UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark one)
X Annual Report Pursuant to Section 13 or 15 (d) of the
----- Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999
Transition Report Pursuant to Section 13 or 15 (d) of the
----- of the Securities
Exchange Act of 1934
Commission File Number: 0-11914
CAPRIUS, INC.
(Name of Small Business Issuer in its charter)
DELAWARE 22-2457487
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE PARKER PLAZA, FORT LEE, NJ 07024
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(Address of principal executive offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER: (201) 592-8838
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Securities to be registered under Section 12 (b) of the Exchange Act:
None
Securities to be registered under Section 12(g) of the Exchange Act:
Common Stock, par value $ .01 per Share
Warrants for purchase of Common Stock
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(Title of Class)
Check whether the issuer (1) filed all reports required to be filed under
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X].
Revenues for the fiscal year ended September 30, 1999: $3,274,191
The aggregate market value of the voting stock held by non-affiliates of
the Registrant computed by reference to the price at which the stock was sold,
or the average bid and ask prices of such stock as of December 15, 1999: $
631,566
The number of shares outstanding of Registrant's Common Stock, $ .01 par
value, outstanding on December 15, 1999: 13,525,517 shares
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Documents Incorporated by Reference: None
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT. YES NO X
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INDEX
Page No.
PART I
Item 1. Business 3
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Securities Holders 7
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 7
Item 6. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 8
Item 7. Financial Statements 11
Item 8. Changes and Disagreements with Accountants on Accounting
and Financial Disclosure 12
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16 (a) of the Exchange Act. 12
Item 10. Executive Compensation 15
Item 11. Security Ownership of Certain Beneficial Owners and Management 18
Item 12. Certain Relationships and Related Transactions 19
PART IV
Item 13. Exhibits and Reports on Form 8-K 20
SIGNATURES
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PART I
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ITEM I. DESCRIPTION OF BUSINESS
GENERAL
Caprius, Inc. ("Caprius" or the "Company") was founded in 1983 and through
June 1999 essentially operated in the business of medical imaging systems as
well as healthcare imaging and rehabilitation services. On June 28, 1999, the
Company acquired Opus Diagnostics Inc. ("Opus") and began manufacturing and
selling medical diagnostic assays. The Company continues to own and operate a
comprehensive imaging center located in Lauderhill, Florida.
Upon the merger (the "Opus Merger") between Opus and Caprius' newly-formed
wholly-owned subsidiary Caprius Merger Sub Inc., the Opus stockholders received
an aggregate of 6,178,977 shares of Caprius Common Stock, par value $.01 per
share, which constituted approximately 45.6% of the outstanding shares after the
Merger.
The Opus Merger was consummated coincident with the closing of an Asset
Purchase Agreement (the "Oxis Purchase Agreement") between Opus and Oxis Health
Products Inc., a Delaware corporation ("Oxis"). The purchase price consisted of
$500,000 in cash, a secured promissory note (the "Oxis Note") in the principal
amount of $586,389 (as adjusted) payable on November 30, 1999, and a warrant
granting Oxis the right to acquire up to 10% equity interest in Opus (on a
pre-Merger basis) (the "Warrant"), exercisable after six months for a period of
five years. Upon the Opus Merger, the Warrant became exercisable for 617,898
shares of Caprius Common Stock at an exercise price equal to 80% of the average
bid and asked prices for the Common Stock for the five trading days immediately
preceding December 28, 1999. As of December 8, 1999, the principal sum due under
the Oxis Note was paid in full and under an Amended and Restated Warrant, a
warrant for 617,898 shares of Caprius Common Stock was issued, exercisable at
$.0875 per share in replacement of the Warrant.
George Aaron and Jonathan Joels formed Opus in 1999 for the purpose of
effecting the Opus Merger and the Oxis Purchase Agreement.
Opus produces and sells 14 diagnostic assays, their calibrators and
controls for therapeutic drug monitoring which are used ON THE ABBOTT TDX(R) AND
TDXFLX(R) instruments. Pursuant to the Oxis Purchase Agreement, Opus acquired
the assets relating to the Oxis reagent patent and trademark and distribution
network for the therapeutic drug monitoring assay business (the "TDM Business").
Additionally, pursuant to a Services Agreement, Oxis is manufacturing the
products of the TDM Business of Opus through September 30, 2000.
On April 27, 1999, pursuant to an Asset Purchase Agreement among Caprius,
Caprius Systems, Inc., a wholly owned subsidiary of Caprius ("Systems" and,
together with Caprius, the "Sellers") and Pacific Republic Capital Corp.
("Pacific"), the Sellers consummated the sale of their Aurora breast scanner
technology ("Aurora Technology") and related assets to Pacific for $854,490 in
cash and the assumption by Pacific of certain obligations associated with the
transferred assets. The assets and obligations transferred included all the
shares of Caprius' wholly owned subsidiary, Caprius Imaging Corp., various
patents relating to the Aurora technology and assets of Systems, including
hospital equipment contracts and equipment leases. Caprius was relieved of an
equipment debt that exceeded $1.1 million.
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In March 1999, the Company transferred its interest in its rehabilitation
center to an unrelated limited liability company in exchange for $900,000, of
which $850,000 was paid as of September 30, 1999. In addition, the acquiring
group assumed certain liabilities totaling approximately $400,000. The transfer
price of $900,000 was used in part to pay a balance of approximately $372,000 to
the former owner of the center, which was the remaining amount due from the
Company's acquisition of its interest in the center.
In July 1998, the Company acquired The Strax Institute ("Strax"), a
comprehensive breast imaging center, located in Lauderhill, Florida. Strax is a
multi-modality breast care center that treats approximately 15,000 patients per
year offering x-ray mammography, ultrasound, stereotactic biopsy and bone
densitometry.
In August 1997, the Company and General Electric Company ("GE") entered
into a Purchase Agreement (the "GE Purchase Agreement") whereby GE purchased all
inventory, equipment and other assets, and assumed liabilities relating to the
Company's high field MRI systems and InstaScan business, in exchange for
$2,432,580 in cash and the purchase by GE of $2.7 million stated value of a
newly issued class of Series B Convertible Redeemable Preferred Stock. The
Company and GE entered into a Settlement and Release Agreement terminating and
releasing their prior obligations to each other.
Effective November 10, 1997, the Company completed a merger (the "AMS
Merger") with Advanced Mammography Systems, Inc. ("AMS"), whereby AMS merged
into AMS Merger Corp., a wholly owned subsidiary of the Company became a wholly
owned subsidiary. Upon the AMS Merger, the Company changed its name to Caprius,
Inc. AMS was originally formed on July 2, 1992 as a wholly owned subsidiary of
Caprius to develop a dedicated breast MRI system and at the time of the AMS
Merger, the Company owned approximately 14% of the outstanding AMS stock.
THERAPEUTIC DRUG MONITORING BUSINESS
Opus sells a comprehensive line of assays for therapeutic drug monitoring
(TDM). The line of products includes two tests that are exclusive to the
Company; one to monitor Topiramate, a drug developed by Johnson & Johnson, and
the other Teicoplanin, developed by Hoechst Marion Dow.
Opus competes with a variety of companies, many of which are considerably
larger than Opus in the area of therapeutic drug monitoring. Among its
competitors are Abbott Laboratories, Roche Diagnostics, Inc. and Sigma, Inc.
Opus attempts to compete in its pricing of its kits. Both the Topirimate and
Teicoplanin kits do not experience competition as the Company enjoys exclusivity
on each.
ACCORDING TO THE MEDICAL & HEALTHCARE MARKETPLACE (11TH Edition) the
therapeutic drug monitoring market is $417M. Opus market penetration is less
than 1%.
The Company determined that in order to remain cost efficient and to
optimize the return on the use of its assets, it will contract its Research &
Development to third parties. This strategy of using outside contractors extends
also to manufacturing. Since there are numerous companies in the business of OEM
manufacturing, it is the Company's intention to utilize this capacity for the
manufacture of its products. This will eliminate the need to invest capital and
will also permit the Company to maintain a low head count. Currently, all of the
Company's manufacturing services have been contracted to Oxis International
under a manufacturing contract which expires on September 30, 2000. The Company
does not intend, at this stage, to manufacture its goods in house unless volume
or other considerations would make it necessary to do so.
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In anticipation of new products that would require 510 K FDA regulatory
approval, the Company consults with a law firm specializing in health care
regulatory affairs.
The Company intends to expand its product portfolio and, where appropriate,
to patent any intellectual properties, as it has in the past. The products of
the Company are sold under the trademark INNOFLUOR(R), which was acquired from
Oxis.
Opus markets the INNOFLUOR(R) products domestically through distributors
and directly to accounts. In the international market, Opus distributes its
products through distributors in 15 countries. There is an ongoing program to
expand the distribution channels of the Company, with special emphasis on the
international market. There are two accounts that together comprise
approximately 25% of the Company's total sales. Approximately 65% of the sales
are international. All sales, including international, are invoiced in U.S.
dollars.
THE STRAX INSTITUTE BUSINESS
Strax was founded in 1979 to provide comprehensive breast care for
patients. It specializes in comprehensive breast care utilizing several imaging
modalities and a high level of hands-on patient care. Strax performs all imaging
and diagnostic services in-house, including x-ray mammography, ultrasound,
stereotactic biopsies, and performs all patient screening, scheduling, billing
and collections, managed care contracts, transcription, medical records and
accounting and bookkeeping.
The healthcare market in which The Strax Institute operates is beneficial
for the services offered. It has a high percentage of elderly female patients,
many of whom are repeat patients, and provides services in an area with a
growing population base.
The opportunities available to increase volume and profitability at Strax
are designed around programs and initiatives to expand patient volume and
particularly to increase the revenues obtained per patient. The Strax Institute
performs all imaging and diagnostic services in-house, including x-ray
mammography, ultrasound, stereotactic biopsies, and bone densitometer. In
November 1998, a new ultrasound unit equipped with color doppler was purchased.
This unit allows the Strax Institute to offer "stroke prevention" imaging and
bundle this procedure together with the annual mammogram and bone densitometry
tests directed to the same patient.
EMPLOYEES
As of December 15, 1999, the Company's breast imaging business had a staff
of 18 full-time employees, including 1 physician and 1 senior manager, and also
4 part-time employees.
As of December 15, 1999, the diagnostic business had 6 full-time employees,
including 3 senior managers.
None of the Company's employees are represented by labor organizations and
the Company is not aware of any activities seeking such organization. The
Company considers its relations with employees to be good.
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ITEM 2. PROPERTIES
The Company leases 1,545 square feet of office space in Fort Lee, New
Jersey for sales and administrative personnel pursuant to a lease that expired
on November 30 1999, at a base monthly rental of approximately $3,733. The lease
is being extended on a month to month basis while the Company is negotiating for
a new lease at the same location for approximately 2,700 square feet.
The Company leases 8,400 square feet for its comprehensive breast-imaging
center in Lauderhill, Florida, pursuant to a lease with current monthly base
rental payment of $ 9,527. The lease expires on January 31, 2004.
