the Debenture, then
the Company shall reissue a new Convertible Debenture in the same form as this
Debenture to reflect the new principal amount.
The Company and the Debenture holder agree that in no event shall the
Company be required to issue (i) an aggregate number of shares constituting more
than 19.99% of the number of shares of Common Stock outstanding on the date of
such issuance or (ii) a number of shares that would result in a change of
control of the Company, unless the shareholders of the Company approve such
issuance of additional Common Shares or NASDAQ waives the applicable
requirements of Market Place Rule 4310(H)(i). The Company agrees to use
commercially reasonable efforts to obtain such approval or waiver on or prior to
the 90(th) day following the date that more than 19.99% of the Common Stock
would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
266,474 shares issuable upon conversion of the Convertible Debentures
described in this prospectus, may be converted at any time beginning ninety
(90) days following the date of closing, into shares of Common Stock at a price
equal to the following Conversion: at the Debenture holders option, either, 65%
of the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, $0.50 Cents per share. In lieu of any fractional share
to which the Debenture holder would otherwise be entitled, the Company will pay
the balance in cash.
The Company shall have the right to redeem in part or in full any
outstanding Debentures at 135% percent of the Principal plus accrued interest.
The interest so payable will be paid at the time of Conversion to the person
in whose name the Convertible Debenture is registered. At the time such interest
is payable, the Company, in its sole discretion, may elect to pay interest in
cash (via wire transfer or certified funds) or in the form of Common Stock. If
paid in the form of Common Stock, the amount of stock to be issued will be
calculated as follows: the value of the stock shall be the Bid Price on:
(i) the date the interest payment is due; or (ii) if the interest payment is not
made when due, the date the interest payment is made. A number of shares of
Common Stock with a value equal to the amount of interest due shall be issued.
No fractional shares will be issued; therefore, in the event that the value of
the Common Stock per share does not equal the total interest due, the Company
will pay the balance in cash.
19
<PAGE>
The Convertible Debenture and all payments, including principal or interest,
shall be subordinate and junior in right of payment to all Company Debt (as
defined hereinafter), but only to the extent set forth as follows:
(i) upon the maturity of any Company Debt, or any installment thereof
then due by lapse of time, acceleration or otherwise, all Company Debt then
due shall first be paid in full (or provision made for payment in full
thereof) before any additional payment on account of principal or interest
is made on this Debenture; and
(ii) in the event of any insolvency or bankruptcy proceedings affecting
the Company, or any receivership, liquidation, reorganization or other
similar proceedings affecting the Company, and, in the event of any
proceedings for voluntary liquidation, dissolution or other winding up of
the Company, whether or not involving insolvency or bankruptcy, then the
holders of Company Debt shall be entitled to receive payment in full of all
principal of and interest on all Company Debt before the holder of this
Debenture is entitled to receive any payment on account of principal,
interest or premium on this Debenture.
The Convertible Debenture may be amended with the consent of the Debenture
holder. Without the consent of the Debenture holder, the Convertible Debenture
may be amended to cure any ambiguity, defect or inconsistency, to provide for
assumption of the Company obligations to the Debenture holder or to make any
change that does not adversely affect the rights of the Debenture holder.
An Event of Default is defined as follows: failure by the Company to pay
amounts due hereunder within two (2) days of the Maturity Date failure by the
Company to advise its transfer agent to issue Common Stock to the Debenture
holder within two (2) business days of the Company's receipt of the Notice of
Conversion from Debenture holder; or failure by the Company for thirty
(30) days after notice to it to comply with any of its other agreements in the
Debenture; and events of bankruptcy or insolvency. The Debenture holder may not
enforce the Convertible Debenture except as provided.
If a successor corporation assumes all the obligations of the predecessor,
Celerity Systems, Inc., the predecessor corporation will be released from those
obligations under the Debenture.
A director, officer, employee or stockholders, as such, of the Company shall
not have any liability for any obligations of the Company under the Debenture or
for any claim based on, in respect of, or by reason of such obligations or their
creation. The Debenture holder, by accepting a Debenture waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Debenture.
When the Debenture holder elects to convert a part of the Convertible
Debenture, then the Company shall reissue a new Convertible Debenture in the
same form as this Debenture to reflect the new principal amount.
The Company and the Debenture holder agree that in no event shall the
Company be required to issue (i) an aggregate number of shares constituting more
than 19.99% of the number of shares of Common Stock outstanding on the date of
such issuance or (ii) a number of shares that would result in a change of
control of the Company, unless the shareholders of the Company approve such
issuance of additional Common Shares or NASDAQ waives the applicable
requirements of Market Place Rule 4310(H)(i). The Company agrees to use
commercially reasonable efforts to obtain such approval or waiver on or prior to
the 90(th) day following the date that more than 19.99% of the Common Stock
would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
13,000 shares issuable upon conversion of the Convertible Debenture
described in this prospectus, may be converted at any time beginning ninety
(90) days following the date of closing, into shares of Common Stock at a price
equal to the following Conversion: at the Debenture holders option, either, 65%
of the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, $0.75
20
<PAGE>
Cents per share. In lieu of any fractional share to which the Debenture holder
would otherwise be entitled, the Company will pay the balance in cash.
The Company shall have the right to redeem in part or in full any
outstanding Convertible Debenture at 135% of the Principal plus accrued
interest.
The interest so payable will be paid at the time of Conversion to the person
in whose name the Convertible Debenture is registered. At the time such interest
is payable, the Company, in its sole discretion, may elect to pay interest in
cash (via wire transfer or certified funds) or in the form of Common Stock. If
paid in the form of Common Stock, the amount of stock to be issued will be
calculated as follows: the value of the stock shall be the Bid Price on:
(i) the date the interest payment is due; or (ii) if the interest payment is not
made when due, the date the interest payment is made. A number of shares of
Common Stock with a value equal to the amount of interest due shall be issued.
No fractional shares will be issued; therefore, in the event that the value of
the Common Stock per share does not equal the total interest due, the Company
will pay the balance in cash.
The Debenture and all payments, including principal or interest, shall be
subordinate and junior in right of payment to all Company Debt (as defined
hereinafter), but only to the extent set forth as follows:
(i) upon the maturity of any Company Debt, or any installment thereof
then due by lapse of time, acceleration or otherwise, all Company Debt then
due shall first be paid in full (or provision made for payment in full
thereof) before any additional payment on account of principal or interest
is made on this Debenture; and
(ii) in the event of any insolvency or bankruptcy proceedings affecting
the Company, or any receivership, liquidation, reorganization or other
similar proceedings affecting the Company, and, in the event of any
proceedings for voluntary liquidation, dissolution or other winding up of
the Company, whether or not involving insolvency or bankruptcy, then the
holders of Company Debt shall be entitled to receive payment in full of all
principal of and interest on all Company Debt before the holder of this
Debenture is entitled to receive any payment on account of principal,
interest or premium on this Debenture.
The Convertible Debenture may be amended with the consent of the Debenture
holder. Without the consent of the Debenture holder, the Convertible Debenture
may be amended to cure any ambiguity, defect or inconsistency, to provide for
assumption of the Company obligations to the Debenture holder or to make any
change that does not adversely affect the rights of the Debenture holder.
An Event of Default is defined as follows: failure by the Company to pay
amounts due hereunder within two (2) days of the Maturity Date failure by the
Company to advise its transfer agent to issue Common Stock to the Debenture
holder within two (2) business days of the Company's receipt if the Notice of
Conversion from Debenture holder; or failure by the Company for thirty
(30) days after notice to it to comply with any of its other agreements in the
Debenture; and events of bankruptcy or insolvency. The Debenture holder may not
enforce the Debenture except as provided.
If a successor corporation assumes all the obligations of the predecessor,
Celerity Systems, Inc., the predecessor corporation will be released from those
obligations under the Debenture.
A director, officer, employee or stockholders, as such, of the Company shall
not have any liability for any obligations of the Company under the Debenture or
for any claim based on, in respect of, or by reason of such obligations or their
creation. The Debenture holder, by accepting a Convertible Debenture waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Debenture.
When the Debenture holder elects to convert a part of the Convertible
Debenture, then the Company shall reissue a new Debenture in the same form as
this Debenture to reflect the new principal amount.
21
<PAGE>
The Company and the Debenture holder agree that in no event shall the
Company be required to issue (i) an aggregate number of shares constituting more
than 19.99% of the number of shares of Common Stock outstanding on the date of
such issuance or (ii) a number of shares that would result in a change of
control of the Company, unless the shareholders of the Company approve such
issuance of additional Common Shares or NASDAQ waives the applicable
requirements of Market Place Rule 4310(H)(i). The Company agrees to use
commercially reasonable efforts to obtain such approval or waiver on or prior to
the 90(th) day following the date that more than 19.99% of the Common Stock
would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
LEGAL MATTERS
The validity of the shares under applicable state law has been passed upon
for the Company by Butler Gonzalez, Union, New Jersey 07083.
We are currently a defendant in two litigations. The litigations arise from
our nonpayment for software licenses and for non payment of furniture
transportation expenses. We believe our exposure in these litigations will not
exceed $13,500.00 collectively. Furthermore we believe that through continued
negotiations we will be able to settle these litigations.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-KSB for the year ended December 31, 1998, have been so
incorporated in reliance on the report (which contains an explanatory paragraph
relating to the Company's ability to continue as a going concern as described in
Note 3 to the financial statements) of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any materials we file with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549, or at the SEC's regional offices in New York City and Chicago. You
may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically (http://www.sec.gov). You also may inspect
reports and other information concerning us at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. We incorporate by reference and make a part of this
prospectus the following:
(1) Amendment No.2 to the Company's Quarterly Report on Form 10-QSBA for
the period ended September 30, 1999;
(2) a Form 12b-25 filed November 16, 1999;
(3) the Company's Current Report on Form 8-K, having a report date of
December 8, 1999;
(4) the Company's Form 8-K, having a report date of November 1, 1999;
(5) the Company's Form 8-K having a report date of October 27, 1999;
(6) the Company's Form 8-K having a report date of October 8, 1999;
22
<PAGE>
(7) Amendment No.1 to the Company's Annual Report on Form 10-KSB for the
Fiscal year ended December 31, 1998;
(8) the Company's Annual Report on Form 10-QSB for the period ended
December 31, 1998.
(9) the description of the Company's common stock contained in its
Registration Statement on Form 8-A (file no. 0-23279) filed with the
Commission on October 28, 1997.
Each document filed by the Company with the SEC pursuant to Section 13(a),
13(c), 14, or 15(d) of the Exchange Act after the date of this prospectus and
before the end of the offering made hereby is also incorporated by reference
into this prospectus from the filing date of filing of such document.
If any statement in any document incorporated by reference is inconsistent
with this prospectus, the statement in the latest document supersedes the
earlier statement. You should not rely on any statement that has been
superseded.
The Company will provide upon request a free copy of the documents that are
incorporated by reference in the prospectus. Requests for such information
should be directed to: Celerity Systems, Inc., 122 Parimeter Drive, Knoxville,
Tennessee 37922; Attention: Kenneth D. Van Meter. The Company's telephone number
is (865) 539-5300.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements included or incorporated by reference into this
prospectus constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, and include statements made in
press releases and oral statements made by our officers, directors or employees
acting on our behalf. All such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, market demand for the Company's products, successful
implementation of the Company's products, competitive factors, the ability to
manage the Company's growth, the ability to recruit additional personnel and
other factors referenced in this prospectus and in the company's filings with
the Securities and Exchange Commission. In addition to statements which
explicitly describe such risks and uncertainties, you are urged to consider
statements labeled with the terms "believes," "belief," "expects," "plans,"
"anticipates" or "intends," to be uncertain and forward-looking.
23
<PAGE>
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NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONNOT CONTAINED IN THIS PROSPECTUS
INCONNECTION WITH THE OFFERING MADE HEREBY, OR MADE AND, IF GIVEN SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATES
AS OF WHICH SUCH INFORMATION IS FURNISHED.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Summary of Offering .................. 2
Risk Factors.......................... 3
The Company........................... 13
Selling Stockholders.................. 14
Use of Proceeds....................... 17
Plan of Distribution.................. 17
Legal Matters......................... 22
Experts............................... 22
Where You Can Find More Information... 22
Special Note Regarding Forward Looking
Statements.......................... 23
</TABLE>
CELERITY SYSTEMS, INC.
2,321,511 SHARES OF
COMMON STOCK
---------------------
PROSPECTUS
---------------------
FEBRUARY , 2000
- --------------------------------------------------------------------------------
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in connection
with the issuance and distribution of the securities being offered hereby (items
marked with an asterisk (*) represent estimated expenses):
<TABLE>
<S> <C>
SEC Registration Fee........................................ $1,226
Legal Fees and Expenses..................................... $ 0*
Accounting Fees and Expenses................................ $7,500*
Miscellaneous............................................... $ 0*
Total................................................... $8,726
</TABLE>
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* Estimate
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware General Corporation Law, Section 102(b)(7), subject to certain
exceptions, enables a corporation in its certificate of incorporation to
eliminate or limit personal liability of members of its Board of Directors for
violations of a director's fiduciary duty of care.
The Company's Certificate of Incorporation includes the following language:
"No director of the Corporation shall be liable to the Corporation or
any of its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this provision does not eliminate or
limit the liability of the director (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholder, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of title 8 of the
Delaware Code, or (iv) for any transaction from which the director
derived an improper personal benefit."
In addition, Delaware General Corporation Law, Section 145, permits a
corporation organized under Delaware law to indemnify directors and officers
with respect to any matter in which a director or officer acted in good faith
and in a manner reasonably believed to be not opposed to the best interests of
the Company, and, with respect to any criminal action, had reasonable cause to
believe the conduct was lawful.
The Company's Certificate of Incorporation includes the following language:
"Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a
director, officer, employee, or agent of the Corporation or any of its
director or indirect subsidiaries or is or was serving at the request of
the Corporation as a director, officer, employee, or agent of any other
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee,
or agent in any other capacity while serving as a director, officer,
employee, or agent in any other capacity while serving as a director,
officer, employee, or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware Code,
as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the
Corporation to provided broader indemnification rights than permitted
prior thereto), against all expense, liability, and loss (including
attorneys' fees, judgments, fines,
II-1
<PAGE>
excise, or other taxes assessed with respect to an employee benefit
plan, penalties, and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith, and such
indemnification shall continue as to an indemnitee who has ceased to be
a director, officer, employee, or agent and shall inure to the benefit
of the indemnitee's heirs, executors, and administrators; provided,
however, that, except as provided in Paragraph C of this Article Ninth
with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee only if such proceeding
(or part thereof) was authorized by the Board of Directors of the
Corporation."
The Company has a liability insurance policy in effect for officers and
directors. Such insurance, in certain instances, insures the directors and
officers of the Company against liabilities arising under the Securities Act,
including liabilities arising out of the offering made by this Registration
Statement.
ITEM 16. EXHIBITS
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- -----------
<C> <S>
4.1 Form of 4% Convertible Debenture due 2004, between the
Company and GMF Holdings(1)
4.2 Form of 4% Convertible Debenture due 2002, between the
Company and each of John Bridges, John Faure,
Loni Spurkeland, Robert Dettle, Michael Genta,
Lennart Dallgren(2)
4.3 Form of 8% Convertible Debenture due 2002, between the
Company and each of Richard T. Garrett, W. David McCoy,
Dominick Chirarisi, Gilda R. Chirarisi, Joseph C.
Cardella, Carl Hoehner(2)
4.4 Form of 8% Convertible Debenture due 2003, between the
Company and John Bolliger(2)
4.5 Form of Registration Rights Agreement, between the Company
and GMF Holdings(1)
4.6 Form of Registration Rights Agreement, between the Company
and each of John Bridges, John Faure, Loni Spurkeland,
Robert Dettle, Michael Genta, Lennart Dallgren(2)
4.7 Form of Registration Rights Agreement, between the Company
and each of Richard T. Garrett, W. David McCoy,
Dominick Chirarisi, Gilda R. Chirarisi, Joseph C.
Cardella, Carl Hoehner(2)
4.8 Form of Registration Rights Agreement, between the Company
and John Bolliger(2)
4.9 Form of Line of Credit Agreement, between the Company and
GMF Holdings(1)
4.10 Form of Warrant issued September 30, 1999(2)
5 Opinion of Butler Gonzalez, LLP(2)
23.1 Consent of PricewaterhouseCoopers LLP(2)
23.2 Consent of Butler Gonzalez, LLP (contained in the Opinion
filed as Exhibit 5)
24 Power of Attorney (included on the signature pages hereto)
27 Financial Data Schedule(3)
</TABLE>
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(1) Incorporated by reference to the Form 8-K filed on October 8, 1999.
(2) Filed herewith.
(3) Incorporated by reference to the Company's Quarterly Report on Form 10-QSBA
for the period ended September 30, 1999
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the Registration Statement is on Form S-3, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, that
are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing this Registration Statement on Form S-3
("Registration Statement") and authorized this Registration Statement to be
signed on its behalf by the undersigned, in the City of Knoxville, State of
Tennessee, February 15, 2000.
<TABLE>
<S> <C> <C>
CELERITY SYSTEMS, INC.
By: /s/ KENNETH D. VAN METER
-----------------------------------------
Kenneth D. Van Meter
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kenneth D. Van Meter, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place, and stead, in any and all
capacities, to sign any and all pre- or post-effective amendments to this
Registration Statement, and to file the same with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorney-in- act and
agent may lawfully do or cause to be done by virtue hereof.
In accordance with to the requirements of the Securities Act, the
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
President, CEO and Chairman
/s/ KENNETH VAN METER* of the Board (Principal
------------------------------------------- Executive Office Principal February 15, 2000
Kenneth Van Meter Financial Officer)
/s/ KENNETH VAN METER*
------------------------------------------- Director February 15, 2000
Fenton Scruggs
/s/ KENNETH VAN METER*
------------------------------------------- Director February 15, 2000
Donald Greehouse
/s/ KENNETH VAN METER*
------------------------------------------- Director February 15, 2000
Stephen Portch
/s/ KENNETH VAN METER*
------------------------------------------- Director February 15, 2000
Mark Braunstein
/s/ KENNETH VAN METER*
------------------------------------------- Director February 15, 2000
Glenn West
</TABLE>
- ------------------------
* Attorney-in-fact and agent
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.1 Form of 4% Convertible Debenture due 2004, between the
Company and GMF Holdings(1)
4.2 Form of 4% Convertible Debenture due 2002, between the
Company and each of John Bridges, John Faure, Loni
Spurkeland, Robert Dettle, Michael Genta, Lennart
Dallgren(2)
4.3 Form of 8% Convertible Debenture due 2002, between the
Company and each of Richard T. Garrett, W. David McCoy,
Dominick Chirarisi, Gilda R. Chiaraisi, Joseph C.
Cardella, Carl Hoehner(2)
4.4 Form of 8% Convertible Debenture due 2003, between the
Company and John Bolliger(2)
4.5 Form of Registration Rights Agreement, between the Company
and GMF Holdings(1)
4.6 Form of Registration Rights Agreement, between the Company
and each of John Bridges, John Faure, Loni Spurkeland,
Robert Dettle, Michael Genta, Lennart Dallgren(2)
4.7 Form of Registration Rights Agreement, between the Company
and each of Richard T. Garrett,W. David McCoy, Dominick
Chirarisi, Gilda R. Chirarisi, Joseph C. Cardella, Carl
Hoehner(2)
4.8 Form Registration Rights Agreement, between the Company and
John Bolliger(2)
4.9 Form of Line of Credit Agreement, between the Company GMF
Holdings(1)
4.10 Form of Warrant issued September 30, 1999(2)
5 Opinion of Butler Gonzalez, LLP(2)
23.1 Consent of PricewaterhouseCoopers LLP(2)
23.2 Consent of Butler Gonzalez, LLP (contained in the Opinion
filed as Exhibit 5)
24 Power of Attorney (included on the signature pages hereto)
27 Financial Data Schedule(3)
</TABLE>
- ------------------------
(1) Incorporated by reference to the Company's Form 8-K filed on October 8,
1999.
(2) Filed herewith.
(3) Incorporated by reference to the Company's Quarterly Report on Form 10-QSBA
for the period ended September 30, 1999.
<PAGE>
Exhibit 4.2
DEBENTURE
CELERITY SYSTEMS, INC.
1999 4% Subordinated Convertible Debenture
Due October 26, 2002
No.0001 $ 15,000.00
This Debenture is issued by Celerity Systems, Inc., (The "Company") to
John Bridges (the "Debenture holder") pursuant to exemptions from registration
under the U.S. Securities Act of 1933.
ARTICLE I
1.01 PRINCIPAL AND INTEREST. The Company, for value received hereby
confers the right upon Debenture holder to convert the sum of Fifteen Thousand
dollars ($ 15,000.00) into the common stock of the Company (the "Common Stock")
on or before October 26, 2002 ("Maturity Date") as set forth herein, and upon
the Maturity Date to pay interest thereon from the date of issue at the rate of
four percent (4%) per annum. The Company shall pay such interest on the
outstanding principal amount of the Debenture from the date of issue until the
Maturity Date or conversion; the Company shall pay interest only upon the
outstanding balance of the Debenture at the rate of four percent (4%) per annum.
Interest will be computed based on a 365 day year.
1.02 RESERVATION OF COMMON STOCK. The Company shall reserve and keep
available out of its authorized, but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Seventy Five cents (.75 )
per share.
The Company shall use its best efforts to file a Registration Statement
within thirty (30) days form the Closing Date, furthermore, the Company shall
use its best efforts to assure that the Registration Statement is effective
within ninety (90) days of the Closing Date. In the event that the Registration
Statement is not effective within ninety (90) days the Company will pay damages
to the Debenture holder in the amount of two percent (2%) a month payable in
cash or stock at the Company's option.
Furthermore, the Company has on deposit at the May Davis Group free
trading shares in the name of Dr. Fenton Scruggs. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Dr. Fenton Scruggs authorize the May Davis Group to deliver these
free trading shares
<PAGE>
to the Debenture holder as necessary on an appropriate basis to honor
Conversions.
Additionally, the Company will deposit with the May Davis Group free
trading shares currently held by Glenn West. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Glenn West authorize the May Davis Group to deliver these free
trading shares to the Debenture holder as necessary on an appropriate basis to
honor Conversions.
1.03 RIGHT OF REDEMPTION. The Company shall have the right to redeem in
part or in full any outstanding Debentures at one hundred and thirty five (135%)
percent of the Principal plus accrued interest.
1.04 INTEREST PAYMENTS. The interest so payable will be paid at the
time of Conversion to the person in whose name this Debenture is registered. At
the time such interest is payable, the Company, in its sole discretion, may
elect to pay interest in cash (via wire transfer or certified funds) or in the
form of Common Stock. If paid in the form of Common Stock, the amount of stock
to be issued will be calculated as follows: the value of the stock shall be the
Bid Price on: (i) the date the interest payment is due; or (ii) if the interest
payment is not made when due, the date the interest payment is made. A number of
shares of Common Stock with a value equal to the amount of interest due shall be
issued. No fractional shares will be issued; therefore, in the event that the
value of the Common Stock per share does not equal the total interest due, the
Company will pay the balance in cash.
1.05 PAYING AGENT AND REGISTRAR. Initially, the Company will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar,
or Company-registrar without notice. The Company may act in any such capacity.
1.06 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all payments
hereon, including principal or interest, shall be subordinate and junior in
right of payment to all Company Debt (as defined hereinafter), but only to the
extent set forth as follows:
(a) upon the maturity of any Company Debt, or any installment thereof
then due by lapse of time, acceleration or otherwise, all Company Debt then due
shall first be paid in full (or provision made for payment in full thereof)
before any additional payment on account of principal or interest is made on
this Debenture; and
(b) in the event of any insolvency or bankruptcy proceedings affecting
the Company, or any receivership, liquidation, reorganization or other similar
proceedings affecting the Company, and, in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy, then the holders of Company Debt
shall be entitled to receive payment in full of all principal of and interest on
all Company Debt before the holder of this Debenture is entitled to receive any
payment on account of principal, interest or premium on this Debenture.
The provisions of the preceding paragraphs are solely for the purpose
of defining the relative rights of the holders of Company Debt on the one hand
and the holder of this Debenture on the other hand and nothing herein shall
impair, as between the Company and the holder of this Debenture, the obligation
of the Company, which is unconditional and absolute, to pay the holder of this
Debenture the principal, interest and premiums hereon in accordance with its
terms, nor shall anything herein prevent the holder of this Debenture from
exercising all remedies otherwise permitted by law or hereunder upon default
hereunder, subject to the relative rights of the holders of Company Debt
expressed in the preceding paragraphs.
<PAGE>
For the purpose of this Notice, the term "Company Debt" shall mean and
include current bank debt and all indebtedness acquired by the Company
subsequent to the date hereof, other than indebtedness to any officer, director
or other person who has beneficial ownership of ten percent (10%) or more of the
Company's issued and outstanding shares of Common Stock.
ARTICLE II
2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended
with the consent of the Debenture holder. Without the consent of the Debenture
holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company obligations to the
Debenture holder or to make any change that does not adversely affect the rights
of the Debenture holder.
ARTICLE III
3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows:
failure by the Company to pay amounts due hereunder within two (2) days of the
Maturity Date failure by the Company to advise its transfer agent to issue
Common Stock to the Debenture holder within two (2) business days of the
Company's receipt of the Notice of Conversion from Debenture holder; or failure
by the Company for thirty (30) days after notice to it to comply with any of its
other agreements in the Debenture; and events of bankruptcy or insolvency. The
Debenture holder may not enforce the Debenture except as provided herein.
3.02 SUCCESSOR CORPORATION. If a successor corporation assumes all the
obligations of this predecessor, Celerity Systems, Inc., the predecessor
corporation will be released from those obligations under the Debenture.
3.03 WAIVER AND RELEASE. A director, officer, employee or stockholders,
as such, of the Company shall not have any liability for any obligations of the
Company under the Debenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. The Debenture holder, by accepting
a Debenture waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Debenture.
ARTICLE IV
4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in
part, may be converted at any time beginning ninety (90) days following the date
of closing, into shares of Common Stock at a price equal to the following
Conversion: at the Debenture holders option, either, sixty five percent (65%) of
the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, Seventy Five cents (.75) per share.
In lieu of any fractional share to which the Debenture holder would
otherwise be entitled, the Company will pay the balance in cash.
<PAGE>
4.02 REISSUANCE OF DEBENTURE. When the Debenture holder elects to
convert a part of the Debenture, then the Company shall reissue a new Debenture
in the same form as this Debenture to reflect the new principal amount.
4.03 TERMINATION OF CONVERSION RIGHTS. The Debenture holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on October 26, 2002 and shall be automatically converted on that
date in accordance with the formula set forth in Section 4.01 hereof, and the
appropriate shares of common stock and amount of interest shall be issued to the
Debenture holder.
4.04. Notwithstanding any other provision contained herein, the parties
agree that in no event shall the Company be required to issue (i) an aggregate
number of shares constituting more than 19.99% of the number of shares of Common
Stock outstanding on the date of such issuance or (ii) a number of shares that
would result in a change of control of the Company, unless the shareholders of
the Company approve such issuance of additional Common Shares or NASDAQ waives
the applicable requirements of Market Place Rule 4310(H)(i). The Company agrees
to use commercially reasonable efforts to obtain such approval or waiver on or
prior to the 90th day following the date that more than 19.99% of the Common
Stock would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
ARTICLE V
5.01 NOTICE. Notices regarding this Debenture shall be sent to the
parties at the following addresses, unless a party notifies the other parties,
in writing, of a change of address:
If to the Company: CELERITY SYSTEMS, INC.
1400 Centerpoint Blvd.
Knoxville, Tennessee 37932.
Attention: President
If to Debenture holder: JOHN BRIDGES
501 Scott Street
Dainbridge, GA 31717
5.02 GOVERNING LAW. This Debenture shall be deemed to be made under and
shall be construed in accordance with the laws of the Commonwealth of Delaware
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law, any
objection, including
<PAGE>
any objection based on FORUM NON CONVENIENS to the bringing of any such
proceeding in such jurisdictions.
5.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
5.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and there are no representations, warranties or commitments, except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.
5.05 COUNTERPARTS. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute on instrument.
5.06 ASSIGNMENT. Neither this Debenture nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Debenture shall insure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Debentures purchased or acquired by the Investor hereunder with respect to the
Common Stock held by such person, and (b) upon the prior written consent of the
Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Debenture may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor).
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
parties hereto have executed this Debenture as of October 26, 1999.
ATTEST:
----------------------------------
CELERITY SYSTEMS, INC.
/s/ Kenneth Van Meter
--------------------------------
Kenneth Van Meter
Title: President/CEO
JOHN BRIDGES
/s/ John Bridges
--------------------------------
Debenture Holder
<PAGE>
DEBENTURE
CELERITY SYSTEMS, INC.
1999 4% Subordinated Convertible Debenture
Due October 28, 2002
No.0002
$ 15,000.00
This Debenture is issued by Celerity Systems, Inc., (The "Company") to
John P. Faure (the "Debenture holder") pursuant to exemptions from registration
under the U.S. Securities Act of 1933.
ARTICLE I
1.01 PRINCIPAL AND INTEREST. The Company, for value received hereby
confers the right upon Debenture holder to convert the sum of Fifteen Thousand
dollars ($ 15,000.00) into the common stock of the Company (the "Common Stock")
on or before October 28, 2002("Maturity Date") as set forth herein, and upon the
Maturity Date to pay interest thereon from the date of issue at the rate of four
percent (4%) per annum. The Company shall pay such interest on the outstanding
principal amount of the Debenture from the date of issue until the Maturity Date
or conversion; the Company shall pay interest only upon the outstanding balance
of the Debenture at the rate of four percent (4%) per annum. Interest will be
computed based on a 365 day year.
1.02 RESERVATION OF COMMON STOCK. The Company shall reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Seventy Five cents (.75 )
per share.
The Company shall use its best efforts to file a Registration Statement
within thirty (30) days form the Closing Date, furthermore, the Company shall
use its best efforts to assure that the Registration Statement is effective
within ninety (90) days of the Closing Date. In the event that the Registration
Statement is not effective within ninety (90) days the Company will pay damages
to the Debenture holder in the amount of two percent (2%) a month payable in
cash or stock at the Company's option.
Furthermore, the Company has on deposit at the May Davis Group free
trading shares in the name of Dr. Fenton Scruggs. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Dr. Fenton Scruggs authorize the May Davis Group to deliver these
free trading shares to the Debenture holder as necessary on an appropriate basis
to honor Conversions.
<PAGE>
Additionally, the Company will deposit with the May Davis Group free
trading shares currently held by Glenn West. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Glenn West authorize the May Davis Group to deliver these free
trading shares to the Debenture holder as necessary on an appropriate basis to
honor Conversions.
1.03 RIGHT OF REDEMPTION. The Company shall have the right to redeem in
part or in full any outstanding Debentures at one hundred and thirty five (135%)
percent of the Principal plus accrued interest.
1.04 INTEREST PAYMENTS. The interest so payable will be paid at the
time of Conversion to the person in whose name this Debenture is registered. At
the time such interest is payable, the Company, in its sole discretion, may
elect to pay interest in cash (via wire transfer or certified funds) or in the
form of Common Stock. If paid in the form of Common Stock, the amount of stock
to be issued will be calculated as follows: the value of the stock shall be the
Bid Price on: (i) the date the interest payment is due; or (ii) if the interest
payment is not made when due, the date the interest payment is made. A number of
shares of Common Stock with a value equal to the amount of interest due shall be
issued. No fractional shares will be issued; therefore, in the event that the
value of the Common Stock per share does not equal the total interest due, the
Company will pay the balance in cash.
1.05 PAYING AGENT AND REGISTRAR. Initially, the Company will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar,
or Company-registrar without notice. The Company may act in any such capacity.
1.06 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all payments
hereon, including principal or interest, shall be subordinate and junior in
right of payment to all Company Debt (as defined hereinafter), but only to the
extent set forth as follows:
(a) upon the maturity of any Company Debt, or any installment thereof
then due by lapse of time, acceleration or otherwise, all Company Debt then due
shall first be paid in full (or provision made for payment in full thereof)
before any additional payment on account of principal or interest is made on
this Debenture; and
(b) in the event of any insolvency or bankruptcy proceedings affecting
the Company, or any receivership, liquidation, reorganization or other similar
proceedings affecting the Company, and, in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy, then the holders of Company Debt
shall be entitled to receive payment in full of all principal of and interest on
all Company Debt before the holder of this Debenture is entitled to receive any
payment on account of principal, interest or premium on this Debenture.
The provisions of the preceding paragraphs are solely for the purpose
of defining the relative rights of the holders of Company Debt on the one hand
and the holder of this Debenture on the other hand and nothing herein shall
impair, as between the Company and the holder of this Debenture, the obligation
of the Company, which is unconditional and absolute, to pay the holder of this
Debenture the principal, interest and premiums hereon in accordance with its
terms, nor shall anything herein prevent the holder of this Debenture from
exercising all remedies otherwise permitted by law or hereunder upon default
hereunder, subject to the relative rights of the holders of Company Debt
expressed in the preceding paragraphs.
<PAGE>
For the purpose of this Notice, the term "Company Debt" shall mean and
include current bank debt and all indebtedness acquired by the Company
subsequent to the date hereof, other than indebtedness to any officer, director
or other person who has beneficial ownership of ten percent (10%) or more of the
Company's issued and outstanding shares of Common Stock.
ARTICLE II
2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended
with the consent of the Debenture holder. Without the consent of the Debenture
holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company obligations to the
Debenture holder or to make any change that does not adversely affect the rights
of the Debenture holder.
ARTICLE III
3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows:
failure by the Company to pay amounts due hereunder within two (2) days of the
Maturity Date failure by the Company to advise its transfer agent to issue
Common Stock to the Debenture holder within two (2) business days of the
Company's receipt of the Notice of Conversion from Debenture holder; or failure
by the Company for thirty (30) days after notice to it to comply with any of its
other agreements in the Debenture; and events of bankruptcy or insolvency. The
Debenture holder may not enforce the Debenture except as provided herein.
3.02 SUCCESSOR CORPORATION. If a successor corporation assumes all the
obligations of this predecessor, Celerity Systems, Inc., the predecessor
corporation will be released from those obligations under the Debenture.
3.03 WAIVER AND RELEASE. A director, officer, employee or stockholders,
as such, of the Company shall not have any liability for any obligations of the
Company under the Debenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. The Debenture holder, by accepting
a Debenture waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Debenture.
ARTICLE IV
4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in
part, may be converted at any time beginning ninety (90) days following the date
of closing, into shares of Common Stock at a price equal to the following
Conversion: at the Debenture holders option, either, sixty five percent (65%) of
the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, Seventy Five cents (.75) per share.
In lieu of any fractional share to which the Debenture holder would
otherwise be entitled, the Company will pay the balance in cash.
4.02 REISSUANCE OF DEBENTURE. When the Debenture holder elects to
convert a part of the Debenture,
<PAGE>
then the Company shall reissue a new Debenture in the same form as this
Debenture to reflect the new principal amount.
4.03 TERMINATION OF CONVERSION RIGHTS. The Debenture holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on October 28, 2002 and shall be automatically converted on that
date in accordance with the formula set forth in Section 4.01 hereof, and the
appropriate shares of common stock and amount of interest shall be issued to the
Debenture holder.
4.04. Notwithstanding any other provision contained herein, the parties
agree that in no event shall the Company be required to issue (i) an aggregate
number of shares constituting more than 19.99% of the number of shares of Common
Stock outstanding on the date of such issuance or (ii) a number of shares that
would result in a change of control of the Company, unless the shareholders of
the Company approve such issuance of additional Common Shares or NASDAQ waives
the applicable requirements of Market Place Rule 4310(H)(i). The Company agrees
to use commercially reasonable efforts to obtain such approval or waiver on or
prior to the 90th day following the date that more than 19.99% of the Common
Stock would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
ARTICLE V
5.01 NOTICE. Notices regarding this Debenture shall be sent to the
parties at the following addresses, unless a party notifies the other parties,
in writing, of a change of address:
If to the Company: CELERITY SYSTEMS, INC.
1400 Centerpoint Blvd.
Knoxville, Tennessee 37932.
Attention: President
If to Debenture holder: JOHN P. FAURE
59 Blue Canyon Trail
Santa Fe, NM 87504
5.02 GOVERNING LAW. This Debenture shall be deemed to be made under and
shall be construed in accordance with the laws of the Commonwealth of Delaware
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law any
objection, including
<PAGE>
any objection based on FORUM NON CONVENIENS to the bringing of any such
proceeding in such jurisdictions.
5.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
5.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and there are no representations, warranties or commitments, except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.
5.05 COUNTERPARTS. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute on instrument.
5.06 ASSIGNMENT. Neither this Debenture nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Debenture shall insure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Debentures purchased or acquired by the Investor hereunder with respect to the
Common Stock held by such person, and (b) upon the prior written consent of the
Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Debenture may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor).
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
parties hereto have executed this Debenture as of October 28, 1999.
ATTEST:
----------------------------------
CELERITY SYSTEMS, INC.
/s/ Kenneth Van Meter
-----------------------------------
Kenneth Van Meter
Title: President/CEO
JOHN P. FAURE
/s/ John P. Faure
-----------------------------------
Debenture Holder
<PAGE>
DEBENTURE
CELERITY SYSTEMS, INC.
1999 4% Subordinated Convertible Debenture
Due October 29, 2002
No.0003 $ 10,000.00
This Debenture is issued by Celerity Systems, Inc., (The "Company") to
Loni Spurkeland (the "Debenture holder") pursuant to exemptions from
registration under the U.S. Securities Act of 1933.
ARTICLE I
1.01 PRINCIPAL AND INTEREST. The Company, for value received hereby
confers the right upon Debenture holder to convert the sum of Ten Thousand
dollars ($ 10,000.00) into the common stock of the Company (the "Common Stock")
on or before October 29, 2002 ("Maturity Date") as set forth herein, and upon
the Maturity Date to pay interest thereon from the date of issue at the rate of
four percent (4%) per annum. The Company shall pay such interest on the
outstanding principal amount of the Debenture from the date of issue until the
Maturity Date or conversion; the Company shall pay interest only upon the
outstanding balance of the Debenture at the rate of four percent (4%) per annum.
Interest will be computed based on a 365 day year.
1.02 RESERVATION OF COMMON STOCK. The Company shall reserve and keep
available out of its authorized, but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Seventy Five cents (.75 )
per share.
The Company shall use its best efforts to file a Registration Statement
within thirty (30) days form the Closing Date, furthermore, the Company shall
use its best efforts to assure that the Registration Statement is effective
within ninety (90) days of the Closing Date. In the event that the Registration
Statement is not effective within ninety (90) days the Company will pay damages
to the Debenture holder in the amount of two percent (2%) a month payable in
cash or stock at the Company's option.
Furthermore, the Company has on deposit at the May Davis Group free
trading shares in the name of Dr. Fenton Scruggs. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Dr. Fenton Scruggs authorize the May Davis Group to deliver these
free trading shares to the Debenture holder as necessary on an appropriate basis
to honor Conversions.
<PAGE>
Additionally, the Company will deposit with the May Davis Group free
trading shares currently held by Glenn West. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Glenn West authorize the May Davis Group to deliver these free
trading shares to the Debenture holder as necessary on an appropriate basis to
honor Conversions.
1.03 RIGHT OF REDEMPTION. The Company shall have the right to redeem in
part or in full any outstanding Debentures at one hundred and thirty five
(135%) percent of the Principal plus accrued interest.
1.04 INTEREST PAYMENTS. The interest so payable will be paid at the
time of Conversion to the person in whose name this Debenture is registered. At
the time such interest is payable, the Company, in its sole discretion, may
elect to pay interest in cash (via wire transfer or certified funds) or in the
form of Common Stock. If paid in the form of Common Stock, the amount of stock
to be issued will be calculated as follows: the value of the stock shall be the
Bid Price on: (i) the date the interest payment is due; or (ii) if the interest
payment is not made when due, the date the interest payment is made. A number of
shares of Common Stock with a value equal to the amount of interest due shall be
issued. No fractional shares will be issued; therefore, in the event that the
value of the Common Stock per share does not equal the total interest due, the
Company will pay the balance in cash.
1.05 PAYING AGENT AND REGISTRAR. Initially, the Company will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar,
or Company-registrar without notice. The Company may act in any such capacity.
1.06 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all payments
hereon, including principal or interest, shall be subordinate and junior in
right of payment to all Company Debt (as defined hereinafter), but only to the
extent set forth as follows:
(a) upon the maturity of any Company Debt, or any installment thereof
then due by lapse of time, acceleration or otherwise, all Company Debt then due
shall first be paid in full (or provision made for payment in full thereof)
before any additional payment on account of principal or interest is made on
this Debenture; and
(b) in the event of any insolvency or bankruptcy proceedings affecting
the Company, or any receivership, liquidation, reorganization or other similar
proceedings affecting the Company, and, in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy, then the holders of Company Debt
shall be entitled to receive payment in full of all principal of and interest on
all Company Debt before the holder of this Debenture is entitled to receive any
payment on account of principal, interest or premium on this Debenture.
The provisions of the preceding paragraphs are solely for the purpose
of defining the relative rights of the holders of Company Debt on the one hand
and the holder of this Debenture on the other hand and nothing herein shall
impair, as between the Company and the holder of this Debenture, the obligation
of the Company, which is unconditional and absolute, to pay the holder of this
Debenture the principal, interest and premiums hereon in accordance with its
terms, nor shall anything herein prevent the holder of this Debenture from
exercising all remedies otherwise permitted by law or hereunder upon default
hereunder, subject to the relative rights of the holders of Company Debt
expressed in the preceding paragraphs.
<PAGE>
For the purpose of this Notice, the term "Company Debt" shall mean and
include current bank debt and all indebtedness acquired by the Company
subsequent to the date hereof, other than indebtedness to any officer, director
or other person who has beneficial ownership of ten percent (10%) or more of the
Company's issued and outstanding shares of Common Stock.
ARTICLE II
2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended
with the consent of the Debenture holder. Without the consent of the Debenture
holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company obligations to the
Debenture holder or to make any change that does not adversely affect the rights
of the Debenture holder.
ARTICLE III
3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows:
failure by the Company to pay amounts due hereunder within two (2) days of the
Maturity Date failure by the Company to advise its transfer agent to issue
Common Stock to the Debenture holder within two (2) business days of the
Company's receipt of the Notice of Conversion from Debenture holder; or failure
by the Company for thirty (30) days after notice to it to comply with any of its
other agreements in the Debenture; and events of bankruptcy or insolvency. The
Debenture holder may not enforce the Debenture except as provided herein.
3.02 SUCCESSOR CORPORATION. If a successor corporation assumes all the
obligations of this predecessor, Celerity Systems, Inc., the predecessor
corporation will be released from those obligations under the Debenture.
3.03 WAIVER AND RELEASE. A director, officer, employee or stockholders,
as such, of the Company shall not have any liability for any obligations of the
Company under the Debenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. The Debenture holder, by accepting
a Debenture waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Debenture.
ARTICLE IV
4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in
part, may be converted at any time beginning ninety (90) days following the date
of closing, into shares of Common Stock at a price equal to the following
Conversion: at the Debenture holders option, either, sixty five percent (65%) of
the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, Seventy Five cents (.75) per share.
In lieu of any fractional share to which the Debenture holder would
otherwise be entitled, the Company will pay the balance in cash.
4.02 REISSUANCE OF DEBENTURE. When the Debenture holder elects to
convert a part of the Debenture,
<PAGE>
then the Company shall reissue a new Debenture in the same form as this
Debenture to reflect the new principal amount.
4.03 TERMINATION OF CONVERSION RIGHTS. The Debenture holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on October 29, 2002 and shall be automatically converted on that
date in accordance with the formula set forth in Section 4.01 hereof, and the
appropriate shares of common stock and amount of interest shall be issued to the
Debenture holder.
4.04. Notwithstanding any other provision contained herein, the parties
agree that in no event shall the Company be required to issue (i) an aggregate
number of shares constituting more than 19.99% of the number of shares of Common
Stock outstanding on the date of such issuance or (ii) a number of shares that
would result in a change of control of the Company, unless the shareholders of
the Company approve such issuance of additional Common Shares or NASDAQ waives
the applicable requirements of Market Place Rule 4310(H)(i). The Company agrees
to use commercially reasonable efforts to obtain such approval or waiver on or
prior to the 90th day following the date that more than 19.99% of the Common
Stock would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
ARTICLE V
5.01 NOTICE. Notices regarding this Debenture shall be sent to the
parties at the following addresses, unless a party notifies the other parties,
in writing, of a change of address:
If to the Company: CELERITY SYSTEMS, INC.
1400 Centerpoint Blvd.
Knoxville, Tennessee 37932.
Attention: President
If to Debenture holder: LONI SPURKELAND
2080 Mummasburg Road
Gettysburg, PA 17325
5.02 GOVERNING LAW. This Debenture shall be deemed to be made under and
shall be construed in accordance with the laws of the Commonwealth of Delaware
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on FORUM NON CONVENIENS to the bringing
of any such proceeding in such jurisdictions.
5.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
<PAGE>
5.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and there are no representations, warranties or commitments, except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.
5.05 COUNTERPARTS. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute on instrument.
5.06 ASSIGNMENT. Neither this Debenture nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Debenture shall insure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Debentures purchased or acquired by the Investor hereunder with respect to the
Common Stock held by such person, and (b) upon the prior written consent of the
Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Debenture may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor).
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
parties hereto have executed this Debenture as of October 29, 1999.
ATTEST:
---------------------
CELERITY SYSTEMS, INC.
/s/ Kenneth Van Meter
-----------------------------
Kenneth Van Meter
Title: President/CEO
LONI SPURKELAND
/s/ Loni Spurkeland
-----------------------------
Debenture Holder
<PAGE>
DEBENTURE
CELERITY SYSTEMS, INC.
1999 4% Subordinated Convertible Debenture
Due November 1, 2002
No.0004 $ 25,000.00
This Debenture is issued by Celerity Systems, Inc., (The "Company") to
Robert E. Dettle (the "Debenture holder") pursuant to exemptions from
registration under the U.S. Securities Act of 1933.
ARTICLE I
1.01 PRINCIPAL AND INTEREST. The Company, for value received hereby
confers the right upon Debenture holder to convert the sum of Twenty Five
Thousand dollars ($ 25,000.00) into the common stock of the Company (the "Common
Stock") on or before November 1, 2002 ("Maturity Date") as set forth herein, and
upon the Maturity Date to pay interest thereon from the date of issue at the
rate of four percent (4%) per annum. The Company shall pay such interest on the
outstanding principal amount of the Debenture from the date of issue until the
Maturity Date or conversion; the Company shall pay interest only upon the
outstanding balance of the Debenture at the rate of four percent (4%) per annum.
