EXHIBIT 10.3
AMENDMENT AND CONVERSION AGREEMENT
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THIS AMENDMENT AND CONVERSION AGREEMENT (this "Agreement") is entered into
this 15 day as of February, 2005, by and among CAPRIUS, INC., a Delaware
corporation (the "Company"), and the undersigned holders of certain 8% Senior
Secured Convertible Promissory Notes (the "Notes") as set forth on the signature
pages affixed hereto (each a "Holder" and collectively, the "Holders").
WITNESSETH:
WHEREAS, from April 26, 2004 through June 9, 2004, the Company issued to
the Holders an aggregate principal amount of One Million Five Hundred Thousand
Dollars ($1,500,000) of Notes;
WHEREAS, to induce the Holders to purchase the Notes, the Company secured
its obligations thereunder by granting to the Holders a security interest in the
Collateral (as such term is defined in the Security and Pledge Agreement, dated
as of April 26, 2004 (the "Security Agreement"), by the Company, in favor of Cap
Agent Associates LLC, acting in its capacity as agent for the Holders (the
"Agent") and provided certain registration rights with respect to the shares of
the Company's Common Stock, $.01 par value (the "Common Stock"), issuable upon
conversion of the Notes pursuant to a Registration Rights Agreement, dated as of
April 26, 2004, among the Company and the Holders (the "Original Registration
Agreement");
WHEREAS, the Company is contemplating a private placement of at least Four
Million Dollars ($4,000,000) (the "New Placement") through the issuance of a
newly-created Series C Mandatory Convertible Preferred Stock (the "Series C
Preferred Stock"), with such provisions substantially contained in the form of
the Certificate of Designations, Preferences and Rights attached hereto as
Exhibit A, to one or more institutional investors (the "New Investors");
WHEREAS, it is a condition precedent to the New Placement that all the
Holders agree to amend their Notes and convert their Notes into Series C
Preferred Stock and take such other actions as more fully set forth herein; and
WHEREAS, the parties hereto are entering into this Agreement to amend the
Notes and convert the Notes into Series C Preferred Stock on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants contained herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, and in order
to induce the New Investors to consummate the New Placement, the parties do
hereby agree as follows:
1. Amendment and Conversion of the Notes.
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1.1. Amendment of the Notes. Pursuant to Section 7.5 of the Notes, the
Holders hereby amend Sections 4.1 and 4.2 of the Notes to provide that the
entire unpaid principal amount of the Notes and any accrued interest thereon
shall be convertible into Series C Preferred Stock at the conversion price
described in Section 1.2 below.
1.2. Automatic Conversion. On the date of the closing of the New
Placement (the "Placement Closing"), the entire outstanding principal balance
and all accrued interest of each Holder's Note as of the date of the Placement
Closing shall automatically convert into that number of shares of Series C
Preferred Stock (such shares, hereinafter the "Conversion Shares") determined by
dividing the entire outstanding principal balance of and all accrued interest on
each Holder's Note as of the date of the Placement Closing by $100., with cash
paid in lieu of issuance of any fractional Conversion Shares, in an amount
determined by multiplying such fractional amount by $100.
1.3. Surrender of Notes; Issuance of New Certificates. Promptly
following a Holder's receipt of notice that the Placement Closing has occurred,
the Holder shall deliver his original Note to the Company for cancellation in
exchange for his Conversion Shares. Promptly following the Company's receipt of
the original Note from the Holder, the Company, at its expense, shall deliver to
the Holder, in the Holder's name, a certificate representing the number of fully
paid and non-assessable Conversion Shares into which the Note has been converted
in accordance with the provisions of Section 1.2 above. Subject to the foregoing
provisions hereof, such conversion shall be deemed to have occurred on the date
of the Placement Closing so that Holder shall be treated for all purposes as
having become the record holder of the Conversion Shares at such time.
1.4. Termination of Security Agreement, Acknowledgement, Waiver of
Rights. Upon the Placement Closing, the Security Agreement shall terminate and
the Agent shall promptly thereafter effect all filings necessary to terminate
the security interests created thereunder and to return the Collateral to the
Company. The Holders further acknowledge that upon the conversion of the Notes,
as provided herein, the Notes will be fully satisfied as to all amounts due
thereunder and the Holders shall have no claims against the Company arising from
the Notes or the Security Agreement. The Holders further acknowledge that Agent
shall have no further responsibilities or obligations pursuant to its agency
appointment under the Securities Purchase Agreement executed in connection with
the Holders purchase of Notes or pursuant to the other transaction documents
referred to in the Securities Purchase Agreement.
