EXHIBIT 10.4
EXCHANGE AGREEMENT
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THIS EXCHANGE AGREEMENT (this "Agreement") is entered into as of this 15th
day of February, 2005, by and among CAPRIUS, INC., a Delaware corporation (the
"Company"), and the holders listed on Schedule I hereto (each a "Holder" and
collectively, the "Holders").
WITNESSETH:
WHEREAS, from January through March, 2004, the Company issued to the
Holders an aggregate principal amount of Five Hundred Thousand Dollars
($500,000) of promissory notes (the "Notes"), and in February 2005, some of the
Holders provided loans to the Company (the "Loans", and together with the Notes,
sometimes collectively, the "Indebtedness") in the aggregate amount of One
Hundred and Forty-five Thousand Nine Hundred and Twenty-three Dollars
($145,923);
WHEREAS, to induce the Holders to purchase the Notes, the Company secured
its obligations thereunder by granting to the Holders a security interest in
certain proceeds due to or received by the Company or its subsidiary Opus
Diagnostics, Inc., a Delaware corporation ("Opus"), resulting from royalties
under a Royalty Agreement, dated October 9, 2002, by and between Seradyn, Inc.,
a Delaware corporation, and Opus (the "Collateral"), pursuant to a Guaranty and
Security Agreement, dated as of January 29, 2004 by Opus, in favor of Xxxxxxx
Xxxxxx acting in his capacity as agent for himself and the Holders (the
"Agent"), dated January 29, 2004, issued by the Company to the Holders;
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 exchange their outstanding Notes for Series C Preferred Stock
and exchange fifty percent (50%) of their outstanding Loans for Series C
Preferred Stock, as set forth on Schedule I hereto; and
WHEREAS, the parties hereto are entering into this Agreement to exchange
the Notes and fifty percent (50%) of the Loans for 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. Exchange of the Notes, Loans.
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1.1 Notes.
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1.1.1. Exchange of Notes. The Holders agree to exchange the entire
unpaid principal amount of the Notes for shares of Series C Preferred Stock at
the exchange price described in Section 1.1.2 below. The accrued interest on the
Notes shall be paid in cash.
1.1.2. Price. On the date of the closing of the New Placement (the
"Placement Closing"), the entire outstanding principal balance of each Holder's
Note as of the date of the Placement Closing shall be exchanged for that number
of shares of Series C Preferred Stock (such shares, hereinafter the "Note
Exchange Shares") determined by dividing the entire outstanding principal
balance of each Holder's Note as of the date of the Placement Closing by $100,
as set forth on Schedule I hereto.
1.1.3. 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 Note Exchange 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 Note Exchange Shares for which the Note has been
exchanged as set forth on Schedule I hereto and a check in payment of accrued
interest on his Notes. Subject to the foregoing provisions hereof, such exchange
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 Note Exchange Shares at such time.
1.1.4. Termination of Security Agreement, Acknowledgement, Waiver of
Rights. Upon the Placement Closing, the Guaranty and 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
exchange 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 Guaranty and Security Agreement. The
Holders further acknowledge that Agent shall have no further responsibilities or
obligations pursuant to his agency appointment under the Guaranty and Security
Agreement.
1.2 Loans.
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1.2.1. Exchange of Amounts under the Loans. The Holders who hold Loans
as set forth on Schedule I hereto agree to exchange fifty percent (50%) of the
entire unpaid amount of the Loans for shares of Series C Preferred Stock (such
shares, hereafter the "Loan Exchange Shares," and together with the Note
Exchange Shares, the "Exchange Shares") at a price determined by dividing the
principal amount of each Holder's Loan to be exchanged by $100, with cash paid
in lieu of issuance of any fractional Loan Exchange Shares, in an amount
determined by multiplying such fractional amount by $100. The remaining fifty
percent (50%) of the entire unpaid principal amount of the Loans, any accrued
interest on the entire outstanding principal amount of the Loans and payment, if
any, for fractional shares shall be paid in cash.
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1.2.2. Issuance of New Certificates. Promptly following the Placement
Closing, the Company, at its expense, shall deliver to each Holder of Loans, in
such Holder's name, a certificate representing the number of fully paid and
non-assessable Loan Exchange Shares into which fifty percent (50%) of the
principal amount of the Loan has been exchanged as set forth on Schedule I
hereto. Subject to the foregoing provisions hereof, such exchange 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 Loan
Exchange Shares at such time.
1.2.3. Acknowledgment; Waiver of Rights. The Holders of the Loans
acknowledge that upon exchange and payment of the Loans, as provided herein, the
Loans will be fully satisfied as to all amounts due thereunder and the Holders
shall have no claims against the Company arising from the Loans.
2. Representations and Warranties of the Holders. Each Holder hereby
severally, and not jointly, represents and warrants to the Company as follows:
2.1 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.
2.2 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.
2.3 Ownership of the Indebtedness. He owns the Indebtedness stated to be
owned by him on Schedule I 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 Indebtedness to any Person, (ii) restricting his right to
exchange his Indebtedness as provided herein or (iii) restricting any other of
his rights with respect to his Indebtedness. He has the absolute and
unrestricted right, power and capacity to exchange the Indebtedness as provided
herein and to surrender the Indebtedness to the Company free and clear of any
Encumbrances.
2.4 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.
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2.5 Confidential Information. The Holder hereby acknowledges that the
information provided herein regarding the exchange of the Indebtedness, 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.
2.6 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 Indebtedness or any interest therein.
2.7 Securities Law. The Holder acknowledges that the Series C Preferred
Stock and the related Exchange 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 the 1933
Act or an opinion of counsel to the Company; provided that the Holder shall have
the right to have the shares of the Company's common stock issuable to him upon
conversion of his Series C Preferred Stock included in a registration statement
to be filed by the Company pursuant to a Registration Rights Agreement to be
entered into among the Company and the New Investors. 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.
3. 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.
4. Miscellaneous.
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4.1 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.
4.2 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 his or its rights or obligations hereunder without the express
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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.
4.3 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.
4.4 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.
4.5 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.
4.6 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.
4.7 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.
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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
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Title: Vice President
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[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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SCHEDULE I
PRINCIPAL AMOUNTS SHARES OF
SERIES C
HOLDER NOTES LOANS* TOTAL PREFERRED STOCK
-------------------- ----------- ---------- ----------- ---------------
Xxxxxx Xxxxx $150,000.00 $32,000.00 $182,000.00 1,820
Xxxxxxxx Xxxxx 100,000.00 31,179.00 131,179.00 1,311
Xxxxxxxx Xxxxx 85,000.00 0 85,000.00 850
Xxxxxxx Xxxxxx 65,000.00 9,783.00 74,783.00 747
Xxxxxxx Xxxxxxx 50,000.00 0.00 50,000.00 500
Citigroup FBO X. Xxxxx 50,000.00 0.00 50,000.00 500
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TOTAL $500,000.00 $72,962.00 $572,962.00 5,728
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* Represents 50% of the
outstanding principal
amount
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EXHIBIT A
SERIES C PREFERRED STOCK
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