EXHIBIT 10.1
--------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
CAPRIUS, INC.
AND
THE SCHEDULE OF INVESTORS ATTACHED HERETO
--------------------------------------------------------------------------------
Dated April 26, 2004
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is made as of the 26th
day of April, 2004, by and among Caprius, Inc., a Delaware corporation (the
"Company") and the individuals and entities listed on Exhibit A hereto under the
heading "Investors" (each an "Investor" and collectively, the "Investors") who
shall become parties to this Agreement by executing and delivering a financing
signature page in the form attached hereto as Exhibit B (the "Financing
Signature Page").
W I T N E S S E T H:
WHEREAS, the Company desires to sell to the Investors, and the Investors
desire to purchase from the Company, an aggregate of up to $1,500,000 principal
amount of 8% Senior Secured Convertible Promissory Notes (the "Notes"), in the
form attached as Exhibit C hereto; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:
1. Purchase and Sale of Notes.
1.1 Issuance and Sale of Notes. Subject to the terms and conditions of this
Agreement, the Investors agree to purchase at the Closing (as hereafter
defined), and the Company agrees to issue and sell to the Investors at the
Closing, the amount of Notes set forth opposite each Investor's name on Exhibit
A hereto, for an aggregate purchase price of up to One Million Five Hundred
Thousand ($1,500,000) Dollars (the "Purchase Price").
1.2 Closing.
(a) The initial closing of the purchase and sale of a minimum of
$500,000 principal amount of Notes (the "Minimum Amount") under this Agreement
(the "Initial Closing") shall be held at the offices of Sands Brothers
International Limited, 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (or remotely via
the exchange of documents and signatures), on May 12, 2004 or at such other time
and place upon which the Company and the Investors shall agree (the date of the
Initial Closing is hereinafter referred to as the "Initial Closing Date"). The
subsequent closing(s) of the purchase and sale of up to an additional $1,000,000
of principal amount of Notes in excess of the Minimum Amount (the "Maximum
Amount") under this Agreement (the "Subsequent Closing(s)") shall take place at
a time agreed upon by the Company and the Investors participating in the
respective Subsequent Closing (the date(s) of the Subsequent Closing(s) is
hereinafter referred to as the "Subsequent Closing Date(s)"), which shall occur
in any event no later than June 11, 2004. The Investors agree that any
additional persons or entities that acquire Notes at any "Subsequent Closing"
shall become "Investors" under this Agreement with all the rights and
obligations attendant thereto, upon their execution of this Agreement without
further action by any other Investor. For purposes of this Agreement, the terms
"Closing" and "Closing Date", unless otherwise indicated, refer to the
applicable closing and closing date of the Initial Closing or the Subsequent
Closing(s), as the case may be.
(b) Sands Brothers International Limited ("SBIL"), in its capacity as
selected dealer for the Company, shall direct Investors to forward their
Purchase Price into a non-interest bearing escrow account in the Company's name
at Signature Bank, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or with such
other escrow agent appointed by SBIL and the Company. In the event that the
Company does not succeed in receiving and accepting subscriptions for at least
the Minimum Amount on or before May 12, 2004, subject to an extension to June
11, 2004 at the discretion of SBIL and the Company, the Company will refund all
subscription funds, without interest accrued thereon or deduction therefrom, and
will return this Agreement to each subscriber, and this Agreement will be
terminated and of no force or effect.
(c) At the Closing, the Company shall deliver or cause to be delivered
to the Investors the following:
(i) At the Initial and Subsequent Closings, the Notes being
purchased at such Closing, duly executed by the Company;
(ii) At the Initial Closing, the Registration Rights Agreement,
in the form attached hereto as Exhibit D, duly executed by the Company
("Registration Rights Agreement");
(iii) At the Initial Closing, a legal opinion of Xxxxxx Xxxx &
Priest LLP, counsel to the Company, in substantially the form attached hereto as
Exhibit E, with a "bring-down of such opinion for the final Subsequent Closing;
(iv) At the Initial and Subsequent Closings, the certificates and
documents contemplated by Section 4.3 and 4.6 hereto;
(v) At the Initial Closing, the Pledge and Security Agreement of
the Company, in the form attached hereto as Exhibit F ("Security Agreement"),
and the related financing statements on Form UCC-1, duly executed by the Company
and original securities being pledged.
