EXHIBIT 10.4
CAPRIUS, INC
Xxx Xxxxxx Xxxxx
Xxxx Xxx, Xxx Xxxxxx 00000
March 27, 2000
Xx. Xxxxxxxx Xxxxx
Xx. Xxxx Xxxxx
Xx. Xxxxx Xxxxxxx
Ladies and Gentlemen:
In consideration of your purchase of an aggregate of Four Hundred and
Fifty-One Thousand (451,000) Units in Caprius, Inc., a Delaware corporation (the
"Company"), in a placement (the "Placement") pursuant to a Stock Purchase
Agreement, dated as of March 27, 2000 (the "Purchase Agreement"), the Company is
granting to you, Xxxxxxxx Xxxxx ("X. Xxxxx"), Xxxx Xxxxx and Xxxxx Xxxxxxx (the
"Holders"), the rights set forth herein. This letter (the "Letter Agreement")
sets forth our mutual agreement as to such rights.
The Units consisted of (i) three (3) shares of Common Stock, $.01 par
value (the "Common Stock"), of the Company, (ii) four (4) redeemable Series A
Warrants and (iii) two (2) redeemable Series B Warrant to purchase shares of
Common Stock (collectively with the Series A Warrants referred to herein as the
"Warrants" and all shares underlying such Warrants are collectively referred to
herein as the "Warrant Shares"). The Units, Common Stock, Warrants and/or the
Warrants Shares are sometimes hereinafter collectively referred to as the
"Securities".
1. Designation of Directors. Upon the closing of the Placement, X. Xxxxx as
------------------------
designee for the Holders shall have the right to designate two (2) members of
the Board of Directors (the "Designees"), one (1) of whom shall be appointed to
the Compensation Committee of the Board of Directors; provided, however, the
Designees are reasonably acceptable to the current Board of Directors. Xxxxxx
Xxxx, Xxxxxx Xxxxxxx, III and X. Xxxxx are hereby deemed reasonably acceptable
to the current Board of Directors for the purposes of the preceding sentence.
The Designees shall be added to the Board of Directors either to fill vacancies
or the number of members of the Board of Directors shall be increased to
accommodate the Designees. At each meeting of stockholders for the election of
directors held at any time prior to March 27, 2003, the Company shall include
the two Designees on the management slate of directors, subject to the
following: (i) if the Holders cease to Beneficially Own (on the basis of
"beneficial ownership" as defined under Section 13(d) of the Securities Exchange
Act of 1934) in aggregate at least ten percent (10%) of the Company's
outstanding Common Stock on a fully-diluted basis, the Holders would have the
right to designate only one (1) person to be a director; and (ii) if the Holders
sell or otherwise dispose of an aggregate of fifty percent (50%) of the
1
Securities Beneficially Owned by them upon the closing of the Placement, their
right to designate directors pursuant to this Letter Agreement shall terminate.
2. Voting Agreement.
----------------
2.1 With respect to the Designation of Directors under Paragraph 1 above, and in
consideration of each Holder's purchase of Units in the Placement, Xxxxxxxx
Xxxxx ("Xxxxx") and Xxxxxx Xxxxx ("Xxxxx") hereby agree to vote shares of the
Company's Common Stock Beneficially Owned by them as of the acceptable record
date for the two Designees at each meeting of stockholders or in any consent in
lieu of a meeting of stockholders with respect to the election of directors held
at any time prior to March 27, 2003, subject to earlier termination pursuant to
the provisos in Section 1 hereof.
2.2 Each Holder hereby agrees to vote all shares of Common Stock of the Company,
which he beneficially owns as of the applicable record date, for Joels and
Xxxxx, at each meeting of stockholders or in any consent in lieu of a meeting of
stockholders with respect to the election of directors held at any time prior to
March 27, 2003, subject to earlier termination pursuant to the provisos in
Section 1 hereof.
2.3 Nothing in this Section 2 shall restrict or limit the Holders, Xxxxx or
Joels from selling or otherwise transferring any Securities of the Company.
3. Preemptive Rights.
-----------------
3.1 If at any time and from time to time, for a period of three (3) years from
the date of this Agreement, the Board of Directors authorizes the Company to
sell (the "Sale"), solely for cash, shares of Common Stock (the "Shares"), or
shares of preferred stock or other securities (the "Derivative Securities") that
are exercisable for, convertible into or exchangeable for shares of Common Stock
in a private placement transaction pursuant to the exemption from registration
under Regulation D of the Securities Act of 1933, the Company shall send a
written notice to each Holder of such authorization (the "Notice of Preemptive
Rights") offering the Holders the right to participate in such Sale. For
purposes of this Section, a "Sale" shall not include (a) an issuance of Shares
directly or underlying options or other rights granted to employees, consultants
or directors under an agreement or an employee incentive plan or otherwise as
incentives or compensation, (b) an issuance of Shares either directly or
underlying Derivative Securities in whole or in part in consideration for
services, (c) the issuance as part of an acquisition transaction or (d) an
issuance to a party (other than the Holders or an affiliate of a Holder) whom
the members of the Board of Directors other than the Designees unanimously
determine would be a strategically important stockholder; provided, however,
that during the first 12 months of this Agreement the Company may only issue up
to ten percent (10%) of its equity on a fully-diluted basis to such party.