ITEM 3. LEGAL PROCEEDINGS
On January 7, 1998, the Company and Jack Nelson, the Company's former
Chairman and Chief Executive Officer, were served with a complaint in connection
with a purported class action brought against them by Dorothy L. Lumsden in the
United States District Court of the District of Massachusetts. The complaint
claimed alleged violations of Sections 10(b) and 20(a) under the Securities
Exchange Act and common law fraud. Ms. Lumsden purported to bring her action "on
behalf of herself and all other persons who purchased or otherwise acquired the
common stock of the Company during the period August 10, 1994 through and
including December 12, 1997". On February 2, 1998, the Company and Mr. Nelson
were served with a class action complaint by Robert Curry naming them as
defendants in connection with a second action brought in the United States
District Court for the District of Massachusetts. The complaint in the second
class action alleged the same purported class and contained similar allegations
and claims as the first class action. On April 24, 1998, the District Court
consolidated the two class actions claims into one for pre-trial purposes. On
January 7, 1999, the Company announced that it had reached a preliminary
settlement in the shareholder class actions. Under the terms of the settlement,
Caprius made a cash payment of $150,000 and agreed to issue 325,000 shares of
common stock to Plaintiffs. Caprius' insurance carrier contributed $100,000 of
the cash payment. In addition, the settlement also stipulated that in the event
Caprius sold all or part of its business within 12 months an additional payment
of $75,000 and issuance of 100,000 additional shares would be made by Caprius to
plaintiffs. Consequently, on April 27, 1999, the additional payment was made and
the additional shares will be issued. For the year ended September 30, 1999,
the Company reported $207,323 as total settlement costs, which included $82,323
for the market value of the shares to be issued.
On October 19, 1998, the Company filed a complaint against Eric T. Shebar,
M.D. ("Shebar"), the former Chief Operating Officer and Medical Director for the
Company's motor vehicle accident rehabilitation ("MVA") business, and MVA Center
for Rehabilitation, Inc. ("MVA, Inc.") whereby the Company alleged breach of
contract and certain misrepresentations and sought damages in an amount to be
determined at trial. The Company filed a preliminary injunction to reach and
apply a secured promissory note to MVA, Inc. against damages sought from Shebar
and to enjoin him against any remedies upon default of the Note. The injunction
was denied. Consequently, the final Note payment of approximately $372,000 was
paid as part of the sale of the MVA. A Settlement Agreement between the Company
and Eric T. Shebar, M.D. was entered into on December 27, 1999, wherein the
Company paid $60,000 immediately with a further $20,000 to be paid over the next
two years. Upon the initial payment, the Company was released from all claims
and actions relating to this matter.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since June 8, 1999, upon the delisting of the Company's Common Stock from
the NASDAQ Small Cap Market, the Common Stock has traded on the OTC Bulletin
Board under the symbol CAPR. From November 10, 1997, upon the Merger with AMS,
until the close of business on June 7, 1999, the Common Stock traded on the
NASDAQ Small Cap Market under the symbol "CAPR". Trading in the Warrants
(NASDAQ: CAPRW) commenced on August 31, 1995, after the closing of the merger
with Medical Diagnostics, Inc. Prior to the AMS Merger, the Warrants traded
under the symbol "ANMRW". The Warrants are now listed on the OTC Bulletin Board
under the symbol CAPRW.
The following table sets forth, for the calendar quarters indicated, the
reported high and low bid quotations per share of the Common Stock as reported
on the NASDAQ Small Cap Market and OTCBB. Such quotations reflect inter-dealer
prices, without retail mark-up, markdown or commission, and may not necessarily
represent actual transactions. There is no quoted public market for the trading
of the Company's Warrants.
Common Stock High Low
1999
Fourth Quarter $ 0.3125 $0.1250
Third Quarter 2.0000 0.1250
Second Quarter 0.4375 0.0625
First Quarter 1.0625 0.2500
1998
Fourth Quarter 1.729 1.063
Third Quarter 1.542 1.042
Second Quarter 1.709 0.896
First Quarter 2.380 1.272
The Company has paid no dividends on its shares of Common Stock since its
inception in July 1983 nor does the Company expect to declare any dividends on
its Common Stock in the foreseeable future.
On September 30, 1999, there were approximately 571 holders of record of
the Common Stock of the Company. Since a large number of shares of Common Stock
are held in street or nominee name, it is believed that there are a substantial
number of additional beneficial owners of the Company's Common Stock. On
September 30, 1999, there were 13,525,517 shares outstanding.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the audited
consolidated financial statements and notes thereto for the years ended
September 30, 1999 and 1998.
GENERAL
Due to significant changes in the nature of operations of the Company
during the past two years, comparisons of results of operations between years
may not be meaningful.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1999 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1998
Net patient service revenue totaled $2,883,000 for the year ended September
30, 1999 versus $3,764,000 for the year ended September 30, 1998. Cost of
service operations totaled $2,080,000 for the year ended September 30, 1999
versus $ 3,616,000 for the year ended September 30, 1998. The decreases from
1998 to 1999 are due to the sale of the Aurora Technology and the rehabilitation
business, partially offset by the additional net patient revenues and operating
expenses for the Strax Institute.
Included in revenues for the year ended September 30, 1999 are
$391,000 of sales revenues for Opus' therapeutic drug monitoring assays for the
period commencing July 1, 1999. The cost of goods for the Opus business for this
period was $107,000, and is included in cost of operation.
Upon the Opus Merger, Caprius also entered into Severance Agreements with
Jack Nelson and Enrique Levy. Mr. Nelson's employment as the Chairman and Chief
Executive Officer to Caprius was terminated, and he currently serves as a
consultant to Caprius for a period of one year. Pursuant to the Agreement, Mr.
Nelson received $46,000 in cash and was to have received a $258,500 payment upon
the earlier of December 28, 1999 or the consummation of a Business Transaction
(as defined therein), and he will get 125,000 shares of Caprius Common Stock in
2000. As of December 28, 1999, the severance payment was converted into a
Secured Promissory Note repayable on October 1, 2000, subject to prepayment (see
Item 10).
Mr. Levy's employment as President and Chief Operating Officer of Caprius
was terminated and he is serving as a consultant to Caprius for a period of one
year. Pursuant to the agreement, Mr. Levy received $44,000 in cash and was to
have received a $247,500 payment upon the earlier of December 28, 1999 or the
consummation of a Business Transaction (as defined therein), and he will get
100,000 shares of Caprius Common Stock in 2000. As of December 28, 1999, the
severance payment was converted into a Secured Promissory Note repayable on
October 1, 2000, subject to prepayment (see Item 10).
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Selling, general and administrative expenses totaled $4,482,000 for the
year ended September 30, 1999 versus $5,166,000 for the year ended September 30,
1998. This decrease reflects the sale of Aurora Technology and the
rehabilitation business as well as a shift in business focus to the Opus
Diagnostics product line of therapeutic drug monitoring assays (TDM).
Loss on sale of the rehabilitation business of $1,461,000 reflects the
accounting for the disposition of the rehabilitation center to Medical
Diagnostics and Rehabilitation, LLC.
Loss on the sale of the Aurora Technology of $2,096,000 reflects the loss
on the sale to Pacific Republic Capital Corp.
In fiscal 1998, research and development reflects the change in the
Company's accounting treatment of AMS from equity to consolidation accounting.
Purchased research and development reflects the portion of the AMS purchase
price allocated to research and development projects in process.
Write down of intangibles in 1998, in the amount of $1,900,000, reflects
the reduction in goodwill related to the Company's Rehabilitation Services
business based on a review of undiscounted future cash flows.
LIQUIDITY AND CAPITAL RESOURCES
The Company had available cash and cash equivalents of $116,068 at
September 30, 1999. The Company intends to utilize the funds for working capital
purposes to continue developing the business of Opus by adding new distributors
in territories currently not covered by existing distributors and for the
development of new diagnostic kits. The Company also intends to pursue efforts
to identify additional funds through various funding options, including bridge
loans, banking facilities and equity offerings. The ability to secure commercial
or other borrowings could be more difficult due to the Company's delisting from
NASDAQ. There can be no assurance that such funding initiatives will be
successful and any equity placement could result in substantial dilution to
current stockholders. Consequently, the Company's viability could be threatened.
Accordingly, the auditors' report on the 1999 financial statements contains an
explanatory paragraph expressing substantial doubt about the Company's ability
to continue as a going concern.
The significant cash flows used in investing activities for the year ended
September 30, 1999 consists primarily of $523,000 for the Opus Merger offset by
the proceeds from the sale of the rehabilitation business and the Aurora
Technology. Cash flows from financing activities include approximately $140,000
of proceeds from financing of long-term debt offset by principal payments on
long-term debt and equipment debt of $839,000. Cash used in operations amounted
to approximately $3,257,000.
During the year ended September 30, 1999, the Company has funded its
operations principally through the cash obtained from the sale of the Aurora
technology business. Since the fiscal year end, the Company completed a
short-term bridge loan of $600,000 through the issuance of loan notes due on
February 29, 2000 and warrants which was used principally to pay the Oxis Note,
retained an investment banker to assist the Company in raising further funds,
has concluded agreements with Messrs. Nelson and Levy to extend the payment
date for their severance payments through the issuance of notes to them, and is
reviewing the possible disposition of The Strax Institute.
INFLATION
To date, inflation has not had a material effect on the Company's business.
The Company believes that the effects of future inflation may be minimized by
controlling costs and increasing efficiency through product sales volume of the
diagnostic kit business.
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YEAR 2000 SYSTEMS
The Company had undertaken a review concerning the ability of its internal
information systems to handle date information and to function appropriately
from and after January 1, 2000. The total cost to address any changes required
as a result of the so-called "Year 2000 Problem" will not be material. In
addition, the Company has evaluated the impact of possible Year 2000 problems
encountered by its suppliers and customers upon the Company and to date there
have not been any problems.
FORWARD LOOKING STATEMENTS
The Company is including the following cautionary statement in this Annual
Report of Form 10-KSB to make applicable and take advantage of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 for any
forward-looking statements made by, or on behalf of, the Company.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements which are other than statements of historical facts. Certain
statements contained herein are forward-looking statements and accordingly
involve risks and uncertainties which could cause actual results or outcomes to
differ materially from those expressed in the forward-looking statements. The
Company's expectations, beliefs and projections are expressed in good faith and
are believed by the Company to have a reasonable basis, including without
limitation, management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that management's expectation, beliefs or
projections will result or be achieved or accomplished. In addition to other
factors and matters discussed elsewhere herein, the following are important
factors that, in the view of the Company, could cause actual results to differ
materially from those discussed in the forward-looking statements: technological
advances by the Company's competitors, changes in health care reform, including
reimbursement programs, capital needs to fund any delays or extensions of
research programs, delays in new product development, lack of market acceptance
of new technology based products, changes in governmental regulations, and the
availability of capital on terms satisfactory to the Company. The Company
disclaims any obligation to update any forward-looking statements to reflect
events or circumstances after the date hereof.