(d) At the Closing, the Investor shall deliver or cause to be
delivered to the Company payment of the amount of the Purchase Price equal to
the principal amount of the Notes being purchased at such Closing, which said
funds shall be released from the Escrow Account.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investors, except as set forth on a Schedule of
Exceptions to Representations and Warranties attached hereto as Exhibit G (the
"Schedule of Exceptions"), the following:
2.1 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity except as disclosed in the SEC Reports (as hereinafter
defined) (each, a "Subsidiary" and collectively, the "Subsidiaries"). Unless the
context requires otherwise, all references herein to the "Company" shall refer
to the Company and its Subsidiaries. The Company is not a party to any joint
venture, partnership, or similar written arrangement.
3
2.2 Organization, Good Standing, and Qualification. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and has all requisite corporate power and
authority to carry on its business as now conducted. The Subsidiaries are duly
organized in their respective jurisdictions of organization, validly existing
and in good standing in such respective jurisdictions and each has the power and
authority to carry on its respective business as now conducted. The Company and
the Subsidiaries are duly qualified to transact business and are in good
standing in each jurisdiction in which the failure so to qualify would have a
Material Adverse Effect (as hereafter defined).
2.3 Capitalization and Voting Rights. The number of authorized, issued
and outstanding capital stock of the Company is set forth in Exhibit G. Except
as disclosed in Exhibit G, no securities of the Company or any Subsidiary are
entitled to preemptive or similar rights, nor is any holder of securities of the
Company or any Subsidiary entitled to preemptive or similar rights arising out
of any agreement or understanding with the Company or any Subsidiary by virtue
of any of the Transaction Documents (defined hereinafter). Except as disclosed
in Exhibit G, there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, except as a result of the purchase and sale of the Securities, or
rights or obligations convertible into or exchangeable for, or giving any Person
(as defined below) any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings, or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock.
2.4 Authorization. All corporate action on the part of the Company
necessary for the authorization, execution, and delivery of this Agreement, the
Registration Rights Agreement, the Note and the Security Agreement
(collectively, the "Transaction Documents"), the performance of all obligations
of the Company hereunder and thereunder and the authorization, issuance (or
reservation for issuance), and delivery of the Note being sold hereunder, the
Common Stock issuable upon conversion of the Note (collectively, the
"Securities"), has been taken or will be taken prior to the Closing, and the
Transaction Documents constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Transaction Documents may
be limited by applicable federal or state laws.
2.5 Valid Issuance of Note and Common Stock. The Note being purchased
by the Investors hereunder, when issued, sold, and delivered in accordance with
the terms hereof for the consideration provided for herein, will be duly and
validly issued, and, based in part upon the representations of the Investors in
this Agreement, will be issued in compliance with all applicable federal and
state securities laws. The Common Stock issuable upon conversion of the Note
have been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Note, shall be duly and validly issued, fully
paid and nonassessable, and issued in compliance with all applicable securities
laws, as presently in effect, of the United States and each of the states whose
securities laws govern the issuance of the Note hereunder.
4
2.6 Filings, Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) a proper Form D in accordance with
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), and applicable Blue Sky filings; (ii) a financing statement
on Form UCC-1; and (iii) in all other cases where the failure to obtain such
consent, waiver, authorization or order, or to give such notice or make such
filing or registration could not have or result in, individually or in the
aggregate, a material adverse effect (financial or otherwise) on the business,
property, prospects, assets or liabilities of the Company and its Subsidiaries
taken as a whole ("Material Adverse Effect").
2.7 Litigation. Except as described in the SEC Reports (specifically
the Form 10-KSB and 10QSB contained in the materials included with this
Agreement), there is no action, suit, proceeding, claim or investigation pending
or, to the knowledge of the Company, currently threatened against the Company
which questions the validity of the Transaction Documents, or the right of the
Company to enter into any of them, or to consummate the transactions
contemplated hereby or thereby, or which might result, either individually or in
the aggregate, in any Material Adverse Effect, nor is the Company aware that
there is any basis for the foregoing. The foregoing includes, without
limitation, actions, pending or threatened (or any basis therefor known to the
Company), involving the prior employment of any of the Company's employees,
their use in connection with the Company's business of any information or
techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers. The Company is not a
party or subject to the provisions of any order, writ, injunction, judgment, or
decree of any court or government agency or instrumentality.