3.2 The Notice of Preemptive Rights shall specify the total aggregate number of
Shares to be issued, the price and other terms of the proposed Sale, the amount
of Shares or Derivative Securities to which each Holder is entitled to purchase
and the period during which the Holders may elect to participate in the
2
purchase. The Notice of Preemptive Rights shall be sent to each Holder at least
fifteen (15) days prior to the anticipated closing date of the Sale. If a Holder
desires to participate in the Sale, that Holder shall notify the Company by
sending a notice of acceptance which must be received by the Company within the
time period specified in the applicable Notice of Preemptive Rights.
3.3 The purpose of this preemptive right is to accommodate the Holders' desire
to have the opportunity to maintain the Holders' beneficial percentage interest
(on a fully diluted basis) in the Company's Common Stock upon certain issuances
by the Company. If (i) any Holder fails to purchase at least fifty percent (50%)
of the Shares or Derivative Securities offered in the Notice of Preemptive
Rights in any Sale which closes, or (ii) any Holder sells or otherwise disposes
of fifty percent (50%) of the Securities Beneficially Owned by him upon the
closing of the Placement, that Holder's rights under this Section 3 shall
terminate with respect to any subsequent Sale.
4. Most Favorable Treatment.
------------------------
4.1 The Company shall provide the Holders with the most favorable investors
rights, if any, received by the holders of the next rounds of equity financing
of the Company occurring within one year after the date hereof (other than a
subsequent sale of stock to the Holders or some of them or the issuance or sale
of any securities listed in subsections 3.1(a) through (d)) (the "Subsequent
Investments"), including without limitation dividends and liquidation,
conversion, antidilution, registration, voting, and information rights and the
Company agrees to prepare, execute, and deliver a revised Subscription
Agreement, stock certificates, warrants, and any other documents necessary to
put the Holders in the same position as the holders of any Subsequent
Investments.
4.2 In the event that any Subsequent Investment is at a price per share of less
than the equivalent of $0.722 per share of Common Stock (i.e., less than $0.722
per share of equity security (including exercise price, if any) exercisable for
or convertible into one share of the Company's Common Stock), then the Company
shall issue to each Holder, without additional consideration, the number of
shares of Common Stock to be calculated as follows:
S = (I/P) - (I/.772)
S = Number of shares of Common Stock to be issued to the Holder
hereunder.
I = The aggregate purchase price of the Units sold to the Holder
hereunder.
P = Equivalent price per share of Common Stock of the equity
securities issued in the Subsequent Investment.
4.3 Upon demand of the majority in interest of the Holders of shares issued
under Section 4.2, the Company will use its best efforts to register such shares
in accordance with the terms set forth in Section 6 of the Purchase Agreement
(including without limitation Section 6.1 thereof), and the Holders shall comply
with the applicable provisions of Section 6 in connection therewith (including
without limitation Sections 6.6 and 6.8(b) thereof). The Company's obligation
under this Section 4.3 is limited to one Registration Statement which is
declared effective under the Securities Act, and the Holders may make a demand
under this Section 4.3 only during the period beginning one year after the date
hereof and ending one year thereafter.
4.4 If any Holder sells or otherwise disposes of fifty percent (50%) of the
Securities Beneficially Owned by him upon the closing of the Placement, that
Holder's rights under this Section 4 shall terminate.
5. Notices. Any notices under this Letter Agreement shall be in writing and
-------
shall be deemed to have been given when delivered personally, or if sent by an
overnight delivery service or by telecopier or other electronic means on the
first day of actual receipt. Notices shall be addressed as set forth at the head
of this Letter Agreement or to such other address as either party hereto may
duly give to the other.
6. Fees. The Company shall be responsible for the payment of up to
----
$5,000 of the legal fees incurred with respect to the Holders' purchase of the
Units and their other agreements with the Company, and the Holders shall
be responsible for the balance of their fees and expenses incurred hereunder.
7. Miscellaneous.
-------------
7.1 This Letter Agreement sets forth the entire agreement between the parties
hereto as to the subject matter herein, and cannot be amended, modified or
terminated except by an agreement in writing executed by the parties hereto.
Terms used but not defined herein shall have the meanings ascribed thereto in
the Stock Purchase Agreement. In the event of any inconsistency between this
Letter Agreement and the Stock Purchase Agreement, the provisions of this Letter
Agreement shall govern.
7.2 In the event any provision of this Letter Agreement is invalid, illegal or
unenforceable, the remainder of hereof shall be construed without taking into
effect such invalid, illegal or unenforceable provision.
7.3 This Letter Agreement shall be governed by the laws of the State of
Delaware.
7.4 The terms of this Letter Agreement shall be binding upon the Company and
each Holder, and their successors, assigns, heirs and successors.
Please signify your agreement to the foregoing by executing and
returning the duplicate of this letter. You may retain the original for your
files.
Very truly yours,
CAPRIUS, INC.
By:_______________________
Name:
Title:
Agreed to solely with respect to the voting provision under Section 2 of this
Agreement:
-------------------------------
Xxxxxxxx Xxxxx
-------------------------------
Xxxxxx Xxxxx
This 27th day of March, 2000
--------------------------------
Xxxxxxxx Xxxxx
--------------------------------
Xxxx Xxxxx
--------------------------------
Xxxxx Xxxxxxx