Interest will be computed based on a 365 day year.
1.02 RESERVATION OF COMMON STOCK. The Company shall reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Seventy Five cents (.75 )
per share.
The Company shall use its best efforts to file a Registration Statement
within thirty (30) days form the Closing Date, furthermore, the Company shall
use its best efforts to assure that the Registration Statement is effective
within ninety (90) days of the Closing Date. In the event that the Registration
Statement is not effective within ninety (90) days the Company will pay damages
to the Debenture holder in the amount of two percent (2%) a month payable in
cash or stock at the Company's option.
Furthermore, the Company has on deposit at the May Davis Group free
trading shares in the name of Dr. Fenton Scruggs. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Dr. Fenton Scruggs authorize the May Davis Group to deliver these
free trading shares to the Debenture holder as necessary on an appropriate basis
to honor Conversions.
<PAGE>
Additionally, the Company will deposit with the May Davis Group free
trading shares currently held by Glenn West. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Glenn West authorize the May Davis Group to deliver these free
trading shares to the Debenture holder as necessary on an appropriate basis to
honor Conversions
1.03 RIGHT OF REDEMPTION. The Company shall have the right to redeem in
part or in full any outstanding Debentures at one hundred and thirty five (135%)
percent of the Principal plus accrued interest.
1.04 INTEREST PAYMENTS. The interest so payable will be paid at the
time of Conversion to the person in whose name this Debenture is registered. At
the time such interest is payable, the Company, in its sole discretion, may
elect to pay interest in cash (via wire transfer or certified funds) or in the
form of Common Stock. If paid in the form of Common Stock, the amount of stock
to be issued will be calculated as follows: the value of the stock shall be the
Bid Price on: (i) the date the interest payment is due; or (ii) if the interest
payment is not made when due, the date the interest payment is made. A number of
shares of Common Stock with a value equal to the amount of interest due shall be
issued. No fractional shares will be issued; therefore, in the event that the
value of the Common Stock per share does not equal the total interest due, the
Company will pay the balance in cash.
1.05 PAYING AGENT AND REGISTRAR. Initially, the Company will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar,
or Company-registrar without notice. The Company may act in any such capacity.
1.06 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all payments
hereon, including principal or interest, shall be subordinate and junior in
right of payment to all Company Debt (as defined hereinafter), but only to the
extent set forth as follows:
(a) upon the maturity of any Company Debt, or any installment thereof
then due by lapse of time, acceleration or otherwise, all Company Debt then due
shall first be paid in full (or provision made for payment in full thereof)
before any additional payment on account of principal or interest is made on
this Debenture; and
(b) in the event of any insolvency or bankruptcy proceedings affecting
the Company, or any receivership, liquidation, reorganization or other similar
proceedings affecting the Company, and, in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy, then the holders of Company Debt
shall be entitled to receive payment in full of all principal of and interest on
all Company Debt before the holder of this Debenture is entitled to receive any
payment on account of principal, interest or premium on this Debenture.
The provisions of the preceding paragraphs are solely for the purpose
of defining the relative rights of the holders of Company Debt on the one hand
and the holder of this Debenture on the other hand and nothing herein shall
impair, as between the Company and the holder of this Debenture, the obligation
of the Company, which is unconditional and absolute, to pay the holder of this
Debenture the principal, interest and premiums hereon in accordance with its
terms, nor shall anything herein prevent the holder of this Debenture from
<PAGE>
exercising all remedies otherwise permitted by law or hereunder upon default
hereunder, subject to the relative rights of the holders of Company Debt
expressed in the preceding paragraphs.
For the purpose of this Notice, the term "Company Debt" shall mean and
include current bank debt and all indebtedness acquired by the Company
subsequent to the date hereof, other than indebtedness to any officer, director
or other person who has beneficial ownership of ten percent (10%) or more of the
Company's issued and outstanding shares of Common Stock.
ARTICLE II
2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended
with the consent of the Debenture holder. Without the consent of the Debenture
holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company obligations to the
Debenture holder or to make any change that does not adversely affect the rights
of the Debenture holder.
ARTICLE III
3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows:
failure by the Company to pay amounts due hereunder within two (2) days of the
Maturity Date failure by the Company to advise its transfer agent to issue
Common Stock to the Debenture holder within two (2) business days of the
Company's receipt of the Notice of Conversion from Debenture holder; or failure
by the Company for thirty (30) days after notice to it to comply with any of its
other agreements in the Debenture; and events of bankruptcy or insolvency. The
Debenture holder may not enforce the Debenture except as provided herein.
3.02 SUCCESSOR CORPORATION. If a successor corporation assumes all the
obligations of this predecessor, Celerity Systems, Inc., the predecessor
corporation will be released from those obligations under the Debenture.
3.03 WAIVER AND RELEASE. A director, officer, employee or stockholders,
as such, of the Company shall not have any liability for any obligations of the
Company under the Debenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. The Debenture holder, by accepting
a Debenture waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Debenture.
ARTICLE IV
4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in
part, may be converted at any time beginning ninety (90) days following the date
of closing, into shares of Common Stock at a price equal to the following
Conversion: at the Debenture holders option, either, sixty five percent (65%) of
the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, Seventy Five cents (.75) per share.
In lieu of any fractional share to which the Debenture holder would
otherwise be entitled, the Company
<PAGE>
will pay the balance in cash.
4.02 REISSUANCE OF DEBENTURE. When the Debenture holder elects to
convert a part of the Debenture, then the Company shall reissue a new Debenture
in the same form as this Debenture to reflect the new principal amount.
4.03 TERMINATION OF CONVERSION RIGHTS. The Debenture holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on November 1, 2002 and shall be automatically converted on that
date in accordance with the formula set forth in Section 4.01 hereof, and the
appropriate shares of common stock and amount of interest shall be issued to the
Debenture holder.
4.04. Notwithstanding any other provision contained herein, the parties
agree that in no event shall the Company be required to issue (i) an aggregate
number of shares constituting more than 19.99% of the number of shares of Common
Stock outstanding on the date of such issuance or (ii) a number of shares that
would result in a change of control of the Company, unless the shareholders of
the Company approve such issuance of additional Common Shares or NASDAQ waives
the applicable requirements of Market Place Rule 4310(H)(i). The Company agrees
to use commercially reasonable efforts to obtain such approval or waiver on or
prior to the 90th day following the date that more than 19.99% of the Common
Stock would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
ARTICLE V
5.01 NOTICE. Notices regarding this Debenture shall be sent to the
parties at the following addresses, unless a party notifies the other parties,
in writing, of a change of address:
If to the Company: CELERITY SYSTEMS, INC.
1400 Centerpoint Blvd.
Knoxville, Tennessee 37932.
Attention: President
If to Debenture holder: ROBERT E. DETTLE
227 Segre Place
Santa Cruz, CA 95060
5.02 GOVERNING LAW. This Debenture shall be deemed to be made under and
shall be construed in accordance with the laws of the Commonwealth of Delaware
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law, any
objections, including any objection based on FORUM NON CONVENIENS to the
bringing of any such proceeding in such jurisdictions.
<PAGE>
5.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
5.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and there are no representations, warranties or commitments, except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.
5.05 COUNTERPARTS. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute on instrument.
5.06 ASSIGNMENT. Neither this Debenture nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Debenture shall insure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Debentures purchased or acquired by the Investor hereunder with respect to the
Common Stock held by such person, and (b) upon the prior written consent of the
Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Debenture may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor).
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
parties hereto have executed this Debenture as of November 1, 1999.
ATTEST:
----------------------
CELERITY SYSTEMS, INC.
/s/ Kenneth Van Meter
-------------------------------
Kenneth Van Meter
Title: President/CEO
ROBERT E. DETTLE
/s/ Robert E. Dettle
-------------------------------
Debenture Holder
<PAGE>
DEBENTURE
CELERITY SYSTEMS, INC.
1999 4% Subordinated Convertible Debenture
Due November 1, 2002
No.0006 $ 20,000.00
This Debenture is issued by Celerity Systems, Inc., (The "Company") to
Lennart Dallgren (the "Debenture holder") pursuant to exemptions from
registration under the U.S. Securities Act of 1933.
ARTICLE I
1.01 PRINCIPAL AND INTEREST. The Company, for value received hereby
confers the right upon Debenture holder to convert the sum of Twenty Thousand
dollars ($ 20,000.00) into the common stock of the Company (the "Common Stock")
on or before November 1, 2002 ("Maturity Date") as set forth herein, and upon
the Maturity Date to pay interest thereon from the date of issue at the rate of
four percent (4%) per annum. The Company shall pay such interest on the
outstanding principal amount of the Debenture from the date of issue until the
Maturity Date or conversion; the Company shall pay interest only upon the
outstanding balance of the Debenture at the rate of four percent (4%) per annum.
Interest will be computed based on a 365 day year.
1.02 RESERVATION OF COMMON STOCK. The Company shall reserve and keep
available out of its authorized, but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Seventy Five cents (.75 )
per share.
The Company shall use its best efforts to file a Registration Statement
within thirty (30) days form the Closing Date, furthermore, the Company shall
use its best efforts to assure that the Registration Statement is effective
within ninety (90) days of the Closing Date. In the event that the Registration
Statement is not effective within ninety (90) days the Company will pay damages
to the Debenture holder in the amount of two percent (2%) a month payable in
cash or stock at the Company's option.
Furthermore, the Company has on deposit at the May Davis Group free
trading shares in the name of Dr. Fenton Scruggs. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Dr. Fenton Scruggs authorize the May Davis Group to deliver these
free trading shares to the Debenture holder as necessary on an appropriate basis
to honor Conversions.
<PAGE>
Additionally, the Company will deposit with the May Davis Group free
trading shares currently held by Glenn West. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Glenn West authorize the May Davis Group to deliver these free
trading shares to the Debenture holder as necessary on an appropriate basis to
honor Conversions.
1.03 RIGHT OF REDEMPTION. The Company shall have the right to redeem in
part or in full any outstanding Debentures at one hundred and thirty five (135
%) percent of the Principal plus accrued interest.
1.04 INTEREST PAYMENTS. The interest so payable will be paid at the
time of Conversion to the person in whose name this Debenture is registered. At
the time such interest is payable, the Company, in its sole discretion, may
elect to pay interest in cash (via wire transfer or certified funds) or in the
form of Common Stock. If paid in the form of Common Stock, the amount of stock
to be issued will be calculated as follows: the value of the stock shall be the
Bid Price on: (i) the date the interest payment is due; or (ii) if the interest
payment is not made when due, the date the interest payment is made. A number of
shares of Common Stock with a value equal to the amount of interest due shall be
issued. No fractional shares will be issued; therefore, in the event that the
value of the Common Stock per share does not equal the total interest due, the
Company will pay the balance in cash.
1.05 PAYING AGENT AND REGISTRAR. Initially, the Company will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar,
or Company-registrar without notice. The Company may act in any such capacity.
1.06 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all payments
hereon, including principal or interest, shall be subordinate and junior in
right of payment to all Company Debt (as defined hereinafter), but only to the
extent set forth as follows:
(a) upon the maturity of any Company Debt, or any installment thereof
then due by lapse of time, acceleration or otherwise, all Company Debt then due
shall first be paid in full (or provision made for payment in full thereof)
before any additional payment on account of principal or interest is made on
this Debenture; and
(b) in the event of any insolvency or bankruptcy proceedings affecting
the Company, or any receivership, liquidation, reorganization or other similar
proceedings affecting the Company, and, in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy, then the holders of Company Debt
shall be entitled to receive payment in full of all principal of and interest on
all Company Debt before the holder of this Debenture is entitled to receive any
payment on account of principal, interest or premium on this Debenture.
The provisions of the preceding paragraphs are solely for the purpose
of defining the relative rights of the holders of Company Debt on the one hand
and the holder of this Debenture on the other hand and nothing herein shall
impair, as between the Company and the holder of this Debenture, the obligation
of the Company, which is unconditional and absolute, to pay the holder of this
Debenture the principal, interest and premiums hereon in accordance with its
terms, nor shall anything herein prevent the holder of this Debenture from
exercising all remedies otherwise permitted by law or hereunder upon default
hereunder, subject to the relative rights of the holders of Company Debt
expressed in the preceding paragraphs.
<PAGE>
For the purpose of this Notice, the term "Company Debt" shall mean and
include current bank debt and all indebtedness acquired by the Company
subsequent to the date hereof, other than indebtedness to any officer, director
or other person who has beneficial ownership of ten percent (10%) or more of the
Company's issued and outstanding shares of Common Stock.
ARTICLE II
2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended
with the consent of the Debenture holder. Without the consent of the Debenture
holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company obligations to the
Debenture holder or to make any change that does not adversely affect the rights
of the Debenture holder.
ARTICLE III
3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows:
failure by the Company to pay amounts due hereunder within two (2) days of the
Maturity Date failure by the Company to advise its transfer agent to issue
Common Stock to the Debenture holder within two (2) business days of the
Company's receipt of the Notice of Conversion from Debenture holder; or failure
by the Company for thirty (30) days after notice to it to comply with any of its
other agreements in the Debenture; and events of bankruptcy or insolvency. The
Debenture holder may not enforce the Debenture except as provided herein.
3.02 SUCCESSOR CORPORATION. If a successor corporation assumes all the
obligations of this predecessor, Celerity Systems, Inc., the predecessor
corporation will be released from those obligations under the Debenture.
3.03 WAIVER AND RELEASE. A director, officer, employee or stockholders,
as such, of the Company shall not have any liability for any obligations of the
Company under the Debenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. The Debenture holder, by accepting
a Debenture waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Debenture.
ARTICLE IV
4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in
part, may be converted at any time beginning ninety (90) days following the date
of closing, into shares of Common Stock at a price equal to the following
Conversion: at the Debenture holders option, either, sixty five percent (65%) of
the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, Seventy Five cents (.75) per share.
In lieu of any fractional share to which the Debenture holder would
otherwise be entitled, the Company will pay the balance in cash.
4.02 REISSUANCE OF DEBENTURE. When the Debenture holder elects to
convert a part of the Debenture,
<PAGE>
then the Company shall reissue a new Debenture in the same form as this
Debenture to reflect the new principal amount.
4.03 TERMINATION OF CONVERSION RIGHTS. The Debenture holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on November 1, 2002 and shall be automatically converted on that
date in accordance with the formula set forth in Section 4.01 hereof, and the
appropriate shares of common stock and amount of interest shall be issued to the
Debenture holder.
4.04. Notwithstanding any other provision contained herein, the parties
agree that in no event shall the Company be required to issue (i) an aggregate
number of shares constituting more than 19.99% of the number of shares of Common
Stock outstanding on the date of such issuance or (ii) a number of shares that
would result in a change of control of the Company, unless the shareholders of
the Company approve such issuance of additional Common Shares or NASDAQ waives
the applicable requirements of Market Place Rule 4310(H)(i). The Company agrees
to use commercially reasonable efforts to obtain such approval or waiver on or
prior to the 90th day following the date that more than 19.99% of the Common
Stock would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
ARTICLE V
5.01 NOTICE. Notices regarding this Debenture shall be sent to the
parties at the following addresses, unless a party notifies the other parties,
in writing, of a change of address:
If to the Company: CELERITY SYSTEMS, INC.
1400 Centerpoint Blvd.
Knoxville, Tennessee 37932.
Attention: President
If to Debenture holder: LENNART DALLGREN
1810 Venice Park Drive, Apt #212
North Miami, FL 33181
5.02 GOVERNING LAW. This Debenture shall be deemed to be made under and
shall be construed in accordance with the laws of the Commonwealth of Delaware
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on FORUM NON CONVENIENS to the bringing
of any such proceeding in such jurisdictions.
5.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
<PAGE>
5.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and there are no representations, warranties or commitments, except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.
5.05 COUNTERPARTS. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute on instrument.
5.06 ASSIGNMENT. Neither this Debenture nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Debenture shall insure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Debentures purchased or acquired by the Investor hereunder with respect to the
Common Stock held by such person, and (b) upon the prior written consent of the
Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Debenture may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor).
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
parties hereto have executed this Debenture as of November 1, 1999.
ATTEST:
-------------------------
CELERITY SYSTEMS, INC.
/s/ Kenneth Van Meter
--------------------------------
Kenneth Van Meter
Title: President/CEO
LENNART DALLGREN
/s/ Lennart Dallgren
--------------------------------
Debenture Holder
<PAGE>
DEBENTURE
CELERITY SYSTEMS, INC.
1999 4% Subordinated Convertible Debenture
Due November 8, 2002
No.0007 $ 15,000.00
This Debenture is issued by Celerity Systems, Inc., (The "Company") to
John P. Faure (the "Debenture holder") pursuant to exemptions from registration
under the U.S. Securities Act of 1933.
ARTICLE I
1.01 PRINCIPAL AND INTEREST. The Company, for value received hereby
confers the right upon Debenture holder to convert the sum of Fifteen Thousand
dollars ($ 15,000.00) into the common stock of the Company (the "Common Stock")
on or before November 8, 2002 ("Maturity Date") as set forth herein, and upon
the Maturity Date to pay interest thereon from the date of issue at the rate of
four percent (4%) per annum. The Company shall pay such interest on the
outstanding principal amount of the Debenture from the date of issue until the
Maturity Date or conversion; the Company shall pay interest only upon the
outstanding balance of the Debenture at the rate of four percent (4%) per annum.
Interest will be computed based on a 365 day year.
1.02 RESERVATION OF COMMON STOCK. The Company shall reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Seventy Five cents (.75 )
per share.
The Company shall use its best efforts to file a Registration Statement
within thirty (30) days form the Closing Date, furthermore, the Company shall
use its best efforts to assure that the Registration Statement is effective
within ninety (90) days of the Closing Date. In the event that the Registration
Statement is not effective within ninety (90) days the Company will pay damages
to the Debenture holder in the amount of two percent (2%) a month payable in
cash or stock at the Company's option.
Furthermore, the Company has on deposit at the May Davis Group free
trading shares in the name of Dr. Fenton Scruggs. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Dr. Fenton Scruggs authorize the May Davis Group to deliver these
free trading shares to the Debenture holder as necessary on an appropriate basis
to honor Conversions.
<PAGE>
Additionally, the Company will deposit with the May Davis Group free
trading shares currently held by Glenn West. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Glenn West authorize the May Davis Group to deliver these free
trading shares to the Debenture holder as necessary on an appropriate basis to
honor Conversions.
1.03 RIGHT OF REDEMPTION. The Company shall have the right to redeem in
part or in full any outstanding Debentures at one hundred and thirty five (135%)
percent of the Principal plus accrued interest.
1.04 INTEREST PAYMENTS. The interest so payable will be paid at the
time of Conversion to the person in whose name this Debenture is registered. At
the time such interest is payable, the Company, in its sole discretion, may
elect to pay interest in cash (via wire transfer or certified funds) or in the
form of Common Stock. If paid in the form of Common Stock, the amount of stock
to be issued will be calculated as follows: the value of the stock shall be the
Bid Price on: (i) the date the interest payment is due; or (ii) if the interest
payment is not made when due, the date the interest payment is made. A number of
shares of Common Stock with a value equal to the amount of interest due shall be
issued. No fractional shares will be issued; therefore, in the event that the
value of the Common Stock per share does not equal the total interest due, the
Company will pay the balance in cash.
1.05 PAYING AGENT AND REGISTRAR. Initially, the Company will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar,
or Company-registrar without notice. The Company may act in any such capacity.
1.06 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all payments
hereon, including principal or interest, shall be subordinate and junior in
right of payment to all Company Debt (as defined hereinafter), but only to the
extent set forth as follows:
(a) upon the maturity of any Company Debt, or any installment thereof
then due by lapse of time, acceleration or otherwise, all Company Debt then due
shall first be paid in full (or provision made for payment in full thereof)
before any additional payment on account of principal or interest is made on
this Debenture; and
(b) in the event of any insolvency or bankruptcy proceedings affecting
the Company, or any receivership, liquidation, reorganization or other similar
proceedings affecting the Company, and, in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy, then the holders of Company Debt
shall be entitled to receive payment in full of all principal of and interest on
all Company Debt before the holder of this Debenture is entitled to receive any
payment on account of principal, interest or premium on this Debenture.
The provisions of the preceding paragraphs are solely for the purpose
of defining the relative rights of the holders of Company Debt on the one hand
and the holder of this Debenture on the other hand and nothing herein shall
impair, as between the Company and the holder of this Debenture, the obligation
of the Company, which is unconditional and absolute, to pay the holder of this
Debenture the principal, interest and premiums hereon in accordance with its
terms, nor shall anything herein prevent the holder of this Debenture from
exercising all remedies otherwise permitted by law or hereunder upon default
hereunder, subject to the relative rights of the holders of Company Debt
expressed in the preceding paragraphs.
<PAGE>
For the purpose of this Notice, the term "Company Debt" shall mean and
include current bank debt and all indebtedness acquired by the Company
subsequent to the date hereof, other than indebtedness to any officer, director
or other person who has beneficial ownership of ten percent (10%) or more of the
Company's issued and outstanding shares of Common Stock.
ARTICLE II
2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended
with the consent of the Debenture holder. Without the consent of the Debenture
holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company obligations to the
Debenture holder or to make any change that does not adversely affect the rights
of the Debenture holder.
ARTICLE III
3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows:
failure by the Company to pay amounts due hereunder within two (2) days of the
Maturity Date failure by the Company to advise its transfer agent to issue
Common Stock to the Debenture holder within two (2) business days of the
Company's receipt of the Notice of Conversion from Debenture holder; or failure
by the Company for thirty (30) days after notice to it to comply with any of its
other agreements in the Debenture; and events of bankruptcy or insolvency. The
Debenture holder may not enforce the Debenture except as provided herein.
3.02 SUCCESSOR CORPORATION. If a successor corporation assumes all the
obligations of this predecessor, Celerity Systems, Inc., the predecessor
corporation will be released from those obligations under the Debenture.
3.03 WAIVER AND RELEASE. A director, officer, employee or stockholders,
as such, of the Company shall not have any liability for any obligations of the
Company under the Debenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. The Debenture holder, by accepting
a Debenture waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Debenture.
ARTICLE IV
4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in
part, may be converted at any time beginning ninety (90) days following the date
of closing, into shares of Common Stock at a price equal to the following
Conversion: at the Debenture holders option, either, sixty five percent (65%) of
the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, Seventy Five cents (.75) per share.
In lieu of any fractional share to which the Debenture holder would
otherwise be entitled, the Company will pay the balance in cash.
4.02 REISSUANCE OF DEBENTURE. When the Debenture holder elects to
convert a part of the Debenture,
<PAGE>
then the Company shall reissue a new Debenture in the same form as this
Debenture to reflect the new principal amount.
4.03 TERMINATION OF CONVERSION RIGHTS. The Debenture holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on November 8, 2002 and shall be automatically converted on that
date in accordance with the formula set forth in Section 4.01 hereof, and the
appropriate shares of common stock and amount of interest shall be issued to the
Debenture holder.
4.04. Notwithstanding any other provision contained herein, the parties
agree that in no event shall the Company be required to issue (i) an aggregate
number of shares constituting more than 19.99% of the number of shares of Common
Stock outstanding on the date of such issuance or (ii) a number of shares that
would result in a change of control of the Company, unless the shareholders of
the Company approve such issuance of additional Common Shares or NASDAQ waives
the applicable requirements of Market Place Rule 4310(H)(i). The Company agrees
to use commercially reasonable efforts to obtain such approval or waiver on or
prior to the 90th day following the date that more than 19.99% of the Common
Stock would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
ARTICLE V
5.01 NOTICE. Notices regarding this Debenture shall be sent to the
parties at the following addresses, unless a party notifies the other parties,
in writing, of a change of address:
If to the Company: CELERITY SYSTEMS, INC.
1400 Centerpoint Blvd.
Knoxville, Tennessee 37932.
Attention: President
If to Debenture holder: JOHN P. FAURE
59 Blue Canyon Trail
Santa Fe, NM 87504
5.02 GOVERNING LAW. This Debenture shall be deemed to be made under and
shall be construed in accordance with the laws of the Commonwealth of Delaware
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law any
objection, including any objection based on FORUM NON CONVENIENS to the bringing
of any such proceeding in
<PAGE>
such jurisdictions.
5.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
5.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and there are no representations, warranties or commitments, except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.
5.05 COUNTERPARTS. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute on instrument.
5.06 ASSIGNMENT. Neither this Debenture nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Debenture shall insure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Debentures purchased or acquired by the Investor hereunder with respect to the
Common Stock held by such person, and (b) upon the prior written consent of the
Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Debenture may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor).
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
parties hereto have executed this Debenture as of November 8, 1999.
ATTEST:
-----------------------
CELERITY SYSTEMS, INC.
/s/ Kenneth Van Meter
-----------------------------------
Kenneth Van Meter
Title: President/CEO
JOHN P. FAURE
/s/ John P. Faure
-----------------------------------
Debenture Holder
<PAGE>
DEBENTURE
CELERITY SYSTEMS, INC.
1999 4% Subordinated Convertible Debenture
Due November 5, 2002
No.0005 $ 10,000.00
This Debenture is issued by Celerity Systems, Inc., (The "Company") to
Michael Genta (the "Debenture holder") pursuant to exemptions from registration
under the U.S. Securities Act of 1933.
ARTICLE I
1.01 PRINCIPAL AND INTEREST. The Company, for value received hereby
confers the right upon Debenture holder to convert the sum of Ten Thousand
dollars ($ 10,000.00) into the common stock of the Company (the "Common Stock")
on or before November 5, 2002 ("Maturity Date") as set forth herein, and upon
the Maturity Date to pay interest thereon from the date of issue at the rate of
four percent (4%) per annum. The Company shall pay such interest on the
outstanding principal amount of the Debenture from the date of issue until the
Maturity Date or conversion; the Company shall pay interest only upon the
outstanding balance of the Debenture at the rate of four percent (4%) per annum.
Interest will be computed based on a 365 day year.
1.02 RESERVATION OF COMMON STOCK. The Company shall reserve and keep
available out of its authorized, but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Seventy Five cents (.75 )
per share.
The Company shall use its best efforts to file a Registration Statement
within thirty (30) days form the Closing Date, furthermore, the Company shall
use its best efforts to assure that the Registration Statement is effective
within ninety (90) days of the Closing Date. In the event that the Registration
Statement is not effective within ninety (90) days the Company will pay damages
to the Debenture holder in the amount of two percent (2%) a month payable in
cash or stock at the Company's option.
Furthermore, the Company has on deposit at the May Davis Group free
trading shares in the name of Dr. Fenton Scruggs. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Dr. Fenton Scruggs authorize the May Davis Group to deliver these
free trading shares to the Debenture holder as necessary on an appropriate basis
to honor Conversions.
Additionally, the Company will deposit with the May Davis Group free
trading shares currently held by Glenn West. In the event the Registration
Statement is not declared effective within a period of ninety (90)
<PAGE>
days the Company and Glenn West authorize the May Davis Group to deliver these
free trading shares to the Debenture holder as necessary on an appropriate basis
to honor Conversions.
1.03 RIGHT OF REDEMPTION. The Company shall have the right to redeem in
part or in full any outstanding Debentures at one hundred and thirty five (135
%) percent of the Principal plus accrued interest.
1.04 INTEREST PAYMENTS. The interest so payable will be paid at the
time of Conversion to the person in whose name this Debenture is registered. At
the time such interest is payable, the Company, in its sole discretion, may
elect to pay interest in cash (via wire transfer or certified funds) or in the
form of Common Stock. If paid in the form of Common Stock, the amount of stock
to be issued will be calculated as follows: the value of the stock shall be the
Bid Price on: (i) the date the interest payment is due; or (ii) if the interest
payment is not made when due, the date the interest payment is made. A number of
shares of Common Stock with a value equal to the amount of interest due shall be
issued. No fractional shares will be issued; therefore, in the event that the
value of the Common Stock per share does not equal the total interest due, the
Company will pay the balance in cash.
1.05 PAYING AGENT AND REGISTRAR. Initially, the Company will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar,
or Company-registrar without notice. The Company may act in any such capacity.
1.06 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all payments
hereon, including principal or interest, shall be subordinate and junior in
right of payment to all Company Debt (as defined hereinafter), but only to the
extent set forth as follows:
(a) upon the maturity of any Company Debt, or any installment thereof
then due by lapse of time, acceleration or otherwise, all Company Debt then due
shall first be paid in full (or provision made for payment in full thereof)
before any additional payment on account of principal or interest is made on
this Debenture; and
(b) in the event of any insolvency or bankruptcy proceedings affecting
the Company, or any receivership, liquidation, reorganization or other similar
proceedings affecting the Company, and, in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy, then the holders of Company Debt
shall be entitled to receive payment in full of all principal of and interest on
all Company Debt before the holder of this Debenture is entitled to receive any
payment on account of principal, interest or premium on this Debenture.
The provisions of the preceding paragraphs are solely for the purpose
of defining the relative rights of the holders of Company Debt on the one hand
and the holder of this Debenture on the other hand and nothing herein shall
impair, as between the Company and the holder of this Debenture, the obligation
of the Company, which is unconditional and absolute, to pay the holder of this
Debenture the principal, interest and premiums hereon in accordance with its
terms, nor shall anything herein prevent the holder of this Debenture from
exercising all remedies otherwise permitted by law or hereunder upon default
hereunder, subject to the relative rights of the holders of Company Debt
expressed in the preceding paragraphs.
For the purpose of this Notice, the term "Company Debt" shall mean and
include current bank debt and all indebtedness acquired by the Company
subsequent to the date hereof, other than indebtedness to any officer,
<PAGE>
director or other person who has beneficial ownership of ten percent (10%) or
more of the Company's issued and outstanding shares of Common Stock.
ARTICLE II
2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended
with the consent of the Debenture holder. Without the consent of the Debenture
holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company obligations to the
Debenture holder or to make any change that does not adversely affect the rights
of the Debenture holder.
ARTICLE III
3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows:
failure by the Company to pay amounts due hereunder within two (2) days of the
Maturity Date failure by the Company to advise its transfer agent to issue
Common Stock to the Debenture holder within two (2) business days of the
Company's receipt of the Notice of Conversion from Debenture holder; or failure
by the Company for thirty (30) days after notice to it to comply with any of its
other agreements in the Debenture; and events of bankruptcy or insolvency. The
Debenture holder may not enforce the Debenture except as provided herein.
3.02 SUCCESSOR CORPORATION. If a successor corporation assumes all the
obligations of this predecessor, Celerity Systems, Inc., the predecessor
corporation will be released from those obligations under the Debenture.
3.03 WAIVER AND RELEASE. A director, officer, employee or stockholders,
as such, of the Company shall not have any liability for any obligations of the
Company under the Debenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. The Debenture holder, by accepting
a Debenture waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Debenture.
ARTICLE IV
4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in
part, may be converted at any time beginning ninety (90) days following the date
of closing, into shares of Common Stock at a price equal to the following
Conversion: at the Debenture holders option, either, sixty five percent (65%) of
the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, Seventy Five cents (.75) per share.
In lieu of any fractional share to which the Debenture holder would
otherwise be entitled, the Company will pay the balance in cash.
4.02 REISSUANCE OF DEBENTURE. When the Debenture holder elects to
convert a part of the Debenture, then the Company shall reissue a new Debenture
in the same form as this Debenture to reflect the new principal amount.
<PAGE>
4.03 TERMINATION OF CONVERSION RIGHTS. The Debenture holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on November 5, 2002 and shall be automatically converted on that
date in accordance with the formula set forth in Section 4.01 hereof, and the
appropriate shares of common stock and amount of interest shall be issued to the
Debenture holder.
4.04. Notwithstanding any other provision contained herein, the parties
agree that in no event shall the Company be required to issue (i) an aggregate
number of shares constituting more than 19.99% of the number of shares of Common
Stock outstanding on the date of such issuance or (ii) a number of shares that
would result in a change of control of the Company, unless the shareholders of
the Company approve such issuance of additional Common Shares or NASDAQ waives
the applicable requirements of Market Place Rule 4310(H)(i). The Company agrees
to use commercially reasonable efforts to obtain such approval or waiver on or
prior to the 90th day following the date that more than 19.99% of the Common
Stock would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
ARTICLE V
5.01 NOTICE. Notices regarding this Debenture shall be sent to the
parties at the following addresses, unless a party notifies the other parties,
in writing, of a change of address:
If to the Company: CELERITY SYSTEMS, INC.
1400 Centerpoint Blvd.
Knoxville, Tennessee 37932.
Attention: President
If to Debenture holder: MICHAEL GENTA
24-19 23rd Street
Astoria, NY 11102
5.02 GOVERNING LAW. This Debenture shall be deemed to be made under and
shall be construed in accordance with the laws of the Commonwealth of Delaware
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on FORUM NON conveniens to the bringing
of any such proceeding in such jurisdictions.
5.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
5.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and there are no representations, warranties or commitments, except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.
<PAGE>
5.05 COUNTERPARTS. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute on instrument.
5.06 ASSIGNMENT. Neither this Debenture nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Debenture shall insure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Debentures purchased or acquired by the Investor hereunder with respect to the
Common Stock held by such person, and (b) upon the prior written consent of the
Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Debenture may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor).
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
parties hereto have executed this Debenture as of October 29, 1999.
ATTEST:
________________________________
CELERITY SYSTEMS, INC.
/s/ Kenneth Van Meter
-------------------------------------
Kenneth Van Meter
Title: President/CEO
MICHAEL GENTA
/s/ Michael Genta
-------------------------------------
Debenture Holder
<PAGE>
Exhibit 4.3
DEBENTURE
CELERITY SYSTEMS, INC.
1999 8% Subordinated Convertible Debenture
Due November 30, 2002
No.0008
$100,000.00
This Debenture is issued by Celerity Systems, Inc., (The "Company") to
Richard T. Garrett (the "Debenture holder") pursuant to exemptions from
registration under the U.S. Securities Act of 1933.
ARTICLE I
1.01 PRINCIPAL AND INTEREST. The Company, for value received hereby
confers the right upon Debenture holder to convert the sum of One Hundred
Thousand dollars ($ 100,000.00) into the common stock of the Company (the
"Common Stock") on or before November 30, 2002 ("Maturity Date") as set forth
herein, and upon the Maturity Date to pay interest thereon from the date of
issue at the rate of eight percent (8%) per annum. The Company shall pay such
interest on the outstanding principal amount of the Debenture from the date of
issue until the Maturity Date or conversion; the Company shall pay interest only
upon the outstanding balance of the Debenture at the rate of eight percent (8%)
per annum. Interest will be computed based on a 365 day year.
1.02 RESERVATION OF COMMON STOCK. The Company shall reserve and keep
available out of its authorized, but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Fifty cents (.50 ) per
share.
The Company shall use its best efforts to file a Registration Statement
within thirty (30) days form the Closing Date, furthermore, the Company shall
use its best efforts to assure that the Registration Statement is effective
within ninety (90) days of the Closing Date. In the event that the Registration
Statement is not effective within ninety (90) days the Company will pay damages
to the Debenture holder in the amount of two percent (2%) a month payable in
cash or stock at the Company's option.
Furthermore, the Company has on deposit at the May Davis Group free
trading shares in the name of Dr. Fenton Scruggs. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Dr. Fenton Scruggs authorize the May Davis Group to deliver these
free trading shares to the Debenture holder as necessary on an appropriate basis
to honor Conversions.
<PAGE>
Additionally, the Company will deposit with the May Davis Group free
trading shares currently held by Glenn West. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Glenn West authorize the May Davis Group to deliver these free
trading shares to the Debenture holder as necessary on an appropriate basis to
honor Conversions.
1.03 RIGHT OF REDEMPTION. The Company shall have the right to redeem in
part or in full any outstanding Debentures at one hundred and thirty five (135
%) percent of the Principal plus accrued interest.
1.04 INTEREST PAYMENTS. The interest so payable will be paid at the
time of Conversion to the person in whose name this Debenture is registered. At
the time such interest is payable, the Company, in its sole discretion, may
elect to pay interest in cash (via wire transfer or certified funds) or in the
form of Common Stock. If paid in the form of Common Stock, the amount of stock
to be issued will be calculated as follows: the value of the stock shall be the
Bid Price on: (i) the date the interest payment is due; or (ii) if the interest
payment is not made when due, the date the interest payment is made. A number of
shares of Common Stock with a value equal to the amount of interest due shall be
issued. No fractional shares will be issued; therefore, in the event that the
value of the Common Stock per share does not equal the total interest due, the
Company will pay the balance in cash.
1.05 PAYING AGENT AND REGISTRAR. Initially, the Company will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar,
or Company-registrar without notice. The Company may act in any such capacity.
1.06 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all payments
hereon, including principal or interest, shall be subordinate and junior in
right of payment to all Company Debt (as defined hereinafter), but only to the
extent set forth as follows:
(a) upon the maturity of any Company Debt, or any installment thereof
then due by lapse of time, acceleration or otherwise, all Company Debt then due
shall first be paid in full (or provision made for payment in full thereof)
before any additional payment on account of principal or interest is made on
this Debenture; and
(b) in the event of any insolvency or bankruptcy proceedings affecting
the Company, or any receivership, liquidation, reorganization or other similar
proceedings affecting the Company, and, in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy, then the holders of Company Debt
shall be entitled to receive payment in full of all principal of and interest on
all Company Debt before the holder of this Debenture is entitled to receive any
payment on account of principal, interest or premium on this Debenture.
The provisions of the preceding paragraphs are solely for the purpose
of defining the relative rights of the holders of Company Debt on the one hand
and the holder of this Debenture on the other hand and nothing herein shall
impair, as between the Company and the holder of this Debenture, the obligation
of the Company, which is unconditional and absolute, to pay the holder of this
Debenture the principal, interest and premiums hereon in accordance with its
terms, nor shall anything herein prevent the holder of this Debenture from
exercising all remedies otherwise permitted by law or hereunder upon default
hereunder, subject to the relative rights of the holders of Company Debt
expressed in the preceding paragraphs.
<PAGE>
For the purpose of this Notice, the term "Company Debt" shall mean and
include current bank debt and all indebtedness acquired by the Company
subsequent to the date hereof, other than indebtedness to any officer, director
or other person who has beneficial ownership of ten percent (10%) or more of the
Company's issued and outstanding shares of Common Stock.
ARTICLE II
2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended
with the consent of the Debenture holder. Without the consent of the Debenture
holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company obligations to the
Debenture holder or to make any change that does not adversely affect the rights
of the Debenture holder.
ARTICLE III
3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows:
failure by the Company to pay amounts due hereunder within two (2) days of the
Maturity Date failure by the Company to advise its transfer agent to issue
Common Stock to the Debenture holder within two (2) business days of the
Company's receipt of the Notice of Conversion from Debenture holder; or failure
by the Company for thirty (30) days after notice to it to comply with any of its
other agreements in the Debenture; and events of bankruptcy or insolvency. The
Debenture holder may not enforce the Debenture except as provided herein.
3.02 SUCCESSOR CORPORATION. If a successor corporation assumes all the
obligations of this predecessor, Celerity Systems, Inc., the predecessor
corporation will be released from those obligations under the Debenture.
3.03 WAIVER AND RELEASE. A director, officer, employee or stockholders,
as such, of the Company shall not have any liability for any obligations of the
Company under the Debenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. The Debenture holder, by accepting
a Debenture waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Debenture.
ARTICLE IV
4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in
part, may be converted at any time beginning ninety (90) days following the date
of closing, into shares of Common Stock at a price equal to the following
Conversion: at the Debenture holders option, either, sixty five percent (65%) of
the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, Fifty cents (.50) per share.
In lieu of any fractional share to which the Debenture holder would
otherwise be entitled, the Company will pay the balance in cash.
<PAGE>
4.02 REISSUANCE OF DEBENTURE. When the Debenture holder elects to
convert a part of the Debenture, then the Company shall reissue a new Debenture
in the same form as this Debenture to reflect the new principal amount.
4.03 TERMINATION OF CONVERSION RIGHTS. The Debenture holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on November 30, 2002 and shall be automatically converted on
that date in accordance with the formula set forth in Section 4.01 hereof, and
the appropriate shares of common stock and amount of interest shall be issued to
the Debenture holder.
4.04. Notwithstanding any other provision contained herein, the parties
agree that in no event shall the Company be required to issue (i) an aggregate
number of shares constituting more than 19.99% of the number of shares of Common
Stock outstanding on the date of such issuance or (ii) a number of shares that
would result in a change of control of the Company, unless the shareholders of
the Company approve such issuance of additional Common Shares or NASDAQ waives
the applicable requirements of Market Place Rule 4310(H)(i). The Company agrees
to use commercially reasonable efforts to obtain such approval or waiver on or
prior to the 90th day following the date that more than 19.99% of the Common
Stock would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
ARTICLE V
5.01 NOTICE. Notices regarding this Debenture shall be sent to the
parties at the following addresses, unless a party notifies the other parties,
in writing, of a change of address:
If to the Company: CELERITY SYSTEMS, INC.
1400 Centerpoint Blvd.
Knoxville, Tennessee 37932.
Attention: President
If to Debenture holder: RICHARD T. GARRETT
2030 W. 19th Street
Cleveland, Ohio 44113
5.02 GOVERNING LAW. This Debenture shall be deemed to be made under and
shall be construed in accordance with the laws of the Commonwealth of Delaware
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on FORUM NON CONVENIENS to the bringing
of any such proceeding in such jurisdictions.
5.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
<PAGE>
5.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and there are no representations, warranties or commitments, except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.
5.05 COUNTERPARTS. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute an instrument.
5.06 ASSIGNMENT. Neither this Debenture nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Debenture shall insure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Debentures purchased or acquired by the Investor hereunder with respect to the
Common Stock held by such person, and (b) upon the prior written consent of the
Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Debenture may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor).
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
parties hereto have executed this Debenture as of November 30, 1999.
ATTEST:
----------------------------------
CELERITY SYSTEMS, INC.
/s/ Kenneth Van Meter
-------------------------------------
Kenneth Van Meter
Title: President/CEO
RICHARD T. GARRETT
/s/ Richard T. Garrett
-------------------------------------
Debenture Holder
<PAGE>
DEBENTURE
CELERITY SYSTEMS, INC.
1999 8% Subordinated Convertible Debenture
Due November 30, 2002
No.0009
$30,000.00
This Debenture is issued by Celerity Systems, Inc., (The "Company") to
W. David McCoy (the "Debenture holder") pursuant to exemptions from registration
under the U.S. Securities Act of 1933.
ARTICLE I
1.01 PRINCIPAL AND INTEREST. The Company, for value received hereby
confers the right upon Debenture holder to convert the sum of Thirty Thousand
dollars ($ 30,000.00) into the common stock of the Company (the "Common Stock")
on or before November 30, 2002 ("Maturity Date") as set forth herein, and upon
the Maturity Date to pay interest thereon from the date of issue at the rate of
eight percent (8%) per annum. The Company shall pay such interest on the
outstanding principal amount of the Debenture from the date of issue until the
Maturity Date or conversion; the Company shall pay interest only upon the
outstanding balance of the Debenture at the rate of eight percent (8%) per
annum. Interest will be computed based on a 365 day year.
1.02 RESERVATION OF COMMON STOCK. The Company shall reserve and keep
available out of its authorized, but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Fifty cents (.50 ) per
share.
The Company shall use its best efforts to file a Registration Statement
within thirty (30) days form the Closing Date, furthermore, the Company shall
use its best efforts to assure that the Registration Statement is effective
within ninety (90) days of the Closing Date. In the event that the Registration
Statement is not effective within ninety (90) days the Company will pay damages
to the Debenture holder in the amount of two percent (2%) a month payable in
cash or stock at the Company's option.
Furthermore, the Company has on deposit at the May Davis Group free
trading shares in the name of Dr. Fenton Scruggs. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Dr. Fenton Scruggs authorize the May Davis Group to deliver these
free trading shares to the Debenture holder as necessary on an appropriate basis
to honor Conversions.
<PAGE>
Additionally, the Company will deposit with the May Davis Group free
trading shares currently held by Glenn West. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Glenn West authorize the May Davis Group to deliver these free
trading shares to the Debenture holder as necessary on an appropriate basis to
honor Conversions.
1.03 RIGHT OF REDEMPTION. The Company shall have the right to redeem in
part or in full any outstanding Debentures at one hundred and thirty five (135
%) percent of the Principal plus accrued interest.
1.04 INTEREST PAYMENTS. The interest so payable will be paid at the
time of Conversion to the person in whose name this Debenture is registered. At
the time such interest is payable, the Company, in its sole discretion, may
elect to pay interest in cash (via wire transfer or certified funds) or in the
form of Common Stock. If paid in the form of Common Stock, the amount of stock
to be issued will be calculated as follows: the value of the stock shall be the
Bid Price on: (i) the date the interest payment is due; or (ii) if the interest
payment is not made when due, the date the interest payment is made. A number of
shares of Common Stock with a value equal to the amount of interest due shall be
issued. No fractional shares will be issued; therefore, in the event that the
value of the Common Stock per share does not equal the total interest due, the
Company will pay the balance in cash.
1.05 PAYING AGENT AND REGISTRAR. Initially, the Company will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar,
or Company-registrar without notice. The Company may act in any such capacity.
1.06 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all payments
hereon, including principal or interest, shall be subordinate and junior in
right of payment to all Company Debt (as defined hereinafter), but only to the
extent set forth as follows:
(a) upon the maturity of any Company Debt, or any installment thereof
then due by lapse of time, acceleration or otherwise, all Company Debt then due
shall first be paid in full (or provision made for payment in full thereof)
before any additional payment on account of principal or interest is made on
this Debenture; and
(b) in the event of any insolvency or bankruptcy proceedings affecting
the Company, or any receivership, liquidation, reorganization or other similar
proceedings affecting the Company, and, in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy, then the holders of Company Debt
shall be entitled to receive payment in full of all principal of and interest on
all Company Debt before the holder of this Debenture is entitled to receive any
payment on account of principal, interest or premium on this Debenture.
The provisions of the preceding paragraphs are solely for the purpose
of defining the relative rights of the holders of Company Debt on the one hand
and the holder of this Debenture on the other hand and nothing herein shall
impair, as between the Company and the holder of this Debenture, the obligation
of the Company, which is unconditional and absolute, to pay the holder of this
Debenture the principal, interest and premiums hereon in accordance with its
terms, nor shall anything herein prevent the holder of this Debenture from
exercising all remedies otherwise permitted by law or hereunder upon default
hereunder, subject to the relative
<PAGE>
rights of the holders of Company Debt expressed in the preceding paragraphs.
For the purpose of this Notice, the term "Company Debt" shall mean and
include current bank debt and all indebtedness acquired by the Company
subsequent to the date hereof, other than indebtedness to any officer, director
or other person who has beneficial ownership of ten percent (10%) or more of the
Company's issued and outstanding shares of Common Stock.