2.8 Patents and Trademarks. The Company has sufficient title and
ownership of, or has otherwise acquired rights with respect to, all patents,
trademarks, service marks, trade names, copyrights, trade secrets, information,
inventions, proprietary rights, and processes necessary for its business as now
conducted without any conflict with or infringement of the rights of others. The
Company has not received any communications alleging that the Company has
violated or, by conducting its business would violate any of the patents,
trademarks, service marks, trade names, copyrights, or trade secrets, or other
proprietary rights of any other person or entity. The Company is not aware that
any of its employees, officers, or consultants are obligated under any contract
(including licenses, covenants, or commitments of any nature) or other
agreement, or subject to any judgment, decree, or order of any court or
administrative agency, that would interfere with the use of such employee's,
officer's, or consultant's commercially reasonable efforts to promote the
interests of the Company or that would conflict with the Company's business as
conducted. Neither the execution nor delivery of the Transaction Documents, nor
the carrying on of the Company's business by the employees of the Company, nor
the conduct of the Company's business, will, to the Company's knowledge,
conflict with or result in a breach of the terms, conditions, or provisions of,
or constitute a default under, any contract, covenant, or instrument under which
any of such employees, officers or consultants are now obligated.
5
2.9 Compliance with Other Instruments. The Company is not in violation
or default of any provisions of its Certificate of Incorporation or Bylaws or,
to its knowledge, of any instrument, judgment, order, writ, decree, mortgage,
indenture, lease, license or contract to which it is a party or by which it is
bound or, to its knowledge, of any provision of federal, state, or local
statute, rule, or regulation applicable to the Company, except as would not
reasonably be expected to have a Material Adverse Effect. The execution,
delivery, and performance of the Transaction Documents and the consummation of
the transactions contemplated thereby will not result in any such violation or
be in conflict with or constitute, with or without the passage of time and
giving of notice, either a default under any such provision, instrument,
judgment, order, writ, decree or contract, or an event which results in the
creation of any lien, charge, or encumbrance upon any assets of the Company or
the suspension, revocation, impairment, forfeiture, or nonrenewal of any
material permit, license, authorization, or approval applicable to the Company,
its business or operations, or any of its assets or properties, except as would
not reasonably be expected to have a Material Adverse Effect.
2.10 Permits. The Company has all material franchises, permits,
licenses, and any similar licensing authorities necessary for the conduct of its
business as now being conducted by it, the lack of which could materially and
adversely affect the business, properties, prospects, or financial condition of
the Company and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any of such
franchises, permits, licenses, or other similar authority.
2.11 Compliance with Laws. Except as set forth in the SEC Reports, the
conduct of business by the Company and each Subsidiary as presently and proposed
to be conducted is not subject to continuing oversight, supervision, regulation
or examination by any governmental official or body of the United States or any
other jurisdiction wherein the Company or any Subsidiary conducts or proposes to
conduct such business, except such regulation as is applicable to commercial
enterprises generally and would not otherwise have a Material Adverse Effect.
Neither the Company nor any of the Subsidiaries has received any written notice
of any violation of or noncompliance with, any federal, state, local or foreign
laws, ordinances, regulations and orders (including, without limitation, those
relating to environmental protection, occupational safety and health, federal
securities laws, equal employment opportunity, consumer protection, credit
reporting, "truth-in-lending", and warranties and trade practices) applicable to
its business or to the business of any Subsidiary, the violation of, or
noncompliance with, which would have a materially adverse effect on either the
Company's business or operations, or that of any Subsidiary, and the Company
knows of no facts or set of circumstances which would give rise to such a
notice.
2.12 Disclosure. This Agreement, when taken together with the
Disclosure Materials (as defined below), do not contain any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements herein or therein not misleading.