2. Registration.
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2.1. Termination of the Original Registration Agreement. Pursuant to
Section 6.6 of the Original Registration Rights Agreement, the Company and the
Holders hereby agree that the Original Registration Agreement and all rights and
obligations related thereunder, shall subject to the provisions of Section 2.2
below, terminate effective upon the Placement Closing. In connection with such
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termination, the Company shall withdraw the Registration Statement on Form SB-2
(No. 333-118869) that it had filed with the Securities and Exchange Commission
for the registration of, among other shares, the shares of Common Stock issuable
upon conversion of the Notes.
2.2. Execution of New Registration Agreement. In order to induce the
Holders to terminate the Original Registration Agreement in accordance with
Section 2.1 above, and in connection with the New Placement and the withdrawal
of the Registration Statement, the Holders shall enter into a new Registration
Rights Agreement (the "New Registration Agreement"), for the registration of the
shares of Common Stock issuable upon conversion of their respective Conversion
Shares. The New Registration Agreement shall be substantially in the form of the
Registration Rights Agreement being entered into between the Company and the
Investors in the New Placement, which Agreement is in the form of Exhibit B
attached hereto. The Company shall deliver a New Registration Agreement to each
Holder prior to the Placement Closing, and the Holder shall promptly execute and
deliver such Agreement to the Company.
2.3 Acknowledgment, Waiver of Rights. The Holders hereby acknowledge
upon the termination of the Original Registration Agreement, the Company will
have no further obligation to the Holders under the Original Registration
Agreement. The Holders consent to the Company withdrawing the Registration
Statement. In addition, each Holder waives any rights he may have against the
Company for fees under Section 2.2 of the Original Registration Agreement.
3. Representations and Warranties of the Holders. Each Holder hereby
severally, and not jointly, represents and warrants to the Company as follows:
3.1. Authorization. He has the power and capacity to execute and
deliver this Agreement and to perform his obligations thereunder. This
Agreement, and the actions contemplated hereby, constitute valid and legally
binding obligations of the Holder enforceable in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited to laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies.
3.2 No Consents. No notice to, filing with, or authorization,
registration, consent or approval of any governmental authority or other
individual, partnership, corporation, joint stock company, unincorporated
organization or association, trust or joint venture, or a governmental agency or
political subdivision thereof (a "Person") is necessary for the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby by him.
3.3 Ownership of the Notes. He owns the Notes stated to be owned by
him on the signature page hereof beneficially and of record, free and clear of
any liens, claims or encumbrances (collectively, "Encumbrances"). There are no
agreements (i) granting any option, warrant or right of first refusal with
respect to his Notes to any Person, (ii) restricting his right to convert his
Notes as provided herein or (iii) restricting any other of his rights with
respect to his Notes. He has the absolute and unrestricted right, power and
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capacity to convert the Notes as provided herein and to the surrender the Notes
to the Company free and clear of any Encumbrances.
3.4. Disclosure of Information. The Holder has received all the
information that he has requested relating to the Company, the New Placement,
this Agreement, the Series C Preferred Stock and the related agreements and
transactions. The Holder further represents that he has had an opportunity to
ask questions and receive answers from the Company regarding the terms and
conditions of the New Placement. The Holder is not relying on any information
other than this Agreement and the agreements contemplated hereby in entering
into this Agreement.
3.5. Confidential Information. The Holder hereby acknowledges that the
information provided herein regarding the amendment of the Notes, the conversion
of the Notes, the New Placement and the related agreements and transactions
constitute or might constitute material, non-public information ("Confidential
Information") about the Company and he hereby agrees not to trade any securities
of the Company based upon such Confidential Information or to disclose any
Confidential Information to any person or entity that is not a party to this
Agreement other than his advisors.
3.6 No Transfers. Prior to the earlier of (i) the termination of the
New Placement and (ii) the Placement Closing, the Holder shall not sell, assign,
transfer or otherwise dispose of his Notes or any interest therein.