ARTICLE II
2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended
with the consent of the Debenture holder. Without the consent of the Debenture
holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company obligations to the
Debenture holder or to make any change that does not adversely affect the rights
of the Debenture holder.
ARTICLE III
3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows:
failure by the Company to pay amounts due hereunder within two (2) days of the
Maturity Date failure by the Company to advise its transfer agent to issue
Common Stock to the Debenture holder within two (2) business days of the
Company's receipt of the Notice of Conversion from Debenture holder; or failure
by the Company for thirty (30) days after notice to it to comply with any of its
other agreements in the Debenture; and events of bankruptcy or insolvency. The
Debenture holder may not enforce the Debenture except as provided herein.
3.02 SUCCESSOR CORPORATION. If a successor corporation assumes all the
obligations of this predecessor, Celerity Systems, Inc., the predecessor
corporation will be released from those obligations under the Debenture.
3.03 WAIVER AND RELEASE. A director, officer, employee or stockholders,
as such, of the Company shall not have any liability for any obligations of the
Company under the Debenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. The Debenture holder, by accepting
a Debenture waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Debenture.
ARTICLE IV
4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in
part, may be converted at any time beginning ninety (90) days following the date
of closing, into shares of Common Stock at a price equal to the following
Conversion: at the Debenture holders option, either, sixty five percent (65%) of
the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, Fifty cents (.50) per share.
In lieu of any fractional share to which the Debenture holder would
otherwise be entitled, the Company will pay the balance in cash.
<PAGE>
4.02 REISSUANCE OF DEBENTURE. When the Debenture holder elects to
convert a part of the Debenture, then the Company shall reissue a new Debenture
in the same form as this Debenture to reflect the new principal amount.
4.03 TERMINATION OF CONVERSION RIGHTS. The Debenture holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on November 30, 2002 and shall be automatically converted on
that date in accordance with the formula set forth in Section 4.01 hereof, and
the appropriate shares of common stock and amount of interest shall be issued to
the Debenture holder.
4.04. Notwithstanding any other provision contained herein, the parties
agree that in no event shall the Company be required to issue (i) an aggregate
number of shares constituting more than 19.99% of the number of shares of Common
Stock outstanding on the date of such issuance or (ii) a number of shares that
would result in a change of control of the Company, unless the shareholders of
the Company approve such issuance of additional Common Shares or NASDAQ waives
the applicable requirements of Market Place Rule 4310(H)(i). The Company agrees
to use commercially reasonable efforts to obtain such approval or waiver on or
prior to the 90th day following the date that more than 19.99% of the Common
Stock would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
ARTICLE V
5.01 NOTICE. Notices regarding this Debenture shall be sent to the
parties at the following addresses, unless a party notifies the other parties,
in writing, of a change of address:
If to the Company: CELERITY SYSTEMS, INC.
1400 Centerpoint Blvd.
Knoxville, Tennessee 37932.
Attention: President
If to Debenture holder: W. DAVID MCCOY
1165 5th Avenue
New York, NY 10029
5.02 GOVERNING LAW. This Debenture shall be deemed to be made under and
shall be construed in accordance with the laws of the Commonwealth of Delaware
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on FORUM NON CONVENIENS to the bringing
of any such proceeding in such jurisdictions.
5.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or
<PAGE>
otherwise affect any of the other provisions of this Debenture, which shall
remain in full force and effect.
5.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and there are no representations, warranties or commitments, except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.
5.05 COUNTERPARTS. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute an instrument.
5.06 ASSIGNMENT. Neither this Debenture nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Debenture shall insure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Debentures purchased or acquired by the Investor hereunder with respect to the
Common Stock held by such person, and (b) upon the prior written consent of the
Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Debenture may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor).
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
parties hereto have executed this Debenture as of November 30, 1999.
ATTEST:
----------------------------------
CELERITY SYSTEMS, INC.
/s/ KENNETH VAN METER
----------------------------------
Kenneth Van Meter
Title: President/CEO
W. DAVID MCCOY
/s/ W. DAVID MCCOY
----------------------------------
Debenture Holder
<PAGE>
DEBENTURE
CELERITY SYSTEMS, INC.
1999 8% Subordinated Convertible Debenture
Due November 30, 2002
No.0010
$15,000.00
This Debenture is issued by Celerity Systems, Inc., (The "Company") to Dominick
Chirarisi and Gilda R. Chirarisi (the "Debenture holder") pursuant to exemptions
from registration under the U.S. Securities Act of 1933.
ARTICLE I
1.01 PRINCIPAL AND INTEREST. The Company, for value received hereby
confers the right upon Debenture holder to convert the sum of Fifteen Thousand
dollars ($ 15,000.00) into the common stock of the Company (the "Common Stock")
on or before November 30, 2002 ("Maturity Date") as set forth herein, and upon
the Maturity Date to pay interest thereon from the date of issue at the rate of
eight percent (8%) per annum. The Company shall pay such interest on the
outstanding principal amount of the Debenture from the date of issue until the
Maturity Date or conversion; the Company shall pay interest only upon the
outstanding balance of the Debenture at the rate of eight percent (8%) per
annum. Interest will be computed based on a 365 day year.
1.02 RESERVATION OF COMMON STOCK. The Company shall reserve and keep
available out of its authorized, but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Fifty cents (.50 ) per
share.
The Company shall use its best efforts to file a Registration Statement
within thirty (30) days form the Closing Date, furthermore, the Company shall
use its best efforts to assure that the Registration Statement is effective
within ninety (90) days of the Closing Date. In the event that the Registration
Statement is not effective within ninety (90) days the Company will pay damages
to the Debenture holder in the amount of two percent (2%) a month payable in
cash or stock at the Company's option.
Furthermore, the Company has on deposit at the May Davis Group free
trading shares in
<PAGE>
the name of Dr. Fenton Scruggs. In the event the Registration Statement is not
declared effective within a period of ninety (90) days the Company and Dr.
Fenton Scruggs authorize the May Davis Group to deliver these free trading
shares to the Debenture holder as necessary on an appropriate basis to honor
Conversions.
Additionally, the Company will deposit with the May Davis Group free
trading shares currently held by Glenn West. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Glenn West authorize the May Davis Group to deliver these free
trading shares to the Debenture holder as necessary on an appropriate basis to
honor Conversions.
1.03 RIGHT OF REDEMPTION. The Company shall have the right to redeem in
part or in full any outstanding Debentures at one hundred and thirty five (135
%) percent of the Principal plus accrued interest.
1.04 INTEREST PAYMENTS. The interest so payable will be paid at the
time of Conversion to the person in whose name this Debenture is registered. At
the time such interest is payable, the Company, in its sole discretion, may
elect to pay interest in cash (via wire transfer or certified funds) or in the
form of Common Stock. If paid in the form of Common Stock, the amount of stock
to be issued will be calculated as follows: the value of the stock shall be the
Bid Price on: (i) the date the interest payment is due; or (ii) if the interest
payment is not made when due, the date the interest payment is made. A number of
shares of Common Stock with a value equal to the amount of interest due shall be
issued. No fractional shares will be issued; therefore, in the event that the
value of the Common Stock per share does not equal the total interest due, the
Company will pay the balance in cash.
1.05 PAYING AGENT AND REGISTRAR. Initially, the Company will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar,
or Company-registrar without notice. The Company may act in any such capacity.
1.06 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all payments
hereon, including principal or interest, shall be subordinate and junior in
right of payment to all Company Debt (as defined hereinafter), but only to the
extent set forth as follows:
(a) upon the maturity of any Company Debt, or any installment thereof
then due by lapse of time, acceleration or otherwise, all Company Debt then due
shall first be paid in full (or provision made for payment in full thereof)
before any additional payment on account of principal or interest is made on
this Debenture; and
(b) in the event of any insolvency or bankruptcy proceedings affecting
the Company, or any receivership, liquidation, reorganization or other similar
proceedings affecting the Company, and, in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy, then the holders of Company Debt
shall be entitled to receive payment in full of all principal of and interest on
all
<PAGE>
Company Debt before the holder of this Debenture is entitled to receive any
payment on account of principal, interest or premium on this Debenture.
The provisions of the preceding paragraphs are solely for the purpose
of defining the relative rights of the holders of Company Debt on the one hand
and the holder of this Debenture on the other hand and nothing herein shall
impair, as between the Company and the holder of this Debenture, the obligation
of the Company, which is unconditional and absolute, to pay the holder of this
Debenture the principal, interest and premiums hereon in accordance with its
terms, nor shall anything herein prevent the holder of this Debenture from
exercising all remedies otherwise permitted by law or hereunder upon default
hereunder, subject to the relative rights of the holders of Company Debt
expressed in the preceding paragraphs.
For the purpose of this Notice, the term "Company Debt" shall mean and
include current bank debt and all indebtedness acquired by the Company
subsequent to the date hereof, other than indebtedness to any officer, director
or other person who has beneficial ownership of ten percent (10%) or more of the
Company's issued and outstanding shares of Common Stock.
ARTICLE II
2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended
with the consent of the Debenture holder. Without the consent of the Debenture
holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company obligations to the
Debenture holder or to make any change that does not adversely affect the rights
of the Debenture holder.
ARTICLE III
3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows:
failure by the Company to pay amounts due hereunder within two (2) days of the
Maturity Date failure by the Company to advise its transfer agent to issue
Common Stock to the Debenture holder within two (2) business days of the
Company's receipt of the Notice of Conversion from Debenture holder; or failure
by the Company for thirty (30) days after notice to it to comply with any of its
other agreements in the Debenture; and events of bankruptcy or insolvency. The
Debenture holder may not enforce the Debenture except as provided herein.
3.02 SUCCESSOR CORPORATION. If a successor corporation assumes all the
obligations of this predecessor, Celerity Systems, Inc., the predecessor
corporation will be released from those obligations under the Debenture.
3.03 WAIVER AND RELEASE. A director, officer, employee or stockholders,
as such, of the Company shall not have any liability for any obligations of the
Company under the Debenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. The Debenture holder, by accepting
a Debenture waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Debenture.
<PAGE>
ARTICLE IV
4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in
part, may be converted at any time beginning ninety (90) days following the date
of closing, into shares of Common Stock at a price equal to the following
Conversion: at the Debenture holders option, either, sixty five percent (65%) of
the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, Fifty cents (.50) per share.
In lieu of any fractional share to which the Debenture holder would
otherwise be entitled, the Company will pay the balance in cash.
4.02 REISSUANCE OF DEBENTURE. When the Debenture holder elects to
convert a part of the Debenture, then the Company shall reissue a new Debenture
in the same form as this Debenture to reflect the new principal amount.
4.03 TERMINATION OF CONVERSION RIGHTS. The Debenture holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on November 30, 2002 and shall be automatically converted on
that date in accordance with the formula set forth in Section 4.01 hereof, and
the appropriate shares of common stock and amount of interest shall be issued to
the Debenture holder.
4.04. Notwithstanding any other provision contained herein, the parties
agree that in no event shall the Company be required to issue (i) an aggregate
number of shares constituting more than 19.99% of the number of shares of Common
Stock outstanding on the date of such issuance or (ii) a number of shares that
would result in a change of control of the Company, unless the shareholders of
the Company approve such issuance of additional Common Shares or NASDAQ waives
the applicable requirements of Market Place Rule 4310(H)(i). The Company agrees
to use commercially reasonable efforts to obtain such approval or waiver on or
prior to the 90th day following the date that more than 19.99% of the Common
Stock would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
ARTICLE V
5.01 NOTICE. Notices regarding this Debenture shall be sent to the
parties at the following addresses, unless a party notifies the other parties,
in writing, of a change of address:
<PAGE>
If to the Company: CELERITY SYSTEMS, INC.
1400 Centerpoint Blvd.
Knoxville, Tennessee 37932.
Attention: President
If to Debenture holder: DOMINICK CHIRARISI
AND GILDA R. CHIRARISI
2500 Johnson Avenue
Apt # 12D
Bronx, NY 10463
5.02 GOVERNING LAW. This Debenture shall be deemed to be made under and
shall be construed in accordance with the laws of the Commonwealth of Delaware
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on FORUM NON CONVENIENS to the bringing
of any such proceeding in such jurisdictions.
5.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
5.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and there are no representations, warranties or commitments, except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.
5.05 COUNTERPARTS. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute an instrument.
5.06 ASSIGNMENT. Neither this Debenture nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Debenture shall insure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Debentures purchased or acquired by the Investor hereunder with respect to the
Common Stock held by such person, and (b) upon the prior written consent of the
Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Debenture may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor).
<PAGE>
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the parties
hereto have executed this Debenture as of November 30, 1999.
ATTEST:
- ----------------------------------
CELERITY SYSTEMS, INC.
/s/ KENNETH VAN METER
-----------------------------------
Kenneth Van Meter
Title: President/CEO
DOMINICK CHIRARISI
/s/ DOMINICK CHIRARISI
-----------------------------------
Debenture Holder
GILDA R. CHIRARISI
/s/ GILDA R. CHIRARISI
-----------------------------------
Debenture Holder
<PAGE>
DEBENTURE
CELERITY SYSTEMS, INC.
1999 8% Subordinated Convertible Debenture
Due November 30, 2002
No.0011 $10,000.00
This Debenture is issued by Celerity Systems, Inc., (The "Company") to
Joseph C. Cardella (the "Debenture holder") pursuant to exemptions from
registration under the U.S. Securities Act of 1933.
ARTICLE I
1.01 PRINCIPAL AND INTEREST. The Company, for value received hereby confers
the right upon Debenture holder to convert the sum of Ten Thousand dollars
($10,000.00) into the common stock of the Company (the "Common Stock") on or
before November 30, 2002 ("Maturity Date") as set forth herein, and upon the
Maturity Date to pay interest thereon from the date of issue at the rate of
eight percent (8%) per annum. The Company shall pay such interest on the
outstanding principal amount of the Debenture from the date of issue until the
Maturity Date or conversion; the Company shall pay interest only upon the
outstanding balance of the Debenture at the rate of eight percent (8%) per
annum. Interest will be computed based on a 365 day year.
1.02 RESERVATION OF COMMON STOCK. The Company shall reserve and keep
available out of its authorized, but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Fifty cents (.50 ) per
share.
The Company shall use its best efforts to file a Registration Statement
within thirty (30) days form the Closing Date, furthermore, the Company shall
use its best efforts to assure that the Registration Statement is effective
within ninety (90) days of the Closing Date. In the event that the Registration
Statement is not effective within ninety (90) days the Company will pay damages
to the Debenture holder in the amount of two percent (2%) a month payable in
cash or
<PAGE>
stock at the Company's option.
Furthermore, the Company has on deposit at the May Davis Group free trading
shares in the name of Dr. Fenton Scruggs. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Dr. Fenton Scruggs authorize the May Davis Group to deliver these
free trading shares to the Debenture holder as necessary on an appropriate basis
to honor Conversions.
Additionally, the Company will deposit with the May Davis Group free
trading shares currently held by Glenn West. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Glenn West authorize the May Davis Group to deliver these free
trading shares to the Debenture holder as necessary on an appropriate basis to
honor Conversions.
1.03 RIGHT OF REDEMPTION. The Company shall have the right to redeem in
part or in full any outstanding Debentures at one hundred and thirty five
(135%) percent of the Principal plus accrued interest.
1.04 INTEREST PAYMENTS. The interest so payable will be paid at the time of
Conversion to the person in whose name this Debenture is registered. At the time
such interest is payable, the Company, in its sole discretion, may elect to pay
interest in cash (via wire transfer or certified funds) or in the form of Common
Stock. If paid in the form of Common Stock, the amount of stock to be issued
will be calculated as follows: the value of the stock shall be the Bid Price on:
(i) the date the interest payment is due; or (ii) if the interest payment is not
made when due, the date the interest payment is made. A number of shares of
Common Stock with a value equal to the amount of interest due shall be issued.
No fractional shares will be issued; therefore, in the event that the value of
the Common Stock per share does not equal the total interest due, the Company
will pay the balance in cash.
1.05 PAYING AGENT AND REGISTRAR. Initially, the Company will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar, or
Company-registrar without notice. The Company may act in any such capacity.
1.06 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all payments
hereon, including principal or interest, shall be subordinate and junior in
right of payment to all Company Debt (as defined hereinafter), but only to the
extent set forth as follows:
(a) upon the maturity of any Company Debt, or any installment thereof then
due by lapse of time, acceleration or otherwise, all Company Debt then due shall
first be paid in full (or provision made for payment in full thereof) before any
additional payment on account of principal or interest is made on this
Debenture; and
(b) in the event of any insolvency or bankruptcy proceedings affecting the
Company, or any receivership, liquidation, reorganization or other similar
proceedings affecting the Company, and, in the event of any proceedings for
voluntary liquidation, dissolution or other
<PAGE>
winding up of the Company, whether or not involving insolvency or bankruptcy,
then the holders of Company Debt shall be entitled to receive payment in full of
all principal of and interest on all Company Debt before the holder of this
Debenture is entitled to receive any payment on account of principal, interest
or premium on this Debenture.
The provisions of the preceding paragraphs are solely for the purpose of
defining the relative rights of the holders of Company Debt on the one hand and
the holder of this Debenture on the other hand and nothing herein shall impair,
as between the Company and the holder of this Debenture, the obligation of the
Company, which is unconditional and absolute, to pay the holder of this
Debenture the principal, interest and premiums hereon in accordance with its
terms, nor shall anything herein prevent the holder of this Debenture from
exercising all remedies otherwise permitted by law or hereunder upon default
hereunder, subject to the relative rights of the holders of Company Debt
expressed in the preceding paragraphs.
For the purpose of this Notice, the term "Company Debt" shall mean and
include current bank debt and all indebtedness acquired by the Company
subsequent to the date hereof, other than indebtedness to any officer, director
or other person who has beneficial ownership of ten percent (10%) or more of the
Company's issued and outstanding shares of Common Stock.
ARTICLE II
2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended with
the consent of the Debenture holder. Without the consent of the Debenture
holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company obligations to the
Debenture holder or to make any change that does not adversely affect the rights
of the Debenture holder.
ARTICLE III
3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows: failure
by the Company to pay amounts due hereunder within two (2) days of the Maturity
Date failure by the Company to advise its transfer agent to issue Common Stock
to the Debenture holder within two (2) business days of the Company's receipt of
the Notice of Conversion from Debenture holder; or failure by the Company for
thirty (30) days after notice to it to comply with any of its other agreements
in the Debenture; and events of bankruptcy or insolvency. The Debenture holder
may not enforce the Debenture except as provided herein.
3.02 SUCCESSOR CORPORATION. If a successor corporation assumes all the
obligations of this predecessor, Celerity Systems, Inc., the predecessor
corporation will be released from those obligations under the Debenture.
3.03 WAIVER AND RELEASE. A director, officer, employee or stockholders, as
such, of the Company shall not have any liability for any obligations of the
Company under the Debenture or
<PAGE>
for any claim based on, in respect of, or by reason of such obligations or their
creation. The Debenture holder, by accepting a Debenture waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Debenture.
ARTICLE IV
4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in part,
may be converted at any time beginning ninety (90) days following the date of
closing, into shares of Common Stock at a price equal to the following
Conversion: at the Debenture holders option, either, sixty five percent (65%) of
the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, Fifty cents (.50) per share.
In lieu of any fractional share to which the Debenture holder would
otherwise be entitled, the Company will pay the balance in cash.
4.02 REISSUANCE OF DEBENTURE. When the Debenture holder elects to convert a
part of the Debenture, then the Company shall reissue a new Debenture in the
same form as this Debenture to reflect the new principal amount.
4.03 TERMINATION OF CONVERSION RIGHTS. The Debenture holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on November 30, 2002 and shall be automatically converted on
that date in accordance with the formula set forth in Section 4.01 hereof, and
the appropriate shares of common stock and amount of interest shall be issued to
the Debenture holder.
4.04. Notwithstanding any other provision contained herein, the parties
agree that in no event shall the Company be required to issue (i) an aggregate
number of shares constituting more than 19.99% of the number of shares of Common
Stock outstanding on the date of such issuance or (ii) a number of shares that
would result in a change of control of the Company, unless the shareholders of
the Company approve such issuance of additional Common Shares or NASDAQ waives
the applicable requirements of Market Place Rule 4310(H)(i). The Company agrees
to use commercially reasonable efforts to obtain such approval or waiver on or
prior to the 90th day following the date that more than 19.99% of the Common
Stock would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
ARTICLE V
5.01 NOTICE. Notices regarding this Debenture shall be sent to the parties
at the following addresses, unless a party notifies the other parties, in
writing, of a change of address:
<PAGE>
If to the Company: CELERITY SYSTEMS, INC.
1400 Centerpoint Blvd.
Knoxville, Tennessee 37932.
Attention: President
If to Debenture holder: JOSEPH C. CARDELLA
9303 Tecumseh-Clinton Road
Tecumseh, MI 49286
5.02 GOVERNING LAW. This Debenture shall be deemed to be made under and
shall be construed in accordance with the laws of the Commonwealth of Delaware
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on FORUM NON CONVENIENS to the bringing
of any such proceeding in such jurisdictions.
5.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
5.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the entire
agreement between the parties hereto with respect to the subject matter hereof
and there are no representations, warranties or commitments, except as set forth
herein. This Debenture may be amended only by an instrument in writing executed
by the parties hereto.
5.05 COUNTERPARTS. This Debenture may be executed in multiple counterparts,
each of which shall be an original, but all of which shall be deemed to
constitute an instrument.
5.06 ASSIGNMENT. Neither this Debenture nor any rights of the Investor or
the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Debenture shall insure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Debentures purchased or acquired by the Investor hereunder with respect to the
Common Stock held by such person, and (b) upon the prior written consent of the
Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Debenture may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor).
<PAGE>
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the parties
hereto have executed this Debenture as of November 30, 1999.
ATTEST:
---------------------
CELERITY SYSTEMS, INC.
/s/ Kenneth Van Meter
---------------------------------------
Kenneth Van Meter
Title: President/CEO
JOSEPH C. CARDELLA
/s/ Joseph C. Cardella
---------------------------------------
Debenture Holder
<PAGE>
DEBENTURE
CELERITY SYSTEMS, INC.
1999 8% Subordinated Convertible Debenture
Due November 30, 2002
No.0012 $49,980.00
This Debenture is issued by Celerity Systems, Inc., (The "Company") to Carl
Hoehner (the "Debenture holder") pursuant to exemptions from registration under
the U.S. Securities Act of 1933.
ARTICLE I
1.01 PRINCIPAL AND INTEREST. The Company, for value received hereby confers
the right upon Debenture holder to convert the sum of Forty Nine Thousand Nine
Hundred and Eighty dollars ($ 49,980.00) into the common stock of the Company
(the "Common Stock") on or before November 30, 2002 ("Maturity Date") as set
forth herein, and upon the Maturity Date to pay interest thereon from the date
of issue at the rate of eight percent (8%) per annum. The Company shall pay such
interest on the outstanding principal amount of the Debenture from the date of
issue until the Maturity Date or conversion; the Company shall pay interest only
upon the outstanding balance of the Debenture at the rate of eight percent (8%)
per annum. Interest will be computed based on a 365 day year.
1.02 RESERVATION OF COMMON STOCK. The Company shall reserve and keep
available out of its authorized, but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Fifty cents (.50 ) per
share.
The Company shall use its best efforts to file a Registration Statement
within thirty (30) days form the Closing Date, furthermore, the Company shall
use its best efforts to assure that the Registration Statement is effective
within ninety (90) days of the Closing Date. In the event that the Registration
Statement is not effective within ninety (90) days the Company will pay damages
to the Debenture holder in the amount of two percent (2%) a month payable in
cash or
<PAGE>
stock at the Company's option.
Furthermore, the Company has on deposit at the May Davis Group free trading
shares in the name of Dr. Fenton Scruggs. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Dr. Fenton Scruggs authorize the May Davis Group to deliver these
free trading shares to the Debenture holder as necessary on an appropriate basis
to honor Conversions.
Additionally, the Company will deposit with the May Davis Group free
trading shares currently held by Glenn West. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Glenn West authorize the May Davis Group to deliver these free
trading shares to the Debenture holder as necessary on an appropriate basis to
honor Conversions.
1.03 RIGHT OF REDEMPTION. The Company shall have the right to redeem in
part or in full any outstanding Debentures at one hundred and thirty five
(135%) percent of the Principal plus accrued interest.
1.04 INTEREST PAYMENTS. The interest so payable will be paid at the time of
Conversion to the person in whose name this Debenture is registered. At the time
such interest is payable, the Company, in its sole discretion, may elect to pay
interest in cash (via wire transfer or certified funds) or in the form of Common
Stock. If paid in the form of Common Stock, the amount of stock to be issued
will be calculated as follows: the value of the stock shall be the Bid Price on:
(i) the date the interest payment is due; or (ii) if the interest payment is not
made when due, the date the interest payment is made. A number of shares of
Common Stock with a value equal to the amount of interest due shall be issued.
No fractional shares will be issued; therefore, in the event that the value of
the Common Stock per share does not equal the total interest due, the Company
will pay the balance in cash.
1.05 PAYING AGENT AND REGISTRAR. Initially, the Company will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar, or
Company-registrar without notice. The Company may act in any such capacity.
1.06 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all payments
hereon, including principal or interest, shall be subordinate and junior in
right of payment to all Company Debt (as defined hereinafter), but only to the
extent set forth as follows:
(a) upon the maturity of any Company Debt, or any installment thereof then
due by lapse of time, acceleration or otherwise, all Company Debt then due shall
first be paid in full (or provision made for payment in full thereof) before any
additional payment on account of principal or interest is made on this
Debenture; and
(b) in the event of any insolvency or bankruptcy proceedings affecting the
Company, or any receivership, liquidation, reorganization or other similar
proceedings affecting the Company, and, in the event of any proceedings for
voluntary liquidation, dissolution or other
<PAGE>
winding up of the Company, whether or not involving insolvency or bankruptcy,
then the holders of Company Debt shall be entitled to receive payment in full of
all principal of and interest on all Company Debt before the holder of this
Debenture is entitled to receive any payment on account of principal, interest
or premium on this Debenture.
The provisions of the preceding paragraphs are solely for the purpose of
defining the relative rights of the holders of Company Debt on the one hand and
the holder of this Debenture on the other hand and nothing herein shall impair,
as between the Company and the holder of this Debenture, the obligation of the
Company, which is unconditional and absolute, to pay the holder of this
Debenture the principal, interest and premiums hereon in accordance with its
terms, nor shall anything herein prevent the holder of this Debenture from
exercising all remedies otherwise permitted by law or hereunder upon default
hereunder, subject to the relative rights of the holders of Company Debt
expressed in the preceding paragraphs.
For the purpose of this Notice, the term "Company Debt" shall mean and
include current bank debt and all indebtedness acquired by the Company
subsequent to the date hereof, other than indebtedness to any officer, director
or other person who has beneficial ownership of ten percent (10%) or more of the
Company's issued and outstanding shares of Common Stock.
ARTICLE II
2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended with
the consent of the Debenture holder. Without the consent of the Debenture
holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company obligations to the
Debenture holder or to make any change that does not adversely affect the rights
of the Debenture holder.
ARTICLE III
3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows: failure
by the Company to pay amounts due hereunder within two (2) days of the Maturity
Date failure by the Company to advise its transfer agent to issue Common Stock
to the Debenture holder within two (2) business days of the Company's receipt of
the Notice of Conversion from Debenture holder; or failure by the Company for
thirty (30) days after notice to it to comply with any of its other agreements
in the Debenture; and events of bankruptcy or insolvency. The Debenture holder
may not enforce the Debenture except as provided herein.
3.02 SUCCESSOR CORPORATION. If a successor corporation assumes all the
obligations of this predecessor, Celerity Systems, Inc., the predecessor
corporation will be released from those obligations under the Debenture.
3.03 WAIVER AND RELEASE. A director, officer, employee or stockholders, as
such, of the Company shall not have any liability for any obligations of the
Company under the Debenture or
<PAGE>
for any claim based on, in respect of, or by reason of such obligations or their
creation. The Debenture holder, by accepting a Debenture waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Debenture.
ARTICLE IV
4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in part,
may be converted at any time beginning ninety (90) days following the date of
closing, into shares of Common Stock at a price equal to the following
Conversion: at the Debenture holders option, either, sixty five percent (65%) of
the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, Fifty cents (.50) per share.
In lieu of any fractional share to which the Debenture holder would
otherwise be entitled, the Company will pay the balance in cash.
4.02 REISSUANCE OF DEBENTURE. When the Debenture holder elects to convert a
part of the Debenture, then the Company shall reissue a new Debenture in the
same form as this Debenture to reflect the new principal amount.
4.03 TERMINATION OF CONVERSION RIGHTS. The Debenture holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on November 30, 2002 and shall be automatically converted on
that date in accordance with the formula set forth in Section 4.01 hereof, and
the appropriate shares of common stock and amount of interest shall be issued to
the Debenture holder.
4.04. Notwithstanding any other provision contained herein, the parties
agree that in no event shall the Company be required to issue (i) an aggregate
number of shares constituting more than 19.99% of the number of shares of Common
Stock outstanding on the date of such issuance or (ii) a number of shares that
would result in a change of control of the Company, unless the shareholders of
the Company approve such issuance of additional Common Shares or NASDAQ waives
the applicable requirements of Market Place Rule 4310(H)(i). The Company agrees
to use commercially reasonable efforts to obtain such approval or waiver on or
prior to the 90th day following the date that more than 19.99% of the Common
Stock would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
ARTICLE V
5.01 NOTICE. Notices regarding this Debenture shall be sent to the parties
at the following addresses, unless a party notifies the other parties, in
writing, of a change of address:
<PAGE>
If to the Company: CELERITY SYSTEMS, INC.
1400 Centerpoint Blvd.
Knoxville, Tennessee 37932.
Attention: President
If to Debenture holder: CARL HOEHNER
7052 Running Iron Lane
Pocatello, Idaho 83204
5.02 GOVERNING LAW. This Debenture shall be deemed to be made under and
shall be construed in accordance with the laws of the Commonwealth of Delaware
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on FORUM NON CONVENIENS to the bringing
of any such proceeding in such jurisdictions.
5.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
5.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the entire
agreement between the parties hereto with respect to the subject matter hereof
and there are no representations, warranties or commitments, except as set forth
herein. This Debenture may be amended only by an instrument in writing executed
by the parties hereto.
5.05 COUNTERPARTS. This Debenture may be executed in multiple counterparts,
each of which shall be an original, but all of which shall be deemed to
constitute an instrument.
5.06 ASSIGNMENT. Neither this Debenture nor any rights of the Investor or
the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Debenture shall insure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Debentures purchased or acquired by the Investor hereunder with respect to the
Common Stock held by such person, and (b) upon the prior written consent of the
Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Debenture may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor).
<PAGE>
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the parties
hereto have executed this Debenture as of November 30, 1999.
ATTEST:
----------------------
CELERITY SYSTEMS, INC.
/s/ Kenneth Van Meter
---------------------------------------
Kenneth Van Meter
Title: President/CEO
CARL HOEHNER
/s/ Carl Hoehner
---------------------------------------
Debenture Holder
<PAGE>
Exhibit 4.4
DEBENTURE
CELERITY SYSTEMS, INC.
2000 8% Subordinated Convertible Debenture
Due January 6, 2003
No.0013 $10,000.00
This Debenture is issued by Celerity Systems, Inc., (The "Company") to John
Bolliger (the "Debenture holder") pursuant to exemptions from registration under
the U.S. Securities Act of 1933.
ARTICLE I
1.01 PRINCIPAL AND INTEREST. The Company, for value received hereby confers
the right upon Debenture holder to convert the sum of Ten Thousand ($ 10,000.00)
Dollars into the common stock of the Company (the "Common Stock") on or before
January 6, 2003 ("Maturity Date") as set forth herein, and upon the Maturity
Date to pay interest thereon from the date of issue at the rate of eight percent
(8%) per annum. The Company shall pay such interest on the outstanding principal
amount of the Debenture from the date of issue until the Maturity Date or
conversion; the Company shall pay interest only upon the outstanding balance of
the Debenture at the rate of eight percent (8%) per annum. Interest will be
computed based on a 365 day year.
1.02 RESERVATION OF COMMON STOCK. The Company shall reserve and keep
available out of its authorized, but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five (65%) percent of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Seventy Five (.75 ) Cents
per share.
The Company shall use its best efforts to file a Registration Statement
within thirty (30) days form the Closing Date, furthermore, the Company shall
use its best efforts to assure that the Registration Statement is effective
within ninety (90) days of the Closing Date. In the event that the Registration
Statement is not effective within ninety (90) days the Company will pay damages
to the Debenture holder in the amount of two percent (2%) a month payable in
cash or stock at the Company's option.
<PAGE>
Furthermore, the Company has on deposit at the May Davis Group free trading
shares in the name of Dr. Fenton Scruggs. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Dr. Fenton Scruggs authorize the May Davis Group to deliver these
free trading shares to the Debenture holder as necessary on an appropriate basis
to honor Conversions.
Additionally, the Company will deposit with the May Davis Group free
trading shares currently held by Glenn West. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Glenn West authorize the May Davis Group to deliver these free
trading shares to the Debenture holder as necessary on an appropriate basis to
honor Conversions.
1.03 RIGHT OF REDEMPTION. The Company shall have the right to redeem in
part or in full any outstanding Debentures at one hundred and thirty five (135
%) percent of the Principal plus accrued interest.
1.04 INTEREST PAYMENTS. The interest so payable will be paid at the time of
Conversion to the person in whose name this Debenture is registered. At the time
such interest is payable, the Company, in its sole discretion, may elect to pay
interest in cash (via wire transfer or certified funds) or in the form of Common
Stock. If paid in the form of Common Stock, the amount of stock to be issued
will be calculated as follows: the value of the stock shall be the Bid Price on:
(i) the date the interest payment is due; or (ii) if the interest payment is not
made when due, the date the interest payment is made. A number of shares of
Common Stock with a value equal to the amount of interest due shall be issued.
No fractional shares will be issued; therefore, in the event that the value of
the Common Stock per share does not equal the total interest due, the Company
will pay the balance in cash.
1.05 PAYING AGENT AND REGISTRAR. Initially, the Company will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar, or
Company-registrar without notice. The Company may act in any such capacity.
1.06 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all payments
hereon, including principal or interest, shall be subordinate and junior in
right of payment to all Company Debt (as defined hereinafter), but only to the
extent set forth as follows:
(a) upon the maturity of any Company Debt, or any installment thereof then
due by lapse of time, acceleration or otherwise, all Company Debt then due shall
first be paid in full (or provision made for payment in full thereof) before any
additional payment on account of principal or interest is made on this
Debenture; and
(b) in the event of any insolvency or bankruptcy proceedings affecting the
Company, or any receivership, liquidation, reorganization or other similar
proceedings affecting the Company, and, in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy, then the holders
<PAGE>
of Company Debt shall be entitled to receive payment in full of all principal of
and interest on all Company Debt before the holder of this Debenture is entitled
to receive any payment on account of principal, interest or premium on this
Debenture.
The provisions of the preceding paragraphs are solely for the purpose of
defining the relative rights of the holders of Company Debt on the one hand and
the holder of this Debenture on the other hand and nothing herein shall impair,
as between the Company and the holder of this Debenture, the obligation of the
Company, which is unconditional and absolute, to pay the holder of this
Debenture the principal, interest and premiums hereon in accordance with its
terms, nor shall anything herein prevent the holder of this Debenture from
exercising all remedies otherwise permitted by law or hereunder upon default
hereunder, subject to the relative rights of the holders of Company Debt
expressed in the preceding paragraphs.
For the purpose of this Notice, the term "Company Debt" shall mean and
include current bank debt and all indebtedness acquired by the Company
subsequent to the date hereof, other than indebtedness to any officer, director
or other person who has beneficial ownership of ten percent (10%) or more of the
Company's issued and outstanding shares of Common Stock.
ARTICLE II
2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended with
the consent of the Debenture holder. Without the consent of the Debenture
holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company obligations to the
Debenture holder or to make any change that does not adversely affect the rights
of the Debenture holder.
ARTICLE III
3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows: failure
by the Company to pay amounts due hereunder within two (2) days of the Maturity
Date failure by the Company to advise its transfer agent to issue Common Stock
to the Debenture holder within two (2) business days of the Company's receipt of
the Notice of Conversion from Debenture holder; or failure by the Company for
thirty (30) days after notice to it to comply with any of its other agreements
in the Debenture; and events of bankruptcy or insolvency. The Debenture holder
may not enforce the Debenture except as provided herein.
3.02 SUCCESSOR CORPORATION. If a successor corporation assumes all the
obligations of this predecessor, Celerity Systems, Inc., the predecessor
corporation will be released from those obligations under the Debenture.
3.03 WAIVER AND RELEASE. A director, officer, employee or stockholders, as
such, of the Company shall not have any liability for any obligations of the
Company under the Debenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. The
<PAGE>
Debenture holder, by accepting a Debenture waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Debenture.
ARTICLE IV
4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in part,
may be converted at any time beginning ninety (90) days following the date of
closing, into shares of Common Stock at a price equal to the following
Conversion: at the Debenture holders option, either, sixty five (65%) percent of
the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, Seventy Five (.75) Cents per share.
In lieu of any fractional share to which the Debenture holder would
otherwise be entitled, the Company will pay the balance in cash.
4.02 REISSUANCE OF DEBENTURE. When the Debenture holder elects to convert a
part of the Debenture, then the Company shall reissue a new Debenture in the
same form as this Debenture to reflect the new principal amount.
4.03 TERMINATION OF CONVERSION RIGHTS. The Debenture holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on December 6, 2003 and shall be automatically converted on that
date in accordance with the formula set forth in Section 4.01 hereof, and the
appropriate shares of common stock and amount of interest shall be issued to the
Debenture holder.
4.04. Notwithstanding any other provision contained herein, the parties
agree that in no event shall the Company be required to issue (i) an aggregate
number of shares constituting more than 19.99% of the number of shares of Common
Stock outstanding on the date of such issuance or (ii) a number of shares that
would result in a change of control of the Company, unless the shareholders of
the Company approve such issuance of additional Common Shares or NASDAQ waives
the applicable requirements of Market Place Rule 4310(H)(i). The Company agrees
to use commercially reasonable efforts to obtain such approval or waiver on or
prior to the 90th day following the date that more than 19.99% of the Common
Stock would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
ARTICLE V
5.01 NOTICE. Notices regarding this Debenture shall be sent to the parties
at the following addresses, unless a party notifies the other parties, in
writing, of a change of address:
<PAGE>
If to the Company: CELERITY SYSTEMS, INC.
1400 Centerpoint Blvd.
Knoxville, Tennessee 37932.
Attention: President
If to Debenture holder: JOHN BOLLIGER
1775 North Elk Road
Polatello, Idaho 83204
5.02 GOVERNING LAW. This Debenture shall be deemed to be made under and
shall be construed in accordance with the laws of the Commonwealth of Delaware
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on FORUM NON CONVENIENS to the bringing
of any such proceeding in such jurisdictions.
5.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
5.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the entire
agreement between the parties hereto with respect to the subject matter hereof
and there are no representations, warranties or commitments, except as set forth
herein. This Debenture may be amended only by an instrument in writing executed
by the parties hereto.
5.05 COUNTERPARTS. This Debenture may be executed in multiple counterparts,
each of which shall be an original, but all of which shall be deemed to
constitute an instrument.
5.06 ASSIGNMENT. Neither this Debenture nor any rights of the Investor or
the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Debenture shall insure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Debentures purchased or acquired by the Investor hereunder with respect to the
Common Stock held by such person, and (b) upon the prior written consent of the
Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Debenture may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor).
<PAGE>
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the parties
hereto have executed this Debenture as of January 6, 2000.
ATTEST:
-----------------------
CELERITY SYSTEMS, INC.
/s/ Kenneth Van Meter
---------------------------------------
Kenneth Van Meter
Title: President/CEO
JOHN BOLLIGER
/s/ John Bolliger
---------------------------------------
Debenture Holder
<PAGE>
Exhibit 4.6
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of October 26, 1999 between Celerity
Systems, Inc., a Delaware corporation, with executive offices at 1400
Centerpoint Blvd., Knoxville Tennessee 37932 (the "Company") and John Bridges
(the "investor").
WITNESSETH
WHEREAS, the Company is offering the (the "Offering") up to $ 15,000.00
of debentures (the "Debentures") to the Investor: and
WHEREAS, in connection with the sale of the Debentures the Company is
granting to the Investor the right to purchase upon the conversion of Debentures
the number of shares of common stock of the Company, par value $0.001 per share
(the "Common Stock") as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Sevent Five cents (.75 )
per share.
.
NOW THEREFORE, the parties hereto hereby agrees as follows:
I. DEFINITIONS
All capitalized terms not hereinafter defined shall have the meanings
ascribed to them in the Line of Credit Agreement.
"BID PRICE" shall mean , on any date, the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five trading days immediately preceding such
date.
"COMMISSION." United States Securities and Exchange Commission or any
successor regulatory body.
"COMMON STOCK." As defined in the third recital hereof.
"COMPANY." As defined in the Line of Credit Agreement.
"DEBENTURES." As defined in the Line of Credit Agreement.
<PAGE>
"EXCHANGE ACT." Securities Exchange Act of 1934, as amended.
"INVESTOR." As defined in the first recital hereof.
"OFFERING." As defined in the first recital hereof.
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commissioner; included in such
definition shall be correlative terms "Register" and "Registered".
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commission; included in such
definition shall be the correlative terms "Register" and "Registered".
"REGISTRABLE SECURITIES." The shares of Common Stock issuable upon the
conversion of the Debentures that have not previously been sold pursuant to a
Registration Statement or Rule 144 and that are not eligible for sale under Rule
144(k) (or any successor provision.).
"REGISTRATION STATEMENT." The registration statement under the
Securities Act covering the resale of the Registrable Securities.
"RULE 144". Rule 144 under the Securities Act.
"RULE 415." Rule 415 under the Securities Act, or any successor rule
providing for offering securities on a continuous basis.
"SECURITIES ACT." As defined in the third recital hereof.
"VIOLATIONS." As defined in Section 4.01 (a) hereof.
II. REGISTRATION RIGHTS.
SECTION 2.01 MANDATORY REGISTRATION .
(a) Registration is mandatory :
(i) On or prior to the issuance of the Debentures pursuant to the Line
of Credit Agreement, the Company shall have caused a Registration Statement
covering the resale of the
<PAGE>
Registrable Securities issuable upon the conversion of the Debentures to be
declared effective and the Company shall cause the Registration Statement to
remain effective until all of the Registrable Securities have been sold. The
Registration Statement shall cover no less than the number of shares of Common
Stock issuable upon the conversion of all outstanding Debentures based upon the
Bid Price of the Common Stock upon the date of the initial filing with the SEC.
(ii) In the event that the Registration Statement does not at any time
cover the requisite number of Registrable Securities, as provided in
2.01(a)(i), the Company shall prepare and file with the Commission, no later
than thirty (30) days after such date, a Registration Statement covering the
number of shares of Common Stock, as provided in 2.01(a)(i). If at any time
the number of shares of Common Stock into which the Debentures may be
converted exceeds the aggregate number of shares of Common Stock then
registered, the Company shall, within thirty (30) days after receipt of a
written notice from the Investor, either (a) amend the Registration Statement
filed by the Company pursuant to the preceding sentence, if such Registration
Statement has not been declared effective but the Commission at the time, to
register additional shares of Common Stock into which the Debentures as
provided above may be converted, or (b) if such Registration Statement has
been declared effective by the Commission at that time, file with the
Commission an additional Registration Statement to register such additional
shares of Common Stock.
(b) In the event that the Registration Statement referred to in Section
2.01(a)(i) does not cover the requisite number of Registrable Securities, as
provided in Section 2.01(a)(i), then the Company shall pay to the Investor an
amount equal to two 2% percent of the principal amount and the accrued interest
on the Debentures (the "Outstanding Amount") for each month or portion thereof
and continuing each amount month thereafter until the date the Registration
Statement is declared effective by the Commission (the "2.01(a) Payment"). The
2.01(a) Payment shall be paid in immediately available funds with three (3)
business days after the end of each month. If the Investor elects to have the
2.01(a) Payment paid in shares of Common Stock, then such amount may be
converted into shares of Common Stock in accordance with the terms of the
Debentures.
SECTION 2.02 PERIOD OF EFFECTIVENESS. The Company shall cause the
Registration Statement to become effective under the Securities Act and maintain
such effectiveness for the period terminating on the date on which the Investor
with respect to the Registrable Securities can sell the Registrable Securities
pursuant to Rule 144 under the Securities Act without restriction under Rule
144(e) thereof.
SECTION 2.03 OBLIGATIONS OF THE COMPANY. The Company Shall:
(a) Cause the Registration Statement to become effective under the
Securities Act and keep the Registration Statement effective under the
Securities Act pursuant to Rule 415 at all times until the date on which the
Investor with respect to the Registrable Securities can sell the Registrable
Securities pursuant to Rule 144 under the Securities Act without restriction
under Rule 144(e) thereof.
<PAGE>
(b) Prepare and file with the Commission such amendments (including
post effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective under the Securities Act
at all times until the date on which the Investor can sell the Registrable
Securities pursuant to Rule 144 of the Securities Act without restriction under
Rule 144 (e) thereof, and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by the Registration
Statement.
(c) Furnish promptly to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as the Investor may reasonably request in order to
facilitate the disposition of Registrable Securities.
(d) Register and qualify the securities covered by the Registration
Statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Investor, and prepare and file in those
jurisdictions such amendments (including post effective amendments) and
supplements and take such other actions as may be necessary to maintain such
registration and qualification in effect at all times until the date on which
the Investor can sell the Registrable Securities pursuant to Rule 144 of the
Securities Act without restriction under Rule 144(e) thereof and to take all
other actions necessary or advisable to enable the disposition of such
securities in such jurisdiction, provided that the Company shall not be required
in connection therewith, or as a condition thereto, to quality to do business or
to file a general consent to service of process in any such state or
jurisdictions or to provide any undertaking or make any change in its charter or
by-laws which the Board of Directors determines to be contrary to the best
interest of the Company and its stockholders.
(e) Notify the Investor, at any time when a prospectus relating to
Registrable Securities covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Company shall promptly amend or supplement the Registration
Statement to correct any such untrue statements or omission.
(f) Notify the Investor of the issuance by the Commission or any state
securities commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceeding for such purpose. The
Company will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible time.
(g) Permit single firm of counsel designated by the holders of a
majority in interest of the Registrable Securities to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing, and not file any document in a form to which such counsel
reasonably objects.
<PAGE>
(h) Make generally available to its security holders as soon as
practicable, but not later than 90 days after the close period covered thereby,
an earnings statement (in form complying with the provisions of Rule 158 under
the Securities Act ) covering a twelve-month period beginning not later that the
first day of the Company's fiscal quarter next following the effective date of
the Registration Statement.