2.13 Title to Property and Assets. The Company owns its property and
assets free and clear of all mortgages, liens, loans, pledges, security
interests, claims, equitable interests, charges, and encumbrances, except such
encumbrances and liens which arise in the ordinary course of business and do not
materially impair the Company's ownership or use of such property or assets and
6
except for an existing lien on certain royalty payments that the Company or its
subsidiary, Opus Diagnostics, Inc., receives pursuant to a Royalty Agreement
dated October 9, 2002. With respect to the property and assets it leases, the
Company is in compliance with such leases and, to its knowledge, holds a valid
leasehold interest free of any liens, claims, or encumbrances.
2.14 Tax Reporting. Since 1999, the Company has made or filed all
federal, state and foreign income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject and which are
due (unless and only to the extent that the Company has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes or has obtained an extension of the deadline for such filing) and has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
To the Company's knowledge, there are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company know of no basis for any such claim. The Company has not executed
a waiver with respect to the statute of limitations relating to the assessment
or collection of any foreign, federal, statue or local tax. To the Company's
knowledge, none of the Company's tax returns is presently being audited by any
taxing authority.
2.15 Insurance. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed, and the Company has insurance against other
hazards, risks, and liabilities to persons and property to the extent and in the
manner customary for companies in similar businesses similarly situated.
2.16 SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period as
the Company was required by law to file such material) (the foregoing materials
being collectively referred to herein as the "SEC Reports" and, together with
the Schedule of Exceptions to this Agreement, the "Disclosure Materials"),
although such filings have not been made on a timely basis. As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Securities and Exchange Commission (the "SEC") promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or assets of
the Company are subject have been filed as exhibits to the SEC Reports to the
extent required. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the SEC with respect thereto as in effect at
the time of filing. Such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise specified in
7
such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments. Except as set
forth on Exhibit G or except as specifically disclosed in the Disclosure
Materials, since December 31, 2003 (a) there has been no event, occurrence or
development that has had or that could reasonably be expected to have or result
in a Material Adverse Effect, (b) the Company has not incurred any liabilities
(contingent or otherwise) other than (x) liabilities incurred in the ordinary
course of business consistent with past practice and (y) liabilities not
required to be reflected in the Company's financial statements pursuant to GAAP
or required to be disclosed in filings made with the SEC, (c) the Company has
not altered its method of accounting or the identity of its auditors and (d) the
Company has not declared or made any payment or distribution of cash or other
property to its stockholders or officers or directors (other than in compliance
with existing Company stock or stock option plans) with respect to its capital
stock, or purchased, redeemed (or made any agreements to purchase or redeem) any
shares of its capital stock. Additionally, since the adoption of the
Xxxxxxxx-Xxxxx Act of 2002 (the "New Act") and to the extent that the Company is
subject to the New Act as an OTC Bulletin Board company, the Company, to its
knowledge, after due inquiry, has complied in all material respects with the
laws, rules and regulation under the New Act.
2.17 No Conflict of Interest. Except as otherwise disclosed in the
Disclosure Materials, the Company is not indebted in excess of $50,000, directly
or indirectly, to any of its employees, officers or directors or to their
respective spouses or children, in any amount whatsoever other than in
connection with expenses or advances of expenses incurred in the ordinary course
of business or relocation expenses of employees, officers and directors, nor is
the Company contemplating such indebtedness as of the date of this Agreement.
Except as otherwise disclosed in the Disclosure Materials, to the Company's
knowledge, none of said employees, officers or directors, or any member of their
immediate families, is directly or indirectly indebted to the Company (other
than in connection with purchases of the Company's stock) or have any direct or
indirect ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship or any firm or
corporation which competes with the Company, nor is the Company contemplating
such indebtedness as of the date of this Agreement, except that employees,
officers, directors and/or shareholders of the Company may own stock in publicly
traded companies (not in excess of 1% of the outstanding capital stock thereof)
which may compete with the Company. Except as otherwise disclosed in the
Disclosure Materials, to the Company's knowledge, no employee, shareholder,
officer or director, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company, nor does any
such person own, directly or indirectly, in whole or in part, any material
tangible or intangible property that the Company uses or contemplates using in
the conduct of its business. The Company is not a guarantor or indemnitor of any
indebtedness of any other Person.