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ITEM 7. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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Independent Auditor's Report
Consolidated Balance Sheets at September 30, 1999 and 1998
Consolidated Statements of Operations for the years ended September
30, 1999 and 1998
Consolidated Statements of Stockholders' Equity for years ended
September 30, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended September
30, 1999 and 1998
Notes to Consolidated Financial Statements
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ITEM 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective April 1, 1998 the Boston office of Richard A. Eisner & Company,
LLP ("RAE") was merged into the Boston office of BDO Seidman, LLP ("BDO"). This
merger resulted in RAE no longer having an office in the Boston area. The
Company concluded that it would be appropriate to select a new accounting firm.
At a meeting of the Audit Committee of the Company on June 3, 1998, it was
approved that the Company would retain BDO to serve as its independent auditors,
effective immediately. During the Company's two most recent fiscal years and
through June 3, 1998, there had not been any disagreements between the Company
and RAE on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which disagreement, if not resolved
to the satisfaction of RAE, would have caused it to make reference to the
subject matter of the disagreements in connection with its report on the audited
financial statements for the two years prior to the termination of its services.
PART III
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ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
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As of December 15, 1999, the directors and executive officers of the
Company were:
NAME AGE POSITION
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George Aaron 47 Chairman of the Board,
President & Chief Executive Officer
Jonathan Joels 43 Chief Financial Officer, Treasurer,
Secretary & Director
Elliott Koppel 55 VP Sales & Marketing
Enrique Levy 61 Director
Jack Nelson 48 Director
Robert Spira, MD (1) (2) 50 Director
Sol Triebwasser, Ph.D. (1)(2) 77 Director
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(1) Member of the Audit Committee
(2) Member of the Compensation/Option Committee
The principal occupations and brief summary of the background of each
Director and executive officer of Caprius during the past five years is as
follows:
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GEORGE AARON. Mr. Aaron has been Chairman of the Board, President & CEO of
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Caprius since June 1999. He also served as a Director on the Board of the
Company from 1992 until 1996. From 1992 to 1998, Mr. Aaron was a co-founder and
CEO of Portman Pharmaceuticals, Inc. which was engaged in therapeutic drug
development and in 1994 he co-founded CBD Technologies, Inc. of which he remains
a Director. From 1983 to 1988, Mr. Aaron was the founder and CEO of
Technogenetics Inc. (a diagnostic company). Prior to 1983, Mr. Aaron was founder
and partner in the Portman Group, Inc. and headed International Business
Development at Schering Plough. Mr. Aaron also serves on the Board of Peptor
Limited, the acquirer of Portman Pharmaceuticals, Inc. Mr. Aaron is a graduate
of the University of Maryland.
JONATHAN JOELS. Mr. Joels has been CFO, Treasurer, Secretary and a director
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of Caprius since June 1999. From 1992 to 1998, Mr. Joels was a co-founder and
CFO of Portman Pharmaceuticals, Inc. and in 1994 he co-founded CBD Technologies,
Inc. Mr. Joels' previous experience included a Partnership in Portman Group,
Inc., CFO of London & Leeds Corp. and Chartered Accountant positions with both
Ernst & Young and Hacker Young between 1977 and 1981. Mr. Joels qualified and
was admitted as a Chartered Accountant to the Institute of Chartered Accountants
in England and Wales in 1981 and holds a BA Honors Degree in Accountancy (1977)
from the City of London.
ELLIOTT KOPPEL. Mr. Koppel has been VP of Marketing and Sales since June
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1999. From 1996 to 1999, he served as CEO of ELK Enterprises, a consulting and
advertising company for the Medical Device industry. From1993 to1996, he was VP
Sales and Marketing for Clark Laboratories Inc. From 1992 to1993 Mr. Koppel was
Director of the Immunology Business Unit at Schiapparelli BioSystems. From1990
to1992 he was VP of Sales and Marketing at Enzo BioChem. From1986 to 1990, Mr.
Koppel was VP of Clinical Sciences Inc. Between 1974 and 1986 he held the
positions of Sales Representative, Regional Manager, and International Marketing
Manager at Warner Lambert Diagnostics. Prior to 1974 Mr. Koppel was Sales
Representative and Product Manager with Ortho Diagnostics. Mr. Koppel has a BS
in Commerce from Rider University
ENRIQUE LEVY. Mr. Levy has been a consultant to the Company since June
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1999, having served as President and Chief Operating Officer of Caprius from
October 1995 to June 1999, and he has been a Director of the Company since
August 31, 1995. From May 1994 to October 1995 he was Manager/Manufacturing at
Xerox Graphic Systems, Harrison, New York, a venture of Xerox Corporation. From
April 1989 to May 1994, he was Executive Vice President of Worldwide Process
Technologies, Allendale, New Jersey, a manufacturer of process systems and
equipment for the web handling and film and paper coating industries. Prior to
1989, he was President and Chief Executive Officer of Polychrome Corporation, an
international manufacturer of supplies to the graphic arts and printing
industry. He holds a BS in Chemical Engineering from the Louisiana State
University.
JACK NELSON. Mr. Nelson has been a consultant to the Company since June
-----------
1999, having served as Caprius' Chairman of the Board and CEO since June 1991
and Treasurer since November 1990. He has been a Director of the Company since
September 1990. From 1976 through 1993, Mr. Nelson had been engaged in the
private practice of law as senior partner with the law firm of Zaslowsky, Marx &
Nelson in New York, New York. Mr. Nelson serves on the Board of Directors of
Advanced Machine Vision, Inc., a publicly traded company (NASDAQ: AMVC). Mr.
Nelson holds a BA degree from Yeshiva University and JD degree from Hofstra
University School of Law.
13
<PAGE>
ROBERT SPIRA, M.D., F.A.C.P. Dr. Spira has been a director of the Company
----------------------------
since September 1990 and Vice Chairman from February 1994 to June 28, 1999.
Since October 1992, he has been the Director of the Department of
Gastroenterology at St. Michael's Medical Center in Newark, New Jersey, and for
more than five years prior thereto, he served as Chief of Gastrointestinal
Endoscopy at St. Michael's Medical Center. Dr. Spira is a graduate of New York
University Medical School, a past president of both the New Jersey Society for
Gastrointestinal Endoscopy and the New Jersey Society of Gastroenterology.
SOL TRIEBWASSER, PH.D. Dr. Triebwasser has been a director of the Company
----------------------
since July 1984. Until 1996, Dr. Triebwasser was Director of Technical Journals
and Professional Relations for IBM Corporation in Yorktown Heights New York and
currently a Research Staff member emeritus. Since receiving his Ph.D. in physics
from Columbia in 1952, he had managed various projects in device research and
applications at IBM. Dr. Triebwasser is a fellow of the Institute for Electrical
and Electronic Engineers, the American Physical Society and the American
Association for the Advancement of Science.
Mr. Aaron and Mr. Joels are brothers-in-law.
The Board of Directors met, either in person or telephonically, nine times
in fiscal 1999. Each of the directors attended or participated in 75% or more of
the meetings.
The Board of Directors has standing Audit and Compensation/Option
Committees.
The Audit Committee reviews with the Company's independent accountants the
scope and timing of the accountants' audit services and any other services they
are asked to perform, their report on the Company's financial statements
following completion of their audit and the Company's policies and procedures
with respect to internal accounting and financial controls. In addition, the
Audit Committee reviews the independence of the independent public accountants
and makes annual recommendations to the Board of Directors for the appointment
of independent public accountants for the ensuing year. The Audit Committee met
twice during fiscal 1999.
The Compensation/Option Committee reviews and recommends to the Board of
Directors the compensation and benefits of all officers of the Company, reviews
general policy matters relating to compensation and benefits of employees of the
Company and administers the Company's Stock Option Plans. The
Compensation/Option Committee met twice during fiscal 1999.
COMPLIANCE WITH SECTION 16 (A)
- ------------------------------
Based solely in its review of copies of Forms 3 and 4 received by it or
representations from certain reporting persons, the Company believes that,
during the fiscal year ended September 30, 1999, there was compliance with
Section 16 (a) filing requirements applicable to its officers, directors and 10%
stockholders.
14
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the aggregate cash compensation paid by the
Company to (i) its Chief Executive Officer and (ii) its most highly compensated
officers whose cash compensation exceeded $100,000 for services performed during
the year ended September 30, 1999.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS
------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities
Name and Other Restricted Underlying
Prinicpal Annual Stock Options LTIP All Other
POSITION YEAR Salary Bonus Compensation Award(s) SARs Payouts Compensation
($) ($) ($) ($) ($) (#) ($)
George 1999(1) -0- -0- -0- -0- -0- -0- -0-(3)
Aaron
President/CEO
Jack Nelson 1999(2)(5) 193,875 -0- 39,263(6) -0- -0- -0- 16,200(3)
1998 258,500 158,000 -0- -0- 125,000 -0- 16,200(3)
1997 247,201 -0- -0- -0- -0- -0-
16,200(3)
Enrique Levy 1999(4)(5) 185,625 -0- 39,340(6) -0- -0- -0- 8,400(3)
1998 247,500 125,000 -0- -0- 100,000 -0-
1997 242,740 -0- -0- -0- -0- -0- 8,400(3)
8,400(3)
</TABLE>
(1) Mr. Aaron was appointed by the Board effective June 28, 1999 as President
and CEO. Mr. Aaron has agreed that the salary of $41,206 for the period be
accrued and will be paid in 2000.
(2) Mr. Nelson was a full-time employee beginning January 1, 1994, and was
Chairman and CEO until June 28, 1999 when he became a consultant.
(3) Paid to Messrs. Aaron, Nelson and Levy for the purpose of reimbursing each
of them for transportation and other expenses. Expenses due to Mr. Aaron in
the amount of $3,000 have been accrued for the period and will be paid in
2000.
(4) Mr. Levy was President and COO beginning October 1, 1995 until June 28,
1999.
(5) The Company had committed to issue Common Stock to Mr. Nelson and Mr. Levy
in the amount of 125,000 and 100,000 shares respectively, and termination
payments of $258,500 and $247,500 respectively pursuant to their
Termination Agreement, see Part II/Item 6.
(6) Paid to Messrs. Nelson and Levy for vacation (based on salary rate).
The Company had an employment agreement with Jack Nelson (the "Nelson
Employment Agreement"), employing him as Chairman of the Board, Chief Executive
Officer and Treasurer. The Agreement was originally entered into on December 20,
1995, whereby Mr. Nelson was employed by both the Company and AMS. Effective
with the AMS Merger, Mr. Nelson became employed full-time by the Company. The
Nelson Employment Agreement included an aggregate base salary of $258,500, with
any additional increases in base salary thereafter being instituted by the Board
of Directors. Upon the Opus Merger, effective June 28, 1999, Caprius entered
into a Severance Agreement with Mr. Nelson terminating the Nelson Employment
Agreement, terminating all options and he ceased serving as the Chairman and
Chief Executive Officer. Pursuant to the Severance Agreement, Mr. Nelson is
15
<PAGE>
serving as a consultant to Caprius for a period of one year. Mr. Nelson received
$45,734 in cash as payment of deferred compensation, will get 125,000 shares
of Caprius Common Stock in 2000, and was to have received a $258,500 payment
upon the earlier of December 28, 1999 or the consummation of a Business
Transaction (as defined therein). As of December 28, 1999, the severance
obligation was converted into a Note repayable on October 1, 2000 subject to
mandatory prepayment from the proceeds of the sale of The Strax Institute, and
if not prepared by March 1, 2000, becomes secured by the assets of The Strax
Institute. Any prepayments on the Note to Mr. Levy would be proposed with
prepayments on the Note to Mr. Nelson.