(i) Make available for inspection by the Investor, any underwriters
participating in offering pursuant to the registration, and the counsel,
accountants, or other agents retained by the Investor or any such underwriter,
all pertinent financial and other records, corporate documents, and properties
of the Company, and cause the Company's officers, directors, and employees to
supply all information reasonably requested by the Investor or any such
underwriters in connection with the registration.
(j) If the Common Stock in then listed on a national securities
exchange, cause the Registrable Securities to be listed on such exchange. If the
Common Stock is not then listed on a national securities exchange, facilitate
the reporting of the Registrable Securities on the Nasdaq Bulletin Board, the
Nasdaq SmallCap Market, or the Nasdag National Market, as applicable.
(k) Provide a transfer agent and register, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement under the Securities Act.
(l) Take all actions reasonable necessary to facilitate the timely
preparation and delivery of certificates representing the Registrable Securities
to be sold pursuant to the Registration Statement and to enable such
certificates to be in such denominations and Registered in such names as the
Investor or any Underwriters may reasonably request.
(m) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
III. FURNISH INFORMATION
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement with respect to each Investor that
such Investor shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
the Registrable Securities and shall execute such documents in connection with
such registration as the Company may reasonably require to effect the
Registration of the Registrable Securities and shall execute such documents in
connection with the registration as the Company may reasonably request.
<PAGE>
IV. INDEMNIFICATION AND CONTRIBUTION
SECTION 4.01 INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To extent permitted by law, the Company will indemnify and hold
harmless each Investor, the directors, if any, of such Investor, the officers,
if any, of such Investor who signed the Registration Statement, each person, if
any, who controls such Investor, any underwriter (as defined in the Securities
Act) of any of the Registrable Securities and each person, if any, who controls
any such underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages, expenses, or liabilities or actions or
proceedings, whether commenced or threatened, in respect thereof that arise out
of, or are based upon, any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material of fact contained in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (ii) the omission or alleged omissions to
state therein a material of fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made not misleading; or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law, or any rule
or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse the Investor and each such
underwriter or controlling person, promptly as such expenses are incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding provided however, that the indemnity agreement contained is this
Section 4.01 (a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action or proceeding if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action or proceeding to the extent that it arises
out of, or is based upon, a Violation which occurs in reliance upon, and in
conformity with, written information furnished expressly for use in connection
with such registration by the Investor or any such underwriter or controlling
person, as the case be. Such indemnity shall remain in full force and effect
regardless of any investigation made by, or on behalf of, the Investor or any
such underwriter or controlling person shall survive the transfer of the
Registrable Securities by the Investor.
(b) To the extent permitted by law, each Investor, severally and not
jointly, will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the Registration Statement, each person, if
any, who controls the Company within the meaning of the Securities Act or
Exchange Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement, or any of its directors or officers or
any person who controls such holder or underwriter, against any losses, claims,
damages, or liabilities (joint or several) to which any of them may become
subject, under the Securities Act, the Exchange Act, or other federal or state
law, insofar as such losses, claims, damages, or
<PAGE>
liabilities or actions in respect thereof arise out of, or are based upon, any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon, and in conformity with, written information
furnished by such Investor expressly for use in connection with such
registration; and such investor will reimburse any legal or other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 4.01(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of such Investor, which consent shall
not be unreasonably withheld; and provided, further that the Investor shall be
liable under this paragraph for only that amount of losses, claims, damages, and
liabilities as does not exceed the proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such registration.
(c) Promptly after receipt by an indemnified party under this Article
IV of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Article IV, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of, the defense thereof with counsel
reasonably satisfactory to the indemnified party; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel for the indemnified party, representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding; notwithstanding the
foregoing, the indemnifying party or parties shall be responsible for only one
counsel representing the indemnified party or parties. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Article IV only to the extent
prejudicial to its ability to defend such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to nay indemnified party otherwise than under this Article IV.
The indemnification required by this Article IV shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, promptly as such expense, loss, damage, or liability is incurred.
SECTION 4.02 CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 4.01 hereof to the extent permitted by
law, provided that (i) no contribution shall be made under circumstances where
the contributor would not have been liable for indemnification under the fault
standards set forth in Section 4.01 hereof, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty or such fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable
<PAGE>
Securities.
V. REPORT UNDER EXCHANGE ACT.
With a view to making available to the Investor the benefits of Rule
144 and any other rule or regulation of the Commission that may at any time
permit the Investor to sell securities of the Company to the public without
registration, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) Furnish to each Investor, so long as such Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act, and the Exchange Act (at any time after it has become subject to
such reporting requirements), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing the Investor of any rule or regulation of the Commission which permits
the selling of any such securities without registration.
VI. ASSIGNMENT OF REGISTRATION RIGHTS.
<PAGE>
The right to have the Company register Registrable Securities under the
Securities Act pursuant to this Agreement may be assigned by the Investor to
permitted transferees or assignees of such securities; provided, that such
transferee or assignee, within a reasonable time after such transfer, furnishes
the Company written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; provided, further, that such assignment shall be effective only
if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act.
The term "Investor" as used in this Agreement shall included permitted
assignees.
VII. EXPENSES OF REGISTRATION.
All expenses other than the underwriting discounts and commissions
incurred in connection with registration, filings, or qualifications pursuant to
Article II hereof, including, without limitation, all registration, listing,
filing, and qualification fees, printers, accounting fees, fees and
disbursements of counsel for the Company shall be borne by the Company.
VIII. MISCELLANEOUS.
SECTION 8.01 FURTHER ACTIONS. At any time and from time to time, each
party agrees, at its expense, to take such actions and to execute and deliver
such documents as may be reasonably necessary to effectuate the purposes of this
Agreement.
SECTION 8.02 ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth
the entire understanding of the parties with respect to the subject matter
hereof, supersedes all existing agreements among them concerning such subject
matter, and may be modified only by a written instrument duly executed by each
party hereto.
SECTION 8.03 NOTICES. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing, and, if sent to any
Investor, shall be mailed, delivered, or telexed or telegraphed and confirmed by
letter, to such Investor at the address set forth on the signature page hereof,
or if sent to the Company, shall be mailed, delivered, or telexed or telegraphed
and confirmed by letter, to 1400 Centerpoint Boulevard, Knoxville, Tennessee
37932. All notices hereunder shall be effective upon receipt by the party to
which it is addressed.
SECTION 8.04 WAIVER. Any waiver by any party of a breach of any term of
this Agreement shall not operate as, or be construed to be, a waiver of any
other breach of that term or of any breach of any other term of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions will not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver hereunder must be in writing.
SECTION 8.05 BINDING EFFECT. The provisions of this Agreement shall be binding
upon, and inure to the benefits of, the parties hereto and their respective
successors and assigns; PROVIDED,
<PAGE>
HOWEVER, that, except as otherwise provided herein, no party hereto shall have
the right to assign its rights and obligations hereunder without the prior
written consent of the other parties hereto.
SECTION 8.06 NO THIRD-PARTY BENEFICIARIES. This Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement, except as otherwise provided herein.
SECTION 8.07 SEPARABILITY. If any provision of this Agreement is
invalid, illegal, or unenforceable, the balance of this Agreement shall remain
in effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and circumstances.
SECTION 8.08 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 8.09 COUNTERPARTS; GOVERNING LAW. This Agreement may be
executed in any number of counterparts, each of which shall be deemed as
original, but all of which together shall constitute one and the same
instrument. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to conflicts of
laws. Each of the parties consents to the jurisdiction of the U.S. District
Court sitting in the Southern District of the State of New York or the state
courts of the State of New York sitting in Manhattan in connection with any
dispute arising under this Debenture and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
CONVENIENS to the bringing of any such proceeding in such jurisdictions.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
day and year first above written.
COMPANY
CELERITY SYSTEMS, INC.
By: /s/ Kenneth Van Meter
-----------------------------
Name: Kenneth Van Meter
Title:President/CEO
INVESTOR
JOHN BRIDGES
By: /s/ John Bridges
-----------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of October 28, 1999 between Celerity
Systems, Inc., a Delaware corporation, with executive offices at 1400
Centerpoint Blvd., Knoxville Tennessee 37932 (the "Company") and John P. Faure
(the "investor").
WITNESSETH
WHEREAS, the Company is offering the (the "Offering") up to $ 30,000.00
of debentures (the "Debentures") to the Investor: and
WHEREAS, in connection with the sale of the Debentures the Company is
granting to the Investor the right to purchase upon the conversion of Debentures
the number of shares of common stock of the Company, par value $0.001 per share
(the "Common Stock") as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Seventy Five cents (.75 )
per share.
.
NOW THEREFORE, the parties hereto hereby agrees as follows:
I. DEFINITIONS
All capitalized terms not hereinafter defined shall have the meanings
ascribed to them in the Line of Credit Agreement.
"BID PRICE" shall mean , on any date, the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five trading days immediately preceding such
date.
"COMMISSION." United States Securities and Exchange Commission or any
successor regulatory body.
"COMMON STOCK." As defined in the third recital hereof.
"COMPANY." As defined in the Line of Credit Agreement.
"DEBENTURES." As defined in the Line of Credit Agreement.
<PAGE>
"EXCHANGE ACT." Securities Exchange Act of 1934, as amended.
"INVESTOR." As defined in the first recital hereof.
"OFFERING." As defined in the first recital hereof.
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commissioner; included in such
definition shall be correlative terms "Register" and "Registered".
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commission; included in such
definition shall be the correlative terms "Register" and "Registered".
"REGISTRABLE SECURITIES." The shares of Common Stock issuable upon the
conversion of the Debentures that have not previously been sold pursuant to a
Registration Statement or Rule 144 and that are not eligible for sale under Rule
144(k) (or any successor provision.).
"REGISTRATION STATEMENT." The registration statement under the
Securities Act covering the resale of the Registrable Securities.
"RULE 144". Rule 144 under the Securities Act.
"RULE 415." Rule 415 under the Securities Act, or any successor rule
providing for offering securities on a continuous basis.
"SECURITIES ACT." As defined in the third recital hereof.
"VIOLATIONS." As defined in Section 4.01 (a) hereof.
II. REGISTRATION RIGHTS.
SECTION 2.01 MANDATORY REGISTRATION .
(a) Registration is mandatory :
(i) On or prior to the issuance of the Debentures pursuant to the Line
of Credit Agreement, the Company shall have caused a Registration Statement
covering the resale of the
<PAGE>
Registrable Securities issuable upon the conversion of the Debentures to be
declared effective and the Company shall cause the Registration Statement to
remain effective until all of the Registrable Securities have been sold. The
Registration Statement shall cover no less than the number of shares of Common
Stock issuable upon the conversion of all outstanding Debentures based upon the
Bid Price of the Common Stock upon the date of the initial filing with the SEC.
(ii) In the event that the Registration Statement does not at any time
cover the requisite number of Registrable Securities, as provided in 2.01 (a)
(i), the Company shall prepare and file with the Commission, no later than
thirty (30) days after such date, a Registration Statement covering the number
of shares of Common Stock, as provided in 2.01 (a) (i). If at any time the
number of shares of Common Stock into which the Debentures may be converted
exceeds the aggregate number of shares of Common Stock then registered, the
Company shall, within thirty (30) days after receipt of a written notice from
the Investor, either (a) amend the Registration Statement filed by the Company
pursuant to the preceding sentence, if such Registration Statement has not been
declared effective but the Commission at the time, to register additional shares
of Common Stock into which the Debentures as provided above may be converted, or
(b) if such Registration Statement has been declared effective by the Commission
at that time, file with the Commission an additional Registration Statement to
register such additional shares of Common Stock.
(b) In the event that the Registration Statement referred to in Section
2.01 (a) (i) does not cover the requisite number of Registrable Securities, as
provided in Section 2.01 (a) (i), then the Company shall pay to the Investor an
amount equal to two 2% percent of the principal amount and the accrued interest
on the Debentures (the "Outstanding Amount") for each month or portion thereof
and continuing each amount month thereafter until the date the Registration
Statement is declared effective by the Commission (the "2.01 (a) Payment"). The
2.01 (a) Payment shall be paid in immediately available funds with three (3)
business days after the end of each month. If the Investor elects to have the
2.01 (a) Payment paid in shares of Common Stock, then such amount may be
converted into shares of Common Stock in accordance with the terms of the
Debentures.
SECTION 2.02 PERIOD OF EFFECTIVENESS. The Company shall cause the
Registration Statement to become effective under the Securities Act and maintain
such effectiveness for the period terminating on the date on which the Investor
with respect to the Registrable Securities can sell the Registrable Securities
pursuant to Rule 144 under the Securities Act without restriction under Rule
144(e) thereof.
SECTION 2.03 OBLIGATIONS OF THE COMPANY. The Company Shall:
(a) Cause the Registration Statement to become effective under the
Securities Act and keep the Registration Statement effective under the
Securities Act pursuant to Rule 415 at all times until the date on which the
Investor with respect to the Registrable Securities can sell the Registrable
Securities pursuant to Rule 144 under the Securities Act without restriction
under Rule 144(e) thereof.
<PAGE>
(b) Prepare and file with the Commission such amendments (including
post effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective under the Securities Act
at all times until the date on which the Investor can sell the Registrable
Securities pursuant to Rule 144 of the Securities Act without restriction under
Rule 144 (e) thereof, and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by the Registration
Statement.
(c) Furnish promptly to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as the Investor may reasonably request in order to
facilitate the disposition of Registrable Securities.
(d) Register and qualify the securities covered by the Registration
Statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Investor, and prepare and file in those
jurisdictions such amendments (including post effective amendments) and
supplements and take such other actions as may be necessary to maintain such
registration and qualification in effect at all times until the date on which
the Investor can sell the Registrable Securities pursuant to Rule 144 of the
Securities Act without restriction under Rule 144(e) thereof and to take all
other actions necessary or advisable to enable the disposition of such
securities in such jurisdiction, provided that the Company shall not be required
in connection therewith, or as a condition thereto, to quality to do business or
to file a general consent to service of process in any such state or
jurisdictions or to provide any undertaking or make any change in its charter or
by-laws which the Board of Directors determines to be contrary to the best
interest of the Company and its stockholders.
(e) Notify the Investor, at any time when a prospectus relating to
Registrable Securities covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Company shall promptly amend or supplement the Registration
Statement to correct any such untrue statements or omission.
(f) Notify the Investor of the issuance by the Commission or any state
securities commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceeding for such purpose. The
Company will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible time.
(g) Permit single firm of counsel designated by the holders of a
majority in interest of the Registrable Securities to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing, and not file any document in a form to which such counsel
reasonably objects.
<PAGE>
(h) Make generally available to its security holders as soon as
practicable, but not later than 90 days after the close period covered thereby,
an earnings statement (in form complying with the provisions of Rule 158 under
the Securities Act ) covering a twelve-month period beginning not later that the
first day of the Company's fiscal quarter next following the effective date of
the Registration Statement.
(i) Make available for inspection by the Investor, any underwriters
participating in offering pursuant to the registration, and the counsel,
accountants, or other agents retained by the Investor or any such underwriter,
all pertinent financial and other records, corporate documents, and properties
of the Company, and cause the Company's officers, directors, and employees to
supply all information reasonably requested by the Investor or any such
underwriters in connection with the registration.
(j) If the Common Stock in then listed on a national securities
exchange, cause the Registrable Securities to be listed on such exchange. If the
Common Stock is not then listed on a national securities exchange, facilitate
the reporting of the Registrable Securities on the Nasdaq Bulletin Board, the
Nasdaq SmallCap Market, or the Nasdag National Market, as applicable.
(k) Provide a transfer agent and register, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement under the Securities Act.
(l) Take all actions reasonable necessary to facilitate the timely
preparation and delivery of certificates representing the Registrable Securities
to be sold pursuant to the Registration Statement and to enable such
certificates to be in such denominations and Registered in such names as the
Investor or any Underwriters may reasonably request.
(m) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
III. FURNISH INFORMATION
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement with respect to each Investor that
such Investor shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
the Registrable Securities and shall execute such documents in connection with
such registration as the Company may reasonably require to effect the
Registration of the Registrable Securities and shall execute such documents in
connection with the registration as the Company may reasonably request.
<PAGE>
IV. INDEMNIFICATION AND CONTRIBUTION
SECTION 4.01 INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To extent permitted by law, the Company will indemnify and hold
harmless each Investor, the directors, if any, of such Investor, the officers,
if any, of such Investor who signed the Registration Statement, each person, if
any, who controls such Investor, any underwriter (as defined in the Securities
Act) of any of the Registrable Securities and each person, if any, who controls
any such underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages, expenses, or liabilities or actions or
proceedings, whether commenced or threatened, in respect thereof that arise out
of, or are based upon, any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material of fact contained in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (ii) the omission or alleged omissions to
state therein a material of fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made not misleading; or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law, or any rule
or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse the Investor and each such
underwriter or controlling person, promptly as such expenses are incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding provided however, that the indemnity agreement contained is this
Section 4.01 (a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action or proceeding if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action or proceeding to the extent that it arises
out of, or is based upon, a Violation which occurs in reliance upon, and in
conformity with, written information furnished expressly for use in connection
with such registration by the Investor or any such underwriter or controlling
person, as the case be. Such indemnity shall remain in full force and effect
regardless of any investigation made by, or on behalf of, the Investor or any
such underwriter or controlling person shall survive the transfer of the
Registrable Securities by the Investor.
(b) To the extent permitted by law, each Investor, severally and not
jointly, will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the Registration Statement, each person, if
any, who controls the Company within the meaning of the Securities Act or
Exchange Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement, or any of its directors or officers or
any person who controls such holder or underwriter, against any losses, claims,
damages, or liabilities (joint or several) to which any of them may become
subject, under the Securities Act, the Exchange Act, or other federal or state
law, insofar as such losses, claims, damages, or
<PAGE>
liabilities or actions in respect thereof arise out of, or are based upon, any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon, and in conformity with, written information
furnished by such Investor expressly for use in connection with such
registration; and such investor will reimburse any legal or other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 4.01(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of such Investor, which consent shall
not be unreasonably withheld; and provided, further that the Investor shall be
liable under this paragraph for only that amount of losses, claims, damages, and
liabilities as does not exceed the proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such registration.
(c) Promptly after receipt by an indemnified party under this Article
IV of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Article IV, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of, the defense thereof with counsel
reasonably satisfactory to the indemnified party; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel for the indemnified party, representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding; notwithstanding the
foregoing, the indemnifying party or parties shall be responsible for only one
counsel representing the indemnified party or parties. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Article IV only to the extent
prejudicial to its ability to defend such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to nay indemnified party otherwise than under this Article IV.
The indemnification required by this Article IV shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, promptly as such expense, loss, damage, or liability is incurred.
SECTION 4.02 CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 4.01 hereof to the extent permitted by
law, provided that (i) no contribution shall be made under circumstances where
the contributor would not have been liable for indemnification under the fault
standards set forth in Section 4.01 hereof, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty or such fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable
<PAGE>
Securities.
V. REPORT UNDER EXCHANGE ACT.
With a view to making available to the Investor the benefits of Rule
144 and any other rule or regulation of the Commission that may at any time
permit the Investor to sell securities of the Company to the public without
registration, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) Furnish to each Investor, so long as such Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act, and the Exchange Act (at any time after it has become subject to
such reporting requirements), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing the Investor of any rule or regulation of the Commission which permits
the selling of any such securities without registration.
VI. ASSIGNMENT OF REGISTRATION RIGHTS.
<PAGE>
The right to have the Company register Registrable Securities under the
Securities Act pursuant to this Agreement may be assigned by the Investor to
permitted transferees or assignees of such securities; provided, that such
transferee or assignee, within a reasonable time after such transfer, furnishes
the Company written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; provided, further, that such assignment shall be effective only
if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act.
The term "Investor" as used in this Agreement shall included permitted
assignees.
VII. EXPENSES OF REGISTRATION.
All expenses other than the underwriting discounts and commissions
incurred in connection with registration, filings, or qualifications pursuant to
Article II hereof, including, without limitation, all registration, listing,
filing, and qualification fees, printers, accounting fees, fees and
disbursements of counsel for the Company shall be borne by the Company.
VIII. MISCELLANEOUS.
SECTION 8.01 FURTHER ACTIONS. At any time and from time to time, each
party agrees, at its expense, to take such actions and to execute and deliver
such documents as may be reasonably necessary to effectuate the purposes of this
Agreement.
SECTION 8.02 ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth
the entire understanding of the parties with respect to the subject matter
hereof, supersedes all existing agreements among them concerning such subject
matter, and may be modified only by a written instrument duly executed by each
party hereto.
SECTION 8.03 NOTICES. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing, and, if sent to any
Investor, shall be mailed, delivered, or telexed or telegraphed and confirmed by
letter, to such Investor at the address set forth on the signature page hereof,
or if sent to the Company, shall be mailed, delivered, or telexed or telegraphed
and confirmed by letter, to 1400 Centerpoint Boulevard, Knoxville, Tennessee
37932. All notices hereunder shall be effective upon receipt by the party to
which it is addressed.
SECTION 8.04 WAIVER. Any waiver by any party of a breach of any term of
this Agreement shall not operate as, or be construed to be, a waiver of any
other breach of that term or of any breach of any other term of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions will not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver hereunder must be in writing.
SECTION 8.05 BINDING EFFECT. The provisions of this Agreement shall be
binding upon,
<PAGE>
and inure to the benefits of, the parties hereto and their respective successors
and assigns; PROVIDED, HOWEVER, that, except as otherwise provided herein, no
party hereto shall have the right to assign its rights and obligations hereunder
without the prior written consent of the other parties hereto.
SECTION 8.06 NO THIRD-PARTY BENEFICIARIES. This Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement, except as otherwise provided herein.
SECTION 8.07 SEPARABILITY. If any provision of this Agreement is
invalid, illegal, or unenforceable, the balance of this Agreement shall remain
in effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and circumstances.
SECTION 8.08 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 8.09 COUNTERPARTS; GOVERNING LAW. This Agreement may be
executed in any number of counterparts, each of which shall be deemed as
original, but all of which together shall constitute one and the same
instrument. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to conflicts of
laws. Each of the parties consents to the jurisdiction of the U.S. District
Court sitting in the Southern District of the State of New York or the state
courts of the State of New York sitting in Manhattan in connection with any
dispute arising under this Debenture and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
CONVENIENS to the bringing of any such proceeding in such jurisdictions.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
day and year first above written.
COMPANY
CELERITY SYSTEMS, INC.
By: /s/ Kenneth Van Meter
-------------------------------
Name: Kenneth Van Meter
Title:President/CEO
INVESTOR
JOHN FAURE
By: /s/ John Faure
-------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of October 29, 1999 between Celerity
Systems, Inc., a Delaware corporation, with executive offices at 1400
Centerpoint Blvd., Knoxville Tennessee 37932 (the "Company") and Loni Spurkeland
(the "investor").
WITNESSETH
WHEREAS, the Company is offering the (the "Offering") up to $ 10,000.00
of debentures (the "Debentures") to the Investor: and
WHEREAS, in connection with the sale of the Debentures the Company is
granting to the Investor the right to purchase upon the conversion of Debentures
the number of shares of common stock of the Company, par value $0.001 per share
(the "Common Stock") as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Seventy Five cents (.75 )
per share.
NOW THEREFORE, the parties hereto hereby agrees as follows:
I. DEFINITIONS
All capitalized terms not hereinafter defined shall have the meanings
ascribed to them in the Line of Credit Agreement.
"BID PRICE" shall mean , on any date, the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five trading days immediately preceding such
date.
"COMMISSION." United States Securities and Exchange Commission or any
successor regulatory body.
"COMMON STOCK." As defined in the third recital hereof.
"COMPANY." As defined in the Line of Credit Agreement.
"DEBENTURES." As defined in the Line of Credit Agreement.
<PAGE>
"EXCHANGE ACT." Securities Exchange Act of 1934, as amended.
"INVESTOR." As defined in the first recital hereof.
"OFFERING." As defined in the first recital hereof.
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commissioner; included in such
definition shall be correlative terms "Register" and "Registered".
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commission; included in such
definition shall be the correlative terms "Register" and "Registered".
"REGISTRABLE SECURITIES." The shares of Common Stock issuable upon the
conversion of the Debentures that have not previously been sold pursuant to a
Registration Statement or Rule 144 and that are not eligible for sale under Rule
144(k) (or any successor provision.).
"REGISTRATION STATEMENT." The registration statement under the
Securities Act covering the resale of the Registrable Securities.
"RULE 144". Rule 144 under the Securities Act.
"RULE 415." Rule 415 under the Securities Act, or any successor rule
providing for offering securities on a continuous basis.
"SECURITIES ACT." As defined in the third recital hereof.
"VIOLATIONS." As defined in Section 4.01 (a) hereof.
II. REGISTRATION RIGHTS.
SECTION 2.01 MANDATORY REGISTRATION .
(a) Registration is mandatory :
(i) On or prior to the issuance of the Debentures pursuant to the Line
of Credit Agreement, the Company shall have caused a Registration Statement
covering the resale of the Registrable Securities issuable upon the conversion
of the Debentures to be declared effective
<PAGE>
and the Company shall cause the Registration Statement to remain effective until
all of the Registrable Securities have been sold. The Registration Statement
shall cover no less than the number of shares of Common Stock issuable upon the
conversion of all outstanding Debentures based upon the Bid Price of the Common
Stock upon the date of the initial filing with the SEC.
(ii) In the event that the Registration Statement does not at any time
cover the requisite number of Registrable Securities, as provided in 2.01 (a)
(i), the Company shall prepare and file with the Commission, no later than
thirty (30) days after such date, a Registration Statement covering the number
of shares of Common Stock, as provided in 2.01 (a) (i). If at any time the
number of shares of Common Stock into which the Debentures may be converted
exceeds the aggregate number of shares of Common Stock then registered, the
Company shall, within thirty (30) days after receipt of a written notice from
the Investor, either (a) amend the Registration Statement filed by the Company
pursuant to the preceding sentence, if such Registration Statement has not been
declared effective but the Commission at the time, to register additional shares
of Common Stock into which the Debentures as provided above may be converted, or
(b) if such Registration Statement has been declared effective by the Commission
at that time, file with the Commission an additional Registration Statement to
register such additional shares of Common Stock.
(b) In the event that the Registration Statement referred to in Section
2.01 (a) (i) does not cover the requisite number of Registrable Securities, as
provided in Section 2.01 (a) (i), then the Company shall pay to the Investor an
amount equal to two 2% percent of the principal amount and the accrued interest
on the Debentures (the "Outstanding Amount") for each month or portion thereof
and continuing each amount month thereafter until the date the Registration
Statement is declared effective by the Commission (the "2.01 (a) Payment"). The
2.01 (a) Payment shall be paid in immediately available funds with three (3)
business days after the end of each month. If the Investor elects to have the
2.01 (a) Payment paid in shares of Common Stock, then such amount may be
converted into shares of Common Stock in accordance with the terms of the
Debentures.
SECTION 2.02 PERIOD OF EFFECTIVENESS. The Company shall cause the
Registration Statement to become effective under the Securities Act and maintain
such effectiveness for the period terminating on the date on which the Investor
with respect to the Registrable Securities can sell the Registrable Securities
pursuant to Rule 144 under the Securities Act without restriction under Rule
144(e) thereof.
SECTION 2.03 OBLIGATIONS OF THE COMPANY. The Company Shall:
(a) Cause the Registration Statement to become effective under the
Securities Act and keep the Registration Statement effective under the
Securities Act pursuant to Rule 415 at all times until the date on which the
Investor with respect to the Registrable Securities can sell the Registrable
Securities pursuant to Rule 144 under the Securities Act without restriction
under Rule 144(e) thereof.
(b) Prepare and file with the Commission such amendments (including
post effective
<PAGE>
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective under the Securities Act at all times until
the date on which the Investor can sell the Registrable Securities pursuant to
Rule 144 of the Securities Act without restriction under Rule 144 (e) thereof,
and to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by the Registration Statement.
(c) Furnish promptly to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as the Investor may reasonably request in order to
facilitate the disposition of Registrable Securities.
(d) Register and qualify the securities covered by the Registration
Statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Investor, and prepare and file in those
jurisdictions such amendments (including post effective amendments) and
supplements and take such other actions as may be necessary to maintain such
registration and qualification in effect at all times until the date on which
the Investor can sell the Registrable Securities pursuant to Rule 144 of the
Securities Act without restriction under Rule 144(e) thereof and to take all
other actions necessary or advisable to enable the disposition of such
securities in such jurisdiction, provided that the Company shall not be required
in connection therewith, or as a condition thereto, to quality to do business or
to file a general consent to service of process in any such state or
jurisdictions or to provide any undertaking or make any change in its charter or
by-laws which the Board of Directors determines to be contrary to the best
interest of the Company and its stockholders.
(e) Notify the Investor, at any time when a prospectus relating to
Registrable Securities covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Company shall promptly amend or supplement the Registration
Statement to correct any such untrue statements or omission.
(f) Notify the Investor of the issuance by the Commission or any state
securities commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceeding for such purpose. The
Company will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible time.
(g) Permit single firm of counsel designated by the holders of a
majority in interest of the Registrable Securities to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing, and not file any document in a form to which such counsel
reasonably objects.
(h) Make generally available to its security holders as soon as
practicable, but not
<PAGE>
later than 90 days after the close period covered thereby, an earnings statement
(in form complying with the provisions of Rule 158 under the Securities Act )
covering a twelve-month period beginning not later that the first day of the
Company's fiscal quarter next following the effective date of the Registration
Statement.
(i) Make available for inspection by the Investor, any underwriters
participating in offering pursuant to the registration, and the counsel,
accountants, or other agents retained by the Investor or any such underwriter,
all pertinent financial and other records, corporate documents, and properties
of the Company, and cause the Company's officers, directors, and employees to
supply all information reasonably requested by the Investor or any such
underwriters in connection with the registration.
(j) If the Common Stock in then listed on a national securities
exchange, cause the Registrable Securities to be listed on such exchange. If the
Common Stock is not then listed on a national securities exchange, facilitate
the reporting of the Registrable Securities on the Nasdaq Bulletin Board, the
Nasdaq SmallCap Market, or the Nasdag National Market, as applicable.
(k) Provide a transfer agent and register, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement under the Securities Act.
(l) Take all actions reasonable necessary to facilitate the timely
preparation and delivery of certificates representing the Registrable Securities
to be sold pursuant to the Registration Statement and to enable such
certificates to be in such denominations and Registered in such names as the
Investor or any Underwriters may reasonably request.
(m) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
III. FURNISH INFORMATION
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement with respect to each Investor that
such Investor shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
the Registrable Securities and shall execute such documents in connection with
such registration as the Company may reasonably require to effect the
Registration of the Registrable Securities and shall execute such documents in
connection with the registration as the Company may reasonably request.
IV. INDEMNIFICATION AND CONTRIBUTION
<PAGE>
SECTION 4.01 INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To extent permitted by law, the Company will indemnify and hold
harmless each Investor, the directors, if any, of such Investor, the officers,
if any, of such Investor who signed the Registration Statement, each person, if
any, who controls such Investor, any underwriter (as defined in the Securities
Act) of any of the Registrable Securities and each person, if any, who controls
any such underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages, expenses, or liabilities or actions or
proceedings, whether commenced or threatened, in respect thereof that arise out
of, or are based upon, any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material of fact contained in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (ii) the omission or alleged omissions to
state therein a material of fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made not misleading; or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law, or any rule
or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse the Investor and each such
underwriter or controlling person, promptly as such expenses are incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding provided however, that the indemnity agreement contained is this
Section 4.01 (a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action or proceeding if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action or proceeding to the extent that it arises
out of, or is based upon, a Violation which occurs in reliance upon, and in
conformity with, written information furnished expressly for use in connection
with such registration by the Investor or any such underwriter or controlling
person, as the case be. Such indemnity shall remain in full force and effect
regardless of any investigation made by, or on behalf of, the Investor or any
such underwriter or controlling person shall survive the transfer of the
Registrable Securities by the Investor.
(b) To the extent permitted by law, each Investor, severally and not
jointly, will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the Registration Statement, each person, if
any, who controls the Company within the meaning of the Securities Act or
Exchange Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement, or any of its directors or officers or
any person who controls such holder or underwriter, against any losses, claims,
damages, or liabilities (joint or several) to which any of them may become
subject, under the Securities Act, the Exchange Act, or other federal or state
law, insofar as such losses, claims, damages, or liabilities or actions in
respect thereof arise out of, or are based upon, any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon,
and in conformity with, written information furnished by such Investor expressly
for use in connection with such registration; and such investor will reimburse
any legal or other expenses reasonably
<PAGE>
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 4.01(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of such Investor, which consent shall
not be unreasonably withheld; and provided, further that the Investor shall be
liable under this paragraph for only that amount of losses, claims, damages, and
liabilities as does not exceed the proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such registration.
(c) Promptly after receipt by an indemnified party under this Article
IV of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Article IV, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of, the defense thereof with counsel
reasonably satisfactory to the indemnified party; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel for the indemnified party, representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding; notwithstanding the
foregoing, the indemnifying party or parties shall be responsible for only one
counsel representing the indemnified party or parties. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Article IV only to the extent
prejudicial to its ability to defend such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to nay indemnified party otherwise than under this Article IV.
The indemnification required by this Article IV shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, promptly as such expense, loss, damage, or liability is incurred.
SECTION 4.02 CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 4.01 hereof to the extent permitted by
law, provided that (i) no contribution shall be made under circumstances where
the contributor would not have been liable for indemnification under the fault
standards set forth in Section 4.01 hereof, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty or such fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
<PAGE>
V. REPORT UNDER EXCHANGE ACT.
With a view to making available to the Investor the benefits of Rule
144 and any other rule or regulation of the Commission that may at any time
permit the Investor to sell securities of the Company to the public without
registration, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) Furnish to each Investor, so long as such Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act, and the Exchange Act (at any time after it has become subject to
such reporting requirements), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing the Investor of any rule or regulation of the Commission which permits
the selling of any such securities without registration.
VI. ASSIGNMENT OF REGISTRATION RIGHTS.
The right to have the Company register Registrable Securities under the
Securities Act pursuant to this Agreement may be assigned by the Investor to
permitted transferees or assignees of such securities; provided, that such
transferee or assignee, within a reasonable time after such transfer, furnishes
the Company written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; provided, further, that such assignment shall be effective only
if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act.
The term "Investor" as used in this Agreement shall included permitted
assignees.
VII. EXPENSES OF REGISTRATION.
All expenses other than the underwriting discounts and commissions
incurred in connection with registration, filings, or qualifications pursuant to
Article II hereof, including, without limitation, all registration, listing,
filing, and qualification fees, printers, accounting fees, fees and
disbursements of counsel for the Company shall be borne by the Company.
VIII. MISCELLANEOUS.
SECTION 8.01 FURTHER ACTIONS. At any time and from time to time, each
party agrees, at
<PAGE>
its expense, to take such actions and to execute and deliver such documents as
may be reasonably necessary to effectuate the purposes of this Agreement.
SECTION 8.02 ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth
the entire understanding of the parties with respect to the subject matter
hereof, supersedes all existing agreements among them concerning such subject
matter, and may be modified only by a written instrument duly executed by each
party hereto.
SECTION 8.03 NOTICES. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing, and, if sent to any
Investor, shall be mailed, delivered, or telexed or telegraphed and confirmed by
letter, to such Investor at the address set forth on the signature page hereof,
or if sent to the Company, shall be mailed, delivered, or telexed or telegraphed
and confirmed by letter, to 1400 Centerpoint Boulevard, Knoxville, Tennessee
37932. All notices hereunder shall be effective upon receipt by the party to
which it is addressed.
SECTION 8.04 WAIVER. Any waiver by any party of a breach of any term of
this Agreement shall not operate as, or be construed to be, a waiver of any
other breach of that term or of any breach of any other term of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions will not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver hereunder must be in writing.
<PAGE>
SECTION 8.05 BINDING EFFECT. The provisions of this Agreement shall be
binding upon, and inure to the benefits of, the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that, except as otherwise
provided herein, no party hereto shall have the right to assign its rights and
obligations hereunder without the prior written consent of the other parties
hereto.
SECTION 8.06 NO THIRD-PARTY BENEFICIARIES. This Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement, except as otherwise provided herein.
SECTION 8.07 SEPARABILITY. If any provision of this Agreement is
invalid, illegal, or unenforceable, the balance of this Agreement shall remain
in effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and circumstances.
SECTION 8.08 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 8.09 COUNTERPARTS; GOVERNING LAW. This Agreement may be
executed in any number of counterparts, each of which shall be deemed as
original, but all of which together shall constitute one and the same
instrument. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to conflicts of
laws. Each of the parties consents to the jurisdiction of the U.S. District
Court sitting in the Southern District of the State of New York or the state
courts of the State of New York sitting in Manhattan in connection with any
dispute arising under this Debenture and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
CONVENIENS to the bringing of any such proceeding in such jurisdictions.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
day and year first above written.
COMPANY
CELERITY SYSTEMS, INC.
By: /s/ Kenneth Van Meter
-----------------------------
Name: Kenneth Van Meter
Title:President/CEO
INVESTOR
LONI SPURKELAND
By: /s/ Loni Spurkeland
-----------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of November 1, 1999 between Celerity
Systems, Inc., a Delaware corporation, with executive offices at 1400
Centerpoint Blvd., Knoxville Tennessee 37932 (the "Company") and Robert E.
Dettle (the "investor").
WITNESSETH
WHEREAS, the Company is offering the (the "Offering") up to $ 25,000.00
of debentures (the "Debentures") to the Investor: and
WHEREAS, in connection with the sale of the Debentures the Company is
granting to the Investor the right to purchase upon the conversion of Debentures
the number of shares of common stock of the Company, par value $0.001 per share
(the "Common Stock") as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Seventy Five cents (.75 )
per share.
NOW THEREFORE, the parties hereto hereby agrees as follows:
I. DEFINITIONS
All capitalized terms not hereinafter defined shall have the meanings
ascribed to them in the Line of Credit Agreement.
"BID PRICE" shall mean , on any date, the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five trading days immediately preceding such
date.
"COMMISSION." United States Securities and Exchange Commission or any
successor regulatory body.
"COMMON STOCK." As defined in the third recital hereof.
"COMPANY." As defined in the Line of Credit Agreement.
"DEBENTURES." As defined in the Line of Credit Agreement.
<PAGE>
"EXCHANGE ACT." Securities Exchange Act of 1934, as amended.
"INVESTOR." As defined in the first recital hereof.
"OFFERING." As defined in the first recital hereof.
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commissioner; included in such
definition shall be correlative terms "Register" and "Registered".
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commission; included in such
definition shall be the correlative terms "Register" and "Registered".
"REGISTRABLE SECURITIES." The shares of Common Stock issuable upon the
conversion of the Debentures that have not previously been sold pursuant to a
Registration Statement or Rule 144 and that are not eligible for sale under Rule
144(k) (or any successor provision.).
"REGISTRATION STATEMENT." The registration statement under the
Securities Act covering the resale of the Registrable Securities.
"RULE 144". Rule 144 under the Securities Act.
"RULE 415." Rule 415 under the Securities Act, or any successor rule
providing for offering securities on a continuous basis.
"SECURITIES ACT." As defined in the third recital hereof.
"VIOLATIONS." As defined in Section 4.01 (a) hereof.
II. REGISTRATION RIGHTS.
SECTION 2.01 MANDATORY REGISTRATION .
(a) Registration is mandatory :
(i) On or prior to the issuance of the Debentures pursuant to the Line
of Credit Agreement, the Company shall have caused a Registration Statement
covering the resale of the
<PAGE>
Registrable Securities issuable upon the conversion of the Debentures to be
declared effective and the Company shall cause the Registration Statement to
remain effective until all of the Registrable Securities have been sold. The
Registration Statement shall cover no less than the number of shares of Common
Stock issuable upon the conversion of all outstanding Debentures based upon the
Bid Price of the Common Stock upon the date of the initial filing with the SEC.
(ii) In the event that the Registration Statement does not at any time
cover the requisite number of Registrable Securities, as provided in 2.01 (a)
(i), the Company shall prepare and file with the Commission, no later than
thirty (30) days after such date, a Registration Statement covering the number
of shares of Common Stock, as provided in 2.01 (a) (i). If at any time the
number of shares of Common Stock into which the Debentures may be converted
exceeds the aggregate number of shares of Common Stock then registered, the
Company shall, within thirty (30) days after receipt of a written notice from
the Investor, either (a) amend the Registration Statement filed by the Company
pursuant to the preceding sentence, if such Registration Statement has not been
declared effective but the Commission at the time, to register additional shares
of Common Stock into which the Debentures as provided above may be converted, or
(b) if such Registration Statement has been declared effective by the Commission
at that time, file with the Commission an additional Registration Statement to
register such additional shares of Common Stock.
(b) In the event that the Registration Statement referred to in Section
2.01 (a) (i) does not cover the requisite number of Registrable Securities, as
provided in Section 2.01 (a) (i), then the Company shall pay to the Investor an
amount equal to two 2% percent of the principal amount and the accrued interest
on the Debentures (the "Outstanding Amount") for each month or portion thereof
and continuing each amount month thereafter until the date the Registration
Statement is declared effective by the Commission (the "2.01 (a) Payment"). The
2.01 (a) Payment shall be paid in immediately available funds with three (3)
business days after the end of each month. If the Investor elects to have the
2.01 (a) Payment paid in shares of Common Stock, then such amount may be
converted into shares of Common Stock in accordance with the terms of the
Debentures.
SECTION 2.02 PERIOD OF EFFECTIVENESS. The Company shall cause the
Registration Statement to become effective under the Securities Act and maintain
such effectiveness for the period terminating on the date on which the Investor
with respect to the Registrable Securities can sell the Registrable Securities
pursuant to Rule 144 under the Securities Act without restriction under Rule
144(e) thereof.
SECTION 2.03 OBLIGATIONS OF THE COMPANY. The Company Shall:
(a) Cause the Registration Statement to become effective under the
Securities Act and keep the Registration Statement effective under the
Securities Act pursuant to Rule 415 at all times until the date on which the
Investor with respect to the Registrable Securities can sell the Registrable
Securities pursuant to Rule 144 under the Securities Act without restriction
under Rule 144(e) thereof.
<PAGE>
(b) Prepare and file with the Commission such amendments (including
post effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective under the Securities Act
at all times until the date on which the Investor can sell the Registrable
Securities pursuant to Rule 144 of the Securities Act without restriction under
Rule 144 (e) thereof, and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by the Registration
Statement.
(c) Furnish promptly to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as the Investor may reasonably request in order to
facilitate the disposition of Registrable Securities.
(d) Register and qualify the securities covered by the Registration
Statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Investor, and prepare and file in those
jurisdictions such amendments (including post effective amendments) and
supplements and take such other actions as may be necessary to maintain such
registration and qualification in effect at all times until the date on which
the Investor can sell the Registrable Securities pursuant to Rule 144 of the
Securities Act without restriction under Rule 144(e) thereof and to take all
other actions necessary or advisable to enable the disposition of such
securities in such jurisdiction, provided that the Company shall not be required
in connection therewith, or as a condition thereto, to quality to do business or
to file a general consent to service of process in any such state or
jurisdictions or to provide any undertaking or make any change in its charter or
by-laws which the Board of Directors determines to be contrary to the best
interest of the Company and its stockholders.
(e) Notify the Investor, at any time when a prospectus relating to
Registrable Securities covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Company shall promptly amend or supplement the Registration
Statement to correct any such untrue statements or omission.
(f) Notify the Investor of the issuance by the Commission or any state
securities commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceeding for such purpose. The
Company will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible time.
(g) Permit single firm of counsel designated by the holders of a
majority in interest of the Registrable Securities to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing, and not file any document in a form to which such counsel
reasonably objects.
<PAGE>
(h) Make generally available to its security holders as soon as
practicable, but not later than 90 days after the close period covered thereby,
an earnings statement (in form complying with the provisions of Rule 158 under
the Securities Act ) covering a twelve-month period beginning not later that the
first day of the Company's fiscal quarter next following the effective date of
the Registration Statement.
(i) Make available for inspection by the Investor, any underwriters
participating in offering pursuant to the registration, and the counsel,
accountants, or other agents retained by the Investor or any such underwriter,
all pertinent financial and other records, corporate documents, and properties
of the Company, and cause the Company's officers, directors, and employees to
supply all information reasonably requested by the Investor or any such
underwriters in connection with the registration.
(j) If the Common Stock in then listed on a national securities
exchange, cause the Registrable Securities to be listed on such exchange. If the
Common Stock is not then listed on a national securities exchange, facilitate
the reporting of the Registrable Securities on the Nasdaq Bulletin Board, the
Nasdaq SmallCap Market, or the Nasdag National Market, as applicable.
(k) Provide a transfer agent and register, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement under the Securities Act.
(l) Take all actions reasonable necessary to facilitate the timely
preparation and delivery of certificates representing the Registrable Securities
to be sold pursuant to the Registration Statement and to enable such
certificates to be in such denominations and Registered in such names as the
Investor or any Underwriters may reasonably request.
(m) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
III. FURNISH INFORMATION
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement with respect to each Investor that
such Investor shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
the Registrable Securities and shall execute such documents in connection with
such registration as the Company may reasonably require to effect the
Registration of the Registrable Securities and shall execute such documents in
connection with the registration as the Company may reasonably request.
<PAGE>
IV. INDEMNIFICATION AND CONTRIBUTION
SECTION 4.01 INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To extent permitted by law, the Company will indemnify and hold
harmless each Investor, the directors, if any, of such Investor, the officers,
if any, of such Investor who signed the Registration Statement, each person, if
any, who controls such Investor, any underwriter (as defined in the Securities
Act) of any of the Registrable Securities and each person, if any, who controls
any such underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages, expenses, or liabilities or actions or
proceedings, whether commenced or threatened, in respect thereof that arise out
of, or are based upon, any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material of fact contained in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (ii) the omission or alleged omissions to
state therein a material of fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made not misleading; or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law, or any rule
or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse the Investor and each such
underwriter or controlling person, promptly as such expenses are incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding provided however, that the indemnity agreement contained is this
Section 4.01 (a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action or proceeding if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action or proceeding to the extent that it arises
out of, or is based upon, a Violation which occurs in reliance upon, and in
conformity with, written information furnished expressly for use in connection
with such registration by the Investor or any such underwriter or controlling
person, as the case be. Such indemnity shall remain in full force and effect
regardless of any investigation made by, or on behalf of, the Investor or any
such underwriter or controlling person shall survive the transfer of the
Registrable Securities by the Investor.