2.18 Solvency. The Company is solvent after giving effect to the
transactions contemplated by this Agreement, the Notes and the Transaction
Documents. The Company does not presently intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).
8
2.19 Foreign Assets Control Legislation. Neither the sale of the Notes
by the Company hereunder nor its use of the proceeds thereof will violate the
Trading with the Enemy Act, as amended, or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating
thereto. Without limiting the foregoing, neither the Company nor any of its
subsidiaries (a) is a person whose property or interests in property are blocked
pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) engages in any
dealings or transactions, or be otherwise associated, with any such person. The
Company and its subsidiaries are in compliance with the USA Patriot Act of 2001
(signed into law October 26, 2001).
3. Representations and Warranties of the Investors. Each of the Investors,
severally and not jointly, hereby represent and warrant that:
3.1 Authorization. The Transaction Documents constitute valid and
legally binding obligations of the Investor enforceable in accordance with their
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 by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
3.2 Purchase Entirely for Own Account. The Notes to be purchased by
the Investor and the Common Stock issuable upon conversion of the Notes
(collectively, the "Securities") will be acquired for investment for the
Investor's own account and not with a view to the resale or distribution of any
part thereof. The Investor represents that it has full power and authority to
enter into this Agreement and this Agreement does not conflict with any
agreement to which it is a party and may be bound.
3.3 Disclosure of Information. The Investor acknowledges that it has
received all the information that it has requested relating to the Company and
the purchase of the Note. The Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Note. The Investor is not relying on
any information other than this Agreement and the Disclosure Materials in making
his investment. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement or
the right of the Investor to rely thereon.
3.4 Accredited Investor. The Investor is an "accredited investor"
within the meaning of Rule 501 of Regulation D under the Securities Act, as
presently in effect. The Investor is also knowledgeable, sophisticated and
experienced in making, and is qualified to make decisions with respect to the
transactions contemplated hereby. The Investor understands the risks attendant
to the investment in the Notes and is able to bear the loss of his entire
investment.
3.5 Restricted Securities. Investor understands that the Note (and the
shares of Common Stock issuable upon conversion of the Note) that it is
purchasing is characterized as "restricted securities" under the federal
9
securities laws inasmuch as it is being acquired from the Company in a
transaction not involving a public offering, and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act, only in certain limited circumstances. In this connection,
the Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
3.6 Legends. It is understood that the instruments evidencing the
Notes (and the certificates evidencing the Common Stock issuable upon conversion
thereof) may bear one or all of the following legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AS SET FORTH IN THIS CERTIFICATE. THE
SECURITIES REPRESENTED HEREBY MAY NOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN OPINION
OF COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY,
TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER, OR DISPOSITION
MAY BE EFFECTUATED WITHOUT REGISTRATION UNDER THE SECURITIES
ACT."
3.7 Agent Appointment.
(a) Each Investor hereby confirms the appointment of Cap Agent Associates
LLC to act as its agent ("Agent") pursuant to the Notes. In such capacity, Agent
shall only be obligated to take action and shall act as directed by the Note
Requisite Holders (as hereinafter defined); neither Agent nor any of its
officers, directors, managers, members, employees or affiliates shall be
responsible to Investors for any losses that any of such Investors may incur
hereunder. The Agent shall be entitled to conclusively rely on any such
direction or consent from the Note Requisite Holders. In addition, the Agent may
act in reliance upon any signature believed by it to be genuine, and may assume
that any person who has been designated by the Investors to give any written
instructions, notice or receipt, or make any statements in connection with the
provisions hereof has been duly authorized to do so. Agent shall have no duty to
make inquiry as to the genuineness, accuracy or validity of any statements or
instructions or any signatures on statements or instructions.
(b) Each Investor hereby confirms the appointment of Agent to act as its
security agent (the "Security Agent") under the Security Agreement with respect
to the Collateral (as defined in the Security Agreement), to take all actions as
contemplated in such capacity in the Security Agreement and to be entitled to
the benefits of the provisions of the Security Agreement. Each Investor
acknowledges that actions by the Security Agent under the Security Agreement
shall be authorized by the Note Requisite Holders.
