EXHIBIT 10.5
CAPRIUS, INC.
Xxx Xxxxxx Xxxxx
Xxxx Xxx, Xxx Xxxxxx 00000
April 12, 2004
Sands Brothers International Limited
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Gentlemen:
The undersigned, Caprius, Inc., a Delaware corporation (the "COMPANY"),
proposes to sell to a limited number of accredited investors up to $1,500,000
principal amount of 8% Senior Secured Convertible Promissory Notes (the
"NOTES"). The Notes will be sold pursuant to the terms and conditions of a
certain Securities Purchase Agreement among the Company and the investors set
forth therein (the "SPA"). The sale of Notes pursuant to the SPA is hereinafter
referred to as the "NOTE TRANSACTION". Any terms used herein and not defined
shall have the respective meanings set forth in the SPA.
The Company acknowledges that Sands Brothers International Limited
(together with its dealers, the "SELECTED DEALER" or "SBIL") is responsible for
introducing the investors participating in the Note Transaction and is acting as
a selected dealer in connection with such transaction. This agreement sets
forth, inter alia, the compensation to be paid to SBIL in connection with the
Note Transaction.
1. Representations and Warranties of the Company. For the
benefit of SBIL, the Company hereby incorporates by reference all of its
representations and warranties as set forth in Section 2 of the SPA with the
same force and effect as if specifically set forth herein.
2. Closing; Fees.
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(a) Selected Dealer Fee and Expenses. Simultaneously with each
closing of the Note Transaction, the Company shall pay SBIL a placement fee
equal to 4% of the principal amount of the Notes sold, as well as an advisory
fee of 2% of the principal amount of the Notes sold. In addition, at each
Closing, the Company shall pay SBIL the accountable legal fees incurred by SBIL
in connection with the Note Transaction in an amount not to exceed $20,000, as
well as a non-accountable expense allowance equal to one percent (1%) of the
principal amount of Notes sold.
(b) Issuance of Warrants to SBIL. In addition to the fees and
expenses of SBIL provided in Section 2(a) hereof, simultaneously with the
initial Closing of the Note Transaction, the Company shall issue to SBIL or its
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designees, for nominal consideration, warrants (the "DEALER WARRANTS"),
exercisable for five years, to purchase up to 1,425,000 shares of Common Stock
at an exercise price of $0.28 per share.
3. Covenants of the Company.
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(a) No Closing. Anything set forth herein to the contrary
notwithstanding, in the event that the Closing does not occur in accordance with
the terms provided herein for any reason other than due to the gross negligence
or willful misconduct of SBIL, no amounts shall be further payable to SBIL
hereunder, except for the accountable legal fees and expenses of SBIL not to
exceed the sum of $20,000 in the aggregate. In no event shall SBIL be
responsible for any of the Company's fees, costs or expenses incurred in
connection with the Note Transaction. The Company shall reimburse SBIL for any
out-of-pocket expenses (including, but not limited to, reasonable legal fees and
expenses) which SBIL may incur in connection with the enforcement of its rights
hereunder.
(b) Company Expenses. The Company shall pay all reasonable
expenses incurred in connection with the preparation and printing of all
necessary offering documents and instruments related to the Note Transaction,
the issuance of the Notes and the Dealer Warrants and will also pay the
Company's own expenses for accounting fees, legal fees, and other costs involved
with the Offering, including the printing costs of the Offering Documents
(defined below). The Company will provide at its own expense such quantities of
the Offering Documents and other documents and instruments relating to the
Offering as the Selected Dealer may reasonably request. In addition, the Company
will pay all reasonable filing fees, costs and legal fees for Blue Sky services
and related filings and expenses of counsel. The Blue Sky filings (state and
federal) shall be prepared by the Company's counsel who shall provide copies to
the Selected Dealer. Further, as promptly as practicable after the Final
Closing, the Company shall prepare, at its own expense, "velobound volumes"
relating to the Offering and will distribute such volumes to the individuals
designated by counsel to the Selected Dealer.