(b) To the extent permitted by law, each Investor, severally and not
jointly, will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the Registration Statement, each person, if
any, who controls the Company within the meaning of the Securities Act or
Exchange Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement, or any of its directors or officers or
any person who controls such holder or underwriter, against any losses, claims,
damages, or liabilities (joint or several) to which any of them may become
subject, under the Securities Act, the Exchange Act, or other federal or state
law, insofar as such losses, claims, damages, or
<PAGE>
liabilities or actions in respect thereof arise out of, or are based upon, any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon, and in conformity with, written information
furnished by such Investor expressly for use in connection with such
registration; and such investor will reimburse any legal or other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 4.01(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of such Investor, which consent shall
not be unreasonably withheld; and provided, further that the Investor shall be
liable under this paragraph for only that amount of losses, claims, damages, and
liabilities as does not exceed the proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such registration.
(c) Promptly after receipt by an indemnified party under this Article
IV of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Article IV, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of, the defense thereof with counsel
reasonably satisfactory to the indemnified party; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel for the indemnified party, representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding; notwithstanding the
foregoing, the indemnifying party or parties shall be responsible for only one
counsel representing the indemnified party or parties. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Article IV only to the extent
prejudicial to its ability to defend such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to nay indemnified party otherwise than under this Article IV.
The indemnification required by this Article IV shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, promptly as such expense, loss, damage, or liability is incurred.
SECTION 4.02 CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 4.01 hereof to the extent permitted by
law, provided that (i) no contribution shall be made under circumstances where
the contributor would not have been liable for indemnification under the fault
standards set forth in Section 4.01 hereof, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty or such fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable
<PAGE>
Securities.
V. REPORT UNDER EXCHANGE ACT.
With a view to making available to the Investor the benefits of Rule
144 and any other rule or regulation of the Commission that may at any time
permit the Investor to sell securities of the Company to the public without
registration, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) Furnish to each Investor, so long as such Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act, and the Exchange Act (at any time after it has become subject to
such reporting requirements), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing the Investor of any rule or regulation of the Commission which permits
the selling of any such securities without registration.
VI. ASSIGNMENT OF REGISTRATION RIGHTS.
The right to have the Company register Registrable Securities under the
Securities Act pursuant to this Agreement may be assigned by the Investor to
permitted transferees or assignees of such securities; provided, that such
transferee or assignee, within a reasonable time after such transfer, furnishes
the Company written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; provided, further, that such assignment shall be effective only
if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act.
The term "Investor" as used in this Agreement shall included permitted
assignees.
VII. EXPENSES OF REGISTRATION.
All expenses other than the underwriting discounts and commissions
incurred in connection with registration, filings, or qualifications pursuant to
Article II hereof, including, without limitation, all registration, listing,
filing, and qualification fees, printers, accounting fees, fees and
disbursements of counsel for the Company shall be borne by the Company.
<PAGE>
VIII. MISCELLANEOUS.
SECTION 8.01 FURTHER ACTIONS. At any time and from time to time, each
party agrees, at its expense, to take such actions and to execute and deliver
such documents as may be reasonably necessary to effectuate the purposes of this
Agreement.
SECTION 8.02 ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth
the entire understanding of the parties with respect to the subject matter
hereof, supersedes all existing agreements among them concerning such subject
matter, and may be modified only by a written instrument duly executed by each
party hereto.
SECTION 8.03 NOTICES. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing, and, if sent to any
Investor, shall be mailed, delivered, or telexed or telegraphed and confirmed by
letter, to such Investor at the address set forth on the signature page hereof,
or if sent to the Company, shall be mailed, delivered, or telexed or telegraphed
and confirmed by letter, to 1400 Centerpoint Boulevard, Knoxville, Tennessee
37932. All notices hereunder shall be effective upon receipt by the party to
which it is addressed.
SECTION 8.04 WAIVER. Any waiver by any party of a breach of any term of
this Agreement shall not operate as, or be construed to be, a waiver of any
other breach of that term or of any breach of any other term of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions will not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver hereunder must be in writing.
<PAGE>
SECTION 8.05 BINDING EFFECT. The provisions of this Agreement shall be
binding upon, and inure to the benefits of, the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that, except as otherwise
provided herein, no party hereto shall have the right to assign its rights and
obligations hereunder without the prior written consent of the other parties
hereto.
SECTION 8.06 NO THIRD-PARTY BENEFICIARIES. This Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement, except as otherwise provided herein.
SECTION 8.07 SEPARABILITY. If any provision of this Agreement is
invalid, illegal, or unenforceable, the balance of this Agreement shall remain
in effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and circumstances.
SECTION 8.08 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 8.09 COUNTERPARTS; GOVERNING LAW. This Agreement may be
executed in any number of counterparts, each of which shall be deemed as
original, but all of which together shall constitute one and the same
instrument. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to conflicts of
laws. Each of the parties consents to the jurisdiction of the U.S. District
Court sitting in the Southern District of the State of New York or the state
courts of the State of New York sitting in Manhattan in connection with any
dispute arising under this Debenture and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
CONVENIENS to the bringing of any such proceeding in such jurisdictions.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
day and year first above written.
COMPANY
CELERITY SYSTEMS, INC.
By: /s/ Kenneth Van Meter
-----------------------------
Name: Kenneth Van Meter
Title:President/CEO
INVESTOR
<PAGE>
ROBERT E. DETTLE
By: /s/ Robert E. Dettle
-----------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of November 5, 1999 between Celerity
Systems, Inc., a Delaware corporation, with executive offices at 1400
Centerpoint Blvd., Knoxville Tennessee 37932 (the "Company") and Michael Genta
(the "investor").
WITNESSETH
WHEREAS, the Company is offering the (the "Offering") up to $ 10,000.00
of debentures (the "Debentures") to the Investor: and
WHEREAS, in connection with the sale of the Debentures the Company is
granting to the Investor the right to purchase upon the conversion of Debentures
the number of shares of common stock of the Company, par value $0.001 per share
(the "Common Stock") as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Seventy Five cents (.75 )
per share.
.
NOW THEREFORE, the parties hereto hereby agrees as follows:
I. DEFINITIONS
All capitalized terms not hereinafter defined shall have the meanings
ascribed to them in the Line of Credit Agreement.
"BID PRICE" shall mean , on any date, the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five trading days immediately preceding such
date.
"COMMISSION." United States Securities and Exchange Commission or any
successor regulatory body.
"COMMON STOCK." As defined in the third recital hereof.
"COMPANY." As defined in the Line of Credit Agreement.
"DEBENTURES." As defined in the Line of Credit Agreement.
<PAGE>
"EXCHANGE ACT." Securities Exchange Act of 1934, as amended.
"INVESTOR." As defined in the first recital hereof.
"OFFERING." As defined in the first recital hereof.
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commissioner; included in such
definition shall be correlative terms "Register" and "Registered".
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commission; included in such
definition shall be the correlative terms "Register" and "Registered".
"REGISTRABLE SECURITIES." The shares of Common Stock issuable upon the
conversion of the Debentures that have not previously been sold pursuant to a
Registration Statement or Rule 144 and that are not eligible for sale under Rule
144(k) (or any successor provision.).
"REGISTRATION STATEMENT." The registration statement under the
Securities Act covering the resale of the Registrable Securities.
"RULE 144". Rule 144 under the Securities Act.
"RULE 415." Rule 415 under the Securities Act, or any successor rule
providing for offering securities on a continuous basis.
"SECURITIES ACT." As defined in the third recital hereof.
"VIOLATIONS." As defined in Section 4.01 (a) hereof.
II. REGISTRATION RIGHTS.
SECTION 2.01 MANDATORY REGISTRATION .
(a) Registration is mandatory :
(i) On or prior to the issuance of the Debentures pursuant to the Line
of Credit Agreement, the Company shall have caused a Registration Statement
covering the resale of the Registrable Securities issuable upon the conversion
of the Debentures to be declared effective
<PAGE>
and the Company shall cause the Registration Statement to remain effective until
all of the Registrable Securities have been sold. The Registration Statement
shall cover no less than the number of shares of Common Stock issuable upon the
conversion of all outstanding Debentures based upon the Bid Price of the Common
Stock upon the date of the initial filing with the SEC.
(ii) In the event that the Registration Statement does not at any time
cover the requisite number of Registrable Securities, as provided in 2.01 (a)
(i), the Company shall prepare and file with the Commission, no later than
thirty (30) days after such date, a Registration Statement covering the number
of shares of Common Stock, as provided in 2.01 (a) (i). If at any time the
number of shares of Common Stock into which the Debentures may be converted
exceeds the aggregate number of shares of Common Stock then registered, the
Company shall, within thirty (30) days after receipt of a written notice from
the Investor, either (a) amend the Registration Statement filed by the Company
pursuant to the preceding sentence, if such Registration Statement has not been
declared effective but the Commission at the time, to register additional shares
of Common Stock into which the Debentures as provided above may be converted, or
(b) if such Registration Statement has been declared effective by the Commission
at that time, file with the Commission an additional Registration Statement to
register such additional shares of Common Stock.
(b) In the event that the Registration Statement referred to in Section
2.01 (a) (i) does not cover the requisite number of Registrable Securities, as
provided in Section 2.01 (a) (i), then the Company shall pay to the Investor an
amount equal to two 2% percent of the principal amount and the accrued interest
on the Debentures (the "Outstanding Amount") for each month or portion thereof
and continuing each amount month thereafter until the date the Registration
Statement is declared effective by the Commission (the "2.01 (a) Payment"). The
2.01 (a) Payment shall be paid in immediately available funds with three (3)
business days after the end of each month. If the Investor elects to have the
2.01 (a) Payment paid in shares of Common Stock, then such amount may be
converted into shares of Common Stock in accordance with the terms of the
Debentures.
SECTION 2.02 PERIOD OF EFFECTIVENESS. The Company shall cause the
Registration Statement to become effective under the Securities Act and maintain
such effectiveness for the period terminating on the date on which the Investor
with respect to the Registrable Securities can sell the Registrable Securities
pursuant to Rule 144 under the Securities Act without restriction under Rule
144(e) thereof.
SECTION 2.03 OBLIGATIONS OF THE COMPANY. The Company Shall:
(a) Cause the Registration Statement to become effective under the
Securities Act and keep the Registration Statement effective under the
Securities Act pursuant to Rule 415 at all times until the date on which the
Investor with respect to the Registrable Securities can sell the Registrable
Securities pursuant to Rule 144 under the Securities Act without restriction
under Rule 144(e) thereof.
(b) Prepare and file with the Commission such amendments (including
post effective
<PAGE>
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective under the Securities Act at all times until
the date on which the Investor can sell the Registrable Securities pursuant to
Rule 144 of the Securities Act without restriction under Rule 144 (e) thereof,
and to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by the Registration Statement.
(c) Furnish promptly to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as the Investor may reasonably request in order to
facilitate the disposition of Registrable Securities.
(d) Register and qualify the securities covered by the Registration
Statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Investor, and prepare and file in those
jurisdictions such amendments (including post effective amendments) and
supplements and take such other actions as may be necessary to maintain such
registration and qualification in effect at all times until the date on which
the Investor can sell the Registrable Securities pursuant to Rule 144 of the
Securities Act without restriction under Rule 144(e) thereof and to take all
other actions necessary or advisable to enable the disposition of such
securities in such jurisdiction, provided that the Company shall not be required
in connection therewith, or as a condition thereto, to quality to do business or
to file a general consent to service of process in any such state or
jurisdictions or to provide any undertaking or make any change in its charter or
by-laws which the Board of Directors determines to be contrary to the best
interest of the Company and its stockholders.
(e) Notify the Investor, at any time when a prospectus relating to
Registrable Securities covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Company shall promptly amend or supplement the Registration
Statement to correct any such untrue statements or omission.
(f) Notify the Investor of the issuance by the Commission or any state
securities commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceeding for such purpose. The
Company will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible time.
(g) Permit single firm of counsel designated by the holders of a
majority in interest of the Registrable Securities to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing, and not file any document in a form to which such counsel
reasonably objects.
(h) Make generally available to its security holders as soon as
practicable, but not
<PAGE>
later than 90 days after the close period covered thereby, an earnings statement
(in form complying with the provisions of Rule 158 under the Securities Act )
covering a twelve-month period beginning not later that the first day of the
Company's fiscal quarter next following the effective date of the Registration
Statement.
(i) Make available for inspection by the Investor, any underwriters
participating in offering pursuant to the registration, and the counsel,
accountants, or other agents retained by the Investor or any such underwriter,
all pertinent financial and other records, corporate documents, and properties
of the Company, and cause the Company's officers, directors, and employees to
supply all information reasonably requested by the Investor or any such
underwriters in connection with the registration.
(j) If the Common Stock in then listed on a national securities
exchange, cause the Registrable Securities to be listed on such exchange. If the
Common Stock is not then listed on a national securities exchange, facilitate
the reporting of the Registrable Securities on the Nasdaq Bulletin Board, the
Nasdaq SmallCap Market, or the Nasdag National Market, as applicable.
(k) Provide a transfer agent and register, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement under the Securities Act.
(l) Take all actions reasonable necessary to facilitate the timely
preparation and delivery of certificates representing the Registrable Securities
to be sold pursuant to the Registration Statement and to enable such
certificates to be in such denominations and Registered in such names as the
Investor or any Underwriters may reasonably request.
(m) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
III. FURNISH INFORMATION
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement with respect to each Investor that
such Investor shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
the Registrable Securities and shall execute such documents in connection with
such registration as the Company may reasonably require to effect the
Registration of the Registrable Securities and shall execute such documents in
connection with the registration as the Company may reasonably request.
IV. INDEMNIFICATION AND CONTRIBUTION
<PAGE>
SECTION 4.01 INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To extent permitted by law, the Company will indemnify and hold
harmless each Investor, the directors, if any, of such Investor, the officers,
if any, of such Investor who signed the Registration Statement, each person, if
any, who controls such Investor, any underwriter (as defined in the Securities
Act) of any of the Registrable Securities and each person, if any, who controls
any such underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages, expenses, or liabilities or actions or
proceedings, whether commenced or threatened, in respect thereof that arise out
of, or are based upon, any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material of fact contained in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (ii) the omission or alleged omissions to
state therein a material of fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made not misleading; or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law, or any rule
or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse the Investor and each such
underwriter or controlling person, promptly as such expenses are incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding provided however, that the indemnity agreement contained is this
Section 4.01 (a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action or proceeding if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action or proceeding to the extent that it arises
out of, or is based upon, a Violation which occurs in reliance upon, and in
conformity with, written information furnished expressly for use in connection
with such registration by the Investor or any such underwriter or controlling
person, as the case be. Such indemnity shall remain in full force and effect
regardless of any investigation made by, or on behalf of, the Investor or any
such underwriter or controlling person shall survive the transfer of the
Registrable Securities by the Investor.
(b) To the extent permitted by law, each Investor, severally and not
jointly, will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the Registration Statement, each person, if
any, who controls the Company within the meaning of the Securities Act or
Exchange Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement, or any of its directors or officers or
any person who controls such holder or underwriter, against any losses, claims,
damages, or liabilities (joint or several) to which any of them may become
subject, under the Securities Act, the Exchange Act, or other federal or state
law, insofar as such losses, claims, damages, or liabilities or actions in
respect thereof arise out of, or are based upon, any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon,
and in conformity with, written information furnished by such Investor expressly
for use in connection with such registration; and such investor will reimburse
any legal or other expenses reasonably
<PAGE>
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 4.01(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of such Investor, which consent shall
not be unreasonably withheld; and provided, further that the Investor shall be
liable under this paragraph for only that amount of losses, claims, damages, and
liabilities as does not exceed the proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such registration.
(c) Promptly after receipt by an indemnified party under this Article
IV of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Article IV, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of, the defense thereof with counsel
reasonably satisfactory to the indemnified party; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel for the indemnified party, representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding; notwithstanding the
foregoing, the indemnifying party or parties shall be responsible for only one
counsel representing the indemnified party or parties. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Article IV only to the extent
prejudicial to its ability to defend such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to nay indemnified party otherwise than under this Article IV.
The indemnification required by this Article IV shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, promptly as such expense, loss, damage, or liability is incurred.
SECTION 4.02 CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 4.01 hereof to the extent permitted by
law, provided that (i) no contribution shall be made under circumstances where
the contributor would not have been liable for indemnification under the fault
standards set forth in Section 4.01 hereof, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty or such fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
<PAGE>
V. REPORT UNDER EXCHANGE ACT.
With a view to making available to the Investor the benefits of Rule
144 and any other rule or regulation of the Commission that may at any time
permit the Investor to sell securities of the Company to the public without
registration, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) Furnish to each Investor, so long as such Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act, and the Exchange Act (at any time after it has become subject to
such reporting requirements), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing the Investor of any rule or regulation of the Commission which permits
the selling of any such securities without registration.
VI. ASSIGNMENT OF REGISTRATION RIGHTS.
The right to have the Company register Registrable Securities under the
Securities Act pursuant to this Agreement may be assigned by the Investor to
permitted transferees or assignees of such securities; provided, that such
transferee or assignee, within a reasonable time after such transfer, furnishes
the Company written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; provided, further, that such assignment shall be effective only
if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act.
The term "Investor" as used in this Agreement shall included permitted
assignees.
VII. EXPENSES OF REGISTRATION.
All expenses other than the underwriting discounts and commissions
incurred in connection with registration, filings, or qualifications pursuant to
Article II hereof, including, without limitation, all registration, listing,
filing, and qualification fees, printers, accounting fees, fees and
disbursements of counsel for the Company shall be borne by the Company.
VIII. MISCELLANEOUS.
SECTION 8.01 FURTHER ACTIONS. At any time and from time to time, each
party agrees, at
<PAGE>
its expense, to take such actions and to execute and deliver such documents as
may be reasonably necessary to effectuate the purposes of this Agreement.
SECTION 8.02 ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth
the entire understanding of the parties with respect to the subject matter
hereof, supersedes all existing agreements among them concerning such subject
matter, and may be modified only by a written instrument duly executed by each
party hereto.
SECTION 8.03 NOTICES. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing, and, if sent to any
Investor, shall be mailed, delivered, or telexed or telegraphed and confirmed by
letter, to such Investor at the address set forth on the signature page hereof,
or if sent to the Company, shall be mailed, delivered, or telexed or telegraphed
and confirmed by letter, to 1400 Centerpoint Boulevard, Knoxville, Tennessee
37932. All notices hereunder shall be effective upon receipt by the party to
which it is addressed.
SECTION 8.04 WAIVER. Any waiver by any party of a breach of any term of
this Agreement shall not operate as, or be construed to be, a waiver of any
other breach of that term or of any breach of any other term of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions will not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver hereunder must be in writing.
<PAGE>
SECTION 8.05 BINDING EFFECT. The provisions of this Agreement shall be
binding upon, and inure to the benefits of, the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that, except as otherwise
provided herein, no party hereto shall have the right to assign its rights and
obligations hereunder without the prior written consent of the other parties
hereto.
SECTION 8.06 NO THIRD-PARTY BENEFICIARIES. This Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement, except as otherwise provided herein.
SECTION 8.07 SEPARABILITY. If any provision of this Agreement is
invalid, illegal, or unenforceable, the balance of this Agreement shall remain
in effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and circumstances.
SECTION 8.08 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 8.09 COUNTERPARTS; GOVERNING LAW. This Agreement may be
executed in any number of counterparts, each of which shall be deemed as
original, but all of which together shall constitute one and the same
instrument. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to conflicts of
laws. Each of the parties consents to the jurisdiction of the U.S. District
Court sitting in the Southern District of the State of New York or the state
courts of the State of New York sitting in Manhattan in connection with any
dispute arising under this Debenture and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
CONVENIENS to the bringing of any such proceeding in such jurisdictions.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
day and year first above written.
COMPANY
CELERITY SYSTEMS, INC.
By: /s/ Kenneth Van Meter
-------------------------------
Name: Kenneth Van Meter
Title:President/CEO
INVESTOR
<PAGE>
MICHAEL GENTA
By: /s/ Michael Genta
-------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of November 1, 1999 between Celerity
Systems, Inc., a Delaware corporation, with executive offices at 1400
Centerpoint Blvd., Knoxville Tennessee 37932 (the "Company") and Lennart
Dallgren (the "investor").
WITNESSETH
WHEREAS, the Company is offering the (the "Offering") up to $ 20,000.00
of debentures (the "Debentures") to the Investor: and
WHEREAS, in connection with the sale of the Debentures the Company is
granting to the Investor the right to purchase upon the conversion of Debentures
the number of shares of common stock of the Company, par value $0.001 per share
(the "Common Stock") as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Seventy Five cents (.75 )
per share.
.
NOW THEREFORE, the parties hereto hereby agrees as follows:
I. DEFINITIONS
All capitalized terms not hereinafter defined shall have the meanings
ascribed to them in the Line of Credit Agreement.
"BID PRICE" shall mean , on any date, the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five trading days immediately preceding such
date.
"COMMISSION." United States Securities and Exchange Commission or any
successor regulatory body.
"COMMON STOCK." As defined in the third recital hereof.
"COMPANY." As defined in the Line of Credit Agreement.
"DEBENTURES." As defined in the Line of Credit Agreement.
<PAGE>
"EXCHANGE ACT." Securities Exchange Act of 1934, as amended.
"INVESTOR." As defined in the first recital hereof.
"OFFERING." As defined in the first recital hereof.
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commissioner; included in such
definition shall be correlative terms "Register" and "Registered".
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commission; included in such
definition shall be the correlative terms "Register" and "Registered".
"REGISTRABLE SECURITIES." The shares of Common Stock issuable upon the
conversion of the Debentures that have not previously been sold pursuant to a
Registration Statement or Rule 144 and that are not eligible for sale under Rule
144(k) (or any successor provision.).
"REGISTRATION STATEMENT." The registration statement under the
Securities Act covering the resale of the Registrable Securities.
"RULE 144". Rule 144 under the Securities Act.
"RULE 415." Rule 415 under the Securities Act, or any successor rule
providing for offering securities on a continuous basis.
"SECURITIES ACT." As defined in the third recital hereof.
"VIOLATIONS." As defined in Section 4.01 (a) hereof.
II. REGISTRATION RIGHTS.
SECTION 2.01 MANDATORY REGISTRATION .
(a) Registration is mandatory :
(i) On or prior to the issuance of the Debentures pursuant to the Line
of Credit Agreement, the Company shall have caused a Registration Statement
covering the resale of the Registrable Securities issuable upon the conversion
of the Debentures to be declared effective
<PAGE>
and the Company shall cause the Registration Statement to remain effective until
all of the Registrable Securities have been sold. The Registration Statement
shall cover no less than the number of shares of Common Stock issuable upon the
conversion of all outstanding Debentures based upon the Bid Price of the Common
Stock upon the date of the initial filing with the SEC.
(ii) In the event that the Registration Statement does not at any time
cover the requisite number of Registrable Securities, as provided in 2.01 (a)
(i), the Company shall prepare and file with the Commission, no later than
thirty (30) days after such date, a Registration Statement covering the number
of shares of Common Stock, as provided in 2.01 (a) (i). If at any time the
number of shares of Common Stock into which the Debentures may be converted
exceeds the aggregate number of shares of Common Stock then registered, the
Company shall, within thirty (30) days after receipt of a written notice from
the Investor, either (a) amend the Registration Statement filed by the Company
pursuant to the preceding sentence, if such Registration Statement has not been
declared effective but the Commission at the time, to register additional shares
of Common Stock into which the Debentures as provided above may be converted, or
(b) if such Registration Statement has been declared effective by the Commission
at that time, file with the Commission an additional Registration Statement to
register such additional shares of Common Stock.
(b) In the event that the Registration Statement referred to in Section
2.01 (a) (i) does not cover the requisite number of Registrable Securities, as
provided in Section 2.01 (a) (i), then the Company shall pay to the Investor an
amount equal to two 2% percent of the principal amount and the accrued interest
on the Debentures (the "Outstanding Amount") for each month or portion thereof
and continuing each amount month thereafter until the date the Registration
Statement is declared effective by the Commission (the "2.01 (a) Payment"). The
2.01 (a) Payment shall be paid in immediately available funds with three (3)
business days after the end of each month. If the Investor elects to have the
2.01 (a) Payment paid in shares of Common Stock, then such amount may be
converted into shares of Common Stock in accordance with the terms of the
Debentures.
SECTION 2.02 PERIOD OF EFFECTIVENESS. The Company shall cause
the Registration Statement to become effective under the Securities Act and
maintain such effectiveness for the period terminating on the date on which
the Investor with respect to the Registrable Securities can sell the
Registrable Securities pursuant to Rule 144 under the Securities Act without
restriction under Rule 144(e) thereof.
SECTION 2.03 OBLIGATIONS OF THE COMPANY. The Company Shall:
(a) Cause the Registration Statement to become effective under the
Securities Act and keep the Registration Statement effective under the
Securities Act pursuant to Rule 415 at all times until the date on which the
Investor with respect to the Registrable Securities can sell the Registrable
Securities pursuant to Rule 144 under the Securities Act without restriction
under Rule 144(e) thereof.
(b) Prepare and file with the Commission such amendments (including
post effective
<PAGE>
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective under the Securities Act at all times until
the date on which the Investor can sell the Registrable Securities pursuant to
Rule 144 of the Securities Act without restriction under Rule 144 (e) thereof,
and to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by the Registration Statement.
(c) Furnish promptly to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as the Investor may reasonably request in order to
facilitate the disposition of Registrable Securities.
(d) Register and qualify the securities covered by the Registration
Statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Investor, and prepare and file in those
jurisdictions such amendments (including post effective amendments) and
supplements and take such other actions as may be necessary to maintain such
registration and qualification in effect at all times until the date on which
the Investor can sell the Registrable Securities pursuant to Rule 144 of the
Securities Act without restriction under Rule 144(e) thereof and to take all
other actions necessary or advisable to enable the disposition of such
securities in such jurisdiction, provided that the Company shall not be required
in connection therewith, or as a condition thereto, to quality to do business or
to file a general consent to service of process in any such state or
jurisdictions or to provide any undertaking or make any change in its charter or
by-laws which the Board of Directors determines to be contrary to the best
interest of the Company and its stockholders.
(e) Notify the Investor, at any time when a prospectus relating to
Registrable Securities covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Company shall promptly amend or supplement the Registration
Statement to correct any such untrue statements or omission.
(f) Notify the Investor of the issuance by the Commission or any state
securities commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceeding for such purpose. The
Company will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible time.
(g) Permit single firm of counsel designated by the holders of a
majority in interest of the Registrable Securities to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing, and not file any document in a form to which such counsel
reasonably objects.
(h) Make generally available to its security holders as soon as
practicable, but not
<PAGE>
later than 90 days after the close period covered thereby, an earnings statement
(in form complying with the provisions of Rule 158 under the Securities Act )
covering a twelve-month period beginning not later that the first day of the
Company's fiscal quarter next following the effective date of the Registration
Statement.
(i) Make available for inspection by the Investor, any underwriters
participating in offering pursuant to the registration, and the counsel,
accountants, or other agents retained by the Investor or any such underwriter,
all pertinent financial and other records, corporate documents, and properties
of the Company, and cause the Company's officers, directors, and employees to
supply all information reasonably requested by the Investor or any such
underwriters in connection with the registration.
(j) If the Common Stock in then listed on a national securities
exchange, cause the Registrable Securities to be listed on such exchange. If the
Common Stock is not then listed on a national securities exchange, facilitate
the reporting of the Registrable Securities on the Nasdaq Bulletin Board, the
Nasdaq SmallCap Market, or the Nasdag National Market, as applicable.
(k) Provide a transfer agent and register, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement under the Securities Act.
(l) Take all actions reasonable necessary to facilitate the timely
preparation and delivery of certificates representing the Registrable Securities
to be sold pursuant to the Registration Statement and to enable such
certificates to be in such denominations and Registered in such names as the
Investor or any Underwriters may reasonably request.
(m) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
III. FURNISH INFORMATION
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement with respect to each Investor that
such Investor shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
the Registrable Securities and shall execute such documents in connection with
such registration as the Company may reasonably require to effect the
Registration of the Registrable Securities and shall execute such documents in
connection with the registration as the Company may reasonably request.
IV. INDEMNIFICATION AND CONTRIBUTION
<PAGE>
SECTION 4.01 INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To extent permitted by law, the Company will indemnify and hold
harmless each Investor, the directors, if any, of such Investor, the officers,
if any, of such Investor who signed the Registration Statement, each person, if
any, who controls such Investor, any underwriter (as defined in the Securities
Act) of any of the Registrable Securities and each person, if any, who controls
any such underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages, expenses, or liabilities or actions or
proceedings, whether commenced or threatened, in respect thereof that arise out
of, or are based upon, any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material of fact contained in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (ii) the omission or alleged omissions to
state therein a material of fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made not misleading; or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law, or any rule
or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse the Investor and each such
underwriter or controlling person, promptly as such expenses are incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding provided however, that the indemnity agreement contained is this
Section 4.01 (a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action or proceeding if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action or proceeding to the extent that it arises
out of, or is based upon, a Violation which occurs in reliance upon, and in
conformity with, written information furnished expressly for use in connection
with such registration by the Investor or any such underwriter or controlling
person, as the case be. Such indemnity shall remain in full force and effect
regardless of any investigation made by, or on behalf of, the Investor or any
such underwriter or controlling person shall survive the transfer of the
Registrable Securities by the Investor.
(b) To the extent permitted by law, each Investor, severally and not
jointly, will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the Registration Statement, each person, if
any, who controls the Company within the meaning of the Securities Act or
Exchange Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement, or any of its directors or officers or
any person who controls such holder or underwriter, against any losses, claims,
damages, or liabilities (joint or several) to which any of them may become
subject, under the Securities Act, the Exchange Act, or other federal or state
law, insofar as such losses, claims, damages, or liabilities or actions in
respect thereof arise out of, or are based upon, any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon,
and in conformity with, written information furnished by such Investor expressly
for use in connection with such registration; and such investor will reimburse
any legal or other expenses reasonably
<PAGE>
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 4.01(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of such Investor, which consent shall
not be unreasonably withheld; and provided, further that the Investor shall be
liable under this paragraph for only that amount of losses, claims, damages, and
liabilities as does not exceed the proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such registration.
(c) Promptly after receipt by an indemnified party under this Article
IV of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Article IV, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of, the defense thereof with counsel
reasonably satisfactory to the indemnified party; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel for the indemnified party, representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding; notwithstanding the
foregoing, the indemnifying party or parties shall be responsible for only one
counsel representing the indemnified party or parties. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Article IV only to the extent
prejudicial to its ability to defend such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to nay indemnified party otherwise than under this Article IV.
The indemnification required by this Article IV shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, promptly as such expense, loss, damage, or liability is incurred.
SECTION 4.02 CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 4.01 hereof to the extent permitted by
law, provided that (i) no contribution shall be made under circumstances where
the contributor would not have been liable for indemnification under the fault
standards set forth in Section 4.01 hereof, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty or such fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
<PAGE>
V. REPORT UNDER EXCHANGE ACT.
With a view to making available to the Investor the benefits of Rule
144 and any other rule or regulation of the Commission that may at any time
permit the Investor to sell securities of the Company to the public without
registration, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) Furnish to each Investor, so long as such Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act, and the Exchange Act (at any time after it has become subject to
such reporting requirements), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing the Investor of any rule or regulation of the Commission which permits
the selling of any such securities without registration.
VI. ASSIGNMENT OF REGISTRATION RIGHTS.
The right to have the Company register Registrable Securities under the
Securities Act pursuant to this Agreement may be assigned by the Investor to
permitted transferees or assignees of such securities; provided, that such
transferee or assignee, within a reasonable time after such transfer, furnishes
the Company written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; provided, further, that such assignment shall be effective only
if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act.
The term "Investor" as used in this Agreement shall included permitted
assignees.
VII. EXPENSES OF REGISTRATION.
All expenses other than the underwriting discounts and commissions
incurred in connection with registration, filings, or qualifications pursuant to
Article II hereof, including, without limitation, all registration, listing,
filing, and qualification fees, printers, accounting fees, fees and
disbursements of counsel for the Company shall be borne by the Company.
VIII. MISCELLANEOUS.
SECTION 8.01 FURTHER ACTIONS. At any time and from time to time, each
party agrees, at
<PAGE>
its expense, to take such actions and to execute and deliver such documents as
may be reasonably necessary to effectuate the purposes of this Agreement.
SECTION 8.02 ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth
the entire understanding of the parties with respect to the subject matter
hereof, supersedes all existing agreements among them concerning such subject
matter, and may be modified only by a written instrument duly executed by each
party hereto.
SECTION 8.03 NOTICES. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing, and, if sent to any
Investor, shall be mailed, delivered, or telexed or telegraphed and confirmed by
letter, to such Investor at the address set forth on the signature page hereof,
or if sent to the Company, shall be mailed, delivered, or telexed or telegraphed
and confirmed by letter, to 1400 Centerpoint Boulevard, Knoxville, Tennessee
37932. All notices hereunder shall be effective upon receipt by the party to
which it is addressed.
SECTION 8.04 WAIVER. Any waiver by any party of a breach of any term of
this Agreement shall not operate as, or be construed to be, a waiver of any
other breach of that term or of any breach of any other term of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions will not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver hereunder must be in writing.
<PAGE>
SECTION 8.05 BINDING EFFECT. The provisions of this Agreement shall be
binding upon, and inure to the benefits of, the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that, except as otherwise
provided herein, no party hereto shall have the right to assign its rights and
obligations hereunder without the prior written consent of the other parties
hereto.
SECTION 8.06 NO THIRD-PARTY BENEFICIARIES. This Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement, except as otherwise provided herein.
SECTION 8.07 SEPARABILITY. If any provision of this Agreement is
invalid, illegal, or unenforceable, the balance of this Agreement shall remain
in effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and circumstances.
SECTION 8.08 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 8.09 COUNTERPARTS; GOVERNING LAW. This Agreement may be
executed in any number of counterparts, each of which shall be deemed as
original, but all of which together shall constitute one and the same
instrument. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to conflicts of
laws. Each of the parties consents to the jurisdiction of the U.S. District
Court sitting in the Southern District of the State of New York or the state
courts of the State of New York sitting in Manhattan in connection with any
dispute arising under this Debenture and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
CONVENIENS to the bringing of any such proceeding in such jurisdictions.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
day and year first above written.
COMPANY
CELERITY SYSTEMS, INC.
By: /s/ Kenneth Van Meter
---------------------------------
Name: Kenneth Van Meter
Title:President/CEO
INVESTOR
LENNART DALLGREN
By: /s/ Lennart Dallgren
---------------------------------
<PAGE>
Exhibit 4.7
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of November 30, 1999 between Celerity
Systems, Inc., a Delaware corporation, with executive offices at 1400
Centerpoint Blvd., Knoxville Tennessee 37932 (the "Company") and Richard T.
Garrett (the "investor").
WITNESSETH
WHEREAS, the Company is offering the (the "Offering") up to
$100,000.00 of debentures (the "Debentures") to the Investor: and
WHEREAS, in connection with the sale of the Debentures the Company is
granting to the Investor the right to purchase upon the conversion of Debentures
the number of shares of common stock of the Company, par value $0.001 per share
(the "Common Stock") as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Fifty cents (.50 ) per
share.
.
NOW THEREFORE, the parties hereto hereby agrees as follows:
I. DEFINITIONS
All capitalized terms not hereinafter defined shall have the meanings
ascribed to them in the Line of Credit Agreement.
"BID PRICE" shall mean , on any date, the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five trading days immediately preceding such
date.
"COMMISSION." United States Securities and Exchange Commission or any
successor regulatory body.
"COMMON STOCK." As defined in the third recital hereof.
"COMPANY." As defined in the Line of Credit Agreement.
"DEBENTURES." As defined in the Line of Credit Agreement.
<PAGE>
"EXCHANGE ACT." Securities Exchange Act of 1934, as amended.
"INVESTOR." As defined in the first recital hereof.
"OFFERING." As defined in the first recital hereof.
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commissioner; included in such
definition shall be correlative terms "Register" and "Registered".
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commission; included in such
definition shall be the correlative terms "Register" and "Registered".
"REGISTRABLE SECURITIES." The shares of Common Stock issuable upon the
conversion of the Debentures that have not previously been sold pursuant to a
Registration Statement or Rule 144 and that are not eligible for sale under Rule
144(k) (or any successor provision.).
"REGISTRATION STATEMENT." The registration statement under the
Securities Act covering the resale of the Registrable Securities.
"RULE 144". Rule 144 under the Securities Act.
"RULE 415." Rule 415 under the Securities Act, or any successor rule
providing for offering securities on a continuous basis.
"SECURITIES ACT." As defined in the third recital hereof.
"VIOLATIONS." As defined in Section 4.01 (a) hereof.
II. REGISTRATION RIGHTS.
SECTION 2.01 MANDATORY REGISTRATION .
(a) Registration is mandatory :
(i) On or prior to the issuance of the Debentures pursuant to the Line
of Credit Agreement, the Company shall have caused a Registration Statement
covering the resale of the Registrable Securities issuable upon the conversion
of the Debentures to be declared effective
<PAGE>
and the Company shall cause the Registration Statement to remain effective until
all of the Registrable Securities have been sold. The Registration Statement
shall cover no less than the number of shares of Common Stock issuable upon the
conversion of all outstanding Debentures based upon the Bid Price of the Common
Stock upon the date of the initial filing with the SEC.
(ii) In the event that the Registration Statement does not at any time
cover the requisite number of Registrable Securities, as provided in 2.01 (a)
(i), the Company shall prepare and file with the Commission, no later than
thirty (30) days after such date, a Registration Statement covering the number
of shares of Common Stock, as provided in 2.01 (a) (i). If at any time the
number of shares of Common Stock into which the Debentures may be converted
exceeds the aggregate number of shares of Common Stock then registered, the
Company shall, within thirty (30) days after receipt of a written notice from
the Investor, either (a) amend the Registration Statement filed by the Company
pursuant to the preceding sentence, if such Registration Statement has not been
declared effective but the Commission at the time, to register additional shares
of Common Stock into which the Debentures as provided above may be converted, or
(b) if such Registration Statement has been declared effective by the Commission
at that time, file with the Commission an additional Registration Statement to
register such additional shares of Common Stock.
(b) In the event that the Registration Statement referred to in Section
2.01 (a) (i) does not cover the requisite number of Registrable Securities, as
provided in Section 2.01 (a) (i), then the Company shall pay to the Investor an
amount equal to two 2% percent of the principal amount and the accrued interest
on the Debentures (the "Outstanding Amount") for each month or portion thereof
and continuing each amount month thereafter until the date the Registration
Statement is declared effective by the Commission (the "2.01 (a) Payment"). The
2.01 (a) Payment shall be paid in immediately available funds with three (3)
business days after the end of each month. If the Investor elects to have the
2.01 (a) Payment paid in shares of Common Stock, then such amount may be
converted into shares of Common Stock in accordance with the terms of the
Debentures.
SECTION 2.02 PERIOD OF EFFECTIVENESS. The Company shall cause the
Registration Statement to become effective under the Securities Act and maintain
such effectiveness for the period terminating on the date on which the Investor
with respect to the Registrable Securities can sell the Registrable Securities
pursuant to Rule 144 under the Securities Act without restriction under Rule
144(e) thereof.
SECTION 2.03 OBLIGATIONS OF THE COMPANY. The Company Shall:
(a) Cause the Registration Statement to become effective under the
Securities Act and keep the Registration Statement effective under the
Securities Act pursuant to Rule 415 at all times until the date on which the
Investor with respect to the Registrable Securities can sell the Registrable
Securities pursuant to Rule 144 under the Securities Act without restriction
under Rule 144(e) thereof.
(b) Prepare and file with the Commission such amendments (including
post effective
<PAGE>
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective under the Securities Act at all times until
the date on which the Investor can sell the Registrable Securities pursuant to
Rule 144 of the Securities Act without restriction under Rule 144 (e) thereof,
and to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by the Registration Statement.
(c) Furnish promptly to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as the Investor may reasonably request in order to
facilitate the disposition of Registrable Securities.
(d) Register and qualify the securities covered by the Registration
Statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Investor, and prepare and file in those
jurisdictions such amendments (including post effective amendments) and
supplements and take such other actions as may be necessary to maintain such
registration and qualification in effect at all times until the date on which
the Investor can sell the Registrable Securities pursuant to Rule 144 of the
Securities Act without restriction under Rule 144(e) thereof and to take all
other actions necessary or advisable to enable the disposition of such
securities in such jurisdiction, provided that the Company shall not be required
in connection therewith, or as a condition thereto, to quality to do business or
to file a general consent to service of process in any such state or
jurisdictions or to provide any undertaking or make any change in its charter or
by-laws which the Board of Directors determines to be contrary to the best
interest of the Company and its stockholders.
(e) Notify the Investor, at any time when a prospectus relating to
Registrable Securities covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Company shall promptly amend or supplement the Registration
Statement to correct any such untrue statements or omission.
(f) Notify the Investor of the issuance by the Commission or any state
securities commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceeding for such purpose. The
Company will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible time.
(g) Permit single firm of counsel designated by the holders of a
majority in interest of the Registrable Securities to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing, and not file any document in a form to which such counsel
reasonably objects.
(h) Make generally available to its security holders as soon as
practicable, but not
<PAGE>
later than 90 days after the close period covered thereby, an earnings statement
(in form complying with the provisions of Rule 158 under the Securities Act )
covering a twelve-month period beginning not later that the first day of the
Company's fiscal quarter next following the effective date of the Registration
Statement.
(i) Make available for inspection by the Investor, any underwriters
participating in offering pursuant to the registration, and the counsel,
accountants, or other agents retained by the Investor or any such underwriter,
all pertinent financial and other records, corporate documents, and properties
of the Company, and cause the Company's officers, directors, and employees to
supply all information reasonably requested by the Investor or any such
underwriters in connection with the registration.
(j) If the Common Stock in then listed on a national securities
exchange, cause the Registrable Securities to be listed on such exchange. If the
Common Stock is not then listed on a national securities exchange, facilitate
the reporting of the Registrable Securities on the Nasdaq Bulletin Board, the
Nasdaq SmallCap Market, or the Nasdag National Market, as applicable.
(k) Provide a transfer agent and register, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement under the Securities Act.
(l) Take all actions reasonable necessary to facilitate the timely
preparation and delivery of certificates representing the Registrable Securities
to be sold pursuant to the Registration Statement and to enable such
certificates to be in such denominations and Registered in such names as the
Investor or any Underwriters may reasonably request.
(m) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
III. FURNISH INFORMATION
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement with respect to each Investor that
such Investor shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
the Registrable Securities and shall execute such documents in connection with
such registration as the Company may reasonably require to effect the
Registration of the Registrable Securities and shall execute such documents in
connection with the registration as the Company may reasonably request.
IV. INDEMNIFICATION AND CONTRIBUTION
<PAGE>
SECTION 4.01 INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To extent permitted by law, the Company will indemnify and hold
harmless each Investor, the directors, if any, of such Investor, the officers,
if any, of such Investor who signed the Registration Statement, each person, if
any, who controls such Investor, any underwriter (as defined in the Securities
Act) of any of the Registrable Securities and each person, if any, who controls
any such underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages, expenses, or liabilities or actions or
proceedings, whether commenced or threatened, in respect thereof that arise out
of, or are based upon, any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material of fact contained in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (ii) the omission or alleged omissions to
state therein a material of fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made not misleading; or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law, or any rule
or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse the Investor and each such
underwriter or controlling person, promptly as such expenses are incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding provided however, that the indemnity agreement contained is this
Section 4.01 (a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action or proceeding if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action or proceeding to the extent that it arises
out of, or is based upon, a Violation which occurs in reliance upon, and in
conformity with, written information furnished expressly for use in connection
with such registration by the Investor or any such underwriter or controlling
person, as the case be. Such indemnity shall remain in full force and effect
regardless of any investigation made by, or on behalf of, the Investor or any
such underwriter or controlling person shall survive the transfer of the
Registrable Securities by the Investor.
(b) To the extent permitted by law, each Investor, severally and not
jointly, will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the Registration Statement, each person, if
any, who controls the Company within the meaning of the Securities Act or
Exchange Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement, or any of its directors or officers or
any person who controls such holder or underwriter, against any losses, claims,
damages, or liabilities (joint or several) to which any of them may become
subject, under the Securities Act, the Exchange Act, or other federal or state
law, insofar as such losses, claims, damages, or liabilities or actions in
respect thereof arise out of, or are based upon, any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon,
and in conformity with, written information furnished by such Investor expressly
for use in connection with such registration; and such investor will reimburse
any legal or other expenses reasonably
<PAGE>
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 4.01(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of such Investor, which consent shall
not be unreasonably withheld; and provided, further that the Investor shall be
liable under this paragraph for only that amount of losses, claims, damages, and
liabilities as does not exceed the proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such registration.
(c) Promptly after receipt by an indemnified party under this Article
IV of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Article IV, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of, the defense thereof with counsel
reasonably satisfactory to the indemnified party; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel for the indemnified party, representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding; notwithstanding the
foregoing, the indemnifying party or parties shall be responsible for only one
counsel representing the indemnified party or parties. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Article IV only to the extent
prejudicial to its ability to defend such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to nay indemnified party otherwise than under this Article IV.
The indemnification required by this Article IV shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, promptly as such expense, loss, damage, or liability is incurred.
SECTION 4.02 CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 4.01 hereof to the extent permitted by
law, provided that (i) no contribution shall be made under circumstances where
the contributor would not have been liable for indemnification under the fault
standards set forth in Section 4.01 hereof, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty or such fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
<PAGE>
V. REPORT UNDER EXCHANGE ACT.
With a view to making available to the Investor the benefits of Rule
144 and any other rule or regulation of the Commission that may at any time
permit the Investor to sell securities of the Company to the public without
registration, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) Furnish to each Investor, so long as such Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act, and the Exchange Act (at any time after it has become subject to
such reporting requirements), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing the Investor of any rule or regulation of the Commission which permits
the selling of any such securities without registration.
VI. ASSIGNMENT OF REGISTRATION RIGHTS.
The right to have the Company register Registrable Securities under the
Securities Act pursuant to this Agreement may be assigned by the Investor to
permitted transferees or assignees of such securities; provided, that such
transferee or assignee, within a reasonable time after such transfer, furnishes
the Company written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; provided, further, that such assignment shall be effective only
if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act.
The term "Investor" as used in this Agreement shall included permitted
assignees.
VII. EXPENSES OF REGISTRATION.
All expenses other than the underwriting discounts and commissions
incurred in connection with registration, filings, or qualifications pursuant to
Article II hereof, including, without limitation, all registration, listing,
filing, and qualification fees, printers, accounting fees, fees and
disbursements of counsel for the Company shall be borne by the Company.