10
(c) Agent may resign as Agent or Security Agent at any time by giving
written notice ("Notice") to the Company and the Investors, which resignation
shall be effective 30 days from the date of the Notice ("Effective Resignation
Date"). Upon the earlier of (i) the Effective Resignation Date or (ii) the
appointment of a successor Agent or Security Agent by the Note Requisite
Holders, Agent shall have no further obligations hereunder or pursuant to the
applicable agreements. In the event a successor Agent is not appointed by the
Note Requisite Holders on or before the Effective Resignation Date, then Agent
shall have the right to deliver any Collateral held by it with a clerk of a
court of competent jurisdiction or a third party escrow provider pending the
appointment of a successor Agent by the Note Requisite Holders.
(d) For purposes hereof, "Note Requisite Holder(s)" shall mean holders of
Notes representing at least 51% of the aggregate amount of principal and accrued
interest then outstanding under such Notes.
(e) Each Investor hereby appoints SBIL to act as its agent ("Reg Rights
Agent") on its behalf for the limited purposes described in the Registration
Rights Agreement.
(f) In Agent's capacity as Agent and Security Agent, and in SBIL's capacity
as Reg Rights Agent, the Company and the Investors each agree to indemnify and
hold the Agent and Reg Rights Agent harmless from and against any and all
expenses (including counsel fees), liabilities, claims, damages, actions, suits
or other charges incurred by or assessed against the Agent and Reg Rights Agent
for anything done or omitted by them in the performance of their duties, except
as a result of their own gross negligence or willful misconduct.
3.8 Investor Questionnaire. The Investor covenants to execute and
deliver to the Company at or before the Closing an investor questionnaire
supplied by the Company.
4. Conditions of the Investors' Obligations at Closing. The obligations of
the Investors under subsection 1.2(d) of this Agreement is subject to the
fulfillment on or before the Closing of each of the following conditions:
4.1 Representations and Warranties. The representations and warranties
of the Company contained in Section 2 hereof shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
4.2 Performance. The Company shall have performed and complied with
all agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
4.3 Compliance Certificate. The President of the Company shall deliver
to the Investors, at the Closing, a certificate certifying that the conditions
specified in Sections 4.1 and 4.2 have been fulfilled and stating that, except
as set forth in the Disclosure Materials, there has been no adverse change in
the business, affairs, prospects, operations, properties, assets, or condition
of the Company since December 31, 2003.
4.4 Proceedings and Documents. All corporate and other proceedings in
11
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Investors and counsel to the Investors, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
4.5 Opinion of Company Counsel. The Investors shall have received from
Xxxxxx Xxxx & Priest LLP, an opinion, dated as of the Closing, in form attached
hereto as Exhibit E.
4.6 Good Standing Certificates. The Company shall have delivered to
the Investors, dated as of a date within five (5) business days of each Closing,
a certificate issued by the proper authority in its jurisdiction of organization
to the effect that it is legally existing and in good standing.
4.7 Secretary's Certificate. The Company shall have delivered to the
Investors a certificate executed by the Secretary of the Company dated as of the
Closing certifying to the resolutions adopted by the Company's Board of
Directors relating to the transactions contemplated by this Agreement; and (b)
the Amended and Restated Articles of Incorporation and Bylaws of the Company.
4.8 Delivery of Note. The Company shall have delivered the Notes as
specified in Section 1.
4.9 Transaction Documents. The Company and the Investors shall have
entered into each and all of the Transaction Documents.
4.10 SBIL Agreement. On or before the Closing, an agreement shall be
executed by the Company and SBIL, in form and substance mutually agreed upon by
the parties (the "SBIL Agreement"), pursuant to which SBIL shall be retained as
a selected dealer.
5. Conditions of the Company's Obligations at Closing. The obligations of
the Company to the Investors under this Agreement is subject to the fulfillment
on or before any Closing of each of the following conditions by the Investors:
5.1 Representations and Warranties. The representations and warranties
of the Investors contained in Section 3 shall be true on and as of such Closing
with the same effect as though such representations and warranties had been made
on and as of such Closing.
5.2 Payment of Purchase Price. The Investors shall have delivered the
purchase price specified in Section 1.2.