4. Indemnification.
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(a) The Company and its successors agree to indemnify and hold
harmless SBIL, its affiliates and any of their respective officers, directors,
stockholders, members, managers, employees, agents, advisors, consultants and
counsel and each person, if any, who controls SBIL, as follows:
(i) against any and all losses, liabilities, claims,
damages and expenses whatsoever arising out of any untrue statement or alleged
untrue statement of a fact set forth in the SPA, the Schedules thereto and the
Transaction Document exhibits thereto (collectively the "OFFERING DOCUMENTS") or
the omission or alleged omission therefrom of a fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading unless such statement or omission was made in reliance on
and in conformity with written information furnished to the Company by SBIL
expressly for inclusion in the Offering Documents;
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(ii) against any and all losses, liabilities, claims,
damages and expenses whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission or any such alleged untrue
statement or omission; and
(iii) against reasonable expenses incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under clause (i) or (ii) above.
(b) The Company agrees to indemnify and hold harmless the
Selected Dealer, its affiliates and any of their respective officers, directors,
stockholders, members, managers, employees, agents, advisors, consultants and
counsel, and each person, if any, who controls the Selected Dealer, to the same
extent as the foregoing Indemnity, against any and all loss, liability, claim,
damage and expense whatsoever directly arising out of the exercise by any person
of any right under the Securities Act or the securities or blue sky laws of any
state on account of violations of the representations, warranties or agreements
of the Company set forth herein or in the Offering Documents.
(c) If any action or proceeding (collectively the
"PROCEEDING") is brought against SBIL, its affiliates or any of their respective
officers, directors, stockholders, members, managers, employees, agents,
advisors, consultants and counsel or any controlling persons of SBIL (each, an
"INDEMNIFIED PARTY" and collectively, "INDEMNIFIED PARTIES"), in respect of
which indemnity may be sought against the Company pursuant to Sections 4(a) or
4(b) above, each such Indemnified Party shall promptly notify the Company (the
"INDEMNIFYING PARTY") in writing of the institution of such Proceeding (but the
failure to so notify shall not relieve the Indemnifying Party from any liability
it may have under this Section 4 unless such failure results in the imposition
of a default judgment which cannot be reopened) and the Indemnifying Party shall
promptly assume the defense of the Proceeding, including the employment of
counsel (reasonably satisfactory to each such Indemnified Party) and payment of
expenses. Each such Indemnified Party shall have the right to employ its own
counsel in any such Proceeding, but the fees and expenses of such counsel shall
be at the expense of each such Indemnified Party unless (i) the employment of
such counsel shall have been authorized in writing by the Indemnifying Party in
connection with the defense of the Proceeding, (ii) the Indemnifying Party shall
have promptly employed counsel reasonably satisfactory to SBIL to direct the
defense of the Proceeding or (iii) each Indemnified Party shall have reasonably
concluded that there may be one or more legal defenses available to it or them
or to other Indemnified Parties which are different from or additional to those
available to one or more of the Indemnifying Parties and it would be
inappropriate for the same counsel to represent both parties due to actual or
potential differing interests between them; in any of which events such fees and
expenses shall be borne by the Indemnifying Party and the Indemnifying Party
shall not have the right to direct the defense of such action on behalf of each
Indemnified Party. Anything in this Section 4(c) to the contrary
notwithstanding, the Indemnifying Party further agrees that it will not, without
the prior written consent of SBIL, settle, compromise or consent to the entry of
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any judgment in any pending or threatened Proceeding in respect of which
indemnification may be sought hereunder (whether or not SBIL or any Indemnified
Party is an actual or potential party to such Proceeding) unless such
settlement, compromise or consent includes an unconditional release of SBIL and
each such Indemnified Party hereunder from all liability arising out of such
Proceeding.
5. Board Designee.
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(a) For a period of two (2) years from the consummation of the
Note Transaction, the Company will, at SBIL's option and if so requested by
SBIL, recommend and use its best efforts to elect one designee of SBIL (such
person to be reasonably acceptable to the Company), at the option of SBIL, as a
member of its Board of Directors; such designee, if elected or appointed, shall
attend meetings of the Board and receive no more or less compensation than is
paid to other non-management directors of the Company and shall be entitled to
receive reimbursement for all reasonable costs incurred in attending such
meetings including, but not limited to, food, lodging and transportation.
(b) To the extent permitted by law, the Company will agree to
indemnify SBIL's designee for the actions of such designee as a director of the
Company. In the event the Company maintains a liability insurance policy
affording coverage for the acts of its officers and directors, it will include
SBIL's designee as an insured under such policy.