3.7 Securities Law. The Holder acknowledges that the Series C
Preferred Stock and the related Conversion Shares at the time of issuance will
not be registered under the Securities Act of 1933, as amended (the "1933 Act"),
as they are to be issued pursuant to an exemption from the registration
requirements thereunder, and such securities may not be resold or otherwise
transferred except pursuant to a registration statement effective under 1933 Act
or an opinion of counsel to the Company. The Holder further acknowledges that
the certificates for such securities will contain a restrictive legend thereon
referring to the restrictions on sale or other transfer under the 1933 Act.
4. Representation of the Company. The Company represents and warrants
that the execution, delivery and performance by the Company of this Agreement
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary action on the part of the Company's Board
of Directors. This Agreement, and the actions contemplated hereby, constitute
valid and legally binding obligations of the Company enforceable in accordance
with its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as limited to laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies. No notice to, filing with, or authorization, registration,
consent or approval of any Person is necessary for the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby by the Company, except as otherwise stated in this
Agreement.
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5. Miscellaneous.
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5.1. Entire Agreement; Amendment. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
supersedes any prior oral or written agreements between the parties hereto, and
this Agreement may not be modified, amended or terminated except by a written
agreement specifically referring to this Agreement signed by each party hereto.
5.2. Successors and Assigns; Third Party Beneficiaries. This Agreement
shall be binding upon and shall inure to the benefit of each party hereto and
their respective successors, assigns, heirs and administrators. Neither party
hereto may assign its rights or obligations hereunder without the express
written consent of the other party hereto. The New Investors shall be express
third-party beneficiaries of this Agreement and shall have the right to enforce
this Agreement against the Company and the Holders in their own right.
5.3. Additional Documents. Each party hereto shall cooperate, shall
take such further action and shall execute and deliver such further documents as
may be reasonably requested by the other party in order to carry out the
provisions and purposes of this Agreement.
5.4. Specific Performance. Each party hereto hereby acknowledges that
the obligations created herein are unique and that the other parties hereto and
the New Investors would suffer irreparable harm in the event of any breach of
this Agreement by any party hereto for which money damages would not be an
adequate remedy. Accordingly, each party hereto and the New Investors shall have
the right to specific performance of this Agreement and to obtain injunctive
relief in the event of any breach or threatened breach of the terms hereof by
any party hereto in addition to any other remedies available at law or in
equity. No one shall be obligated to post any bond or other security in
connection with any action seeking specific performance of this Agreement or any
other equitable remedy.
5.5. Governing Law. This Agreement and all amendments thereof shall be
governed by and construed in accordance with the laws of the State of New York,
without reference to its conflicts of laws principles.
5.6. Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible in
any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein and no action taken by any Holder pursuant hereto shall
be deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be entitled to
protect and enforce his rights, including without limitation, the rights arising
out of this Agreement, and it shall not be necessary for any other Holder to be
joined as an additional party in any proceeding for such purpose.
5.7 Legal Representation. The Company and each Holder acknowledge that
Xxxxxxx Xxxxxx LLP ("Xxxxxxx Xxxxxx") has represented only the Sands Brothers
Venture Funds and their affiliates in connection with this Agreement, and that
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Xxxxxxx Xxxxxx has not represented any other Holder in any way in connection
therewith. Each Holder also acknowledges that the interests of the Sands
Brothers Venture Funds and their affiliates are different than the interests of
such other Holders and that such other Holders has the sophistication and
ability to look out for its own interest. Each Holder further acknowledges that
it has had the opportunity to be represented by its own legal counsel in
connection with this Agreement and has consulted with and relied upon the legal
representation and advice of such legal counsel in connection therewith.
5.8 Confirmation of Prior Agreements. Except as expressly amended by
this Agreement, the Notes, the Original Registration Agreement and the Security
Agreement shall continue in full force and effect in accordance with the
provisions thereof, and provided further that notwithstanding anything contained
herein to the contrary, the amendments and terminations provided in this
Agreement shall not be effective until the occurrence of the Placement Closing.
5.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[signature pages follow]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date and year first above written.
COMPANY:
CAPRIUS, INC.
By: /s/ Xxxxxxxx Xxxxx
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Name: Xxxxxxxx Xxxxx
Title: _____________________
[SIGNATURE PAGES OF HOLDERS FOLLOW]
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[SIGNATURE PAGE OF HOLDERS]
HOLDER:
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(Signature)
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(Print Name)
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Principal Amount of Notes
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EXHIBIT A
SERIES C PREFERRED STOCK
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EXHIBIT B
NEW REGISTRATION RIGHTS AGREEMENT
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