5.3 Transaction Documents. The Company and the Investors shall have
entered into each and every Transaction Document.
6. Indemnification. The Company agrees to indemnify and hold harmless
Investors and any of Investors' general partners, employees, officers,
directors, members, managers, agents and other representatives (collectively,
the "Indemnitees"), against any investigations, proceedings, claims or actions
12
and for any expenses, damages, liabilities or losses (joint or several) arising
out of such investigations, proceedings, claims or actions, to which the
Indemnitees may become subject, whether under the Exchange Act or any rules or
regulations promulgated thereunder, the Exchange Act or any rules or regulations
promulgated thereunder, or any state law or regulation, or common law, arising
out of, related to or in any way attributable to the Indemnitee's purchase of
the Notes, including, but not limited to, investigations, proceedings, claims or
actions and any expenses, losses, damages or liabilities (or actions in respect
thereof) that arise out of or are based upon any breach of any representation,
warranty, agreement, obligation or covenant of the Company contained herein. The
Company also agrees to reimburse the Indemnitees for any legal or other expenses
reasonably incurred in connection with investigating or defending any such
investigations, proceedings, claims or actions, as such expenses or other costs
are incurred. The Investor agrees to indemnify and hold harmless the Company,
Agent, Reg Rights Agent and their respective officers, directors, employees,
agents, control persons and affiliates from and against all losses, liabilities,
claims, damages, costs, fees and expenses whatsoever (including, but not limited
to, any and all expenses incurred in investigating, preparing or defending
against any litigation commenced or threatened) based upon or arising out of any
false representation or warranty or breach by the Investor of any material
covenant or agreement made by the Investor herein or in any other document
delivered in connection with this Agreement.
7. Miscellaneous.
7.1 Survival of Warranties. All of the representations and warranties
made herein shall survive the execution and delivery of this Agreement for a
period of eighteen (18) months. The Investors are entitled to rely, and the
parties hereby acknowledge that the Investors have so relied, upon the truth,
accuracy and completeness of each of the representations and warranties of the
Company contained herein, irrespective of any independent investigation made by
Investors. The Company is entitled to rely, and the parties hereby acknowledge
that the Company has so relied, upon the truth, accuracy and completeness of
each of the representations and warranties of the Investors contained herein,
irrespective of any independent investigation made by the Company.
7.2 Successors and Assigns. This Agreement is personal to each of the
parties and may not be assigned without the written consent of the other
parties; provided, however, that any of the Investors shall be permitted to
assign its rights under this Agreement and the Transaction Documents to any
affiliate of such Investor who meets the suitability standards and becomes a
party to this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York as applied to agreements among New York
residents entered into and to be performed entirely within New York. The Company
(1) agrees that any legal suit, action or proceeding arising out of or relating
to this Agreement shall be instituted exclusively in New York State Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New York, (2) waives any objection which the Company may
have now or hereafter to the venue of any such suit, action or proceeding, and
(3) irrevocably consents to the jurisdiction of the New York State Supreme
Court, County of New York, and the United States District Court for the Southern
13
District of New York in any such suit, action or proceeding. The Company further
agrees to accept and acknowledge service of any and all process which may be
served in any such suit, action or proceeding in the New York State Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New York and agrees that service of process upon the
Company mailed by certified mail to the Company's address shall be deemed in
every respect effective service of process upon the Company, in any such suit,
action or proceeding. THE PARTIES HERETO AGREE TO WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.
7.4 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. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
7.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice, authorization,
request or demand required or permitted to be given under this Agreement shall
be given in writing and shall be deemed effectively given upon personal delivery
to the party to be notified or three (3) days following deposit with the United
States Post Office, by registered or certified mail, postage prepaid, or two
days after it is sent by an overnight delivery service, or when sent by
facsimile with machine confirmation of delivery addressed as follows:
If to the Investors to such address as is set forth on Exhibit A
annexed hereto:
With a copy to:
Xxxxxxx Krooks LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to Company, to:
Caprius, Inc.
Xxx Xxxxxx Xxxxx
Xxxx Xxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxxx Xxxxx, CFO
14
With a copy to:
Xxxxxx Xxxx & Priest LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxx X. Xxxx, Esq.