VIII. MISCELLANEOUS.
SECTION 8.01 FURTHER ACTIONS. At any time and from time to time, each
party agrees, at
<PAGE>
its expense, to take such actions and to execute and deliver such documents as
may be reasonably necessary to effectuate the purposes of this Agreement.
SECTION 8.02 ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth
the entire understanding of the parties with respect to the subject matter
hereof, supersedes all existing agreements among them concerning such subject
matter, and may be modified only by a written instrument duly executed by each
party hereto.
SECTION 8.03 NOTICES. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing, and, if sent to any
Investor, shall be mailed, delivered, or telexed or telegraphed and confirmed by
letter, to such Investor at the address set forth on the signature page hereof,
or if sent to the Company, shall be mailed, delivered, or telexed or telegraphed
and confirmed by letter, to 1400 Centerpoint Boulevard, Knoxville, Tennessee
37932. All notices hereunder shall be effective upon receipt by the party to
which it is addressed.
SECTION 8.04 WAIVER. Any waiver by any party of a breach of any term of
this Agreement shall not operate as, or be construed to be, a waiver of any
other breach of that term or of any breach of any other term of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions will not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver hereunder must be in writing.
<PAGE>
SECTION 8.05 BINDING EFFECT. The provisions of this Agreement shall be
binding upon, and inure to the benefits of, the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that, except as otherwise
provided herein, no party hereto shall have the right to assign its rights and
obligations hereunder without the prior written consent of the other parties
hereto.
SECTION 8.06 NO THIRD-PARTY BENEFICIARIES. This Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement, except as otherwise provided herein.
SECTION 8.07 SEPARABILITY. If any provision of this Agreement is
invalid, illegal, or unenforceable, the balance of this Agreement shall remain
in effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and circumstances.
SECTION 8.08 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 8.09 COUNTERPARTS; GOVERNING LAW. This Agreement may be
executed in any number of counterparts, each of which shall be deemed as
original, but all of which together shall constitute one and the same
instrument. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to conflicts of
laws. Each of the parties consents to the jurisdiction of the U.S. District
Court sitting in the Southern District of the State of New York or the state
courts of the State of New York sitting in Manhattan in connection with any
dispute arising under this Debenture and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
CONVENIENS to the bringing of any such proceeding in such jurisdictions.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
day and year first above written.
COMPANY
CELERITY SYSTEMS, INC.
By: /s/ Kenneth Van Meter
-------------------------------
Name: Kenneth Van Meter
Title:President/CEO
INVESTOR
RICHARD T. GARRETT
By: /s/ Richard T. Garrett
-------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of November 30, 1999 between Celerity
Systems, Inc., a Delaware corporation, with executive offices at 1400
Centerpoint Blvd., Knoxville Tennessee 37932 (the "Company") and W. David McCoy
(the "investor").
WITNESSETH
WHEREAS, the Company is offering the (the "Offering") up to $ 30,000.00 of
debentures (the "Debentures") to the Investor: and
WHEREAS, in connection with the sale of the Debentures the Company is
granting to the Investor the right to purchase upon the conversion of Debentures
the number of shares of common stock of the Company, par value $0.001 per share
(the "Common Stock") as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Fifty cents (.50 ) per
share. . NOW THEREFORE, the parties hereto hereby agrees as follows:
I. DEFINITIONS
All capitalized terms not hereinafter defined shall have the meanings
ascribed to them in the Line of Credit Agreement.
"BID PRICE" shall mean , on any date, the closing bid price (as reported by
Bloomberg L.P.) of the Common Stock on the Principal Market, or if the Common
Stock is not traded on a Principal Market, the highest reported bid price for
the Common Stock, as furnished by the National Association of Securities
Dealers, Inc., for the five trading days immediately preceding such date.
"COMMISSION." United States Securities and Exchange Commission or any
successor regulatory body.
"COMMON STOCK." As defined in the third recital hereof.
"COMPANY." As defined in the Line of Credit Agreement.
"DEBENTURES." As defined in the Line of Credit Agreement.
<PAGE>
"EXCHANGE ACT." Securities Exchange Act of 1934, as amended.
"INVESTOR." As defined in the first recital hereof.
"OFFERING." As defined in the first recital hereof.
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commissioner; included in such
definition shall be correlative terms "Register" and "Registered".
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commission; included in such
definition shall be the correlative terms "Register" and "Registered".
"REGISTRABLE SECURITIES." The shares of Common Stock issuable upon the
conversion of the Debentures that have not previously been sold pursuant to a
Registration Statement or Rule 144 and that are not eligible for sale under Rule
144(k) (or any successor provision.).
"REGISTRATION STATEMENT." The registration statement under the Securities
Act covering the resale of the Registrable Securities.
"RULE 144". Rule 144 under the Securities Act.
"RULE 415." Rule 415 under the Securities Act, or any successor rule
providing for offering securities on a continuous basis.
"SECURITIES ACT." As defined in the third recital hereof.
"VIOLATIONS." As defined in Section 4.01 (a) hereof.
II. REGISTRATION RIGHTS.
SECTION 2.01 MANDATORY REGISTRATION .
(a) Registration is mandatory :
(i) On or prior to the issuance of the Debentures pursuant to the Line of
Credit Agreement, the Company shall have caused a Registration Statement
covering the resale of the Registrable Securities issuable upon the conversion
of the Debentures to be declared effective
<PAGE>
and the Company shall cause the Registration Statement to remain effective until
all of the Registrable Securities have been sold. The Registration Statement
shall cover no less than the number of shares of Common Stock issuable upon the
conversion of all outstanding Debentures based upon the Bid Price of the Common
Stock upon the date of the initial filing with the SEC.
(ii) In the event that the Registration Statement does not at any time
cover the requisite number of Registrable Securities, as provided in 2.01 (a)
(i), the Company shall prepare and file with the Commission, no later than
thirty (30) days after such date, a Registration Statement covering the number
of shares of Common Stock, as provided in 2.01 (a) (i). If at any time the
number of shares of Common Stock into which the Debentures may be converted
exceeds the aggregate number of shares of Common Stock then registered, the
Company shall, within thirty (30) days after receipt of a written notice from
the Investor, either (a) amend the Registration Statement filed by the Company
pursuant to the preceding sentence, if such Registration Statement has not been
declared effective but the Commission at the time, to register additional shares
of Common Stock into which the Debentures as provided above may be converted, or
(b) if such Registration Statement has been declared effective by the Commission
at that time, file with the Commission an additional Registration Statement to
register such additional shares of Common Stock.
(b) In the event that the Registration Statement referred to in Section
2.01 (a) (i) does not cover the requisite number of Registrable Securities, as
provided in Section 2.01 (a) (i), then the Company shall pay to the Investor an
amount equal to two 2% percent of the principal amount and the accrued interest
on the Debentures (the "Outstanding Amount") for each month or portion thereof
and continuing each amount month thereafter until the date the Registration
Statement is declared effective by the Commission (the "2.01 (a) Payment"). The
2.01 (a) Payment shall be paid in immediately available funds with three (3)
business days after the end of each month. If the Investor elects to have the
2.01 (a) Payment paid in shares of Common Stock, then such amount may be
converted into shares of Common Stock in accordance with the terms of the
Debentures.
SECTION 2.02 PERIOD OF EFFECTIVENESS. The Company shall cause the
Registration Statement to become effective under the Securities Act and maintain
such effectiveness for the period terminating on the date on which the Investor
with respect to the Registrable Securities can sell the Registrable Securities
pursuant to Rule 144 under the Securities Act without restriction under Rule
144(e) thereof.
SECTION 2.03 OBLIGATIONS OF THE COMPANY. The Company Shall:
(a) Cause the Registration Statement to become effective under the
Securities Act and keep the Registration Statement effective under the
Securities Act pursuant to Rule 415 at all times until the date on which the
Investor with respect to the Registrable Securities can sell the Registrable
Securities pursuant to Rule 144 under the Securities Act without restriction
under Rule 144(e) thereof.
(b) Prepare and file with the Commission such amendments (including post
effective
<PAGE>
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective under the Securities Act at all times until
the date on which the Investor can sell the Registrable Securities pursuant to
Rule 144 of the Securities Act without restriction under Rule 144 (e) thereof,
and to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by the Registration Statement.
(c) Furnish promptly to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as the Investor may reasonably request in order to
facilitate the disposition of Registrable Securities.
(d) Register and qualify the securities covered by the Registration
Statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Investor, and prepare and file in those
jurisdictions such amendments (including post effective amendments) and
supplements and take such other actions as may be necessary to maintain such
registration and qualification in effect at all times until the date on which
the Investor can sell the Registrable Securities pursuant to Rule 144 of the
Securities Act without restriction under Rule 144(e) thereof and to take all
other actions necessary or advisable to enable the disposition of such
securities in such jurisdiction, provided that the Company shall not be required
in connection therewith, or as a condition thereto, to quality to do business or
to file a general consent to service of process in any such state or
jurisdictions or to provide any undertaking or make any change in its charter or
by-laws which the Board of Directors determines to be contrary to the best
interest of the Company and its stockholders.
(e) Notify the Investor, at any time when a prospectus relating to
Registrable Securities covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Company shall promptly amend or supplement the Registration
Statement to correct any such untrue statements or omission.
(f) Notify the Investor of the issuance by the Commission or any state
securities commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceeding for such purpose. The
Company will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible time.
(g) Permit single firm of counsel designated by the holders of a majority
in interest of the Registrable Securities to review the Registration Statement
and all amendments and supplements thereto a reasonable period of time prior to
their filing, and not file any document in a form to which such counsel
reasonably objects.
(h) Make generally available to its security holders as soon as
practicable, but not
<PAGE>
later than 90 days after the close period covered thereby, an earnings statement
(in form complying with the provisions of Rule 158 under the Securities Act )
covering a twelve-month period beginning not later that the first day of the
Company's fiscal quarter next following the effective date of the Registration
Statement.
(i) Make available for inspection by the Investor, any underwriters
participating in offering pursuant to the registration, and the counsel,
accountants, or other agents retained by the Investor or any such underwriter,
all pertinent financial and other records, corporate documents, and properties
of the Company, and cause the Company's officers, directors, and employees to
supply all information reasonably requested by the Investor or any such
underwriters in connection with the registration.
(j) If the Common Stock in then listed on a national securities exchange,
cause the Registrable Securities to be listed on such exchange. If the Common
Stock is not then listed on a national securities exchange, facilitate the
reporting of the Registrable Securities on the Nasdaq Bulletin Board, the Nasdaq
SmallCap Market, or the Nasdag National Market, as applicable.
(k) Provide a transfer agent and register, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement under the Securities Act.
(l) Take all actions reasonable necessary to facilitate the timely
preparation and delivery of certificates representing the Registrable Securities
to be sold pursuant to the Registration Statement and to enable such
certificates to be in such denominations and Registered in such names as the
Investor or any Underwriters may reasonably request.
(m) Take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.
III. FURNISH INFORMATION
It shall be a condition precedent to the obligations of the Company to take
any action pursuant to this Agreement with respect to each Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
the Registrable Securities and shall execute such documents in connection with
such registration as the Company may reasonably require to effect the
Registration of the Registrable Securities and shall execute such documents in
connection with the registration as the Company may reasonably request.
IV. INDEMNIFICATION AND CONTRIBUTION
<PAGE>
SECTION 4.01 INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To extent permitted by law, the Company will indemnify and hold
harmless each Investor, the directors, if any, of such Investor, the officers,
if any, of such Investor who signed the Registration Statement, each person, if
any, who controls such Investor, any underwriter (as defined in the Securities
Act) of any of the Registrable Securities and each person, if any, who controls
any such underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages, expenses, or liabilities or actions or
proceedings, whether commenced or threatened, in respect thereof that arise out
of, or are based upon, any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material of fact contained in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (ii) the omission or alleged omissions to
state therein a material of fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made not misleading; or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law, or any rule
or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse the Investor and each such
underwriter or controlling person, promptly as such expenses are incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding provided however, that the indemnity agreement contained is this
Section 4.01 (a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action or proceeding if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action or proceeding to the extent that it arises
out of, or is based upon, a Violation which occurs in reliance upon, and in
conformity with, written information furnished expressly for use in connection
with such registration by the Investor or any such underwriter or controlling
person, as the case be. Such indemnity shall remain in full force and effect
regardless of any investigation made by, or on behalf of, the Investor or any
such underwriter or controlling person shall survive the transfer of the
Registrable Securities by the Investor.
(b) To the extent permitted by law, each Investor, severally and not
jointly, will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the Registration Statement, each person, if
any, who controls the Company within the meaning of the Securities Act or
Exchange Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement, or any of its directors or officers or
any person who controls such holder or underwriter, against any losses, claims,
damages, or liabilities (joint or several) to which any of them may become
subject, under the Securities Act, the Exchange Act, or other federal or state
law, insofar as such losses, claims, damages, or liabilities or actions in
respect thereof arise out of, or are based upon, any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon,
and in conformity with, written information furnished by such Investor expressly
for use in connection with such registration; and such investor will reimburse
any legal or other expenses reasonably
<PAGE>
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 4.01(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of such Investor, which consent shall
not be unreasonably withheld; and provided, further that the Investor shall be
liable under this paragraph for only that amount of losses, claims, damages, and
liabilities as does not exceed the proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such registration.
(c) Promptly after receipt by an indemnified party under this Article IV of
notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Article IV, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of, the defense thereof with counsel reasonably satisfactory to the
indemnified party; provided, however, that an indemnified party shall have the
right to retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel for the indemnified
party, representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding; notwithstanding the foregoing, the indemnifying
party or parties shall be responsible for only one counsel representing the
indemnified party or parties. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall relieve such indemnifying party of any liability to the indemnified
party under this Article IV only to the extent prejudicial to its ability to
defend such action, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to nay
indemnified party otherwise than under this Article IV. The indemnification
required by this Article IV shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, promptly as such
expense, loss, damage, or liability is incurred.
SECTION 4.02 CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 4.01 hereof to the extent permitted by
law, provided that (i) no contribution shall be made under circumstances where
the contributor would not have been liable for indemnification under the fault
standards set forth in Section 4.01 hereof, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty or such fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
<PAGE>
V. REPORT UNDER EXCHANGE ACT.
With a view to making available to the Investor the benefits of Rule 144
and any other rule or regulation of the Commission that may at any time permit
the Investor to sell securities of the Company to the public without
registration, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) Furnish to each Investor, so long as such Investor owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act,
and the Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing the Investor
of any rule or regulation of the Commission which permits the selling of any
such securities without registration.
VI. ASSIGNMENT OF REGISTRATION RIGHTS.
The right to have the Company register Registrable Securities under the
Securities Act pursuant to this Agreement may be assigned by the Investor to
permitted transferees or assignees of such securities; provided, that such
transferee or assignee, within a reasonable time after such transfer, furnishes
the Company written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; provided, further, that such assignment shall be effective only
if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act.
The term "Investor" as used in this Agreement shall included permitted
assignees.
VII. EXPENSES OF REGISTRATION.
All expenses other than the underwriting discounts and commissions incurred
in connection with registration, filings, or qualifications pursuant to Article
II hereof, including, without limitation, all registration, listing, filing, and
qualification fees, printers, accounting fees, fees and disbursements of counsel
for the Company shall be borne by the Company.
VIII. MISCELLANEOUS.
SECTION 8.01 FURTHER ACTIONS. At any time and from time to time, each party
agrees, at
<PAGE>
its expense, to take such actions and to execute and deliver such documents as
may be reasonably necessary to effectuate the purposes of this Agreement.
SECTION 8.02 ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth the
entire understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements among them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party
hereto.
SECTION 8.03 NOTICES. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing, and, if sent to any
Investor, shall be mailed, delivered, or telexed or telegraphed and confirmed by
letter, to such Investor at the address set forth on the signature page hereof,
or if sent to the Company, shall be mailed, delivered, or telexed or telegraphed
and confirmed by letter, to 1400 Centerpoint Boulevard, Knoxville, Tennessee
37932. All notices hereunder shall be effective upon receipt by the party to
which it is addressed.
SECTION 8.04 WAIVER. Any waiver by any party of a breach of any term of
this Agreement shall not operate as, or be construed to be, a waiver of any
other breach of that term or of any breach of any other term of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions will not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver hereunder must be in writing.
<PAGE>
SECTION 8.05 BINDING EFFECT. The provisions of this Agreement shall be
binding upon, and inure to the benefits of, the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that, except as otherwise
provided herein, no party hereto shall have the right to assign its rights and
obligations hereunder without the prior written consent of the other parties
hereto.
SECTION 8.06 NO THIRD-PARTY BENEFICIARIES. This Agreement does not create,
and shall not be construed as creating, any rights enforceable by any person not
a party to this Agreement, except as otherwise provided herein.
SECTION 8.07 SEPARABILITY. If any provision of this Agreement is invalid,
illegal, or unenforceable, the balance of this Agreement shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
SECTION 8.08 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 8.09 COUNTERPARTS; GOVERNING LAW. This Agreement may be executed in
any number of counterparts, each of which shall be deemed as original, but all
of which together shall constitute one and the same instrument. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
Delaware, without giving effect to conflicts of laws. Each of the parties
consents to the jurisdiction of the U.S. District Court sitting in the Southern
District of the State of New York or the state courts of the State of New York
sitting in Manhattan in connection with any dispute arising under this Debenture
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on FORUM NON CONVENIENS to the bringing of any
such proceeding in such jurisdictions.
IN WITNESS WHEREOF, the parties have executed this instrument as of the day
and year first above written.
COMPANY
CELERITY SYSTEMS, INC.
By: /s/ Kenneth Van Meter
---------------------------
Name: Kenneth Van Meter
Title:President/CEO
INVESTOR
<PAGE>
W. DAVID McCOY
By: /s/ W. David McCoy
---------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of November 30, 1999 between Celerity
Systems, Inc., a Delaware corporation, with executive offices at 1400
Centerpoint Blvd., Knoxville Tennessee 37932 (the "Company") and Dominick
Chirarisi and Gilda R. Chirarisi (the "investor").
WITNESSETH
WHEREAS, the Company is offering the (the "Offering") up to $ 15,000.00 of
debentures (the "Debentures") to the Investor: and
WHEREAS, in connection with the sale of the Debentures the Company is
granting to the Investor the right to purchase upon the conversion of Debentures
the number of shares of common stock of the Company, par value $0.001 per share
(the "Common Stock") as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Fifty cents (.50 ) per
share. . NOW THEREFORE, the parties hereto hereby agrees as follows:
I. DEFINITIONS
All capitalized terms not hereinafter defined shall have the meanings
ascribed to them in the Line of Credit Agreement.
"BID PRICE" shall mean , on any date, the closing bid price (as reported by
Bloomberg L.P.) of the Common Stock on the Principal Market, or if the Common
Stock is not traded on a Principal Market, the highest reported bid price for
the Common Stock, as furnished by the National Association of Securities
Dealers, Inc., for the five trading days immediately preceding such date.
"COMMISSION." United States Securities and Exchange Commission or any
successor regulatory body.
"COMMON STOCK." As defined in the third recital hereof.
"COMPANY." As defined in the Line of Credit Agreement.
"DEBENTURES." As defined in the Line of Credit Agreement.
<PAGE>
"EXCHANGE ACT." Securities Exchange Act of 1934, as amended.
"INVESTOR." As defined in the first recital hereof.
"OFFERING." As defined in the first recital hereof.
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commissioner; included in such
definition shall be correlative terms "Register" and "Registered".
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commission; included in such
definition shall be the correlative terms "Register" and "Registered".
"REGISTRABLE SECURITIES." The shares of Common Stock issuable upon the
conversion of the Debentures that have not previously been sold pursuant to a
Registration Statement or Rule 144 and that are not eligible for sale under Rule
144(k) (or any successor provision.).
"REGISTRATION STATEMENT." The registration statement under the Securities
Act covering the resale of the Registrable Securities.
"RULE 144". Rule 144 under the Securities Act.
"RULE 415." Rule 415 under the Securities Act, or any successor rule
providing for offering securities on a continuous basis.
"SECURITIES ACT." As defined in the third recital hereof.
"VIOLATIONS." As defined in Section 4.01 (a) hereof.
II. REGISTRATION RIGHTS.
SECTION 2.01 MANDATORY REGISTRATION .
(a) Registration is mandatory :
(i) On or prior to the issuance of the Debentures pursuant to the Line of
Credit Agreement, the Company shall have caused a Registration Statement
covering the resale of the
<PAGE>
Registrable Securities issuable upon the conversion of the Debentures to be
declared effective and the Company shall cause the Registration Statement to
remain effective until all of the Registrable Securities have been sold. The
Registration Statement shall cover no less than the number of shares of Common
Stock issuable upon the conversion of all outstanding Debentures based upon the
Bid Price of the Common Stock upon the date of the initial filing with the SEC.
(ii) In the event that the Registration Statement does not at any time
cover the requisite number of Registrable Securities, as provided in 2.01 (a)
(i), the Company shall prepare and file with the Commission, no later than
thirty (30) days after such date, a Registration Statement covering the number
of shares of Common Stock, as provided in 2.01 (a) (i). If at any time the
number of shares of Common Stock into which the Debentures may be converted
exceeds the aggregate number of shares of Common Stock then registered, the
Company shall, within thirty (30) days after receipt of a written notice from
the Investor, either (a) amend the Registration Statement filed by the Company
pursuant to the preceding sentence, if such Registration Statement has not been
declared effective but the Commission at the time, to register additional shares
of Common Stock into which the Debentures as provided above may be converted, or
(b) if such Registration Statement has been declared effective by the Commission
at that time, file with the Commission an additional Registration Statement to
register such additional shares of Common Stock.
(b) In the event that the Registration Statement referred to in Section
2.01 (a) (i) does not cover the requisite number of Registrable Securities, as
provided in Section 2.01 (a) (i), then the Company shall pay to the Investor an
amount equal to two 2% percent of the principal amount and the accrued interest
on the Debentures (the "Outstanding Amount") for each month or portion thereof
and continuing each amount month thereafter until the date the Registration
Statement is declared effective by the Commission (the "2.01 (a) Payment"). The
2.01 (a) Payment shall be paid in immediately available funds with three (3)
business days after the end of each month. If the Investor elects to have the
2.01 (a) Payment paid in shares of Common Stock, then such amount may be
converted into shares of Common Stock in accordance with the terms of the
Debentures.
SECTION 2.02 PERIOD OF EFFECTIVENESS. The Company shall cause the
Registration Statement to become effective under the Securities Act and maintain
such effectiveness for the period terminating on the date on which the Investor
with respect to the Registrable Securities can sell the Registrable Securities
pursuant to Rule 144 under the Securities Act without restriction under Rule
144(e) thereof.
SECTION 2.03 OBLIGATIONS OF THE COMPANY. The Company Shall:
(a) Cause the Registration Statement to become effective under the
Securities Act and keep the Registration Statement effective under the
Securities Act pursuant to Rule 415 at all times until the date on which the
Investor with respect to the Registrable Securities can sell the Registrable
Securities pursuant to Rule 144 under the Securities Act without restriction
under Rule 144(e) thereof.
<PAGE>
(b) Prepare and file with the Commission such amendments (including post
effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective under the Securities Act
at all times until the date on which the Investor can sell the Registrable
Securities pursuant to Rule 144 of the Securities Act without restriction under
Rule 144 (e) thereof, and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by the Registration
Statement.
(c) Furnish promptly to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as the Investor may reasonably request in order to
facilitate the disposition of Registrable Securities.
(d) Register and qualify the securities covered by the Registration
Statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Investor, and prepare and file in those
jurisdictions such amendments (including post effective amendments) and
supplements and take such other actions as may be necessary to maintain such
registration and qualification in effect at all times until the date on which
the Investor can sell the Registrable Securities pursuant to Rule 144 of the
Securities Act without restriction under Rule 144(e) thereof and to take all
other actions necessary or advisable to enable the disposition of such
securities in such jurisdiction, provided that the Company shall not be required
in connection therewith, or as a condition thereto, to quality to do business or
to file a general consent to service of process in any such state or
jurisdictions or to provide any undertaking or make any change in its charter or
by-laws which the Board of Directors determines to be contrary to the best
interest of the Company and its stockholders.
(e) Notify the Investor, at any time when a prospectus relating to
Registrable Securities covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Company shall promptly amend or supplement the Registration
Statement to correct any such untrue statements or omission.
(f) Notify the Investor of the issuance by the Commission or any state
securities commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceeding for such purpose. The
Company will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible time.
(g) Permit single firm of counsel designated by the holders of a majority
in interest of the Registrable Securities to review the Registration Statement
and all amendments and supplements thereto a reasonable period of time prior to
their filing, and not file any document in a form to which such counsel
reasonably objects.
<PAGE>
(h) Make generally available to its security holders as soon as
practicable, but not later than 90 days after the close period covered thereby,
an earnings statement (in form complying with the provisions of Rule 158 under
the Securities Act ) covering a twelve-month period beginning not later that the
first day of the Company's fiscal quarter next following the effective date of
the Registration Statement.
(i) Make available for inspection by the Investor, any underwriters
participating in offering pursuant to the registration, and the counsel,
accountants, or other agents retained by the Investor or any such underwriter,
all pertinent financial and other records, corporate documents, and properties
of the Company, and cause the Company's officers, directors, and employees to
supply all information reasonably requested by the Investor or any such
underwriters in connection with the registration.
(j) If the Common Stock in then listed on a national securities exchange,
cause the Registrable Securities to be listed on such exchange. If the Common
Stock is not then listed on a national securities exchange, facilitate the
reporting of the Registrable Securities on the Nasdaq Bulletin Board, the Nasdaq
SmallCap Market, or the Nasdag National Market, as applicable.
(k) Provide a transfer agent and register, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement under the Securities Act.
(l) Take all actions reasonable necessary to facilitate the timely
preparation and delivery of certificates representing the Registrable Securities
to be sold pursuant to the Registration Statement and to enable such
certificates to be in such denominations and Registered in such names as the
Investor or any Underwriters may reasonably request.
(m) Take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.
III. FURNISH INFORMATION
It shall be a condition precedent to the obligations of the Company to take
any action pursuant to this Agreement with respect to each Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
the Registrable Securities and shall execute such documents in connection with
such registration as the Company may reasonably require to effect the
Registration of the Registrable Securities and shall execute such documents in
connection with the registration as the Company may reasonably request.
<PAGE>
IV. INDEMNIFICATION AND CONTRIBUTION
SECTION 4.01 INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To extent permitted by law, the Company will indemnify and hold
harmless each Investor, the directors, if any, of such Investor, the officers,
if any, of such Investor who signed the Registration Statement, each person, if
any, who controls such Investor, any underwriter (as defined in the Securities
Act) of any of the Registrable Securities and each person, if any, who controls
any such underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages, expenses, or liabilities or actions or
proceedings, whether commenced or threatened, in respect thereof that arise out
of, or are based upon, any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material of fact contained in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (ii) the omission or alleged omissions to
state therein a material of fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made not misleading; or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law, or any rule
or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse the Investor and each such
underwriter or controlling person, promptly as such expenses are incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding provided however, that the indemnity agreement contained is this
Section 4.01 (a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action or proceeding if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action or proceeding to the extent that it arises
out of, or is based upon, a Violation which occurs in reliance upon, and in
conformity with, written information furnished expressly for use in connection
with such registration by the Investor or any such underwriter or controlling
person, as the case be. Such indemnity shall remain in full force and effect
regardless of any investigation made by, or on behalf of, the Investor or any
such underwriter or controlling person shall survive the transfer of the
Registrable Securities by the Investor.
(b) To the extent permitted by law, each Investor, severally and not
jointly, will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the Registration Statement, each person, if
any, who controls the Company within the meaning of the Securities Act or
Exchange Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement, or any of its directors or officers or
any person who controls such holder or underwriter, against any losses, claims,
damages, or
<PAGE>
liabilities (joint or several) to which any of them may become subject, under
the Securities Act, the Exchange Act, or other federal or state law, insofar as
such losses, claims, damages, or liabilities or actions in respect thereof arise
out of, or are based upon, any Violation, in each case to the extent (and only
to the extent) that such Violation occurs in reliance upon, and in conformity
with, written information furnished by such Investor expressly for use in
connection with such registration; and such investor will reimburse any legal or
other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section
4.01(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of such Investor, which consent shall not be unreasonably withheld; and
provided, further that the Investor shall be liable under this paragraph for
only that amount of losses, claims, damages, and liabilities as does not exceed
the proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such registration.
(c) Promptly after receipt by an indemnified party under this Article IV of
notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Article IV, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of, the defense thereof with counsel reasonably satisfactory to the
indemnified party; provided, however, that an indemnified party shall have the
right to retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel for the indemnified
party, representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding; notwithstanding the foregoing, the indemnifying
party or parties shall be responsible for only one counsel representing the
indemnified party or parties. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall relieve such indemnifying party of any liability to the indemnified
party under this Article IV only to the extent prejudicial to its ability to
defend such action, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to nay
indemnified party otherwise than under this Article IV. The indemnification
required by this Article IV shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, promptly as such
expense, loss, damage, or liability is incurred.
SECTION 4.02 CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 4.01 hereof to the extent permitted by
law, provided that (i) no contribution shall be made under circumstances where
the contributor would not have been liable for indemnification under the fault
standards set forth in Section 4.01 hereof, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty or such fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable
<PAGE>
Securities.
V. REPORT UNDER EXCHANGE ACT.
With a view to making available to the Investor the benefits of Rule 144
and any other rule or regulation of the Commission that may at any time permit
the Investor to sell securities of the Company to the public without
registration, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) Furnish to each Investor, so long as such Investor owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act,
and the Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing the Investor
of any rule or regulation of the Commission which permits the selling of any
such securities without registration.
VI. ASSIGNMENT OF REGISTRATION RIGHTS.
The right to have the Company register Registrable Securities under the
Securities Act pursuant to this Agreement may be assigned by the Investor to
permitted transferees or assignees of such securities; provided, that such
transferee or assignee, within a reasonable time after such transfer, furnishes
the Company written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; provided, further, that such assignment shall be effective only
if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act.
The term "Investor" as used in this Agreement shall included permitted
assignees.
VII. EXPENSES OF REGISTRATION.
All expenses other than the underwriting discounts and commissions incurred
in connection with registration, filings, or qualifications pursuant to Article
II hereof, including, without limitation, all registration, listing, filing, and
qualification fees, printers, accounting fees, fees and disbursements of counsel
for the Company shall be borne by the Company.
<PAGE>
VIII. MISCELLANEOUS.
SECTION 8.01 FURTHER ACTIONS. At any time and from time to time, each party
agrees, at its expense, to take such actions and to execute and deliver such
documents as may be reasonably necessary to effectuate the purposes of this
Agreement.
SECTION 8.02 ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth the
entire understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements among them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party
hereto.
SECTION 8.03 NOTICES. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing, and, if sent to any
Investor, shall be mailed, delivered, or telexed or telegraphed and confirmed by
letter, to such Investor at the address set forth on the signature page hereof,
or if sent to the Company, shall be mailed, delivered, or telexed or telegraphed
and confirmed by letter, to 1400 Centerpoint Boulevard, Knoxville, Tennessee
37932. All notices hereunder shall be effective upon receipt by the party to
which it is addressed.
SECTION 8.04 WAIVER. Any waiver by any party of a breach of any term of
this Agreement shall not operate as, or be construed to be, a waiver of any
other breach of that term or of any breach of any other term of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions will not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver hereunder must be in writing.
<PAGE>
SECTION 8.05 BINDING EFFECT. The provisions of this Agreement shall be
binding upon, and inure to the benefits of, the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that, except as otherwise
provided herein, no party hereto shall have the right to assign its rights and
obligations hereunder without the prior written consent of the other parties
hereto.
SECTION 8.06 NO THIRD-PARTY BENEFICIARIES. This Agreement does not create,
and shall not be construed as creating, any rights enforceable by any person not
a party to this Agreement, except as otherwise provided herein.
SECTION 8.07 SEPARABILITY. If any provision of this Agreement is invalid,
illegal, or unenforceable, the balance of this Agreement shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
SECTION 8.08 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 8.09 COUNTERPARTS; GOVERNING LAW. This Agreement may be executed in
any number of counterparts, each of which shall be deemed as original, but all
of which together shall constitute one and the same instrument. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
Delaware, without giving effect to conflicts of laws. Each of the parties
consents to the jurisdiction of the U.S. District Court sitting in the Southern
District of the State of New York or the state courts of the State of New York
sitting in Manhattan in connection with any dispute arising under this Debenture
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on FORUM NON CONVENIENS to the bringing of any
such proceeding in such jurisdictions.
IN WITNESS WHEREOF, the parties have executed this instrument as of the day
and year first above written.
COMPANY
CELERITY SYSTEMS, INC.
By: /s/ Kenneth Van Meter
---------------------------
Name: Kenneth Van Meter
Title:President/CEO
INVESTOR
<PAGE>
DOMINICK CHIRARISI
By: /s/ Dominick Chirarisi
---------------------------
GILDA R. CHIRARISI
By: /s/ Gilda R. Chirarisi
---------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of November 30, 1999 between Celerity
Systems, Inc., a Delaware corporation, with executive offices at 1400
Centerpoint Blvd., Knoxville Tennessee 37932 (the "Company") and Joseph C.
Cardella (the "investor").
WITNESSETH
WHEREAS, the Company is offering the (the "Offering") up to $ 10,000.00
of debentures (the "Debentures") to the Investor: and
WHEREAS, in connection with the sale of the Debentures the Company is
granting to the Investor the right to purchase upon the conversion of Debentures
the number of shares of common stock of the Company, par value $0.001 per share
(the "Common Stock") as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Fifty cents (.50 ) per
share.
.
NOW THEREFORE, the parties hereto hereby agrees as follows:
I. DEFINITIONS
All capitalized terms not hereinafter defined shall have the meanings
ascribed to them in the Line of Credit Agreement.
"BID PRICE" shall mean , on any date, the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five trading days immediately preceding such
date.
"COMMISSION." United States Securities and Exchange Commission or any
successor regulatory body.
"COMMON STOCK." As defined in the third recital hereof.
"COMPANY." As defined in the Line of Credit Agreement.
"DEBENTURES." As defined in the Line of Credit Agreement.
<PAGE>
"EXCHANGE ACT." Securities Exchange Act of 1934, as amended.
"INVESTOR." As defined in the first recital hereof.
"OFFERING." As defined in the first recital hereof.
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commissioner; included in such
definition shall be correlative terms "Register" and "Registered".
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commission; included in such
definition shall be the correlative terms "Register" and "Registered".
"REGISTRABLE SECURITIES." The shares of Common Stock issuable upon the
conversion of the Debentures that have not previously been sold pursuant to a
Registration Statement or Rule 144 and that are not eligible for sale under Rule
144(k) (or any successor provision.).
"REGISTRATION STATEMENT." The registration statement under the
Securities Act covering the resale of the Registrable Securities.
"RULE 144". Rule 144 under the Securities Act.
"RULE 415." Rule 415 under the Securities Act, or any successor rule
providing for offering securities on a continuous -------- basis.
"SECURITIES ACT." As defined in the third recital hereof.
"VIOLATIONS." As defined in Section 4.01 (a) hereof.
II. REGISTRATION RIGHTS.
SECTION 2.01 MANDATORY REGISTRATION .
(a) Registration is mandatory :
(i) On or prior to the issuance of the Debentures pursuant to the Line
of Credit Agreement, the Company shall have caused a Registration Statement
covering the resale of the Registrable Securities issuable upon the conversion
of the Debentures to be declared effective
<PAGE>
and the Company shall cause the Registration Statement to remain effective until
all of the Registrable Securities have been sold. The Registration Statement
shall cover no less than the number of shares of Common Stock issuable upon the
conversion of all outstanding Debentures based upon the Bid Price of the Common
Stock upon the date of the initial filing with the SEC.
(ii) In the event that the Registration Statement does not at any time
cover the requisite number of Registrable Securities, as provided in 2.01 (a)
(i), the Company shall prepare and file with the Commission, no later than
thirty (30) days after such date, a Registration Statement covering the number
of shares of Common Stock, as provided in 2.01 (a) (i). If at any time the
number of shares of Common Stock into which the Debentures may be converted
exceeds the aggregate number of shares of Common Stock then registered, the
Company shall, within thirty (30) days after receipt of a written notice from
the Investor, either (a) amend the Registration Statement filed by the Company
pursuant to the preceding sentence, if such Registration Statement has not been
declared effective but the Commission at the time, to register additional shares
of Common Stock into which the Debentures as provided above may be converted, or
(b) if such Registration Statement has been declared effective by the Commission
at that time, file with the Commission an additional Registration Statement to
register such additional shares of Common Stock.
(b) In the event that the Registration Statement referred to in Section
2.01 (a) (i) does not cover the requisite number of Registrable Securities, as
provided in Section 2.01 (a) (i), then the Company shall pay to the Investor an
amount equal to two 2% percent of the principal amount and the accrued interest
on the Debentures (the "Outstanding Amount") for each month or portion thereof
and continuing each amount month thereafter until the date the Registration
Statement is declared effective by the Commission (the "2.01 (a) Payment"). The
2.01 (a) Payment shall be paid in immediately available funds with three (3)
business days after the end of each month. If the Investor elects to have the
2.01 (a) Payment paid in shares of Common Stock, then such amount may be
converted into shares of Common Stock in accordance with the terms of the
Debentures.
SECTION 2.02 PERIOD OF EFFECTIVENESS. The Company shall cause the
Registration Statement to become effective under the Securities Act and maintain
such effectiveness for the period terminating on the date on which the Investor
with respect to the Registrable Securities can sell the Registrable Securities
pursuant to Rule 144 under the Securities Act without restriction under Rule
144(e) thereof.
SECTION 2.03 OBLIGATIONS OF THE COMPANY. The Company Shall:
(a) Cause the Registration Statement to become effective under the
Securities Act and keep the Registration Statement effective under the
Securities Act pursuant to Rule 415 at all times until the date on which the
Investor with respect to the Registrable Securities can sell the Registrable
Securities pursuant to Rule 144 under the Securities Act without restriction
under Rule 144(e) thereof.
(b) Prepare and file with the Commission such amendments (including
post effective
<PAGE>
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective under the Securities Act at all times until
the date on which the Investor can sell the Registrable Securities pursuant to
Rule 144 of the Securities Act without restriction under Rule 144 (e) thereof,
and to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by the Registration Statement.
(c) Furnish promptly to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as the Investor may reasonably request in order to
facilitate the disposition of Registrable Securities.
(d) Register and qualify the securities covered by the Registration
Statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Investor, and prepare and file in those
jurisdictions such amendments (including post effective amendments) and
supplements and take such other actions as may be necessary to maintain such
registration and qualification in effect at all times until the date on which
the Investor can sell the Registrable Securities pursuant to Rule 144 of the
Securities Act without restriction under Rule 144(e) thereof and to take all
other actions necessary or advisable to enable the disposition of such
securities in such jurisdiction, provided that the Company shall not be required
in connection therewith, or as a condition thereto, to quality to do business or
to file a general consent to service of process in any such state or
jurisdictions or to provide any undertaking or make any change in its charter or
by-laws which the Board of Directors determines to be contrary to the best
interest of the Company and its stockholders.
(e) Notify the Investor, at any time when a prospectus relating to
Registrable Securities covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Company shall promptly amend or supplement the Registration
Statement to correct any such untrue statements or omission.
(f) Notify the Investor of the issuance by the Commission or any state
securities commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceeding for such purpose. The
Company will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible time.
(g) Permit single firm of counsel designated by the holders of a
majority in interest of the Registrable Securities to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing, and not file any document in a form to which such counsel
reasonably objects.
(h) Make generally available to its security holders as soon as
practicable, but not
<PAGE>
later than 90 days after the close period covered thereby, an earnings statement
(in form complying with the provisions of Rule 158 under the Securities Act )
covering a twelve-month period beginning not later that the first day of the
Company's fiscal quarter next following the effective date of the Registration
Statement.
(i) Make available for inspection by the Investor, any underwriters
participating in offering pursuant to the registration, and the counsel,
accountants, or other agents retained by the Investor or any such underwriter,
all pertinent financial and other records, corporate documents, and properties
of the Company, and cause the Company's officers, directors, and employees to
supply all information reasonably requested by the Investor or any such
underwriters in connection with the registration.
(j) If the Common Stock in then listed on a national securities
exchange, cause the Registrable Securities to be listed on such exchange. If the
Common Stock is not then listed on a national securities exchange, facilitate
the reporting of the Registrable Securities on the Nasdaq Bulletin Board, the
Nasdaq SmallCap Market, or the Nasdag National Market, as applicable.
(k) Provide a transfer agent and register, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement under the Securities Act.
(l) Take all actions reasonable necessary to facilitate the timely
preparation and delivery of certificates representing the Registrable Securities
to be sold pursuant to the Registration Statement and to enable such
certificates to be in such denominations and Registered in such names as the
Investor or any Underwriters may reasonably request.
(m) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
III. FURNISH INFORMATION
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement with respect to each Investor that
such Investor shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
the Registrable Securities and shall execute such documents in connection with
such registration as the Company may reasonably require to effect the
Registration of the Registrable Securities and shall execute such documents in
connection with the registration as the Company may reasonably request.
IV. INDEMNIFICATION AND CONTRIBUTION
<PAGE>
SECTION 4.01 INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To extent permitted by law, the Company will indemnify and hold
harmless each Investor, the directors, if any, of such Investor, the officers,
if any, of such Investor who signed the Registration Statement, each person, if
any, who controls such Investor, any underwriter (as defined in the Securities
Act) of any of the Registrable Securities and each person, if any, who controls
any such underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages, expenses, or liabilities or actions or
proceedings, whether commenced or threatened, in respect thereof that arise out
of, or are based upon, any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material of fact contained in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (ii) the omission or alleged omissions to
state therein a material of fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made not misleading; or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law, or any rule
or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse the Investor and each such
underwriter or controlling person, promptly as such expenses are incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding provided however, that the indemnity agreement contained is this
Section 4.01 (a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action or proceeding if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action or proceeding to the extent that it arises
out of, or is based upon, a Violation which occurs in reliance upon, and in
conformity with, written information furnished expressly for use in connection
with such registration by the Investor or any such underwriter or controlling
person, as the case be. Such indemnity shall remain in full force and effect
regardless of any investigation made by, or on behalf of, the Investor or any
such underwriter or controlling person shall survive the transfer of the
Registrable Securities by the Investor.
(b) To the extent permitted by law, each Investor, severally and not
jointly, will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the Registration Statement, each person, if
any, who controls the Company within the meaning of the Securities Act or
Exchange Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement, or any of its directors or officers or
any person who controls such holder or underwriter, against any losses, claims,
damages, or liabilities (joint or several) to which any of them may become
subject, under the Securities Act, the Exchange Act, or other federal or state
law, insofar as such losses, claims, damages, or liabilities or actions in
respect thereof arise out of, or are based upon, any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon,
and in conformity with, written information furnished by such Investor expressly
for use in connection with such registration; and such investor will reimburse
any legal or other expenses reasonably
<PAGE>
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 4.01(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of such Investor, which consent shall
not be unreasonably withheld; and provided, further that the Investor shall be
liable under this paragraph for only that amount of losses, claims, damages, and
liabilities as does not exceed the proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such registration.
(c) Promptly after receipt by an indemnified party under this Article
IV of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Article IV, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of, the defense thereof with counsel
reasonably satisfactory to the indemnified party; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel for the indemnified party, representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding; notwithstanding the
foregoing, the indemnifying party or parties shall be responsible for only one
counsel representing the indemnified party or parties. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Article IV only to the extent
prejudicial to its ability to defend such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to nay indemnified party otherwise than under this Article IV.
The indemnification required by this Article IV shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, promptly as such expense, loss, damage, or liability is incurred.
SECTION 4.02 CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 4.01 hereof to the extent permitted by
law, provided that (i) no contribution shall be made under circumstances where
the contributor would not have been liable for indemnification under the fault
standards set forth in Section 4.01 hereof, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty or such fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
<PAGE>
V. REPORT UNDER EXCHANGE ACT.
With a view to making available to the Investor the benefits of Rule
144 and any other rule or regulation of the Commission that may at any time
permit the Investor to sell securities of the Company to the public without
registration, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) Furnish to each Investor, so long as such Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act, and the Exchange Act (at any time after it has become subject to
such reporting requirements), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing the Investor of any rule or regulation of the Commission which permits
the selling of any such securities without registration.
VI. ASSIGNMENT OF REGISTRATION RIGHTS.
The right to have the Company register Registrable Securities under the
Securities Act pursuant to this Agreement may be assigned by the Investor to
permitted transferees or assignees of such securities; provided, that such
transferee or assignee, within a reasonable time after such transfer, furnishes
the Company written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; provided, further, that such assignment shall be effective only
if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act.
The term "Investor" as used in this Agreement shall included permitted
assignees.
VII. EXPENSES OF REGISTRATION.
All expenses other than the underwriting discounts and commissions
incurred in connection with registration, filings, or qualifications pursuant to
Article II hereof, including, without limitation, all registration, listing,
filing, and qualification fees, printers, accounting fees, fees and
disbursements of counsel for the Company shall be borne by the Company.
VIII. MISCELLANEOUS.
SECTION 8.01 FURTHER ACTIONS. At any time and from time to time, each
party agrees, at
<PAGE>
its expense, to take such actions and to execute and deliver such documents as
may be reasonably necessary to effectuate the purposes of this Agreement.
SECTION 8.02 ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth
the entire understanding of the parties with respect to the subject matter
hereof, supersedes all existing agreements among them concerning such subject
matter, and may be modified only by a written instrument duly executed by each
party hereto.
SECTION 8.03 NOTICES. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing, and, if sent to any
Investor, shall be mailed, delivered, or telexed or telegraphed and confirmed by
letter, to such Investor at the address set forth on the signature page hereof,
or if sent to the Company, shall be mailed, delivered, or telexed or telegraphed
and confirmed by letter, to 1400 Centerpoint Boulevard, Knoxville, Tennessee
37932. All notices hereunder shall be effective upon receipt by the party to
which it is addressed.
SECTION 8.04 WAIVER. Any waiver by any party of a breach of any term of
this Agreement shall not operate as, or be construed to be, a waiver of any
other breach of that term or of any breach of any other term of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions will not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver hereunder must be in writing.
<PAGE>
SECTION 8.05 BINDING EFFECT. The provisions of this Agreement shall be
binding upon, and inure to the benefits of, the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that, except as otherwise
provided herein, no party hereto shall have the right to assign its rights and
obligations hereunder without the prior written consent of the other parties
hereto.
SECTION 8.06 NO THIRD-PARTY BENEFICIARIES. This Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement, except as otherwise provided herein.
SECTION 8.07 SEPARABILITY. If any provision of this Agreement is
invalid, illegal, or unenforceable, the balance of this Agreement shall remain
in effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and circumstances.