The Company had an employment agreement with Enrique Levy (the "Levy
Employment Agreement") employing him as President and Chief Operating Officer.
The Levy Employment Agreement included an aggregate base salary of $247,500 with
any additional increases in base salary thereafter being instituted by the Board
of Directors. Upon the Merger with Opus, effective June 28, 1999, Caprius
entered into a Severance Agreement with Mr. Levy terminating the Levy Employment
Agreement, terminating all options and he ceased serving as the President and
Chief Operating Officer. Pursuant to the Severance Agreement, Mr. Levy is
serving as a consultant to Caprius for a period of one year. Mr. Levy received
$43,789 in cash as payment of deferred compensation, will get 100,000 shares
of Caprius Common Stock in 2000 and was to have received a $247,500 payment upon
the earlier of December 28, 1999 or the consummation of a Business Transaction
(as defined therein). As of December 28, 1999, the severance obligation was
converted into a Note repayable on October 1, 2000 subject to mandatory
prepayment from the proceeds of the sale of The Strax Institute, and if not
prepared by March 1, 2000, becomes secured by the assets of The Strax
Institute. Any prepayments on the Note to Mr. Levy would be proposed with
prepayments on the Note to Mr. Nelson.
The Company does not have Employment Agreements for Messrs. Aaron, Joels
and Koppel.
The Company does not have any annuity, retirement, pension or deferred
compensation plan or other arrangements under which any executive officers are
entitled to participate without similar participation by other employees.
16
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realized
Value at Assumed Alternative
Annual Rates of Stock to (f) and
Individual Price Appreciation for (g) Grant
Grants Option Term Date Value
<S> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h)
% of
Number of Total
Securities Options/ Exercise Grant
Underlying SARS on Base Expiration Date
Name Options/ Granted to Price Date 5% ($) 10% ($) Present
SARs mployee(s) ($/Sh) Value $
Granted (#) in Fiscal
Year
- --------------------------------------------------------------------------------------------------------------------
George Aaron -0- -0- -0- -0- -0- -0- -0-
Jack Nelson -0- -0- -0- -0- -0- -0- -0-
Enrique Levy -0- -0- -0- -0- -0- -0- -0-
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
FISCAL YEAR END OPTION VALUE
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT SEPT. 30, 1999 AT SEPT. 30, 1999
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE ($)
- ---- ------------------------- ---------------
George Aaron 18,500/0 $-0-
Jack Nelson -0- $-0-
Enrique Levy -0- $-0-
17
<PAGE>
COMPENSATION OF DIRECTORS
Directors who are employees of the Company are not paid any fees or
additional compensation for services as members of the Company's Board of
Directors or any committee thereof. Although non-employee Directors do not
receive Board fees, they are entitled to Options to purchase shares of the
Company's Common Stock. Each person that becomes a member of the Board is
granted Options to purchase 15,000 shares of the Common Stock. Thereafter, a
Director is granted Options to purchase 10,000 shares annually if that person
has been a Director of the Company for more than six months. Pursuant to the
1993 Directors Stock Option Plan for Non-Employee Directors (the "1993 Directors
Plan"), which was amended in December 1997, the number of shares available under
the 1993 Directors Plan has been increased to 200,000 shares. At September 30,
1999, options to purchase an aggregate of 54,000 shares of Common Stock at
exercise prices ranging from $2.925 to $5.00 were outstanding under the 1993
Directors Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation/Option Committee are Robert
Spira, M.D., F.A.C.P., and Sol Triebwasser, Ph.D., none of whom is an executive
officer or employee of the company or its subsidiaries. The Compensation
Committee met during Fiscal 1999 to review executive compensation and obtained
approval from the Board of Directors for changes to executive compensation.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 15, 1999, certain
information regarding the beneficial ownership of Common Stock by (i) each
person who is known by the Company to own beneficially more than five percent of
the outstanding Common Stock, (ii) each director and executive officer of the
Company, and (iii) all directors and executive officers as a group:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Amount and Nature Percentage of
Name of Position with of Beneficial Common
Beneficial Owner Company Ownership (1) Stock
- ----------------------------------------------------------------------------------------------
George Aaron Chairman of the 3,108,689 (2) 22.9%
Board; Chief Executive
Officer;
President
Jonathan Joels Director; Chief 3,089,489 22.8%
Financial Officer;
Treasurer;
Secretary
18
<PAGE>
Elliott Koppel VP Sales & Marketing -0- *
Jack Nelson Director 157,500 (3) 1.2%
Enrique Levy Director 112,000 (4) *
Robert Spira, M.D. Director 14,000 (5) *
Sol Triebwasser, Ph.D. Director 17,000 (6) *
All Directors and Executive
Officers as a group %
(7 persons) (1)(2)(3)(4)(5)(6) 6,498,678 47.1
</TABLE>
- ---------------
* Less than one percent (1%).
(1) All shares of Caprius Common Stock are beneficially owned, and the sole
voting and investment power is held by the persons named, except as set
forth in the notes below. A person is deemed to be the beneficial owner of
shares that can be acquired within 60 days of the date of this table upon
exercise of options or warrants.
(2) Includes 18,500 shares underlying options presently exercisable granted
under the 1993 Directors Plan and excludes 1,500 shares underlying options
granted under the 1993 Directors Plan, which are currently not exercisable.
(3) Includes 125,000 shares to be issued in 2000 pursuant to Severance
Agreement. Excludes 30,200 shares owned by Mr. Nelson's wife and children,
as to which shares he disclaims beneficial ownership.
(4) Includes 100,000 shares to be issued in 2000 pursuant to Severance
Agreement.
(5) Includes 14,000 shares underlying options presently exercisable granted
under the 1993 Directors Plan and excludes 1,500 shares underlying options
granted under the 1993 Directors Plan, which are currently not exercisable.
(6) Includes 17,000 shares underlying options presently exercisable granted the
1993 Directors Plan and excludes 1,500 shares underlying options granted
under the 1993 Directors Plan, which are currently not exercisable.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Item 10 regarding conversion of severance payment obligations of the
Company to Messrs. Nelson and Levy into Securred Promissory Notes.
19
<PAGE>
PART IV
-------
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits, including those incorporated by reference.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Agreement and Plan of Merger, dated January 20, 1997, by and
among Registrant, Medial Diagnostics, Inc. ("MDI"), MDI
Acquisition Corporation and US Diagnostic Inc. (incorporated
by reference to Exhibit 1 to Registrant's Form 8-K filed
January 23, 1997).
2.2 Agreement and Plan of Merger, dated as of June 23, 1997, among
Registrant, ANMR/AMS Merger Corp. and Advanced Mammography
Systems, Inc. ("AMS") (incorporated by reference to Annex A to
the Joint Proxy Statement Prospectus that formed part of
Registrant's Registration Statement of Form S-4 filed on
October 9, 1997 ("Registrant's Form S-4")).
2.3 Agreement and Plan of Merger dated as of June 28, 1999 among
Registrant, Caprius Merger Sub, Opus Diagnostics Inc.
("Opus"), George Aaron and Jonathan Joels (incorporated by
reference to Exhibit 2.1 to Registrant's Form 8-K, filed July
1, 1999 (the "July 1000 Form 8-K")).
3.1 Certificate of Incorporation of Registrant. (incorporated by
reference to Exhibit 3 filed with Registrant's Registration
Statement on Form S-2, and amendments thereto, declared
effective August 18, 1993 (File No. 2084785 ("Registrant's
Form S-2")).
3.2 Amendment to Certificate of Incorporation of Registrant filed
November 5, 1993 (incorporated by reference to Exhibit 3.2 to
Registrant's Form S-4).
3.3 Amendment to Certificate of Incorporation of Registrant, filed
August 31, 1995, (incorporated by reference to Exhibit 3.1 to
Registrant's Form 8-K for an event of August 31, 1995 (the
"August 1995 Form 8-K")).
3.4 Amendment to Certificate of Incorporation of Registrant, filed
September 21, 1995 (incorporated by reference to Exhibit 3.1
to Registrant's Annual Report on Form 10-K for the nine months
ended September 30, 1995 (the "ANMR 1995 Form10-K")).
3.5 Amended and Restated By-laws of Registrant (incorporated by
reference to Exhibit 3.4 to Registrant's Form S-4).
4.1.1 Form of Warrant Agreement between Registrant and American
Stock Transfer & Trust Company, as Warrant Agent (incorporated
by reference to Exhibit 4 to Registrant's August 1995 Form
8-K).
4.1.2 Form of Warrant Certificate (incorporated by reference to
Annex B to the Registrant's Joint Proxy Statement, dated
August 31, 1995).
4.2 Specimen Certificate for Common Stock, par value $.01 per
share, of Registrant (incorporated by reference to Exhibit 4.2
to Registrant's Form S-4).
4.3.1 Form of Supplemental Agreement relating to Registrant's
assumption of MDI's obligations under the Warrant Agreement
between MDI and First Albany Corporation and Janney Montgomery
Scott, Inc. (incorporated by reference to Exhibit 4.3.1 to
Registrant's Form S-4).
20
<PAGE>
4.3.2 Form of Supplemental Agreement relating to Registrant's
assumption of MDI's Obligations under the Warrant Agreement
between MDI and Jacob by reference to Exhibit 4.3.2 to
Registrant's Form S-4).
4.4 Form of Warrant Certificate, dated as of March 6, 1994, issued
to Dominick & Dominick Incorporated (incorporated by reference
to Exhibit 4.4 to Registrant's Form S-4).
4.5 Certificate of Designation of Series A Preferred Stock of the
Registrant (incorporated by reference to the Registrant's Form
8-K, filed on March 31, 1996.
4.6 Certificate of Designation of Series B Convertible Redeemable
Preferred Stock of Registrant (incorporated by reference to
Registrant's Form 8-K, filed September 2, 1997).
4.7 Warrant issued to Oxis Health Products, Inc. (incorporated by
reference to Exhibit 10.2 to Registrant's July 1999 Form 8-K).
10.1 Registrant's 1983 Incentive and Non-Qualified Stock Option
Plan, Amended and Restated as
of February 1, 1988, and form of incentive stock option
(incorporated by reference to Exhibit 10.4 to Registrant's
Form S-2).
10.2 Registrant's 1993 Employee Stock Option Plan (incorporated by
reference to Exhibit A of the Proxy Statement for Registrant's
1993 Annual Meeting of Stockholders).
10.3 Registrant's 1993 Directors Stock Option Plan for Non-Employee
Directors (incorporated by reference to Exhibit B of the Proxy
Statement for Registrant's 1993 Annual Meeting of
Stockholders).
10.4.1 Registration Rights Agreement, dated August 18, 1997, between
the Registrant and General Electric Company ("GE")
(incorporated by reference to Exhibit 10.2 to the Registrant's
Form 8-K, filed September 2, 1997).