(c) If SBIL does not exercise its option to designate such
member to the Company's Board of Directors, SBIL shall nonetheless have the
right to send representatives (who need not be the same individuals from meeting
to meeting) to observe each meeting of the Board of Directors, provided,
however, such observers may be subject to recusal from certain Board meetings as
reasonably determined by the Board of Directors for appropriate agenda items.
The Company agrees to give SBIL notice of each such meeting (or copies of any
consents in lieu of meetings) and to provide SBIL with an agenda and minutes of
the meeting no later than it gives such notice and provides such items to the
directors. In addition, SBIL's representatives (as described in this Section
5(c)) (collectively, the "REPRESENTATIVES") agree to use their reasonable
efforts to keep the information provided at such meetings confidential (the
"CONFIDENTIAL INFORMATION"), provided, however, the Representatives may present
the Confidential Information to such parties if compelled by law or called upon
to establish the availability under any Federal or state securities laws of an
exemption from registration of the Offering or if the contents thereof are
relevant to any issue in any action, suit or proceeding to which the
Representatives are a party or by which they are or may be bound. Further, if
the Representatives are compelled to disclose any Confidential Information, the
Representatives agree to provide notice to the Company of such disclosure within
a reasonable time thereafter.
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6. Miscellaneous.
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(a) Survival. Any termination of the Note Transaction without
consummation thereof shall be without obligation on the part of any party except
that the provisions of Section 3 and 4 shall survive.
(b) Representations, Warranties and Covenants to Survive
Delivery. The representations, warranties, indemnities, agreements, covenants
and other statements of the Company contained herein shall survive execution of
the SPA and the closing of the Note Transaction for a period of eighteen (18)
months.
(c) No Other Beneficiaries. This Agreement is intended for the
sole and exclusive benefit of the parties hereto and their respective
successors, controlling persons and permitted assigns, and no other person, firm
or corporation shall have any third party beneficiary or other rights hereunder.
(d) Applicable 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.
Each of the parties hereto (1) agree 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) waive any objection
which the Company may have now or hereafter to the venue of any such suit,
action or proceeding, and (3) irrevocably consent to the jurisdiction of the New
York State Supreme Court, County of New York, and the United States District
Court for the Southern District of New York in any such suit, action or
proceeding. Each of the parties hereto 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 agree
that service of process upon it mailed by certified mail to its address shall be
deemed in every respect effective service of process upon it, 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.
(e) Notices. All notices, requests, demands and other
communications which are required or may be given hereunder shall be in writing
and shall be deemed to have been duly given when delivered personally, receipt
acknowledged or five (5) days after being sent by registered or certified mail,
return receipt requested, postage prepaid. All notices shall be made to the
parties at the addresses designated above or at such other or different
addresses which a party may subsequently provide with notice thereof, and to
their respective legal counsel, as follows:
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(i) If to SBIL, to:
Sands Brothers International Limited
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxxxx Xxxxx, President
Telecopier No.: (000) 000-0000
with a copy to:
Sands Brothers International Limited
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxx Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxxx Krooks LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxxx X. Xxxxxxx, Esq.
Telecopier No.: (000) 000-0000
or to such other person or address as SBIL shall furnish to the Company in
writing.
(ii) If to the Company, to:
Caprius, Inc.
Xxx Xxxxxx Xxxxx
Xxxx Xxx, Xxx Xxxxxx 00000
Attn.: Xxxxxxxx Xxxxx, CFO
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxx & Priest LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxx X. Xxxx, Esq.
Telecopier No.: (000) 000-0000
or to such other person or address as the Company shall furnish to SBIL in
writing.
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(f) Counterparts. This Agreement may be signed in counterparts
with the same effect as if both parties had signed one and the same instrument.
(g) Entire Agreement. This Agreement and the Exhibits hereto
constitute the entire agreement between the parties hereto pertaining to the
subject matter hereof and supersede all prior and contemporaneous agreements,
understandings, documents, negotiations and discussions, whether oral or
written, of the parties hereto.
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If you find the foregoing is in accordance with our
understanding, kindly sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
us.
Very truly yours,
CAPRIUS, INC.
By: /s/ Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxx, CFO
AGREED AND ACCEPTED TO:
SANDS BROTHERS INTERNATIONAL LIMITED
By: /s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, President