SECTION 8.08 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 8.09 COUNTERPARTS; GOVERNING LAW. This Agreement may be
executed in any number of counterparts, each of which shall be deemed as
original, but all of which together shall constitute one and the same
instrument. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to conflicts of
laws. Each of the parties consents to the jurisdiction of the U.S. District
Court sitting in the Southern District of the State of New York or the state
courts of the State of New York sitting in Manhattan in connection with any
dispute arising under this Debenture and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
CONVENIENS to the bringing of any such proceeding in such jurisdictions.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this instrument as of the
day and year first above written.
COMPANY
CELERITY SYSTEMS, INC.
By: /s/ Kenneth Van Meter
------------------------
Name: Kenneth Van Meter
Title:President/CEO
INVESTOR
JOSEPH C. CARDELLA
By: /s/ Joseph C. Cardella
------------------------
<PAGE>
DEBENTURE
CELERITY SYSTEMS, INC.
1999 4% Subordinated Convertible Debenture
Due November 5, 2002
No.0005 $ 10,000.00
This Debenture is issued by Celerity Systems, Inc., (The "Company") to
Michael Genta (the "Debenture holder") pursuant to exemptions from registration
under the U.S. Securities Act of 1933.
ARTICLE I
1.01 PRINCIPAL AND INTEREST. The Company, for value received hereby
confers the right upon Debenture holder to convert the sum of Ten Thousand
dollars ($ 10,000.00) into the common stock of the Company (the "Common Stock")
on or before November 5, 2002 ("Maturity Date") as set forth herein, and upon
the Maturity Date to pay interest thereon from the date of issue at the rate of
four percent (4%) per annum. The Company shall pay such interest on the
outstanding principal amount of the Debenture from the date of issue until the
Maturity Date or conversion; the Company shall pay interest only upon the
outstanding balance of the Debenture at the rate of four percent (4%) per annum.
Interest will be computed based on a 365 day year.
1.02 RESERVATION OF COMMON STOCK. The Company shall reserve and keep
available out of its authorized, but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five percent (65%) of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Seventy Five cents (.75 )
per share.
The Company shall use its best efforts to file a Registration Statement
within thirty (30) days form the Closing Date, furthermore, the Company shall
use its best efforts to assure that the Registration Statement is effective
within ninety (90) days of the Closing Date. In the event that the Registration
Statement is not effective within ninety (90) days the Company will pay damages
to the Debenture holder in the amount of two percent (2%) a month payable in
cash or stock at the Company's option.
Furthermore, the Company has on deposit at the May Davis Group free
trading shares in the name of Dr. Fenton Scruggs. In the event the Registration
Statement is not declared effective within a period of ninety (90) days the
Company and Dr. Fenton Scruggs authorize the May Davis Group to deliver these
free trading shares to the Debenture holder as necessary on an appropriate basis
to honor Conversions.
Additionally, the Company will deposit with the May Davis Group free
trading shares currently held by Glenn West. In the event the Registration
Statement is not declared effective within a period of ninety (90)
<PAGE>
days the Company and Glenn West authorize the May Davis Group to deliver these
free trading shares to the Debenture holder as necessary on an appropriate basis
to honor Conversions.
1.03 RIGHT OF REDEMPTION. The Company shall have the right to redeem in
part or in full any outstanding Debentures at one hundred and thirty five (135
%) percent of the Principal plus accrued interest.
1.04 INTEREST PAYMENTS. The interest so payable will be paid at the
time of Conversion to the person in whose name this Debenture is registered. At
the time such interest is payable, the Company, in its sole discretion, may
elect to pay interest in cash (via wire transfer or certified funds) or in the
form of Common Stock. If paid in the form of Common Stock, the amount of stock
to be issued will be calculated as follows: the value of the stock shall be the
Bid Price on: (i) the date the interest payment is due; or (ii) if the interest
payment is not made when due, the date the interest payment is made. A number of
shares of Common Stock with a value equal to the amount of interest due shall be
issued. No fractional shares will be issued; therefore, in the event that the
value of the Common Stock per share does not equal the total interest due, the
Company will pay the balance in cash.
1.05 PAYING AGENT AND REGISTRAR. Initially, the Company will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar,
or Company-registrar without notice. The Company may act in any such capacity.
1.06 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all payments
hereon, including principal or interest, shall be subordinate and junior in
right of payment to all Company Debt (as defined hereinafter), but only to the
extent set forth as follows:
(a) upon the maturity of any Company Debt, or any installment thereof
then due by lapse of time, acceleration or otherwise, all Company Debt then due
shall first be paid in full (or provision made for payment in full thereof)
before any additional payment on account of principal or interest is made on
this Debenture; and
(b) in the event of any insolvency or bankruptcy proceedings affecting
the Company, or any receivership, liquidation, reorganization or other similar
proceedings affecting the Company, and, in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy, then the holders of Company Debt
shall be entitled to receive payment in full of all principal of and interest on
all Company Debt before the holder of this Debenture is entitled to receive any
payment on account of principal, interest or premium on this Debenture.
The provisions of the preceding paragraphs are solely for the purpose
of defining the relative rights of the holders of Company Debt on the one hand
and the holder of this Debenture on the other hand and nothing herein shall
impair, as between the Company and the holder of this Debenture, the obligation
of the Company, which is unconditional and absolute, to pay the holder of this
Debenture the principal, interest and premiums hereon in accordance with its
terms, nor shall anything herein prevent the holder of this Debenture from
exercising all remedies otherwise permitted by law or hereunder upon default
hereunder, subject to the relative rights of the holders of Company Debt
expressed in the preceding paragraphs.
For the purpose of this Notice, the term "Company Debt" shall mean and
include current bank debt and all indebtedness acquired by the Company
subsequent to the date hereof, other than indebtedness to any officer,
<PAGE>
director or other person who has beneficial ownership of ten percent (10%) or
more of the Company's issued and outstanding shares of Common Stock.
ARTICLE II
2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended
with the consent of the Debenture holder. Without the consent of the Debenture
holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company obligations to the
Debenture holder or to make any change that does not adversely affect the rights
of the Debenture holder.
ARTICLE III
3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows:
failure by the Company to pay amounts due hereunder within two (2) days of the
Maturity Date failure by the Company to advise its transfer agent to issue
Common Stock to the Debenture holder within two (2) business days of the
Company's receipt of the Notice of Conversion from Debenture holder; or failure
by the Company for thirty (30) days after notice to it to comply with any of its
other agreements in the Debenture; and events of bankruptcy or insolvency. The
Debenture holder may not enforce the Debenture except as provided herein.
3.02 SUCCESSOR CORPORATION. If a successor corporation assumes all the
obligations of this predecessor, Celerity Systems, Inc., the predecessor
corporation will be released from those obligations under the Debenture.
3.03 WAIVER AND RELEASE. A director, officer, employee or stockholders,
as such, of the Company shall not have any liability for any obligations of the
Company under the Debenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. The Debenture holder, by accepting
a Debenture waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Debenture.
ARTICLE IV
4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in
part, may be converted at any time beginning ninety (90) days following the date
of closing, into shares of Common Stock at a price equal to the following
Conversion: at the Debenture holders option, either, sixty five percent (65%) of
the average closing Bid Price for the five (5) trading days immediately
preceding conversion, or, Seventy Five cents (.75) per share.
In lieu of any fractional share to which the Debenture holder would
otherwise be entitled, the Company will pay the balance in cash.
4.02 REISSUANCE OF DEBENTURE. When the Debenture holder elects to
convert a part of the Debenture, then the Company shall reissue a new Debenture
in the same form as this Debenture to reflect the new principal amount.
<PAGE>
4.03 TERMINATION OF CONVERSION RIGHTS. The Debenture holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on November 5, 2002 and shall be automatically converted on that
date in accordance with the formula set forth in Section 4.01 hereof, and the
appropriate shares of common stock and amount of interest shall be issued to the
Debenture holder.
4.04. Notwithstanding any other provision contained herein, the parties
agree that in no event shall the Company be required to issue (i) an aggregate
number of shares constituting more than 19.99% of the number of shares of Common
Stock outstanding on the date of such issuance or (ii) a number of shares that
would result in a change of control of the Company, unless the shareholders of
the Company approve such issuance of additional Common Shares or NASDAQ waives
the applicable requirements of Market Place Rule 4310(H)(i). The Company agrees
to use commercially reasonable efforts to obtain such approval or waiver on or
prior to the 90th day following the date that more than 19.99% of the Common
Stock would otherwise be issuable pursuant to outstanding Debentures or that an
issuance would otherwise result in a change of control by scheduling a
shareholders meeting as soon as practicable after such date.
ARTICLE V
5.01 NOTICE. Notices regarding this Debenture shall be sent to the
parties at the following addresses, unless a party notifies the other parties,
in writing, of a change of address:
If to the Company: CELERITY SYSTEMS, INC.
1400 Centerpoint Blvd.
Knoxville, Tennessee 37932.
Attention: President
If to Debenture holder: MICHAEL GENTA
24-19 23rd Street
Astoria, NY 11102
5.02 GOVERNING LAW. This Debenture shall be deemed to be made under and
shall be construed in accordance with the laws of the Commonwealth of Delaware
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on FORUM NON conveniens to the bringing
of any such proceeding in such jurisdictions.
5.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
5.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and there are no representations, warranties or commitments, except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.
<PAGE>
5.05 COUNTERPARTS. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute on instrument.
5.06 ASSIGNMENT. Neither this Debenture nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Debenture shall insure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Debentures purchased or acquired by the Investor hereunder with respect to the
Common Stock held by such person, and (b) upon the prior written consent of the
Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Debenture may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor).
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
parties hereto have executed this Debenture as of October 29, 1999.
ATTEST:
________________________________
CELERITY SYSTEMS, INC.
/s/ Kenneth Van Meter
-------------------------------------
Kenneth Van Meter
Title: President/CEO
MICHAEL GENTA
/s/ Michael Genta
-------------------------------------
Debenture Holder
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of January 6, 2000 between Celerity
Systems, Inc., a Delaware corporation, with executive offices at 1400
Centerpoint Blvd.,
<PAGE>
Knoxville Tennessee 37932 (the "Company") and John Bolliger (the "investor").
WITNESSETH
WHEREAS, the Company is offering the (the "Offering") up to $ 10,000.00
of debentures (the "Debentures") to the Investor: and
WHEREAS, in connection with the sale of the Debentures the Company is
granting to the Investor the right to purchase upon the conversion of Debentures
the number of shares of common stock of the Company, par value $0.001 per share
(the "Common Stock") as shall from time to time be sufficient to effect such
conversion, at the Debenture holders option, either, sixty five (65%) percent of
the Bid Price, (Bid Price shall mean on any date the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five (5) trading days immediately preceding
such date of the Common Stock, or, at a fixed price of Sevent Five (.75 ) Cents
per share.
.
NOW THEREFORE, the parties hereto hereby agrees as follows:
I. DEFINITIONS
All capitalized terms not hereinafter defined shall have the meanings
ascribed to them in the Line of Credit Agreement.
"BID PRICE" shall mean , on any date, the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc., for the five trading days immediately preceding such
date.
"COMMISSION." United States Securities and Exchange Commission or any
successor regulatory body.
"COMMON STOCK." As defined in the third recital hereof.
"COMPANY." As defined in the Line of Credit Agreement.
"DEBENTURES." As defined in the Line of Credit Agreement.
"EXCHANGE ACT." Securities Exchange Act of 1934, as amended.
"INVESTOR." As defined in the first recital hereof.
"OFFERING." As defined in the first recital hereof.
<PAGE>
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commissioner; included in such
definition shall be correlative terms "Register" and "Registered".
"PREFERRED STOCK." As defined in the first recital hereof.
"REGISTRATION." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commission; included in such
definition shall be the correlative terms "Register" and "Registered".
"REGISTRABLE SECURITIES." The shares of Common Stock issuable upon the
conversion of the Debentures that have not previously been sold pursuant to a
Registration Statement or Rule 144 and that are not eligible for sale under Rule
144 (k) (or any successor provision.).
"REGISTRATION STATEMENT." The registration statement under the
Securities Act covering the resale of the Registrable Securities.
"RULE 144". Rule 144 under the Securities Act.
"RULE 415." Rule 415 under the Securities Act, or any successor rule
providing for offering securities on a continuous -------- basis.
"SECURITIES ACT." As defined in the third recital hereof.
"VIOLATIONS." As defined in Section 4.01 (a) hereof.
II. REGISTRATION RIGHTS.
SECTION 2.01 MANDATORY REGISTRATION .
(a) Registration is mandatory :
(i) On or prior to the issuance of the Debentures pursuant to the Line
of Credit Agreement, the Company shall have caused a Registration Statement
covering the resale of the Registrable Securities issuable upon the conversion
of the Debentures to be declared effective and the Company shall cause the
Registration Statement to remain effective until all of the Registrable
Securities have been sold. The Registration Statement shall cover no less than
the number of shares of Common Stock issuable upon the conversion of all
outstanding Debentures based upon the Bid Price of the Common Stock upon the
date of the initial filing with the SEC.
<PAGE>
(ii) In the event that the Registration Statement does not at any time
cover the requisite number of Registrable Securities, as provided in 2.01 (a)
(i), the Company shall prepare and file with the Commission, no later than
thirty (30) days after such date, a Registration Statement covering the number
of shares of Common Stock, as provided in 2.01 (a) (i). If at any time the
number of shares of Common Stock into which the Debentures may be converted
exceeds the aggregate number of shares of Common Stock then registered, the
Company shall, within thirty (30) days after receipt of a written notice from
the Investor, either (a) amend the Registration Statement filed by the Company
pursuant to the preceding sentence, if such Registration Statement has not been
declared effective but the Commission at the time, to register additional shares
of Common Stock into which the Debentures as provided above may be converted, or
(b) if such Registration Statement has been declared effective by the Commission
at that time, file with the Commission an additional Registration Statement to
register such additional shares of Common Stock.
(b) In the event that the Registration Statement referred to in Section
2.01 (a) (i) does not cover the requisite number of Registrable Securities, as
provided in Section 2.01 (a) (i), then the Company shall pay to the Investor an
amount equal to two 2% percent of the principal amount and the accrued interest
on the Debentures (the "Outstanding Amount") for each month or portion thereof
and continuing each amount month thereafter until the date the Registration
Statement is declared effective by the Commission (the "2.01 (a) Payment"). The
2.01 (a) Payment shall be paid in immediately available funds with three (3)
business days after the end of each month. If the Investor elects to have the
2.01 (a) Payment paid in shares of Common Stock, then such amount may be
converted into shares of Common Stock in accordance with the terms of the
Debentures.
SECTION 2.02 PERIOD OF EFFECTIVENESS. The Company shall cause the
Registration Statement to become effective under the Securities Act and maintain
such effectiveness for the period terminating on the date on which the Investor
with respect to the Registrable Securities can sell the Registrable Securities
pursuant to Rule 144 under the Securities Act without restriction under Rule
144(e) thereof.
SECTION 2.03 OBLIGATIONS OF THE COMPANY. The Company Shall:
(a) Cause the Registration Statement to become effective under the
Securities Act and keep the Registration Statement effective under the
Securities Act pursuant to Rule 415 at all times until the date on which the
Investor with respect to the Registrable Securities can sell the Registrable
Securities pursuant to Rule 144 under the Securities Act without restriction
under Rule 144(e) thereof.
(b) Prepare and file with the Commission such amendments (including
post effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective under the Securities Act
at all times until the date on which the Investor can sell the Registrable
Securities pursuant to Rule 144 of the Securities Act without restriction under
Rule 144 (e) thereof, and to comply with the provisions of the Securities Act
with respect
<PAGE>
to the disposition of all securities covered by the Registration Statement.
(c) Furnish promptly to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as the Investor may reasonably request in order to
facilitate the disposition of Registrable Securities.
(d) Register and qualify the securities covered by the Registration
Statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Investor, and prepare and file in those
jurisdictions such amendments (including post effective amendments) and
supplements and take such other actions as may be necessary to maintain such
registration and qualification in effect at all times until the date on which
the Investor can sell the Registrable Securities pursuant to Rule 144 of the
Securities Act without restriction under Rule 144(e) thereof and to take all
other actions necessary or advisable to enable the disposition of such
securities in such jurisdiction, provided that the Company shall not be required
in connection therewith, or as a condition thereto, to quality to do business or
to file a general consent to service of process in any such state or
jurisdictions or to provide any undertaking or make any change in its charter or
by-laws which the Board of Directors determines to be contrary to the best
interest of the Company and its stockholders.
(e) Notify the Investor, at any time when a prospectus relating to
Registrable Securities covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Company shall promptly amend or supplement the Registration
Statement to correct any such untrue statements or omission.
(f) Notify the Investor of the issuance by the Commission or any state
securities commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceeding for such purpose. The
Company will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible time.
(g) Permit single firm of counsel designated by the holders of a
majority in interest of the Registrable Securities to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing, and not file any document in a form to which such counsel
reasonably objects.
(h) Make generally available to its security holders as soon as
practicable, but not later than 90 days after the close period covered thereby,
an earnings statement (in form complying with the provisions of Rule 158 under
the Securities Act ) covering a twelve-month period beginning not later that the
first day of the Company's fiscal quarter next following the effective date of
the Registration Statement.
<PAGE>
(i) Make available for inspection by the Investor, any underwriters
participating in offering pursuant to the registration, and the counsel,
accountants, or other agents retained by the Investor or any such underwriter,
all pertinent financial and other records, corporate documents, and properties
of the Company, and cause the Company's officers, directors, and employees to
supply all information reasonably requested by the Investor or any such
underwriters in connection with the registration.
(j) If the Common Stock in then listed on a national securities
exchange, cause the Registrable Securities to be listed on such exchange. If the
Common Stock is not then listed on a national securities exchange, facilitate
the reporting of the Registrable Securities on the Nasdaq Bulletin Board, the
Nasdaq SmallCap Market, or the Nasdag National Market, as applicable.
(k) Provide a transfer agent and register, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement under the Securities Act.
(l) Take all actions reasonable necessary to facilitate the timely
preparation and delivery of certificates representing the Registrable Securities
to be sold pursuant to the Registration Statement and to enable such
certificates to be in such denominations and Registered in such names as the
Investor or any Underwriters may reasonably request.
(m) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
III. FURNISH INFORMATION
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement with respect to each Investor that
such Investor shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
the Registrable Securities and shall execute such documents in connection with
such registration as the Company may reasonably require to effect the
Registration of the Registrable Securities and shall execute such documents in
connection with the registration as the Company may reasonably request.
IV. INDEMNIFICATION AND CONTRIBUTION
SECTION 4.01 INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To extent permitted by law, the Company will indemnify and hold
harmless each
<PAGE>
Investor, the directors, if any, of such Investor, the officers, if any, of such
Investor who signed the Registration Statement, each person, if any, who
controls such Investor, any underwriter (as defined in the Securities Act) of
any of the Registrable Securities and each person, if any, who controls any such
underwriter within the meaning of the Securities Act or the Exchange Act against
any losses, claims, damages, expenses, or liabilities or actions or proceedings,
whether commenced or threatened, in respect thereof that arise out of, or are
based upon, any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material of fact contained in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (ii) the omission or alleged omissions to
state therein a material of fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made not misleading; or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law, or any rule
or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse the Investor and each such
underwriter or controlling person, promptly as such expenses are incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding provided however, that the indemnity agreement contained is this
Section 4.01 (a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action or proceeding if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action or proceeding to the extent that it arises
out of, or is based upon, a Violation which occurs in reliance upon, and in
conformity with, written information furnished expressly for use in connection
with such registration by the Investor or any such underwriter or controlling
person, as the case be. Such indemnity shall remain in full force and effect
regardless of any investigation made by, or on behalf of, the Investor or any
such underwriter or controlling person shall survive the transfer of the
Registrable Securities by the Investor.
(b) To the extent permitted by law, each Investor, severally and not
jointly, will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the Registration Statement, each person, if
any, who controls the Company within the meaning of the Securities Act or
Exchange Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement, or any of its directors or officers or
any person who controls such holder or underwriter, against any losses, claims,
damages, or liabilities (joint or several) to which any of them may become
subject, under the Securities Act, the Exchange Act, or other federal or state
law, insofar as such losses, claims, damages, or liabilities or actions in
respect thereof arise out of, or are based upon, any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon,
and in conformity with, written information furnished by such Investor expressly
for use in connection with such registration; and such investor will reimburse
any legal or other expenses reasonably incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
Section 4.01(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without the
consent of such Investor, which
<PAGE>
consent shall not be unreasonably withheld; and provided, further that the
Investor shall be liable under this paragraph for only that amount of losses,
claims, damages, and liabilities as does not exceed the proceeds to such
Investor as a result of the sale of Registrable Securities pursuant to such
registration.
(c) Promptly after receipt by an indemnified party under this Article
IV of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Article IV, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of, the defense thereof with counsel
reasonably satisfactory to the indemnified party; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel for the indemnified party, representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding; notwithstanding the
foregoing, the indemnifying party or parties shall be responsible for only one
counsel representing the indemnified party or parties. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Article IV only to the extent
prejudicial to its ability to defend such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to nay indemnified party otherwise than under this Article IV.
The indemnification required by this Article IV shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, promptly as such expense, loss, damage, or liability is incurred.
SECTION 4.02 CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 4.01 hereof to the extent permitted by
law, provided that (i) no contribution shall be made under circumstances where
the contributor would not have been liable for indemnification under the fault
standards set forth in Section 4.01 hereof, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty or such fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
V. REPORT UNDER EXCHANGE ACT.
With a view to making available to the Investor the benefits of Rule
144 and any other
<PAGE>
rule or regulation of the Commission that may at any time permit the Investor to
sell securities of the Company to the public without registration, the Company
agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) Furnish to each Investor, so long as such Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act, and the Exchange Act (at any time after it has become subject to
such reporting requirements), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing the Investor of any rule or regulation of the Commission which permits
the selling of any such securities without registration.
VI. ASSIGNMENT OF REGISTRATION RIGHTS.
The right to have the Company register Registrable Securities under the
Securities Act pursuant to this Agreement may be assigned by the Investor to
permitted transferees or assignees of such securities; provided, that such
transferee or assignee, within a reasonable time after such transfer, furnishes
the Company written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; provided, further, that such assignment shall be effective only
if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act.
The term "Investor" as used in this Agreement shall included permitted
assignees.
VII. EXPENSES OF REGISTRATION.
All expenses other than the underwriting discounts and commissions
incurred in connection with registration, filings, or qualifications pursuant to
Article II hereof, including, without limitation, all registration, listing,
filing, and qualification fees, printers, accounting fees, fees and
disbursements of counsel for the Company shall be borne by the Company.
VIII. MISCELLANEOUS.
SECTION 8.01 FURTHER ACTIONS. At any time and from time to time, each
party agrees, at its expense, to take such actions and to execute and deliver
such documents as may be reasonably necessary to effectuate the purposes of this
Agreement.
SECTION 8.02 ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth
the entire
<PAGE>
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements among them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party
hereto.
SECTION 8.03 NOTICES. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing, and, if sent to any
Investor, shall be mailed, delivered, or telexed or telegraphed and confirmed by
letter, to such Investor at the address set forth on the signature page hereof,
or if sent to the Company, shall be mailed, delivered, or telexed or telegraphed
and confirmed by letter, to 1400 Centerpoint Boulevard, Knoxville, Tennessee
37932. All notices hereunder shall be effective upon receipt by the party to
which it is addressed.
SECTION 8.04 WAIVER. Any waiver by any party of a breach of any term of
this Agreement shall not operate as, or be construed to be, a waiver of any
other breach of that term or of any breach of any other term of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions will not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver hereunder must be in writing.
SECTION 8.05 BINDING EFFECT. The provisions of this Agreement shall be
binding upon, and inure to the benefits of, the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that, except as otherwise
provided herein, no party hereto shall have the right to assign its rights and
obligations hereunder without the prior written consent of the other parties
hereto.
SECTION 8.06 NO THIRD-PARTY BENEFICIARIES. This Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement, except as otherwise provided herein.
SECTION 8.07 SEPARABILITY. If any provision of this Agreement is
invalid, illegal, or unenforceable, the balance of this Agreement shall remain
in effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and circumstances.
SECTION 8.08 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 8.09 COUNTERPARTS; GOVERNING LAW. This Agreement may be
executed in any number of counterparts, each of which shall be deemed as
original, but all of which together shall constitute one and the same
instrument. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to conflicts of
laws. Each of the parties consents to the jurisdiction of the U.S. District
Court sitting in the Southern District of the State of New York or the state
courts of the State of New York sitting in Manhattan in connection with any
dispute arising under this Debenture and hereby waives, to the
2
<PAGE>
maximum extent permitted by law, any objection, including any objection based on
FORUM NON CONVENIENS to the bringing of any such proceeding in such
jurisdictions.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
day and year first above written.
COMPANY
CELERITY SYSTEMS, INC.
By: /s/ Kenneth Van Meter
-------------------------
Name: Kenneth Van Meter
Title:President/CEO
INVESTOR
JOHN BOLLIGER
By: /s/ John Bolliger
-------------------------
<PAGE>
Exhibit 4.10
No. W-8 Warrant to Purchase Fifty Thousand (50,000) Shares of
Common Stock of Celerity Systems, Inc.
(Subject to adjustment)
Date of Issuance - As of September 30, 1999
WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYOTHOCATED IN THE
ABSENCE OF A REGISTERATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRIED.
WARRANT TO PURCHASE COMMON STOCK
of
CELERITY SYSTEMS, INC.
This certifies that, for value received, May Davis Group, or its
registered assigns ("Holder") is entitled, subject to the terms set forth below,
to purchase from CELERITY SYSTEMS, INC., a Delaware corporation (the "Company"),
Fifty Thousand (50,000) shares of common stock of the Company, as constituted on
the date hereof (the "Warrant Issue Date"), upon surrender hereof, at the
principal office of the Company referred to below, with the subscription form
attached hereto duly executed, and simultaneous payment of the exercise price
(the "Exercise Price") therefore, as set forth in Sections 2 and 3 below. The
number, character and Exercise Price of such shares of Common Stock are subject
to adjustment as provided below. The term "Warrant" as used herein shall include
the Warrant and any warrants delivered in substitution or exchange therefore as
provided herein.
1. TERM OF WARRANT. Subject to the terms and conditions set forth
herein, the Warrant shall be exercisable, in whole or in part,
during the term commencing as of September 30, 1999 and ending
5:00 p.m., Eastern Time September 29, 2002 and shall be void
thereafter (the "Term").
2. EXERCISE PRICE. The Exercise Price at which the Warrant may be
exercised shall be $0.586 per share of Common Stock, as
adjusted from time to time to pursuant to Section 11 hereof
(the "Exercise Price").
<PAGE>
3. EXERCISE OF WARRANT.
(a) The purchase rights represented by the Warrant are
exercisable by the Holder in whole or in part, but
not for less than 100 shares at a time (or such
lesser number of shares which may then constitute the
maximum number purchasable; such number being subject
to adjustment as provided in Section 11 below), at
any time, or from time to time, during the Term
hereof as described in Section 1 above, by the
surrender of this warrant and Notice of Exercise
annexed hereto as EXHIBIT "A" duly completed and
executed on behalf of the Holder, at the office of
the Company (or such other office or agency of the
Company as it may designate by notice in writing to
the Holder at the address of the Holder appearing
on the books of the Company) upon payment in cash
or by check acceptable to the Company in an amount
equal to the product of the Exercise Price set
forth in Section 2 above multiplied by the number
of shares of common Stock being purchased upon such
exercise.
(b) This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the
date of its surrender for exercise as provided above,
and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be
treated for all purposes as the holder of record of
such shares as of the close of business on such date.
As promptly as practicable on or after such date and
in event within ten (10) days thereafter, the Company
as its expense shall issue and deliver to the person
or persons entitled to receive the same certificate
or certificates for the number of shares issuable
upon such exercise. In the event that this Warrant is
exercised in part, the Company at its expense will
execute and deliver a new Warrant of like tenor
exercisable for the number of shares for which this
warrant may then be exercised
4. NO FACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise
of this warrant. In lieu of any fractional share to which the
Holder otherwise be entitled, the Company shall make a cash
payment equal to the Current Market value multiplied by such
fraction.
Current Market Value of one share Common Stock shall mean:
(1) If the common Stock is listed on national securities exchange or
admitted to unlisted trading privileges on such exchange or listed for trading
on the NASDAQ National Market system or Small cap system, the Current Market
Value shall be last reported sale price of the common Stock on such exchange or
system on the last business
<PAGE>
day prior to the date of exercise of this Warrant or if no such sale is made on
such day, the average closing bid and asked prices for such day on such exchange
or system or
(2) If the common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the last
reported bid and asked prices reported by the NASDAQ Electronic Bulletin Board
or its then existing successor on the last business day prior to the date of the
exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the Current
Market Value shall be an amount determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
5. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction,
or mutilation of this warrant and, in the case of loss, theft,
or destruction, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company
or, on the case of mutilation, on surrender and cancellation
of this Warrant, the Company at its expense shall execute and
deliver, in lieu of this Warrant, a new warrant of like tenor
and amount.
6. RIGHTS OF STOCKHOLDERS. This warrant shall not entitle the
Holder to any of the rights of a Stockholder of the Company.
7. TRANSFER WARRANT.
(a) WARRANT REGISTER. The Company will maintain a register ( the
"Warrant Register") containing the names and addresses of the Holder or Holders.
Any Holder of this Warrant or any portion thereof may change his address as
shown on the Warrant Register by written notice to the Company requesting such
change. Any notice or written communication required or permitted to be given by
mail to such Holder as shown on the Warrant Register and at the address shown on
the Warrant Register. Until this Warrant is transferred in the Warrant Register
of the Company, the Company may treat the holder as shown on the Warrant
Register as the absolute owner of this Warrant for all purposes, notwithstanding
any notice to the contrary.
(b) TRANSFERABILITY AND NONNEGOTIABILITY OF WARRANT AND UNDERLYING
COMMON STOCK. This Warrant may be transferred or assigned in whole or in part
without compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if such are requested by the Company). Subject to the provisions of
this Warrant with respect to compliance with the Securities Act 1933, as amended
(the "Act"), title to this Warrant may be transferred by the endorsement (by the
Holder executing the Assignment Form annexed hereto as Exhibit B) and delivery
in the same manner as a negotiable instrument transferable by the endorsement
and delivery.
<PAGE>
The Common Stock to be issued upon exercise hereof, may not be transferred or
assigned in whole or in part without compliance with all applicable federal and
state securities laws by the transferor and the transferee (including the
delivery of investment representation letters and legal opinions reasonably
satisfactory to the Company, if such are requested by the Company)
(c) EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of this Warrant
for exchange, properly endorsed on the Assignment Form and subject to the
provisions of this Warrant with respect to compliance with the Act and with the
limitations on assignments and transfers and contained in this Section 7, the
Company at its exercise shall issue to or the order of the Holder a new warrant
or warrants of like tenor, in the name of the Holder or as the Holder (on
payment by the Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise thereof.
(d) COMPLIANCE WITH SECURITIES LAWS.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Common Stock to be issued upon
exercise hereof or conversion thereof being acquired solely for the Holder's own
account and not as a nominee for any other party, and for investment, and that
the Holder will not offer, sell or otherwise dispose of this Warrant or any
shares of Common Stock to be issued upon exercise hereof except under
circumstances that will not result in a violation of the Act or any state
securities laws. Upon exercise of this Warrant, the Holder shall, if requested
by the Company, confirm in writing, in a form satisfactory to the Company, that
the shares of Common Stock so purchased are being acquired solely for the
Holder's own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale.
(ii) This Warrant and all shares of Common Stock issued upon
exercise hereof shall, unless registered under the Act, be stamped or imprinted
with a legend in substantially the following form (in addition to any legend
required by the State securities laws):
THE SECURITIES PRESENTED HEREBY HAVE BEEN ACUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSED
HEREUNDER OR THEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR EXEPTION THEREFORM UNDER SAID ACT.
COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES
AND RESTRICTING THEIR TRANSFER OR SALE MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE
SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
COMPANY.
<PAGE>
8. RESERVATION OF STOCK. The company covenants that during the
Term this Warrant is exercisable, the Company will reserve
from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of Common Sock
upon the exercise of this warrant, and from time to time, will
take all steps necessary to amend its Certificate of
Incorporation (the "Certificate") to provide sufficient
reserves of shares of Common Stock issuable upon exercise of
the Warrant. The Company further covenants that all shares may
be issued upon the exercise of rights represented by this
Warrant, upon exercise of the rights represented by this
Warrant and payment of the Exercise Price, all as set forth
herein, will be in free from all taxes, liens and charges in
respect of the issue thereof (other than taxes in respect of
any transfer occurring contemporaneously or otherwise
specified herein). The Company agrees that its issuance of
this Warrant shall constitute full authority to its officers
who are in charged with the duty of executing stock
certificates to execute and issue the necessary certificates
for shares of Common Stock upon the exercise of this Warrant.
9. NOTICES.
(a) Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its Treasurers setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated and the Exercise Price and number
of shares purchasable hereunder after giving effect to such adjustment. And
shall cause a copy of such certificate to be mailed (by first class mail,
postage prepaid) to the Holder of this Warrant.
(b) In case
(i) The Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time receivable upon the
exercise of this Warrant) for the purposes of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right, or
(ii) of any reclassification of the capital stock of the
Company, any consolidation or merger of the Company with or into another
corporation, or any conveyance of all or subsequently all the assets of the
Company to another incorporation, or
<PAGE>
(iii) of any voluntary dissolution, liquidation of winding-up
of this Company,
then, and in each such case, the Company will mail or cause to mail the Holder
or Holders a notice specifying, as the case may be (A) the date on which a
record is to be taken for the purpose of such dividend, distribution or right
and stating the amount and character of such dividend distribution or right, or
(B) the date on which such reorganization, reclassification, consolidation
merger, conveyance dissolution, liquidation or winding-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common
Stock (or such stock or securities at the time receivable upon the exercise of
this Warrant) shall be entitled to exchange their shares of Common Stock (or
such other stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 10
days prior to the date therein specified.
(c) All such notices, advices and communications shall be deemed to
have been received (i) in the case of personal delivery, on the date of such
delivery and (ii) in the case of mailing, on the third (3) business day
following the date of such mailing.
10. AMENDMENTS.
(a) Any term of this Warrant may be amended with the written consent of
the Company and the Holder.
(b) No waivers of or exceptions to any term, condition or provision of
this Warrant, in any one or more instances, shall be deemed to be, or construed,
a further or continuing waiver of any such term, condition, or provision.
11. ADJUSTMENTS. The exercise Price and the number of shares
purchasable hereunder are subject to adjustment from time to
time as follows:
11.1 MERGER RECLASSIFICATION, ETC. If the Company at any time while
this Warrant or any portion thereof, remains outstanding and unexpired shall, by
merger, consolidation, reclassification of securities or otherwise, change any
of the securities as to which purchase rights under this Warrant exists into the
same or a different number of securities of any other class or classes this
Warrant shall thereafter represent the right to acquire such number and kind of
securities which were subject to the purchase rights under this Warrant
immediately prior to such merger, consolidation, reclassification or other
change and the Exercise Price therefore shall be approximately adjusted, all
subject to further adjustment as provided in Section II.
11.2 SPLIT, SUBDIVISION OF COMBINATION OF SHARES. If the Company at any
time while this warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivided or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such
1
<PAGE>
securities shall be proportionately decreased in the case of a split or
subdivision or proportionately increased in the case of combination.
11.3 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 11, the Company at its
expense shall promptly compute such adjustment in accordance with the terms
hereof and furnish to each holder of this Warrant a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment and readjustment is based. The Company shall, upon written request,
at any time, of any such holder, furnish or cause to be furnished to such holder
a like certificate setting forth: (i) such adjustments and readjustments; (ii)
the Exercise Price at the time in effect and; (iii) the number of shares and the
amount, if any, of other property which at the time would be received upon the
exercise of the Warrant.
11.4 NO IMPAIRMENT, The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 11 and in
the taking of all of such action as may be necessary or appropriate in order to
protect the rights of the holders of this Warrant against impairment.
12. MISCELLANEOUS.
12.1 AMENDMENTS OF WAIVER. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Holder.
12.2 NOTICES. Any notices required to be sent to a Holder will be
delivered to the address of such Holder shown on the books of the Company. All
notices referred to herein will be delivered in person or sent by first class
mail, postage prepaid and will be deemed to have been given when so delivered or
sent.
12.3 DESCRIPTIVE HEADINGS: GOVERNING LAW. The descriptive heading of
the paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The construction, validity and interpretation
of this Warrant will be governed by the laws of the States of Delaware, without
regard to principals of conflicts or choice of law.
<PAGE>
IN WITNESS WHEREOF, CELERITY SYSTEMS, INC. caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated: September 30, 1999
CELERITY SYSTEMS, INC.
By: /s/ Kenneth D. Van Meter
Title: President & CEO
AGREED AND ACCEPTED:
HOLDER:
By:
Title:
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EXERCISE
To: CELERITY SYSTEMS, INC.
(1) The undersigned hereby elects to purchase shares of Common Stock of
CELERITY SYSTEMS, INC. pursuant to the terms of the attached Warrant, and
tenders herewith payments of the purchase price for such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for the
account of the undersigned and not as a nominee for any other party, and for
investment, and that the undersigned will not offer, sell, or otherwise dispose
of any such shares of Common Stock except under circumstances that will not
result in a violation of the Securities Act of 1933, as amended, or any state
securities laws.
(3) Please issue a certificate or certificates presenting said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
Name
Name
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as
specified below.
Name
Name
2
<PAGE>
EXHIBIT B
FORM OF ASSIGNEMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee names below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock set forth below but not below
Name of Assignee Address No. of Shares
And does hereby irrevocably constitute and appoint
Attorney to make such transfer on the books of CELERITY SYSTEMS, INC. maintained
for the purpose with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the shares of stock to be issued upon
exercise hereof or conversion thereof are being acquired for investment and that
the Assignee will not offer, sell or otherwise dispose of this Warrant or any
shares of stock to be issued upon exercise hereof or conversion thereof except
under circumstances which will not result in a violation of the Securities Act
1933, as amended, or any state securities laws. Further, the Assignee has
acknowledged that upon exercise of this Warrant, the Assignee shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the shares of stock so purchased are being acquired for investment
and not with a view toward distribution or resale.
DATED:
Signature of Holder
Witness
3
<PAGE>
No. W-9 Warrant to Purchase Fifty Thousand (50,000) Shares of
Common Stock of Celerity Systems, Inc.
(Subject to adjustment)
Date of Issuance - As of September 30, 1999
WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYOTHOCATED IN THE
ABSENCE OF A REGISTERATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRIED.
WARRANT TO PURCHASE COMMON STOCK
of
CELERITY SYSTEMS, INC.
This certifies that, for value received, Mark Angelo, or its registered
assigns ("Holder") is entitled, subject to the terms set forth below, to
purchase from CELERITY SYSTEMS, INC., a Delaware corporation (the "Company"),
Fifty Thousand (50,000) shares of common stock of the Company, as constituted on
the date hereof (the "Warrant Issue Date"), upon surrender hereof, at the
principal office of the Company referred to below, with the subscription form
attached hereto duly executed, and simultaneous payment of the exercise price
(the "Exercise Price") therefore, as set forth in Sections 2 and 3 below. The
number, character and Exercise Price of such shares of Common Stock are subject
to adjustment as provided below. The term "Warrant" as used herein shall include
the Warrant and any warrants delivered in substitution or exchange therefore as
provided herein.
1. TERM OF WARRANT. Subject to the terms and conditions set forth
herein, the Warrant shall be exercisable, in whole or in part,
during the term commencing as of September 30, 1999 and ending
5:00 p.m., Eastern Time September 29, 2002 and shall be void
thereafter (the "Term").
2. EXERCISE PRICE. The Exercise Price at which the Warrant may be
exercised shall be $0.586 per share of Common Stock, as
adjusted from time to time to pursuant to Section 11 hereof
(the "Exercise Price").
4
<PAGE>
3. EXERCISE OF WARRANT.
(a) The purchase rights represented by the Warrant are
exercisable by the Holder in whole or in part, but
not for less than 100 shares at a time (or such
lesser number of shares which may then constitute the
maximum number purchasable; such number being subject
to adjustment as provided in Section 11 below), at
any time, or from time to time, during the Term
hereof as described in Section 1 above, by the
surrender of this warrant and Notice of Exercise
annexed hereto as EXHIBIT "A" duly completed and
executed on behalf of the Holder, at the office of
the Company (or such other office or agency of the
Company as it may designate by notice in writing to
the Holder at the address of the Holder appearing on
the books of the Company) upon payment in cash or by
check acceptable to the Company in an amount equal to
the product of the Exercise Price set forth in
Section 2 above multiplied by the number of shares of
common Stock being purchased upon such exercise.
(b) This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the
date of its surrender for exercise as provided above,
and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be
treated for all purposes as the holder of record of
such shares as of the close of business on such date.
As promptly as practicable on or after such date and
in event within ten (10) days thereafter, the Company
as its expense shall issue and deliver to the person
or persons entitled to receive the same certificate
or certificates for the number of shares issuable
upon such exercise. In the event that this Warrant is
exercised in part, the Company at its expense will
execute and deliver a new Warrant of like tenor
exercisable for the number of shares for which this
warrant may then be exercised.
4. NO FACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise
of this warrant. In lieu of any fractional share to which the
Holder otherwise be entitled, the Company shall make a cash
payment equal to the Current Market value multiplied by such
fraction.
Current Market Value of one share Common Stock shall mean:
(1) If the common Stock is listed on national securities exchange or
admitted to unlisted trading privileges on such exchange or listed for trading
on the NASDAQ
5
<PAGE>
National Market system or Small cap system, the Current Market Value shall be
last reported sale price of the common Stock on such exchange or system on the
last business day prior to the date of exercise of this Warrant or if no such
sale is made on such day, the average closing bid and asked prices for such day
on such exchange or system or
(2) If the common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the last
reported bid and asked prices reported by the NASDAQ Electronic Bulletin Board
or its then existing successor on the last business day prior to the date of the
exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the Current
Market Value shall be an amount determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
5. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction,
or mutilation of this warrant and, in the case of loss, theft,
or destruction, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company
or, on the case of mutilation, on surrender and cancellation
of this Warrant, the Company at its expense shall execute and
deliver, in lieu of this Warrant, a new warrant of like tenor
and amount.
6. RIGHTS OF STOCKHOLDERS. This warrant shall not entitle the
Holder to any of the rights of a Stockholder of the Company.
7. TRANSFER WARRANT.
(a) WARRANT REGISTER. The Company will maintain a register (the
"Warrant Register") containing the names and addresses of the Holder or Holders.
Any Holder of this Warrant or any portion thereof may change his address as
shown on the Warrant Register by written notice to the Company requesting such
change. Any notice or written communication required or permitted to be given by
mail to such Holder as shown on the Warrant Register and at the address shown on
the Warrant Register. Until this Warrant is transferred in the Warrant Register
of the Company, the Company may treat the holder as shown on the Warrant
Register as the absolute owner of this Warrant for all purposes, notwithstanding
any notice to the contrary.
(b) TRANSFERABILITY AND NONNEGOTIABILITY OF WARRANT AND UNDERLYING
COMMON STOCK. This Warrant may be transferred or assigned in whole or in part
without compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if such are requested by the Company). Subject to the provisions of
this Warrant with respect to compliance with the Securities Act 1933,
6
<PAGE>
as amended (the "Act"), title to this Warrant may be transferred by the
endorsement (by the Holder executing the Assignment Form annexed hereto as
Exhibit B) and delivery in the same manner as a negotiable instrument
transferable by the endorsement and delivery. The Common Stock to be issued upon
exercise hereof, may not be transferred or assigned in whole or in part without
compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if such are requested by the Company)
(c) EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of this Warrant
for exchange, properly endorsed on the Assignment Form and subject to the
provisions of this Warrant with respect to compliance with the Act and with the
limitations on assignments and transfers and contained in this Section 7, the
Company at its exercise shall issue to or the order of the Holder a new warrant
or warrants of like tenor, in the name of the Holder or as the Holder (on
payment by the Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise thereof.
(d) COMPLIANCE WITH SECURITIES LAWS.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Common Stock to be issued upon
exercise hereof or conversion thereof being acquired solely for the Holder's own
account and not as a nominee for any other party, and for investment, and that
the Holder will not offer, sell or otherwise dispose of this Warrant or any
shares of Common Stock to be issued upon exercise hereof except under
circumstances that will not result in a violation of the Act or any state
securities laws. Upon exercise of this Warrant, the Holder shall, if requested
by the Company, confirm in writing, in a form satisfactory to the Company, that
the shares of Common Stock so purchased are being acquired solely for the
Holder's own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale.
(ii) This Warrant and all shares of Common Stock issued upon
exercise hereof shall, unless registered under the Act, be stamped or imprinted
with a legend in substantially the following form (in addition to any legend
required by the State securities laws):
THE SECURITIES PRESENTED HEREBY HAVE BEEN ACUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTED UNDER THE SECURITIES
ACT OF
7
<PAGE>
1933, AS AMENDED. SUCH SECURITIES AND ANY SECURITIES OR
SHARES ISSED HEREUNDER OR THEREUNDER MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR EXEPTION
THEREFORM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING
THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR
TRANSFER OR SALE MAY NE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY
OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
COMPANY.
8. RESERVATION OF STOCK. The company covenants that during the
Term of this Warrant is exercisable, the Company will reserve
from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of Common Sock
upon the exercise of this warrant, and from time to time, will
take all steps necessary to amend its Certificate of
Incorporation (the "Certificate") to provide sufficient
reserves of shares of Common Stock issuable upon exercise of
the Warrant. The Company further covenants that all shares may
be issued upon the exercise of rights represented by this
Warrant, upon exercise of the rights represented by this
Warrant and payment of the Exercise Price, all as set forth
herein, will be in free from all taxes, liens and charges in
respect of the issue thereof (other than taxes in respect of
any transfer occurring contemporaneously or otherwise
specified herein). The Company agrees that its issuance of
this Warrant shall constitute full authority to its officers
who are in charged with the duty of executing stock
certificates to execute and issue the necessary certificates
for shares of Common Stock upon the exercise of this Warrant.
9. NOTICES.
(a) Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its Treasurers setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated and the Exercise Price and number
of shares purchasable hereunder after giving effect to such adjustment. And
shall cause a copy of such certificate to be mailed (by first class mail,
postage prepaid) to the Holder of this Warrant.