10.4.2 Stockholders Agreement, dated August 18, 1997, between the
Registrant and GE (incorporated by reference to Exhibit 10.3
to the Registrant's Form 8-K, filed September 2, 1997).
10.4.3 Settlement and Release Agreement, dated August 18, 1997,
between the Registrant and GE (incorporated by reference to
Exhibit 10.4 to the Registrant's Form 8-K, filed September 2,
1997).
10.4.4 License Agreement, dated August 18, 1997, between the
Registrant and GE (incorporated by reference to Exhibit 10.4
to the Registrant's Form 8-K, filed September 2, 1997).
10.5.1 Employment Agreement between Registrant and Jack Nelson dated
as of December 6, 1993 (incorporated by reference to Exhibit
10.5 filed with the ANMR 1994 Form 10-K).
10.5.2 Severance and Consulting Agreement between Registrant and
Nelson (incorporated by reference to Exhibit 10.4 to the
Registrant's July 1999 Form 8-K).
10.6.1 Employment Agreement among Registrant, Advanced Mammography
Systems, Inc. ("AMS") and Enrique Levy dated September 17,
1995 (incorporated by reference to Exhibit 10.6 to Registrants
ANMR September 1995 Form 10K)
10.6.2 Severance and Consulting Agreement between Registrant and Levy
(incorporated by reference to Exhibit 10.5 to the Registrant's
July 1999 Form 8-K).
10.7 Lease Agreement between Registrant and John T. Spinelli, dated
May 5, 1991 (incorporated by reference to Exhibit 10.9 filed
with Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995).
10.8 Key Employment Agreement between MVA Rehabilitation Associates
and Eric T. Shebar, M.D. dated as of January 31, 1995
(incorporated by reference to Exhibit 10(b) to MDI's Form 8-K
filed on February 15, 1995 (File No. 0-19736)).
21
<PAGE>
10.9 Amended and Restated Agreement of Partnership of MVA
Rehabilitation Associates (incorporated by reference to
Exhibit 10(a) to MDI's Form 8-K filed on February 15, 1995).
10.10 Form of Regulation S Securities Subscription Agreement
relating to the Company's Series A Preferred Stock
(incorporated by reference to the Registrant's Form 8-K, dated
March 31, 1996).
10.11 Interest Transfer Agreement by and among Middlesex MRI Center
Inc. ("Middlesex") and MDI Rehab Inc. and Medical Diagnostics
and Rehabilitation, LLC ("MDR") the sole general partners of
MVA Rehabilitation Associates ("MVA") for the transfer of
Middlesex and MDR's partnership interests in MVA.(incorporated
by Reference to Exhibit 2.1 to Registrant's Form 8-K dated
March 11, 1999).
10.12 Asset Purchase Agreement between Registrant and Pacific
Republic Capital Corp. for the sale of Aurora breast scanner
technology related assets (incorporated by reference to
Exhibit 2.1 to the Registrant's Form 8-K dated April 27,
1999).
10.13.1 Asset Purchase Agreement dated as of June 28, 1999, among
Opus, Oxis Health Products, Inc. and Oxis International, Inc.
(incorporated by reference to Exhibit 2.2 to Registrant's July
1999 Form 8-K).
10.13.2 Secured Promissory Note of Opus issued to Oxis Health
Products, Inc. in the initial principal amount of $565,000
(incorporated by reference to Exhibit 10.1 to Registrant's
July 1999 Form 8-K).
10.13.3 Services Agreement, dated as of June 30, 1999, between Opus
and Oxis Health Products, Inc. (incorporated by reference to
Exhibit 10.3 to Registrant's July 1999 Form 8-K).
10.14* Settlement Agreement, General Release and Covenant Not to Sue
("Agreement") between MVA Rehabilitation Associates, MDI Rehab
Inc. Middlesex MRI Center and Eric T. Shebar, M.D.,
dated December 27, 1999.
10.15* Promissory Notes issued for bridge loan in the aggregate
amount of $600,000 (November 1999 and December 1999).
10.16.1* Securred Promissory Note, dated as of December 28, 1999 from
Registrant to Jack Nelson.
10.16.2* Securred Promissory Note, dated as of December 28, 1999 from
Registrant to Enrique Levy.
10.16.3* Security Agreement, dated as of December 28, 1999 from
Registrant to Enrique Levy, as agent.
21* List of Company's subsidiaries.
23.1* Consent of BDO Seidman, LLP, independent public accountants
for Company.
27* Financial Data Schedule
- ----------
* Filed herewith
(b) Reports on Form 8-K:
None
22
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 14th day of
January 2000.
CAPRIUS, INC.
BY: /S/JONATHAN JOELS
--------------------------------------------------
Jonathan Joels, CFO, Treasurer & Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934 this
report has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/George Aaron Chairman of the Board, Jan. 11, 2000
------------------- President & CEO
George Aaron
/s/Jonathan Joels Director, CFO, Treasurer Jan. 11, 2000
------------------- & Secretary
Jonathan Joels
/s/ Jack Nelson
------------------- Director Jan. 14, 2000
Jack Nelson
/s/ Enrique Levy Jan. 14, 2000
------------------- Director
Enrique Levy
/s/Robert Spira Director Jan. 8, 2000
--------------------
Robert Spira, M.D.
/s/ Sol Triebwasser Director Jan. 11, 2000
-------------------
Sol Triebwasser, Ph.D.
23
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
I N D E X
Independent Auditors' Report F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
F1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Caprius, Inc.
We have audited the accompanying consolidated balance sheets of
Caprius, Inc. (formerly Advanced NMR Systems, Inc.) and subsidiaries as of
September 30, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for years ended September 30,
1999 and 1998. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Caprius, Inc. and subsidiaries at September 30, 1999 and 1998, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. However, the Company has incurred
substantial losses in recent years which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to this
matter are described in Note A. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
BDO Seidman, LLP
- ----------------
BDO Seidman, LLP
Boston, Massachusetts
December 7, 1999
F2
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1999 September 30, 1998
-------------------- --------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 116,068 $ 1,791,476
Accounts receivable, net of reserve
for bad debts of $25,669 at
September 30, 1999 and $663,314 at
September 30, 1998 537,510 2,899,282
Inventories 210,983 720,858
Other current assets 91,723 584,875
-------------------- --------------------
Total current assets 956,284 5,996,491
-------------------- --------------------
PROPERTY AND EQUIPMENT:
Medical equipment 314,320 2,145,674
Office furniture and equipment 188,001 251,199
Other equipment - 1,518,874
Leasehold improvements 950 1,153,576
-------------------- --------------------
503,271 5,069,323
Less: accumulated depreciation
and amortization 151,348 1,824,946
-------------------- --------------------
Net property and equipment 351,923 3,244,377
-------------------- --------------------
OTHER ASSETS:
Goodwill, net of accumulated
amortization of $45,006 at
September 30, 1999 and
$2,357,703 at September 30, 1998 675,176 1,053,797
Other intangibles, net of
accumulated amortization of
$29,880 at September 30, 1999
and $371,698 at September 30, 1998 2,360,493 1,240,678
Other 9,314 32,037
-------------------- --------------------
Total other assets 3,044,983 2,326,512
-------------------- --------------------
$ 4,353,190 $ 11,567,380
==================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 342,204 $ 810,990
Accrued expenses 465,941 964,922
Accrued compensation 652,153 388,748
Other current liabilities - 53,664
Current maturities of long-term debt
and capital lease obligations 703,100 915,608
-------------------- --------------------
Total current liabilities 2,163,398 3,133,932
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS,
NET OF CURRENT MATURITIES 180,623 1,207,624
-------------------- --------------------
TOTAL LIABILITIES 2,344,021 4,341,556
-------------------- --------------------
Commitments and contingencies - -
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value
Authorized - 1,000,000 shares
Issued and outstanding - Series A,
none; Series B, convertible, 27,000
shares at September 30, 1999 and
September 30, 1998.
Liquidation preference $2,700,000 2,700,000 2,700,000
Common stock, $.01 par value
Authorized - 50,000,000 shares
Issued - 13,548,017 shares at
September 30, 1999 and 7,369,040
shares at September 30, 1998 135,480 73,690
Additional paid-in capital 64,778,855 63,561,672
Accumulated deficit (65,602,916) (59,107,288)
Treasury stock (22,500 common shares,
at cost) (2,250) (2,250)
-------------------- --------------------
Total stockholders' equity 2,009,169 7,225,824
-------------------- --------------------
$ 4,353,190 $ 11,567,380
==================== ====================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F3
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Year Ended September 30,
1999 1998
------------------------- ------------------------
<S> <C> <C>
REVENUES:
Net patient service revenues $ 2,882,818 $ 3,764,189
Net product sales 391,373 -
------------------------- ------------------------
Total revenues 3,274,191 3,764,189
------------------------- ------------------------
OPERATING EXPENSES:
Cost of operations 2,079,613 3,616,331
Selling, general and administrative 4,482,038 5,166,042
Research and development 496,480 2,950,578
Purchased research and development - 7,097,566
Provision for bad debt and
collection costs 149,297 340,426
Loss on sale of imaging business 12,670 265,791
Loss on sale of rehabilitation business 1,461,121 -
Loss on sale of Aurora Technology 2,096,057 -
Write down of intangibles - 1,900,000
------------------------- ------------------------
Total operating expenses 10,777,276 21,336,734
------------------------- ------------------------
Operating loss from continuing
operations (7,503,085) (17,572,545)
Interest income 33,939 328,235
Interest expense (135,482) (219,338)
Other income 9,000 3,050
------------------------- ------------------------
Loss from continuing operations
before equity in net loss of
unconsolidated subsidiary (7,595,628) (17,460,598)
Equity in net loss of unconsolidated
subsidiary - (67,358)
------------------------- ------------------------
Loss from continuing operations
before provision for income taxes (7,595,628) (17,527,956)
Provision for income taxes - (98,177)
------------------------- ------------------------
Loss from continuing operations (7,595,628) (17,626,133)
Income on disposal of discontinued
operation 1,100,000 107,430
------------------------- ------------------------
Net Loss $ (6,495,628) $ (17,518,703)
========================= ========================
Income (loss) per basic and diluted
common share:
Loss from continuing operations $(0.85) $(2.51)
Income on disposal of discontinued
operation 0.12 0.02
-------------------------- ------------------------
Net loss per share $(0.73) $(2.49)
========================= ========================
Weighted average number of common shares
outstanding, basic and diluted 8,971,411 7,025,802
========================= ========================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F4
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Common Stock
----------------------------------------------------------
Number Number Additional
of of $0.01 Paid-in Accumulated
Shares Amount Shares Par Value Capital Deficit
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
SEPTEMBER 30, 1997 27,000 $ 2,700,000 4,374,763 $ 43,748 $56,170,271 $(41,588,585)
Issuance of common stock
related to AMS merger - - 2,956,741 29,567 7,362,287 -
Conversion of note payable - - 27,429 274 20,725 -
Exercise of stock options - - 10,107 101 8,389 -
Net loss - - - - - (17,518,703)
-----------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1998 27,000 2,700,000 7,369,040 73,690 63,561,672 (59,107,288)
Issuance of common stock
related to Opus merger - - 6,178,977 61,790 1,217,183 -
Net loss - - - - - (6,495,628)
-----------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1999 27,000 $ 2,700,000 13,548,017 $ 135,480 $64,778,855 $(65,602,916)
===================================================================================
</TABLE>
Treasury Stock
--------------------
Number Total
of $0.01 Stockholders'
Shares Par Value Equity
----------------------------------------
BALANCE,
SEPTEMBER 30, 1997 22,500 $ (2,250) $ 17,323,184
Issuance of common stock
related to AMS merger - - 7,391,854
Conversion of note payable - - 20,999
Exercise of stock options - - 8,490
Net loss - - (17,518,703)
-------------------------------------
BALANCE, SEPTEMBER 30, 1998 22,500 (2,250) 7,225,824
Issuance of common stock
related to Opus merger - - 1,278,973
Net loss - - (6,495,628)
-------------------------------------
BALANCE, SEPTEMBER 30, 1999 22,500 $ (2,250) $ 2,009,169
=====================================
The accompanying notes are an integral part of these
consolidated financial statements.