Any party may change its address for such communications by giving notice
thereof to the other parties in conformity with this Section.
7.7 Finder's Fee. Each party represents that it neither is nor will be
obligated for any finders' or brokers' fee or commission in connection with this
transaction; provided, however, that the Company is obligated to pay certain
compensation upon consummation of the transactions contemplated hereby to SBIL
pursuant to the SBIL Agreement described in Section 4.10 hereto.
7.8 Transaction Expenses; Enforcement of Transaction Documents. The
Company and each Investor shall pay their respective costs and expenses incurred
with respect to the negotiation, execution, delivery and performance of this
Agreement; provided, however, that if the Closing is effected, the Company shall
promptly make payment to a law firm designated by SBIL, for up to $20,000, of
legal fees and expenses ("Legal Expense Obligation") as well as a
non-accountable expense allowance to SBIL equal to one percent (1%) of the
aggregate principal amount of Notes sold hereunder to be paid at each Closing.
If any action at law or in equity is necessary to enforce or interpret the terms
of the Transaction Documents, the prevailing party shall be entitled to
reasonable attorney's fees, costs, and necessary disbursements in addition to
any other relief to which such party may be entitled.
7.9 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Note Requisite Holders;
provided, however, that this Agreement may not be amended and the observance of
any term hereunder may not be waived with respect to any Investor without the
written consent of such Investor unless such amendment or waiver applies to all
Investors in the same fashion. Any amendment or waiver effected in accordance
with this paragraph shall be binding upon each holder of any securities
purchased under this Agreement at the time outstanding, each future holder of
all such securities, and the Company.
7.10 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
15
representations, or covenants except as specifically set forth herein or
therein.
7.12 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Investor shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such purpose.
7.13 Representation. Each party hereto acknowledges that certain
affiliates of Agent that are purchasing Notes hereunder (collectively, the
"Sands Entities" and each, a "Sands Entity") retained Xxxxxxx Xxxxxx LLP ("LK")
to represent the Sands Entities in connection with the Agreement and the
Transaction Documents, that the Sands Entities' interests may not necessarily
coincide with the interests of the other Investors, and that each Investor has
consulted with, or has had the opportunity to consult with, its own legal
counsel and has not relied on LK for legal counsel in connection with this
transaction.
16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Caprius, Inc.
By: /s/ Xxxxxx Xxxxx
---------------------------------
Name: Xxxxxx Xxxxx
Title: President Officer
EXHIBIT G
SCHEDULE OF EXCEPTIONS
2.3 Capitalization
--------------
Common Stock, $.01 par value.
50,000,000 shares authorized
20,446,562 shares issued and outstanding
(excluding 22,500 shares held in treasury)
Preferred Stock, $.01 par value
1,000,000 shares authorized
27,000 shares designated as Series B issued and
outstanding which are currently convertible into 1,159,793
shares of Common Stock.
Warrants - see attached schedule.
Options:
See Note I [4] to Notes to a 2003 audited financial statements
in Form 10-KSB for fiscal year ended September 30, 2003.
See Note 4 to Notes to Condensed Consolidated Financial
Statements in Form 10-QSB for fiscal quarter ended December
31, 2003 (the "December 2003 Form 10-QSB").
2.14 Tax Reporting
-------------
The Company is delinquent in filing its federal and state income tax
returns for the fiscal year ended September 30, 2003, and did not filed
extensions of time to file, however, it has reserved on its financial
statements the amounts payable thereunder.
2.16 SEC Reports; Financial Statements
---------------------------------
On March 15, 2004, the Company changed its accountants to Xxxxxx & Xxxxxxxx
LLP, see Form 8-K for an event of March 15, 2004.
2.17 No Conflict of Interest.
-----------------------
In addition to the $500,000 bridge loan disclosed in Liquidity and Capital
Resources in Item 2 to the December 2003 Form 10-QSB, the Company recently
received advances aggregating $32,385 to be repaid at the Initial Closing
from the following:
Lender Amount
------ ------
Xxxxxx Xxxxx $ 7,385
Xxxxxxx Xxxxxx 25,000