(b) In case
(i) The Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time receivable upon the
exercise of this Warrant) for the purposes of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to
8
<PAGE>
receive any other right, or
(ii) of any reclassification of the capital stock of the
Company, any consolidation or merger of the Company with or into another
corporation, or any conveyance of all or subsequently all the assets of the
Company to another incorporation, or
(iii) of any voluntary dissolution, liquidation of winding-up
of this Company,
then, and in each such case, the Company will mail or cause to mail the Holder
or Holders a notice specifying, as the case may be (A) the date on which a
record is to be taken for the purpose of such dividend, distribution or right
and stating the amount and character of such dividend distribution or right, or
(B) the date on which such reorganization, reclassification, consolidation
merger, conveyance dissolution, liquidation or winding-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common
Stock (or such stock or securities at the time receivable upon the exercise of
this Warrant) shall be entitled to exchange their shares of Common Stock (or
such other stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 10
days prior to the date therein specified.
(c) All such notices, advices and communications shall be deemed to
have been received (i) in the case of personal delivery, on the date of such
delivery and (ii) in the case of mailing, on the third (3) business day
following the date of such mailing.
10. AMENDMENTS.
(a) Any term of this Warrant may be amended with the written consent of
the Company and the Holder.
(b) No waivers of or exceptions to any term, condition or provision of
this Warrant, in any one or more instances, shall be deemed to be, or construed,
a further or continuing waiver of any such term, condition, or provision.
11. ADJUSTMENTS. The exercise Price and the number of shares
purchasable hereunder are subject to adjustment from time to
time as follows:
11.1 MERGER RECLASSIFICATION, ETC. If the Company at any time while
this Warrant or any portion thereof, remains outstanding and unexpired shall, by
merger, consolidation, reclassification of securities or otherwise, change any
of the securities as to which purchase rights under this Warrant exists into the
same or a different number of securities of any other class or classes this
Warrant shall thereafter represent the right to acquire such number and kind of
securities which were subject to the purchase rights under this Warrant
immediately prior to such merger, consolidation, reclassification or other
change and the Exercise Price therefore shall be approximately adjusted, all
subject
9
<PAGE>
to further adjustment as provided in Section II.
11.2 SPLIT, SUBDIVISION OF COMBINATION OF SHARES. If the Company at any
time while this warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivided or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased in the case of a split or subdivision or proportionately increased in
the case of combination.
11.3 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 11, the Company at its
expense shall promptly compute such adjustment in accordance with the terms
hereof and furnish to each holder of this Warrant a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment and readjustment is based. The Company shall, upon written request,
at any time, of any such holder, furnish or cause to be furnished to such holder
a like certificate setting forth: (i) such adjustments and readjustments; (ii)
the Exercise Price at the time in effect and; (iii) the number of shares and the
amount, if any, of other property which at the time would be received upon the
exercise of the Warrant.
11.5 NO IMPAIRMENT, The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 11 and in
the taking of all of such action as may be necessary or appropriate in order to
protect the rights of the holders of this Warrant against impairment.
12. MISCELLANEOUS.
12.1 AMENDMENTS OF WAIVER. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Holder.
12.2 NOTICES. Any notices required to be sent to a Holder will be
delivered to the address of such Holder shown on the books of the Company. All
notices referred to herein will be delivered in person or sent by first class
mail, postage prepaid and will be deemed to have been given when so delivered or
sent.
12.3 DESCRIPTIVE HEADINGS: GOVERNING LAW. The descriptive heading of
the paragraphs of this Warrant are inserted for convenience only and do not
constitute a pat of this Warrant. The construction, validity and interpretation
of this Warrant will be governed by the laws of the States of Delaware, without
regard to principals of conflicts or choice of law.
<PAGE>
IN WITNESS WHEREOF, CELERITY SYSTEMS, INC. caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated: September 30, 1999
CELERITY SYSTEMS, INC.
By: /s/ Kenneth D. Van Meter
Title: President & CEO
AGREED AND ACCEPTED:
HOLDER:
By:
Title:
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EXERCISE
To: CELERITY SYSTEMS, INC.
(1) The undersigned hereby elects to purchase shares of Common Stock of
CELERITY SYSTEMS, INC. pursuant to the terms of the attached Warrant, and
tenders herewith payments of the purchase price for such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for the
account of the undersigned and not as a nominee for any other party, and for
investment, and that the undersigned will not offer, sell, or otherwise dispose
of any such shares of Common Stock except under circumstances that will not
result in a violation of the Securities Act of 1933, as amended, or any state
securities laws.
(3) Please issue a certificate or certificates presenting said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
Name
Name
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as
specified below.
Name
Name
<PAGE>
EXHIBIT B
FORM OF ASSIGNEMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee names below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock set forth below but not below
Name of Assignee Address No. of Shares
And does hereby irrevocably constitute and appoint
Attorney to make such transfer on the books of CELERITY SYSTEMS, INC. maintained
for the purpose with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the shares of stock to be issued upon
exercise hereof or conversion thereof are being acquired for investment and that
the Assignee will not offer, sell or otherwise dispose of this Warrant or any
shares of stock to be issued upon exercise hereof or conversion thereof except
under circumstances which will not result in a violation of the Securities Act
1933, as amended, or any state securities laws. Further, the Assignee has
acknowledged that upon exercise of this Warrant, the Assignee shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the shares of stock so purchased are being acquired for investment
and not with a view toward distribution or resale.
DATED:
Signature of Holder
Witness
<PAGE>
No. W-10 Warrant to Purchase Fifty Thousand (50,000) Shares of
Common Stock of Celerity Systems, Inc.
(Subject to adjustment)
Date of Issuance - As of September 30, 1999
WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYOTHOCATED IN THE
ABSENCE OF A REGISTERATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRIED.
WARRANT TO PURCHASE COMMON STOCK
of
CELERITY SYSTEMS, INC.
This certifies that, for value received, Hunter Singer, or its
registered assigns ("Holder") is entitled, subject to the terms set forth below,
to purchase from CELERITY SYSTEMS, INC., a Delaware corporation (the "Company"),
Fifty Thousand (50,000) shares of common stock of the Company, as constituted on
the date hereof (the "Warrant Issue Date"), upon surrender hereof, at the
principal office of the Company referred to below, with the subscription form
attached hereto duly executed, and simultaneous payment of the exercise price
(the "Exercise Price") therefore, as set forth in Sections 2 and 3 below. The
number, character and Exercise Price of such shares of Common Stock are subject
to adjustment as provided below. The term "Warrant" as used herein shall include
the Warrant and any warrants delivered in substitution or exchange therefore as
provided herein.
1.. TERM OF WARRANT. Subject to the terms and conditions set forth
herein, the Warrant shall be exercisable, in whole or in part,
during the term commencing as of September 30, 1999 and ending
5:00 p.m., Eastern Time September 29, 2002 and shall be void
thereafter (the "Term").
2. EXERCISE PRICE. The Exercise Price at which the Warrant may be
exercised shall be $0.586 per share of Common Stock, as
adjusted from time to time to pursuant to Section 11 hereof
(the "Exercise Price").
<PAGE>
9. EXERCISE OF WARRANT.
(a) The purchase rights represented by the Warrant are
exercisable by the Holder in whole or in part, but
not for less than 100 shares at a time (or such
lesser number of shares which may then constitute the
maximum number purchasable; such number being subject
to adjustment as provided in Section 11 below), at
any time, or from time to time, during the Term
hereof as described in Section 1 above, by the
surrender of this warrant and Notice of Exercise
annexed hereto as EXHIBIT "A" duly completed and
executed on behalf of the Holder, at the office of
the Company (or such other office or agency of the
Company as it may designate by notice in writing to
the Holder at the address of the Holder appearing
on the books of the Company) upon payment in cash
or by check acceptable to the Company in an amount
equal to the product of the Exercise Price set
forth in Section 2 above multiplied by the number
of shares of common Stock being purchased upon such
exercise.
(b) This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the
date of its surrender for exercise as provided above,
and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be
treated for all purposes as the holder of record of
such shares as of the close of business on such date.
As promptly as practicable on or after such date and
in event within ten (10) days thereafter, the Company
as its expense shall issue and deliver to the person
or persons entitled to receive the same certificate
or certificates for the number of shares issuable
upon such exercise. In the event that this Warrant is
exercised in part, the Company at its expense will
execute and deliver a new Warrant of like tenor
exercisable for the number of shares for which this
warrant may then be exercised.
4. NO FACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the
exercise of this warrant. In lieu of any fractional share to
which the Holder otherwise be entitled, the Company shall make
a cash payment equal to the Current Market value multiplied by
such fraction.
Current Market Value of one share Common Stock shall mean:
(1) If the common Stock is listed on national securities exchange or
admitted to unlisted trading privileges on such exchange or listed for trading
on the NASDAQ
<PAGE>
National Market system or Small cap system, the Current Market Value shall be
last reported sale price of the common Stock on such exchange or system on the
last business day prior to the date of exercise of this Warrant or if no such
sale is made on such day, the average closing bid and asked prices for such day
on such exchange or system or
(2) If the common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the last
reported bid and asked prices reported by the NASDAQ Electronic Bulletin Board
or its then existing successor on the last business day prior to the date of the
exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the Current
Market Value shall be an amount determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
5. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction,
or mutilation of this warrant and, in the case of loss, theft,
or destruction, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company
or, on the case of mutilation, on surrender and cancellation
of this Warrant, the Company at its expense shall execute and
deliver, in lieu of this Warrant, a new warrant of like tenor
and amount.
6. RIGHTS OF STOCKHOLDERS. This warrant shall not entitle the
Holder to any of the rights of a Stockholder of the Company.
7. TRANSFER WARRANT.
(a) WARRANT REGISTER. The Company will maintain a register (the
"Warrant Register") containing the names and addresses of the Holder or Holders.
Any Holder of this Warrant or any portion thereof may change his address as
shown on the Warrant Register by written notice to the Company requesting such
change. Any notice or written communication required or permitted to be given by
mail to such Holder as shown on the Warrant Register and at the address shown on
the Warrant Register. Until this Warrant is transferred in the Warrant Register
of the Company, the Company may treat the holder as shown on the Warrant
Register as the absolute owner of this Warrant for all purposes, notwithstanding
any notice to the contrary.
(b) TRANSFERABILITY AND NONNEGOTIABILITY OF WARRANT AND UNDERLYING
COMMON STOCK. This Warrant may be transferred or assigned in whole or in part
without compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if such are requested by the Company). Subject to the provisions of
this Warrant with respect to compliance with the Securities Act 1933,
<PAGE>
as amended (the "Act"), title to this Warrant may be transferred by the
endorsement (by the Holder executing the Assignment Form annexed hereto as
Exhibit B) and delivery in the same manner as a negotiable instrument
transferable by the endorsement and delivery. The Common Stock to be issued upon
exercise hereof, may not be transferred or assigned in whole or in part without
compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if such are requested by the Company)
(c) EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of this Warrant
for exchange, properly endorsed on the Assignment Form and subject to the
provisions of this Warrant with respect to compliance with the Act and with the
limitations on assignments and transfers and contained in this Section 7, the
Company at its exercise shall issue to or the order of the Holder a new warrant
or warrants of like tenor, in the name of the Holder or as the Holder (on
payment by the Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise thereof.
(d) COMPLIANCE WITH SECURITIES LAWS.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Common Stock to be issued upon
exercise hereof or conversion thereof being acquired solely for the Holder's own
account and not as a nominee for any other party, and for investment, and that
the Holder will not offer, sell or otherwise dispose of this Warrant or any
shares of Common Stock to be issued upon exercise hereof except under
circumstances that will not result in a violation of the Act or any state
securities laws. Upon exercise of this Warrant, the Holder shall, if requested
by the Company, confirm in writing, in a form satisfactory to the Company, that
the shares of Common Stock so purchased are being acquired solely for the
Holder's own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale.
(ii) This Warrant and all shares of Common Stock issued upon
exercise hereof shall, unless registered under the Act, be stamped or imprinted
with a legend in substantially the following form (in addition to any legend
required by the State securities laws):
THE SECURITIES PRESENTED HEREBY HAVE BEEN ACUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTED UNDER THE SECURITIES
ACT OF
<PAGE>
1933, AS AMENDED. SUCH SECURITIES AND ANY SECURITIES OR
SHARES ISSED HEREUNDER OR THEREUNDER MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR EXEPTION
THEREFORM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING
THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR
TRANSFER OR SALE MAY NE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY
OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
COMPANY.
8. RESERVATION OF STOCK. The company covenants that during the
Term of this Warrant is exercisable, the Company will reserve
from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of Common Sock
upon the exercise of this warrant, and from time to time, will
take all steps necessary to amend its Certificate of
Incorporation (the "Certificate") to provide sufficient
reserves of shares of Common Stock issuable upon exercise of
the Warrant. The Company further covenants that all shares may
be issued upon the exercise of rights represented by this
Warrant, upon exercise of the rights represented by this
Warrant and payment of the Exercise Price, all as set forth
herein, will be in free from all taxes, liens and charges in
respect of the issue thereof (other than taxes in respect of
any transfer occurring contemporaneously or otherwise
specified herein). The Company agrees that its issuance of
this Warrant shall constitute full authority to its officers
who are in charged with the duty of executing stock
certificates to execute and issue the necessary certificates
for shares of Common Stock upon the exercise of this Warrant.
9. NOTICES.
(a) Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its Treasurers setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated and the Exercise Price and number
of shares purchasable hereunder after giving effect to such adjustment. And
shall cause a copy of such certificate to be mailed (by first class mail,
postage prepaid) to the Holder of this Warrant.
(b) In case
(i) The Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time receivable upon the
exercise of this Warrant) for the purposes of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to
<PAGE>
receive any other right, or
(ii) of any reclassification of the capital stock of the
Company, any consolidation or merger of the Company with or into another
corporation, or any conveyance of all or subsequently all the assets of the
Company to another incorporation, or
(iii) of any voluntary dissolution, liquidation of winding-up
of this Company,
then, and in each such case, the Company will mail or cause to mail the Holder
or Holders a notice specifying, as the case may be (A) the date on which a
record is to be taken for the purpose of such dividend, distribution or right
and stating the amount and character of such dividend distribution or right, or
(B) the date on which such reorganization, reclassification, consolidation
merger, conveyance dissolution, liquidation or winding-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common
Stock (or such stock or securities at the time receivable upon the exercise of
this Warrant) shall be entitled to exchange their shares of Common Stock (or
such other stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 10
days prior to the date therein specified.
(c) All such notices, advices and communications shall be deemed to
have been received (i) in the case of personal delivery, on the date of such
delivery and (ii) in the case of mailing, on the third (3) business day
following the date of such mailing.
10. AMENDMENTS.
(a) Any term of this Warrant may be amended with the written consent of
the Company and the Holder.
(b) No waivers of or exceptions to any term, condition or provision of
this Warrant, in any one or more instances, shall be deemed to be, or construed,
a further or continuing waiver of any such term, condition, or provision.
11. ADJUSTMENTS. The exercise Price and the number of shares
purchasable hereunder are subject to adjustment from time to
time as follows:
11.1 MERGER RECLASSIFICATION, ETC. If the Company at any time while
this Warrant or any portion thereof, remains outstanding and unexpired shall, by
merger, consolidation, reclassification of securities or otherwise, change any
of the securities as to which purchase rights under this Warrant exists into the
same or a different number of securities of any other class or classes this
Warrant shall thereafter represent the right to acquire such number and kind of
securities which were subject
<PAGE>
to the purchase rights under this Warrant immediately prior to such merger,
consolidation, reclassification or other change and the Exercise Price therefore
shall be approximately adjusted, all subject to further adjustment as provided
in Section II.
11.2 SPLIT, SUBDIVISION OF COMBINATION OF SHARES. If the Company at any
time while this warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivided or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased in the case of a split or subdivision or proportionately increased in
the case of combination.
11.3 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 11, the Company at its
expense shall promptly compute such adjustment in accordance with the terms
hereof and furnish to each holder of this Warrant a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment and readjustment is based. The Company shall, upon written request,
at any time, of any such holder, furnish or cause to be furnished to such holder
a like certificate setting forth: (i) such adjustments and readjustments; (ii)
the Exercise Price at the time in effect and; (iii) the number of shares and the
amount, if any, of other property which at the time would be received upon the
exercise of the Warrant.
11.6 NO IMPAIRMENT, The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 11 and in
the taking of all of such action as may be necessary or appropriate in order to
protect the rights of the holders of this Warrant against impairment.
12. MISCELLANEOUS.
12.1 AMENDMENTS OF WAIVER. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Holder.
12.2 NOTICES. Any notices required to be sent to a Holder will be
delivered to the address of such Holder shown on the books of the Company. All
notices referred to herein will be delivered in person or sent by first class
mail, postage prepaid and will be deemed to have been given when so delivered or
sent.
12.3 DESCRIPTIVE HEADINGS: GOVERNING LAW. The descriptive heading of
the paragraphs of this Warrant are inserted for convenience only and do not
constitute a pat of this Warrant. The construction, validity and interpretation
of this Warrant will be governed by the laws of the States of Delaware, without
regard to principals of conflicts or choice of law.
<PAGE>
IN WITNESS WHEREOF, CELERITY SYSTEMS, INC. caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated: September 30, 1999
CELERITY SYSTEMS, INC.
By: /s/ Kenneth D. Van Meter
Title: President & CEO
AGREED AND ACCEPTED:
HOLDER:
By:
Title:
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EXERCISE
To: CELERITY SYSTEMS, INC.
(1) The undersigned hereby elects to purchase shares of Common Stock of
CELERITY SYSTEMS, INC. pursuant to the terms of the attached Warrant, and
tenders herewith payments of the purchase price for such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for the
account of the undersigned and not as a nominee for any other party, and for
investment, and that the undersigned will not offer, sell, or otherwise dispose
of any such shares of Common Stock except under circumstances that will not
result in a violation of the Securities Act of 1933, as amended, or any state
securities laws.
(3) Please issue a certificate or certificates presenting said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
Name
Name
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as
specified below.
Name
Name
<PAGE>
EXHIBIT B
FORM OF ASSIGNEMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee names below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock set forth below but not below
Name of Assignee Address No. of Shares
And does hereby irrevocably constitute and appoint
Attorney to make such transfer on the books of CELERITY SYSTEMS, INC. maintained
for the purpose with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the shares of stock to be issued upon
exercise hereof or conversion thereof are being acquired for investment and that
the Assignee will not offer, sell or otherwise dispose of this Warrant or any
shares of stock to be issued upon exercise hereof or conversion thereof except
under circumstances which will not result in a violation of the Securities Act
1933, as amended, or any state securities laws. Further, the Assignee has
acknowledged that upon exercise of this Warrant, the Assignee shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the shares of stock so purchased are being acquired for investment
and not with a view toward distribution or resale.
DATED:
Signature of Holder
Witness
<PAGE>
No. W-11 Warrant to Purchase Fifty Thousand (50,000) Shares of
Common Stock of Celerity Systems, Inc.
(Subject to adjustment)
Date of Issuance - As of September 30, 1999
WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYOTHOCATED IN THE
ABSENCE OF A REGISTERATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRIED.
WARRANT TO PURCHASE COMMON STOCK
of
CELERITY SYSTEMS, INC.
This certifies that, for value received, Joe Donahue, or its registered
assigns ("Holder") is entitled, subject to the terms set forth below, to
purchase from CELERITY SYSTEMS, INC., a Delaware corporation (the "Company"),
Fifty Thousand (50,000) shares of common stock of the Company, as constituted on
the date hereof (the "Warrant Issue Date"), upon surrender hereof, at the
principal office of the Company referred to below, with the subscription form
attached hereto duly executed, and simultaneous payment of the exercise price
(the "Exercise Price") therefore, as set forth in Sections 2 and 3 below. The
number, character and Exercise Price of such shares of Common Stock are subject
to adjustment as provided below. The term "Warrant" as used herein shall include
the Warrant and any warrants delivered in substitution or exchange therefore as
provided herein.
1. TERM OF WARRANT. Subject to the terms and conditions set forth
herein, the Warrant shall be exercisable, in whole or in part,
during the term commencing as of September 30, 1999 and ending
5:00 p.m., Eastern Time September 29, 2002 and shall be void
thereafter (the "Term").
2. EXERCISE PRICE. The Exercise Price at which the Warrant may be
exercised shall be $0.586 per share of Common Stock, as
adjusted from time to time to pursuant to Section 11 hereof
(the "Exercise Price").
<PAGE>
3. EXERCISE OF WARRANT.
(a) The purchase rights represented by the Warrant are exercisable by
the Holder in whole or in part, but not for less than 100 shares at a time (or
such lesser number of shares which may then constitute the maximum number
purchasable; such number being subject to adjustment as provided in Section 11
below), at any time, or from time to time, during the Term hereof as described
in Section 1 above, by the surrender of this warrant and Notice of Exercise
annexed hereto as EXHIBIT "A" duly completed and executed on ------- behalf of
the Holder, at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company) upon payment in cash or by
check acceptable to the Company in an amount equal to the product of the
Exercise Price set forth in Section 2 above multiplied by the number of shares
of common Stock being purchased upon such exercise.
(b) This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the shares of Common Stock
issuable upon such exercise shall be treated for all purposes as the holder of
record of such shares as of the close of business on such date. As promptly as
practicable on or after such date and in event within ten (10) days thereafter,
the Company as its expense shall issue and deliver to the person or persons
entitled to receive the same certificate or certificates for the number of
shares issuable upon such exercise. In the event that this Warrant is exercised
in part, the Company at its expense will execute and deliver a new Warrant of
like tenor exercisable for the number of shares for which this warrant may then
be exercised.
4. NO FACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise
of this warrant. In lieu of any fractional share to which the
Holder otherwise be entitled, the Company shall make a cash
payment equal to the Current Market value multiplied by such
fraction.
Current Market Value of one share Common Stock shall mean:
(1) If the common Stock is listed on national securities exchange or
admitted to unlisted trading privileges on such exchange or listed for trading
on the NASDAQ
<PAGE>
National Market system or Small cap system, the Current Market Value shall be
last reported sale price of the common Stock on such exchange or system on the
last business day prior to the date of exercise of this Warrant or if no such
sale is made on such day, the average closing bid and asked prices for such day
on such exchange or system or
(2) If the common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the last
reported bid and asked prices reported by the NASDAQ Electronic Bulletin Board
or its then existing successor on the last business day prior to the date of the
exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the Current
Market Value shall be an amount determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
5. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction,
or mutilation of this warrant and, in the case of loss, theft,
or destruction, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company
or, on the case of mutilation, on surrender and cancellation
of this Warrant, the Company at its expense shall execute and
deliver, in lieu of this Warrant, a new warrant of like tenor
and amount.
6. RIGHTS OF STOCKHOLDERS. This warrant shall not entitle the
Holder to any of the rights of a Stockholder of the Company.
7. TRANSFER WARRANT.
(a) WARRANT REGISTER. The Company will maintain a register (the
"Warrant Register") containing the names and addresses of the Holder or Holders.
Any Holder of this Warrant or any portion thereof may change his address as
shown on the Warrant Register by written notice to the Company requesting such
change. Any notice or written communication required or permitted to be given by
mail to such Holder as shown on the Warrant Register and at the address shown on
the Warrant Register. Until this Warrant is transferred in the Warrant Register
of the Company, the Company may treat the holder as shown on the Warrant
Register as the absolute owner of this Warrant for all purposes, notwithstanding
any notice to the contrary.
(b) TRANSFERABILITY AND NONNEGOTIABILITY OF WARRANT AND UNDERLYING
COMMON STOCK. This Warrant may be transferred or assigned in whole or in part
without compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if such are requested by the Company). Subject to the provisions of
this Warrant with respect to compliance with the Securities Act 1933,
<PAGE>
as amended (the "Act"), title to this Warrant may be transferred by the
endorsement (by the Holder executing the Assignment Form annexed hereto as
Exhibit B) and delivery in the same manner as a negotiable instrument
transferable by the endorsement and delivery. The Common Stock to be issued upon
exercise hereof, may not be transferred or assigned in whole or in part without
compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if such are requested by the Company)
(c) EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of this Warrant
for exchange, properly endorsed on the Assignment Form and subject to the
provisions of this Warrant with respect to compliance with the Act and with the
limitations on assignments and transfers and contained in this Section 7, the
Company at its exercise shall issue to or the order of the Holder a new warrant
or warrants of like tenor, in the name of the Holder or as the Holder (on
payment by the Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise thereof.
(d) COMPLIANCE WITH SECURITIES LAWS.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Common Stock to be issued upon
exercise hereof or conversion thereof being acquired solely for the Holder's own
account and not as a nominee for any other party, and for investment, and that
the Holder will not offer, sell or otherwise dispose of this Warrant or any
shares of Common Stock to be issued upon exercise hereof except under
circumstances that will not result in a violation of the Act or any state
securities laws. Upon exercise of this Warrant, the Holder shall, if requested
by the Company, confirm in writing, in a form satisfactory to the Company, that
the shares of Common Stock so purchased are being acquired solely for the
Holder's own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale.
(ii) This Warrant and all shares of Common Stock issued upon
exercise hereof shall, unless registered under the Act, be stamped or imprinted
with a legend in substantially the following form (in addition to any legend
required by the State securities laws):
THE SECURITIES PRESENTED HEREBY HAVE BEEN ACUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTED UNDER THE SECURITIES
ACT OF
<PAGE>
1933, AS AMENDED. SUCH SECURITIES AND ANY SECURITIES OR
SHARES ISSED HEREUNDER OR THEREUNDER MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR EXEPTION
THEREFORM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING
THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR
TRANSFER OR SALE MAY NE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY
OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
COMPANY.
8. RESERVATION OF STOCK. The company covenants that during the
Term of this Warrant is exercisable, the Company will reserve
from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of Common Sock
upon the exercise of this warrant, and from time to time, will
take all steps necessary to amend its Certificate of
Incorporation (the "Certificate") to provide sufficient
reserves of shares of Common Stock issuable upon exercise of
the Warrant. The Company further covenants that all shares may
be issued upon the exercise of rights represented by this
Warrant, upon exercise of the rights represented by this
Warrant and payment of the Exercise Price, all as set forth
herein, will be in free from all taxes, liens and charges in
respect of the issue thereof (other than taxes in respect of
any transfer occurring contemporaneously or otherwise
specified herein). The Company agrees that its issuance of
this Warrant shall constitute full authority to its officers
who are in charged with the duty of executing stock
certificates to execute and issue the necessary certificates
for shares of Common Stock upon the exercise of this Warrant.
9. NOTICES.
(a) Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its Treasurers setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated and the Exercise Price and number
of shares purchasable hereunder after giving effect to such adjustment. And
shall cause a copy of such certificate to be mailed (by first class mail,
postage prepaid) to the Holder of this Warrant.
(b) In case
(i) The Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time receivable upon the
exercise of this Warrant) for the purposes of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to
<PAGE>
receive any other right, or
(ii) of any reclassification of the capital stock of the
Company, any consolidation or merger of the Company with or into another
corporation, or any conveyance of all or subsequently all the assets of the
Company to another incorporation, or
(iii) of any voluntary dissolution, liquidation of winding-up
of this Company,
then, and in each such case, the Company will mail or cause to mail the Holder
or Holders a notice specifying, as the case may be (A) the date on which a
record is to be taken for the purpose of such dividend, distribution or right
and stating the amount and character of such dividend distribution or right, or
(B) the date on which such reorganization, reclassification, consolidation
merger, conveyance dissolution, liquidation or winding-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common
Stock (or such stock or securities at the time receivable upon the exercise of
this Warrant) shall be entitled to exchange their shares of Common Stock (or
such other stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 10
days prior to the date therein specified.
(c) All such notices, advices and communications shall be deemed to
have been received (i) in the case of personal delivery, on the date of such
delivery and (ii) in the case of mailing, on the third (3) business day
following the date of such mailing.
10. AMENDMENTS.
(a) Any term of this Warrant may be amended with the written consent of
the Company and the Holder.
(b) No waivers of or exceptions to any term, condition or provision of
this Warrant, in any one or more instances, shall be deemed to be, or construed,
a further or continuing waiver of any such term, condition, or provision.
11. ADJUSTMENTS. The exercise Price and the number of shares
purchasable hereunder are subject to adjustment from time to
time as follows:
11.1 MERGER RECLASSIFICATION, ETC. If the Company at any time while
this Warrant or any portion thereof, remains outstanding and unexpired shall, by
merger, consolidation, reclassification of securities or otherwise, change any
of the securities as to which purchase rights under this Warrant exists into the
same or a different number of securities of any other class or classes this
Warrant shall thereafter represent the right to acquire such number and kind of
securities which were subject
<PAGE>
to the purchase rights under this Warrant immediately prior to such merger,
consolidation, reclassification or other change and the Exercise Price therefore
shall be approximately adjusted, all subject to further adjustment as provided
in Section II.
11.2 SPLIT, SUBDIVISION OF COMBINATION OF SHARES. If the Company at any
time while this warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivided or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased in the case of a split or subdivision or proportionately increased in
the case of combination.
11.3 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 11, the Company at its
expense shall promptly compute such adjustment in accordance with the terms
hereof and furnish to each holder of this Warrant a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment and readjustment is based. The Company shall, upon written request,
at any time, of any such holder, furnish or cause to be furnished to such holder
a like certificate setting forth: (i) such adjustments and readjustments; (ii)
the Exercise Price at the time in effect and; (iii) the number of shares and the
amount, if any, of other property which at the time would be received upon the
exercise of the Warrant.
11.4 NO IMPAIRMENT, The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 11 and in
the taking of all of such action as may be necessary or appropriate in order to
protect the rights of the holders of this Warrant against impairment.
12. MISCELLANEOUS.
12.1 AMENDMENTS OF WAIVER. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Holder.
12.2 NOTICES. Any notices required to be sent to a Holder will be
delivered to the address of such Holder shown on the books of the Company. All
notices referred to herein will be delivered in person or sent by first class
mail, postage prepaid and will be deemed to have been given when so delivered or
sent.
12.3 DESCRIPTIVE HEADINGS: GOVERNING LAW. The descriptive heading of
the paragraphs of this Warrant are inserted for convenience only and do not
constitute a pat of this Warrant. The construction, validity and interpretation
of this Warrant will be governed by the laws of the States of Delaware, without
regard to principals of conflicts or choice of law.
<PAGE>
IN WITNESS WHEREOF, CELERITY SYSTEMS, INC. caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated: September 30, 1999
CELERITY SYSTEMS, INC.
By: /s/ Kenneth D. Van Meter
Title: President & CEO
AGREED AND ACCEPTED:
HOLDER:
By:
Title:
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EXERCISE
To: CELERITY SYSTEMS, INC.
(1) The undersigned hereby elects to purchase shares of Common Stock of
CELERITY SYSTEMS, INC. pursuant to the terms of the attached Warrant, and
tenders herewith payments of the purchase price for such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for the
account of the undersigned and not as a nominee for any other party, and for
investment, and that the undersigned will not offer, sell, or otherwise dispose
of any such shares of Common Stock except under circumstances that will not
result in a violation of the Securities Act of 1933, as amended, or any state
securities laws.
(3) Please issue a certificate or certificates presenting said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
Name
Name
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as
specified below.
Name
Name
<PAGE>
EXHIBIT B
FORM OF ASSIGNEMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee names below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock set forth below but not below
Name of Assignee Address No. of Shares
And does hereby irrevocably constitute and appoint
Attorney to make such transfer on the books of CELERITY SYSTEMS, INC. maintained
for the purpose with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the shares of stock to be issued upon
exercise hereof or conversion thereof are being acquired for investment and that
the Assignee will not offer, sell or otherwise dispose of this Warrant or any
shares of stock to be issued upon exercise hereof or conversion thereof except
under circumstances which will not result in a violation of the Securities Act
1933, as amended, or any state securities laws. Further, the Assignee has
acknowledged that upon exercise of this Warrant, the Assignee shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the shares of stock so purchased are being acquired for investment
and not with a view toward distribution or resale.
DATED:
Signature of Holder
Witness
<PAGE>
No. W-12 Warrant to Purchase Fifty Thousand (50,000) Shares of
Common Stock of Celerity Systems, Inc.
(Subject to adjustment)
Date of Issuance - As of September 30, 1999
WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYOTHOCATED IN THE
ABSENCE OF A REGISTERATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRIED.
WARRANT TO PURCHASE COMMON STOCK
of
CELERITY SYSTEMS, INC.
This certifies that, for value received, Max Rockwell, or its
registered assigns ("Holder") is entitled, subject to the terms set forth below,
to purchase from CELERITY SYSTEMS, INC., a Delaware corporation (the "Company"),
Fifty Thousand (50,000) shares of common stock of the Company, as constituted on
the date hereof (the "Warrant Issue Date"), upon surrender hereof, at the
principal office of the Company referred to below, with the subscription form
attached hereto duly executed, and simultaneous payment of the exercise price
(the "Exercise Price") therefore, as set forth in Sections 2 and 3 below. The
number, character and Exercise Price of such shares of Common Stock are subject
to adjustment as provided below. The term "Warrant" as used herein shall include
the Warrant and any warrants delivered in substitution or exchange therefore as
provided herein.
1. TERM OF WARRANT. Subject to the terms and conditions set forth
herein, the Warrant shall be exercisable, in whole or in part,
during the term commencing as of September 30, 1999 and ending
5:00 p.m., Eastern Time September 29, 2002 and shall be void
thereafter (the "Term").
2. EXERCISE PRICE. The Exercise Price at which the Warrant may be
exercised shall be $0.586 per share of Common Stock, as
adjusted from time to time to pursuant to Section 11 hereof
(the "Exercise Price").
<PAGE>
3. EXERCISE OF WARRANT.
(a) The purchase rights represented by the Warrant are
exercisable by the Holder in whole or in part, but
not for less than 100 shares at a time (or such
lesser number of shares which may then constitute the
maximum number purchasable; such number being subject
to adjustment as provided in Section 11 below), at
any time, or from time to time, during the Term
hereof as described in Section 1 above, by the
surrender of this warrant and Notice of Exercise
annexed hereto as EXHIBIT "A" duly completed and
executed on behalf of the Holder, at the office of
the Company (or such other office or agency of the
Company as it may designate by notice in writing to
the Holder at the address of the Holder appearing
on the books of the Company) upon payment in cash
or by check acceptable to the Company in an amount
equal to the product of the Exercise Price set
forth in Section 2 above multiplied by the number
of shares of common Stock being purchased upon such
exercise.
(b) This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the
date of its surrender for exercise as provided above,
and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be
treated for all purposes as the holder of record of
such shares as of the close of business on such date.
As promptly as practicable on or after such date and
in event within ten (10) days thereafter, the Company
as its expense shall issue and deliver to the person
or persons entitled to receive the same certificate
or certificates for the number of shares issuable
upon such exercise. In the event that this Warrant is
exercised in part, the Company at its expense will
execute and deliver a new Warrant of like tenor
exercisable for the number of shares for which this
warrant may then be exercised.
4. NO FACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise
of this warrant. In lieu of any fractional share to which the
Holder otherwise be entitled, the Company shall make a cash
payment equal to the Current Market value multiplied by such
fraction.
Current Market Value of one share Common Stock shall mean:
(1) If the common Stock is listed on national securities
exchange or admitted to unlisted trading privileges on such exchange
or listed for trading on the NASDAQ
<PAGE>
National Market system or Small cap system, the Current Market Value shall be
last reported sale price of the common Stock on such exchange or system on the
last business day prior to the date of exercise of this Warrant or if no such
sale is made on such day, the average closing bid and asked prices for such day
on such exchange or system or
(2) If the common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the last
reported bid and asked prices reported by the NASDAQ Electronic Bulletin Board
or its then existing successor on the last business day prior to the date of the
exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the Current
Market Value shall be an amount determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
5. REPLACEMENT OF WARRANT. On receipt of evidence
reasonably satisfactory to the Company of the loss,
theft, destruction, or mutilation of this warrant
and, in the case of loss, theft, or destruction, on
delivery of an indemnity agreement reasonably
satisfactory in form and substance to the Company or,
on the case of mutilation, on surrender and
cancellation of this Warrant, the Company at its
expense shall execute and deliver, in lieu of this
Warrant, a new warrant of like tenor and amount.
6. RIGHTS OF STOCKHOLDERS. This warrant shall not
entitle the Holder to any of the rights of a
Stockholder of the Company.
7. TRANSFER WARRANT.
(a) WARRANT REGISTER. The Company will maintain a register (the
"Warrant Register") containing the names and addresses of the Holder or Holders.
Any Holder of this Warrant or any portion thereof may change his address as
shown on the Warrant Register by written notice to the Company requesting such
change. Any notice or written communication required or permitted to be given by
mail to such Holder as shown on the Warrant Register and at the address shown on
the Warrant Register. Until this Warrant is transferred in the Warrant Register
of the Company, the Company may treat the holder as shown on the Warrant
Register as the absolute owner of this Warrant for all purposes, notwithstanding
any notice to the contrary.
(b) TRANSFERABILITY AND NONNEGOTIABILITY OF WARRANT AND UNDERLYING
COMMON STOCK. This Warrant may be transferred or assigned in whole or in part
without compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if such are requested by the Company). Subject to the provisions of
this Warrant with respect to compliance with the Securities Act 1933,
<PAGE>
as amended (the "Act"), title to this Warrant may be transferred by the
endorsement (by the Holder executing the Assignment Form annexed hereto as
Exhibit B) and delivery in the same manner as a negotiable instrument
transferable by the endorsement and delivery. The Common Stock to be issued upon
exercise hereof, may not be transferred or assigned in whole or in part without
compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if such are requested by the Company)
(c) EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of this Warrant
for exchange, properly endorsed on the Assignment Form and subject to the
provisions of this Warrant with respect to compliance with the Act and with the
limitations on assignments and transfers and contained in this Section 7, the
Company at its exercise shall issue to or the order of the Holder a new warrant
or warrants of like tenor, in the name of the Holder or as the Holder (on
payment by the Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise thereof.
(d) COMPLIANCE WITH SECURITIES LAWS.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Common Stock to be issued upon
exercise hereof or conversion thereof being acquired solely for the Holder's own
account and not as a nominee for any other party, and for investment, and that
the Holder will not offer, sell or otherwise dispose of this Warrant or any
shares of Common Stock to be issued upon exercise hereof except under
circumstances that will not result in a violation of the Act or any state
securities laws. Upon exercise of this Warrant, the Holder shall, if requested
by the Company, confirm in writing, in a form satisfactory to the Company, that
the shares of Common Stock so purchased are being acquired solely for the
Holder's own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale.
(ii) This Warrant and all shares of Common Stock issued upon
exercise hereof shall, unless registered under the Act, be stamped or imprinted
with a legend in substantially the following form (in addition to any legend
required by the State securities laws):
THE SECURITIES PRESENTED HEREBY HAVE BEEN ACUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTED UNDER THE SECURITIES
ACT OF
<PAGE>
1933, AS AMENDED. SUCH SECURITIES AND ANY SECURITIES OR
SHARES ISSED HEREUNDER OR THEREUNDER MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR EXEPTION
THEREFORM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING
THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR
TRANSFER OR SALE MAY NE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY
OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
COMPANY.
8. RESERVATION OF STOCK. The company covenants that during the
Term of this Warrant is exercisable, the Company will reserve
from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of Common Sock
upon the exercise of this warrant, and from time to time, will
take all steps necessary to amend its Certificate of
Incorporation (the "Certificate") to provide sufficient
reserves of shares of Common Stock issuable upon exercise of
the Warrant. The Company further covenants that all shares may
be issued upon the exercise of rights represented by this
Warrant, upon exercise of the rights represented by this
Warrant and payment of the Exercise Price, all as set forth
herein, will be in free from all taxes, liens and charges in
respect of the issue thereof (other than taxes in respect of
any transfer occurring contemporaneously or otherwise
specified herein). The Company agrees that its issuance of
this Warrant shall constitute full authority to its officers
who are in charged with the duty of executing stock
certificates to execute and issue the necessary certificates
for shares of Common Stock upon the exercise of this Warrant.
9. NOTICES.
(a) Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its Treasurers setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated and the Exercise Price and number
of shares purchasable hereunder after giving effect to such adjustment. And
shall cause a copy of such certificate to be mailed (by first class mail,
postage prepaid) to the Holder of this Warrant.
(b) In case
(i) The Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time receivable upon the
exercise of this Warrant) for the purposes of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to
<PAGE>
receive any other right, or
(ii) of any reclassification of the capital stock of the
Company, any consolidation or merger of the Company with or into another
corporation, or any conveyance of all or subsequently all the assets of the
Company to another incorporation, or
(iii) of any voluntary dissolution, liquidation of winding-up
of this Company,
then, and in each such case, the Company will mail or cause to mail the Holder
or Holders a notice specifying, as the case may be (A) the date on which a
record is to be taken for the purpose of such dividend, distribution or right
and stating the amount and character of such dividend distribution or right, or
(B) the date on which such reorganization, reclassification, consolidation
merger, conveyance dissolution, liquidation or winding-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common
Stock (or such stock or securities at the time receivable upon the exercise of
this Warrant) shall be entitled to exchange their shares of Common Stock (or
such other stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 10
days prior to the date therein specified.
(c) All such notices, advices and communications shall be deemed to
have been received (i) in the case of personal delivery, on the date of such
delivery and (ii) in the case of mailing, on the third (3) business day
following the date of such mailing.
10. AMENDMENTS.
(a) Any term of this Warrant may be amended with the written consent of
the Company and the Holder.
(b) No waivers of or exceptions to any term, condition or provision of
this Warrant, in any one or more instances, shall be deemed to be, or construed,
a further or continuing waiver of any such term, condition, or provision.
11. ADJUSTMENTS. The exercise Price and the number of shares
purchasable hereunder are subject to adjustment from time to
time as follows:
11.1 MERGER RECLASSIFICATION, ETC. If the Company at any time while
this Warrant or any portion thereof, remains outstanding and unexpired shall, by
merger, consolidation, reclassification of securities or otherwise, change any
of the securities as to which purchase rights under this Warrant exists into the
same or a different number of securities of any other class or classes this
Warrant shall thereafter represent the right to acquire such number and kind of
securities which were subject
<PAGE>
to the purchase rights under this Warrant immediately prior to such merger,
consolidation, reclassification or other change and the Exercise Price therefore
shall be approximately adjusted, all subject to further adjustment as provided
in Section II.
11.2 SPLIT, SUBDIVISION OF COMBINATION OF SHARES. If the Company at any
time while this warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivided or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased in the case of a split or subdivision or proportionately increased in
the case of combination.
11.3 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 11, the Company at its
expense shall promptly compute such adjustment in accordance with the terms
hereof and furnish to each holder of this Warrant a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment and readjustment is based. The Company shall, upon written request,
at any time, of any such holder, furnish or cause to be furnished to such holder
a like certificate setting forth: (i) such adjustments and readjustments; (ii)
the Exercise Price at the time in effect and; (iii) the number of shares and the
amount, if any, of other property which at the time would be received upon the
exercise of the Warrant.
11.4 NO IMPAIRMENT, The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 11 and in
the taking of all of such action as may be necessary or appropriate in order to
protect the rights of the holders of this Warrant against impairment.
12. MISCELLANEOUS.
12.1 AMENDMENTS OF WAIVER. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Holder.
12.2 NOTICES. Any notices required to be sent to a Holder will be
delivered to the address of such Holder shown on the books of the Company. All
notices referred to herein will be delivered in person or sent by first class
mail, postage prepaid and will be deemed to have been given when so delivered or
sent.
12.3 DESCRIPTIVE HEADINGS: GOVERNING LAW. The descriptive heading of
the paragraphs of this Warrant are inserted for convenience only and do not
constitute a pat of this Warrant. The construction, validity and interpretation
of this Warrant will be governed by the laws of the States of Delaware, without
regard to principals of conflicts or choice of law.
<PAGE>
IN WITNESS WHEREOF, CELERITY SYSTEMS, INC. caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated: September 30, 1999
CELERITY SYSTEMS, INC.
By: /s/ Kenneth D. Van Meter
Title: President & CEO
AGREED AND ACCEPTED:
HOLDER:
By:
Title:
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EXERCISE
To: CELERITY SYSTEMS, INC.
() The undersigned hereby elects to purchase shares of Common Stock of
CELERITY SYSTEMS, INC. pursuant to the terms of the attached Warrant, and
tenders herewith payments of the purchase price for such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for the
account of the undersigned and not as a nominee for any other party, and for
investment, and that the undersigned will not offer, sell, or otherwise dispose
of any such shares of Common Stock except under circumstances that will not
result in a violation of the Securities Act of 1933, as amended, or any state
securities laws.
(3) Please issue a certificate or certificates presenting said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
Name
Name
(4) Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned or in such other name as specified below.
Name
Name
<PAGE>
EXHIBIT B
FORM OF ASSIGNEMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee names below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock set forth below but not below
Name of Assignee Address No. of Shares
And does hereby irrevocably constitute and appoint
Attorney to make such transfer on the books of CELERITY SYSTEMS, INC. maintained
for the purpose with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the shares of stock to be issued upon
exercise hereof or conversion thereof are being acquired for investment and that
the Assignee will not offer, sell or otherwise dispose of this Warrant or any
shares of stock to be issued upon exercise hereof or conversion thereof except
under circumstances which will not result in a violation of the Securities Act
1933, as amended, or any state securities laws. Further, the Assignee has
acknowledged that upon exercise of this Warrant, the Assignee shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the shares of stock so purchased are being acquired for investment
and not with a view toward distribution or resale.
DATED:
Signature of Holder
Witness
<PAGE>
EXHIBIT 5
[BG LETTERHEAD]
February 10, 2000
Celerity Systems, Inc.
1400 Centerpoint Boulevard
Knoxville, Tennessee 37932
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
You have requested our opinion, as counsel for Celerity systems, Inc, a
Delaware corporation (the "Company"), in connection with the registration
statement on Form S-3 (the "Registration Statement"), filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Act").
The Registration Statement relates to the registration by the Company of the
sale of up to 2,271,511 shares of common stock, par value $.001 per share, (the
"Shares"), of the Company.
We have examined such records and documents and made such examinations of
law as we have deemed relevant in connection with this opinion. Based upon such
examinations, it is our opinion that, when there has been compliance with the
Act and the applicable state securities laws, the Shares, when issued, delivered
and paid for in accordance with the terms thereof, will be validly issued, and
the Shares, when so issued, delivered and paid for will also be fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Registration Statement. In so doing, we do not admit that we are
in the category of persons whose consent is required under Section 7 of the Act
or the rules and regulations of the Securities and Exchange Commission
promulgated there under.
Very truly yours,
/s/ Butler Gonzalez, LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated February 26, 1999, which report
includes an explanatory paragraph regarding substantial doubt about Celerity
Systems, Inc.'s ability to continue as a going concern, relating to the
financial statements, which appears in Celerity Systems, Inc.'s Annual Report on
Form 10-KSB for the year ended December 31, 1998. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Knoxville, TN
February 14, 2000