F5
<PAGE>
<TABLE>
<CAPTION>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended September 30,
1999 1998
------------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss $ (6,495,628) $ (17,518,703)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 787,389 2,352,068
Equity in net loss of unconsolidated subsidiary - 67,358
Gain on disposal of discontinued business (1,100,000) -
Loss (gain) on sale of Aurora Technology 2,096,057 -
Loss (gain) on sale of rehabilitation business 1,461,121 -
Loss (gain) on sale of imaging business 12,670 -
Purchased research and development - 7,097,566
Changes in operating assets and liabilities:
Accounts receivable, net (204,907) (207,425)
Inventories (213,763) 87,976
Other current assets 147,617 (293,435)
Accounts payable and accrued expenses 252,856 36,156
------------------- ------------------
Net cash used in operating activities (3,256,588) (8,378,439)
------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of rehabilitation business 762,804 -
Proceeds from sale of equipment 13,693 -
Proceeds from sale of imaging business (12,670) -
Proceeds from disposal of discontinued operations 1,100,000 -
Proceeds from sale of Aurora Technology 952,367 -
Cash used in Opus merger (522,940)
Cash used in AMS merger - (128,406)
Advances to unconsolidated subsidiaries - (479,673)
Purchase of equipment, furniture and leasehold improvements (12,803) (1,981,001)
------------------- ------------------
Net cash provided by (used in) investing
activities 2,280,451 (2,589,080)
------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options - 8,490
Proceeds from issuance of long-term debt 140,216 2,105,921
Repayment of long-term debt and capital lease obligations (839,487) (853,151)
------------------- -----------------
Net cash provided by (used in) financing
activities (699,271) 1,261,260
------------------- ------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,675,408) (9,706,259)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,791,476 11,497,735
------------------- ------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 116,068 $ 1,791,476
=================== ==================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest during the period $ 38,112 $ 203,876
=================== ==================
Common stock issued in AMS merger $ - $ 7,391,854
=================== ==================
Common stock issued in Opus merger $ 1,278,973 $ -
=================== ==================
Additions to capital leases $ 215,676 $ -
=================== ==================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F6
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(NOTE A) - Business and Basis of Presentation
- ---------------------------------------------
Caprius, Inc. ("Caprius" or the "Company") was founded in 1983 and through
June 1999 essentially operated in the business of medical imaging systems as
well as healthcare imaging and rehabilitation services. On June 28, 1999, the
Company acquired Opus Diagnostics Inc. ("Opus") and began manufacturing and
selling medical diagnostic assays. The Company continues to own and operate a
comprehensive imaging center located in Lauderhill, Florida.
Upon the merger (the "Opus Merger") between Opus and Caprius'
newly-formed wholly-owned subsidiary Caprius Merger Sub Inc., the Opus
stockholders received an aggregate of 6,178,977 shares of Caprius Common Stock,
par value $.01 per share, which constituted approximately 45.6% of the
outstanding shares after the Merger.
The Opus Merger was consummated coincident with the closing of an Asset
Purchase Agreement (the "Oxis Purchase Agreement") between Opus and Oxis Health
Products Inc., a Delaware corporation ("Oxis"). The purchase price consisted of
$500,000 in cash, a secured promissory note (the "Oxis Note") in the principal
amount of $586,389 (as adjusted) payable on November 30, 1999, and a warrant
granting Oxis the right to acquire up to 10% equity interest in Opus (on a
pre-Merger basis) (the "Warrant"), exercisable after six months for a period of
five years. This note is secured by substantially all assets of Opus. Upon the
Opus Merger, the Warrant became exercisable for 617,898 shares of Caprius Common
Stock at an exercise price equal to 80% of the average bid and asked prices for
the Common Stock for the five trading days immediately preceding December 28,
1999. As of December 8, 1999, the principal sum due under the Oxis Note was paid
in full and under an Amended and Restated Warrant, a warrant for 617,898 shares
of Caprius Common Stock was issued, exercisable at $.0875 per share in
replacement of the Warrant.
George Aaron and Jonathan Joels formed Opus in 1999 for the purpose of
effecting the Opus Merger and the Oxis Purchase Agreement.
Opus produces and sells 14 diagnostic assays, calibrators and controls
for therapeutic drug monitoring which are used on the Abbott TDx(R) and
TDxFLx(R) instruments. Pursuant to the Oxis Purchase Agreement, Opus acquired
the assets relating to the Oxis reagent patent and trademark and distribution
network for the therapeutic drug monitoring assay business (the "TDM Business").
Additionally, pursuant to a Services Agreement, Oxis is manufacturing the
products of the TDM Business of Opus through September 30, 2000.
On April 27, 1999, pursuant to an Asset Purchase Agreement among
Caprius, Caprius Systems, Inc., a wholly owned subsidiary of Caprius ("Systems"
and, together with Caprius, the "Sellers") and Pacific Republic Capital Corp.
("Pacific" the Buyer), the Sellers consummated the sale of their Aurora breast
scanner technology ("Aurora Technology") and related assets to Pacific for
$854,490 in cash and the assumption by Pacific of certain obligations associated
with the transferred assets. The assets and obligations transferred included all
the shares of Caprius' wholly owned subsidiary, Caprius Imaging Corp., various
patents relating to the Aurora technology and assets of Systems, including
hospital equipment contracts and equipment leases. Caprius was relieved of an
equipment debt that exceeded $1.1 million.
F7
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
In March 1999, the Company transferred its interest in its
rehabilitation center to an unrelated limited liability company in exchange for
$900,000, of which $850,000 was paid as of September 30, 1999. In addition, the
acquiring group assumed certain liabilities totaling approximately $400,000. The
cash received of $900,000 was used in part to pay a balance of approximately
$372,000 to the former owner of the center, which was the remaining amount due
from the Company's acquisition of its interest in the center.
In July 1998, the Company acquired The Strax Institute ("Strax"), a
comprehensive breast imaging center, located in Lauderhill, Florida. Strax is a
multi-modality breast care center that treats approximately 15,000 patients per
year offering x-ray mammography, ultrasound, stereotactic biopsy and bone
densitometry.
In August 1997, the Company and General Electric Company ("GE") entered
into a Purchase Agreement (the "GE Purchase Agreement") whereby GE purchased all
inventory, equipment and other assets, and assumed liabilities relating to the
Company's high field MRI systems and InstaScan business, in exchange for
$2,432,580 in cash and the purchase by GE of $2.7 million stated value of a
newly issued class of Series B Convertible Redeemable Preferred Stock. The
Company and GE entered into a Settlement and Release Agreement terminating and
releasing their prior obligations to each other.
Effective November 10, 1997, the Company completed a merger (the "AMS
Merger") with Advanced Mammography Systems, Inc. ("AMS"), whereby AMS merged
into AMS Merger Corp., a wholly owned subsidiary of the Company, and became a
wholly owned subsidiary. Upon the AMS Merger, the Company changed its name to
Caprius, Inc. AMS was originally formed on July 2, 1992 as a wholly owned
subsidiary of Caprius to develop a dedicated breast MRI system and at the time
of the AMS Merger, the Company owned approximately 14% of the outstanding AMS
stock.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. However, the Company has incurred
substantial losses in recent years which raises substantial doubt about its
ability to continue as a going concern. The financial statements do not include
one adjustment that might result from the outcome of this uncertainty. The
Company had available cash and cash equivalents of $116,068 at September 30,
1999. The Company intends to utilize the funds for working capital purposes to
continue developing the business of Opus by adding new distributors in
territories currently not covered by existing distributors and for the
development of new diagnostic kits. The Company also intends to pursue efforts
to identify additional funds through various funding options, including bridge
loans, banking facilities and equity offerings. The ability to secure commercial
or other borrowings could be more difficult due to the Company's delisting from
NASDAQ. There can be no assurance that such funding initiatives will be
successful and any equity placement could result in substantial dilution to
current stockholders.
(NOTE B) - Summary of Significant Accounting Policies
- -----------------------------------------------------
[1] Principles of consolidation
---------------------------
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.
[2] Revenue recognition
-------------------
The breast imaging and rehabilitation services businesses recognize
revenue as services are provided to patients. Reimbursements for services
provided to patients covered by Blue Cross/Blue Shield, Medicare, Medicaid,
HMO's and other contracted insurance programs are generally less than rates
charged by the Company. Differences between gross charges and estimated
third-party payments are recorded as contractual allowances in determining net
patient service revenue during the period that the services are provided.
Revenue from the sale of a comprehensive line of assays for therapeutic
drug monitoring is recognized when the products are shipped to the customer.
F8
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
[3] Cash equivalents
----------------
The Company considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents.
[4] Inventories
-----------
Inventories are accounted for at the lower of cost or market using the
first-in, first-out ("FIFO") method.
[5] Equipment, furniture and leasehold improvements
-----------------------------------------------
Equipment, furniture and leasehold improvements are recorded at cost.
Depreciation and amortization are computed by the straight-line method over the
estimated lives of the applicable assets, or term of the lease, if applicable.
Assets are written off when they become fully depreciated.
Equipment under capital lease is stated at the lower of the fair market
value or the net present value of the minimum lease payments at the inception of
the lease. Capitalized lease equipment is amortized over the shorter of the term
of the lease or the estimated useful life.
Asset Classification Useful Lives
-------------------- ------------
Medical and other equipment 5-8 years
Office furniture and equipment 3-5 years
Other equipment 5 years
Leasehold improvements Term of lease
[6] Goodwill and other intangibles
------------------------------
At September 30, 1999, goodwill is related to the Opus Diagnostics
business and to The Strax Institute. At September 30, 1998, goodwill is related
to the company's rehabilitation services business and its breast care center.
Goodwill and other intangibles are amortized over their estimated useful lives.
The Company periodically reviews the carrying amount of goodwill and other
intangibles to determine whether an impairment has been incurred based on
undiscounted future cash flows. Other intangibles include trademarks, technical
know how and distributor agreements. Goodwill and other intangibles are being
amortized over twenty years.
[7] Net loss per share
------------------
Net loss per share is computed in accordance with Statement of
Financial Standards No. 128, "Earning Per Share" ("SFAS No. 128"). SFAS No.
128 requires the presentation of both basic and diluted earnings per share.
F9
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
Basic net loss per common share was computed using the weighted average
common shares outstanding during the period. Outstanding warrants and options
had an anti-dilutive effect and were therefore excluded from the computation of
diluted net loss per common share.
[8] Income taxes
------------
The Company utilizes the liability method of accounting for income
taxes, as set forth in Statement of Financial Accounting Standards No. 109.
"Accounting for Income Taxes". Under this method, deferred tax liabilities and
assets are recognized for the expected tax consequences of temporary differences
between the carrying amount and the tax basis of assets and liabilities.
[9] Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
[10] Recent pronouncements
---------------------
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income." ("SFAS No. 130") established standards for reporting and
display of comprehensive income, its components, and accumulated balances.
Comprehensive income is defined to include all changes in equity except those
resulting from investments by owners and distributions to owners. Among other
disclosures, SFAS No. 130 requires that all items that are required to be
recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements.
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information", which supersedes SFAS No. 14, "Financial Reporting for Segments of
a Business Enterprise", establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas, and major customers. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief decision maker in deciding
how to allocate resources and in assessing performance.
Both of these new standards are effective for financial statements for
periods beginning after December 15, 1997 and require comparative information
for earlier years to be restated. The adoption of these standards has no effect
on the Company's financial condition or results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133 and 137. (SFAS No. 133), "Accounting for Derivative Instruments and Hedging
Activities" and (SFAS No. 137) "Accounting for Derivative Instruments and
F10
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133".
SFAS No. 133 and SFAS No. 137 require companies to recognize all derivative
contracts as either assets or liabilities in the balance sheet and to measure
them at fair value. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of ( i ) the changes in the fair value of the hedged asset or
liability that are attributable to the hedge risk or (ii) the earnings effect of
the hedged forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of change.
These statements are effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. The Company has no derivatives and does not expect the
pronouncement to materially effect future financial statements and disclosures.
(NOTE C) - Acquisitions
- -----------------------
On July 1, 1998, the Company acquired substantially all of the assets
and business of the Gertrude and Philip Strax Breast Diagnostic Institute in
Lauderhill, Florida, a comprehensive breast imaging center. As consideration for
the acquisition, the Company paid $600,000 in cash. The acquisition was
accounted for under the purchase method of accounting and the cost in excess of
net assets of approximately $450,000 is being amortized over 20 years.
Effective June 28, 1999, the Company merged with Opus Diagnostics Inc.
coincident with the closing of the asset purchase agreement between Opus and
Oxis Health Products, Inc. As consideration related to the purchase, the Company
paid $500,000 in cash, issued a secured promissory note in the amount of
$586,389 and a warrant for up to 10% equity interest in Opus. The Company issued
6,178,977 shares of the Company's common stock to the shareholders of Opus
Diagnostics Inc., related to the merger of the companies. The asset purchase
agreement was accounted for under the purchase method of accounting. Costs in
excess of net assets of approximately $930,000 are being amortized over 20
years. Other intangibles in the sum of $2,360,493 are included in the Balance
Sheet as of September 30, 1999.
(NOTE D) - Inventory
- --------------------
At September 30, 1999, inventory represents completed medical
diagnostic assays. At September 30, 1998 inventory represented materials used to
manufacture the Aurora system.
F11
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(NOTE E) - Long-term Debt and Capital Lease Obligations
- -------------------------------------------------------
Long-term debt and capital lease obligations at September 30, 1999 and
1998 consisted of the following:
1999 1998
---- ----
Notes payable to major
supplier of medical diagnostic assays. $588,460 $ -
Principal repayment due November 30, 1999.
Notes payable to various leasing companies, 295,263 1,542,046
secured by the respective medical equipment,
interest rates ranging from 10.0% - 12.7%,
Monthly payments of principal and interest
ranging from $1,107 to $3,621, maturities
ranging from November 2000 to July 2004.
Note payable to former minority owner of - 337,500
rehabilitation business, interest at 12%,
quarterly principal payments of $137,500
plus interest through October 1998 with a
balloon payment of $200,000, collateralized
by certain assets of the rehabilitation
business.
Note payable to a hospital for leasehold -
improvements, interest at 11%, Monthly
payments of principal and interest of $4,685
payable through August 2005
- 243,686
------- -------
Total long-term debt and capital lease obligations 883,723 2,123,232
Less: current maturities 703,100 915,608
------- -------
$180,623 $1,207,624
======== ========
Future minimum debt payments for the next five years are as follows:
Fiscal Year
2000 $703,100
2001 106,844
2002 51,893
2003 11,944
2004 9,942
------------
$883,723
==========
F12
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(NOTE F) - Income Taxes
- ------------------------
At September 30, 1999, the Company had a deferred tax asset totaling
approximately $17,680,000 due to net operating loss carryovers. A valuation
allowance has been established for the full amount of this asset due to
uncertainty as to the realization of the benefit.
At September 30, 1999 and September 30, 1998, the Company had available
net operating loss carryforwards for tax purposes, expiring through 2015 of
approximately $52,000,000 and $30,000,000 respectively. The Internal Revenue
Code contains provisions which may limit the net operating loss carry forward
available for use in any given year if significant changes in ownership interest
of the Company occur.
The following table reconciles the tax provision per the accompanying
statements of operations with the expected provision obtained by applying
statutory tax rates to the loss from continuing operations:
Year Ended September 30,
1999 1998
Loss from continuing operations: $(6,495,628) $(17,420,526)
Loss attributable to AMS
prior to merger - 67,358
Loss attributable to Aurora
Systems prior to sale 9,918 -
------------- --------------
$(6,485,710) $(17,353,168)
============= ==============
Expected tax (benefit) at 34% $(2,205,000) $(5,900,077)
Adjustment due to
increase in valuation reserve 2,205,000 3,600,000
Non-deductible purchased
R&D Costs - 2,300,077
Other - (98,177)
------------ --------------
Tax benefit (expense) per
financial statements $ - $(98,177)
============ ==============
F13
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(NOTE G) - Commitments and Contingencies
- ----------------------------------------
[1] Operating leases
----------------
The Company leases facilities and equipment under non-cancelable
operating leases expiring at various dates through fiscal 2003. Facility leases
require the Company to pay certain insurance, maintenance and real estate taxes.
Rental expenses totaled approximately $197,412 and $528,000 for the years ended
September 30, 1999 and 1998.
Future basic rental commitments under operating leases are as follows.
Fiscal Year Amount
--------------------------------------------------------------------
2000 121,798
2001 120,115
2002 123,719
2003 127,430
---------
$ 493,062
=========
[2] Legal proceedings
-----------------
On January 7, 1998, the Company and Jack Nelson, the Company's former
Chairman and Chief Executive Officer were served with a complaint in connection
with a purported class action brought against them by Dorothy L. Lumsden in the
United States District Court of the District of Massachusetts. The complaint
contains claims for alleged violations of Sections 10(b) and 20(a) under the
Securities Exchange Act and for common law fraud. Ms. Lumsden purported to bring
her action "on behalf of herself and all other persons who purchased or
otherwise acquired the common stock of the Company during the period August 10,
1994 through and including December 12, 1997". On February 2, 1998, the Company
and Mr. Nelson were served with a second class action complaint naming them as
defendants in connection with another action brought in the United States
District Court for the District of Massachusetts. This action was brought by
Robert Curry and the complaint alleged the same purported class and contained
similar allegations and claims as the class action complaint discussed above. On
April 24, 1998, the District Court consolidated the two class actions claims
into one for pre-trial purposes. On January 7, 1999, the Company announced that
it had reached a preliminary settlement in the shareholder class action in
Federal Court in Boston. Under the terms of the settlement, Caprius made a cash
payment of $150,000 and agreed to issue 325,000 shares of common stock to
Plaintiffs. Caprius' insurance carrier contributed $100,000 of the cash payment.
In addition, the settlement also stipulated that in the event Caprius sold all
or part of its business within 12 months an additional payment of $75,000 and
issuance of 100,000 additional shares would be made by Caprius to plaintiffs.
Consequently, on April 27, 1999, the additional payment was made and the
additional shares will be issued. For the year ended September 30, 1999, the
Company reported $207,323 as total settlement costs, which included $82,323 for
the market value of the shares to be issued.
F14
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
On October 19, 1998, the Company filed a complaint against Eric T.
Shebar, M.D. ("Shebar"), the former Chief Operating Officer and Medical Director
for the Company's motor vehicle accident rehabilitation ("MVA") business, and
MVA Center for Rehabilitation, Inc. ("MVA, Inc.") whereby the Company alleges
breach of contract and certain misrepresentations and sought damages in an
amount to be determined at trial. The Company filed a preliminary injunction to
reach and apply a secured promissory note to MVA, Inc. against damages sought
from Shebar and to enjoin against any remedies upon default of the Note. The
ruling on the injunction was denied. Consequently, the final Note payment of
$347,000 was paid as part of the sale of the MVA. The new Caprius management
negotiated a settlement agreement between the Company and Eric T. Shebar, M.D.
that was entered into on December 27, 1999, wherein the Company agreed to pay
$60,000 immediately and a further $20,000 over the next two years. Upon the
initial payment, the Company was released from all claims and actions relating
to this matter.
(NOTE H) - Capital Transactions
- --------------------------------
[1] Preferred Stock - Class B
-------------------------
On August 18, 1997, the Company entered into various agreements with
General Electric Company ("GE") including an agreement whereby GE purchased
27,000 shares of newly issued Series B Convertible Redeemable Preferred Stock
(the "Series B Preferred Stock") for $2,700,000.
The Series B Preferred Stock consists of 27,000 shares, ranks senior to
any other shares of preferred stock which may be created and the Common Stock.
It has a liquidation value of $100.00 per share, plus accrued and unpaid
dividends, is non-voting except if the Company proposes an amendment to its
Certificate of Incorporation which would adversely affect the rights of the
holders of the Series B Preferred Stock, and is initially convertible into
1,597,930 shares of Common Stock, subject to customary anti-dilution provisions,
commencing on August 18, 1998, or earlier upon a change of control as defined.
No fixed dividends are payable on the Series B Preferred Stock, except that if a
dividend is paid on the Common Stock, dividends are paid on the shares of Series
B Preferred Stock as if they were converted into shares of Common Stock.
[2] Warrants
--------
At September 30, 1998, in connection with various transactions
including the acquisition of MDI and the AMS Merger, the Company had
outstanding warrants to purchase 996,987 shares of the Company's common stock
at exercise prices ranging from $4.20 to $106.30 per share and have a weighted
average exercise price of $16.83.
The warrants expire at various dates from January 31, 2000 to May 31, 2001.
At September 30, 1999, in connection with the Opus Diagnostics Inc.
merger, the Company issued a warrant to purchase 617,898 shares of the company's
common stock at an exercise price of $.0875. The warrant expires on June 28,
2004.
F15
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
[3] Stock options
-------------
The Company has an Incentive and Nonqualified Stock Option Plan which
provides for the granting of options to purchase not more than 100,000 shares of
common stock. Exercise prices for any incentive options are at prices not less
than the fair market value at the date of grant, while exercise prices for
nonqualified options may be at any price in excess of $.01. When fair market
value at the date of issuance is in excess of the option exercise price, the
excess is recorded as compensation expense. The total number of shares
authorized for grant under this plan were reached during 1993 and no additional
options can be granted. During fiscal 1997 and 1998 certain options were
canceled and replaced with options exercisable at the then fair market value.
Stock option transactions under the above plan for the past two fiscal
periods are as follows:
Number of Option Price
Shares Per Share
------ ---------
Balance, September 30, 1997 4,500 $5.00 - $31.30
Repriced Options:
Original (2,000) $3.13
Repriced 2,000 $0.84
Cancelled in 1998 (2,500) $5.00
-------
Balance, September 30, 1998 2,000 $0.84
Cancelled in 1999 (2,000) $0.84
-------
Balance, September 30, 1999 0
=
During 1993, the Company adopted a new employee stock option plan and a
stock option plan for non-employee directors. The employee stock option plan
provides for the granting of options to purchase not more than 1,000,000 shares
of common stock. The options issued under the plan may be incentive or
nonqualified options. The exercise price for any incentive options cannot be
less than the fair market value of the stock on the date of the grant, while the
exercise price for nonqualified options will be determined by the option
committee. The Directors' stock option plan provides for the granting of options
to purchase not more than 200,000 shares of common stock. The exercise price for
shares granted under the Directors' plan cannot be less than the fair market
value of the stock on the date of the grant. Both plans expire May 25, 2003.
During 1998 certain options were cancelled and replaced with options
exercisable at the then fair market value. Stock option transactions under the
1993 plans are as follows:
F16
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
Number of Option Price
Shares Per Share
------ ---------
Balance, September 30, 1997 181,767 $2.80 - $52.50
Granted in 1998 576,510 $0.84 - $1.46
Granted pursuant to AMS Merger 454,000 $0.84 - $20.00
Exercised in 1998 ( 10,107) $0.84
Repriced Options:
Original (182,141) $5.00 - $8.00
Repriced 182,141 $0.84
Cancelled in 1998 (292,849) $0.84 - $42.50
---------
Balance, September 30, 1998 909,321 $0.84 - $33.80
-------
Cancelled in 1999 (762,685) $0.84 - $25.60
---------
Balance, September 30, 1999 146,636 $0.84 - $25.60
=======
Stock option transactions not covered under the option plans in 1998, 1997 and
1996 are as follows:
Number of Option Price
Shares Per Share
------ ---------
Balance, September 30, 1997 81,032 $7.90 - $33.80
Repriced Options:
Original (6,000) $5.00
Repriced 6,000 $0.84
Cancelled in 1998 (4,000) $14.10
-------
Balance, September 30, 1998 77,032 $0.84 - $20.10
------
Balance, September 30, 1999 77,032 $0.84 - $20.10
======
Under all plan and non-plan stock options, as of September 30, 1999, options to
purchase 1,055,364 shares were available for grant and options to purchase
226,827 shares at a weighted average price of $5.35 per share were exercisable.
The outstanding options expire at various dates within ten years from the date
of grant.
F17
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting or Stock-Based Compensation", but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its plans.
There was no compensation expense recognized in 1999 or 1998. If the Company had
elected to recognize compensation cost for the plans based on the fair value at
the grant date for awards under the plans, consistent with the method prescribed
by SFAS No. 123, net loss per share would have been changed to the pro forma
amounts indicated below:
Year Ended September 30,
1999 1998
---- ----
Net loss:
As reported $(6,495,628) $(17,518,703)
Pro forma $(6,495,945) $(17,600,935)
Net loss per share:
As reported $(.73) $(2.49)
Pro forma $(.73) $(2.51)
The fair value of the Company's stock options used to compute pro forma
net loss and net loss per share disclosures is the estimated present value at
grant date using the Black-Scholes option-pricing model with the following
weighted average assumptions for 1999 and 1998: dividend yield of 0%; expected
volatility of 0.50; risk free interest rates of 5.59%-7.78%; and an expected
holding period of 10 years.
The Company did not grant options during fiscal year 1999. The
weighted-average grant-date fair value of options granted was $0.44 per share
for the year ended September 30, 1998.
During fiscal 1998, the stockholders of the Company approved a reverse
1 for 10 stock split and an increase of shares authorized under the 1993 plans
to 1,200,000 shares on a post-reverse stock split basis. All share and option
amounts have been restated to reflect the stock split. On January 1, 1998, all
190,141 of the then outstanding employee stock options were repriced to the
current market price, using the existing exercise durations.
F18
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(NOTE I) - Unconsolidated Subsidiary (AMS):
- -------------------------------------------
On November 10, 1997, the shareholders of Caprius and AMS agreed to
merge, and AMS became a wholly-owned subsidiary of the Company (see Note A).
The following unaudited pro forma financial information sets for the
results of the Company as if the AMS merger had occurred October 1, 1997. The
pro forma financial information does not purport to be indicative of what would
have occurred had the acquisition been made as of October 1, 1997 or results
that may occur in the future. The pro forma information does not include the
expense for the purchased research and development costs.
Year ended
September 30, 1998
(000's)
Net revenues $ 3,764
Operating expenses (15,005)
------
Operating loss from continuing operations $(11,241)
Net loss $(11,395)
Net loss per common share $ (1.55)
(NOTE J) - Discontinued Operations
- ----------------------------------
In August 1996, the Company's Board of Directors adopted a formal plan
to discontinue its Imaging Systems business segment. The segment was accounted
for as discontinued operations in accordance with APB 30, which among other
provisions, requires the plan of disposal to be carried out within one year. The
Company's estimated loss on disposal was less than anticipated resulting in
income in fiscal 1998 amounting to approximately $107,000.
In December 1998, the Company received $1,100,000 from a major MRI
manufacturer to resolve outstanding patent issues unrelated to the patents
protecting its Aurora technology.
F19
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(NOTE K) -Pro Forma Information
- -------------------------------
The following unaudited pro forma financial information sets forth the
results of the Company as if the merger with Opus has occurred as of October 1,
1997. The pro forma financial information does not purport to be indicative of
what would have occurred had the acquisition been made as of October 1, 1997 or
results that may occur in the future.
Year ended September 30,
1999 1998
Net Revenues $ 4,352,991 $ 5,202,589
Operating expenses 11,505,901 22,367,334
Operating loss from (6,643,398) (17,164,745)
continuing operations
Loss from continuing operations (6,735,941) (17,218,333)
Loss per common share (.77) (2.45)
(NOTE L) - Segment Information
- ------------------------------
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, 'Disclosure about Segments of an Enterprise and Related Information'. SFAS
No. 131 established standards for the way that public enterprises report
information about operating segments. Due to the significant restructuring of
the Company during the years ended September 30, 1999 and September 30, 1998, it
is impracticable and would not be meaningful to financial statement users to
provide such information at this time.
F20
EXHIBIT 10.14
SETTLEMENT AGREEMENT, GENERAL RELEASE AND
-----------------------------------------
COVENANT NOT TO SUE
-------------------
This Settlement Agreement, General Release and Covenant Not to Sue
("Agreement") is made this ____ day of December, 1999, by and between MVA
Rehabilitation Associates ("MVA"), MDI Rehab Inc. ("MDI"), Middlesex MRI Center,
Inc. ("MRI"), (hereinafter collectively referred to as "Releasors"), on the one
hand, and Eric T. Shebar, M.D. ("Shebar") on the other hand.
WHEREAS MVA and Shebar entered into a Key Employee Agreement, a copy of
which is attached hereto as Exhibit A;
WHEREAS, in August, 1998, Posternak, Blankstein & Lund, on behalf of MVA,
sent a letter to Shebar terminating his employment, a copy of which is attached
hereto as Exhibit B;
WHEREAS, Shebar claims that the Releasors breached said Key Employee
Agreement relationship;
WHEREAS, the parties are currently engaged in Civil Action No. 98-5183B,
currently pending in Middlesex Superior Court entitled MVA Rehabilitation
------------------
Associates; MDI Rehab, Inc., General Partner of MVA Rehabilitation Associates;
- ------------------------------------------------------------------------------
Middlesex MRI Center, Inc., General Partner of MVA Rehabilitation Associates v.
- -------------------------------------------------------------------------------
Eric T. Shebar, et al. (hereinafter "the Civil Action");
- ----------------------
WHEREAS, the parties desire to resolve this dispute without admission of
liability, in order that the parties seek to avoid the expense and inconvenience
of litigation;
WHEREAS, the parties desire to enter into a compromise agreement that will
terminate all aspects of Shebar's alleged claims, causes of action and/or
damages arising out of or relating in any way to his relationship with the
Releasors in any capacity and at any time;
WHEREAS, Releasors deny and dispute all of Shebar's alleged claims and
causes of action, and deny any liability or responsibility therefor;
NOW, THEREFORE, in consideration of the promises, conditions and
representations set forth herein, the payment being made to Shebar by Releasors
as set forth below, and other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, Shebar and the Releasors agree as
follows:
<PAGE>
1. Definitions
-----------
1(a) Any reference in this Agreement to Shebar shall, at all
times, unless otherwise specified, include, and this Agreement shall cover, his
attorneys, heirs, administrators, representatives, attorneys, executors,
legatees, partners, affiliates, successors, agents and assigns.
1(b) Any reference in this Agreement to the Releasors and/or
to MVA, MDI and MRI shall, at all times, unless otherwise specified, include,
and this Agreement shall cover, their predecessors, successors, affiliates,
subsidiaries, joint-venturers, and/or all of their past, present and future
officers, directors, employees, former employees, representatives, shareholders,
trustees, attorneys, agents, assigns, and all other legal entities describing
their organizations, and parents or controlling companies.
2. Consideration
-------------
For good and valuable consideration (including but not limited to the
exchange of mutual covenants and dismissal with prejudice, of the Civil Action),
the receipt and sufficiency of which is hereby acknowledged.
The parties have reached a full settlement of the subject matter of the
Civil Action as follows:
o $10,000 to be paid to Shebar by Releasors simultaneously with delivery
to counsel for Releasors of this executed Agreement and the executed
Stipulation of Dismissal in the form attached, for filing with the
court. It is agreed that the Stipulation of Dismissal may not be filed
with the court until this initial payment is made to Shebar;
o $50,000 to be paid to Shebar by Releasors on or before December 31,
1999;
o $10,000 to be paid to Shebar by Releasors on or before December 31,
2000;
o $10, 000 to be paid to Shebar by Releasors on or before December 31,
2001;
o All payments will be paid by Releasors pursuant to the provisions of
an unsecured promissory note (a copy of which is attached as
Exhibit C), which note shall provide for joint and several liability
among the Releasors.
Shebar expressly acknowledges and agrees that no further benefits, sums,
payments or monies are owed to him by Releasors pursuant to or on account of
Exhibits A or B, nor under any other factual or legal theories or claims.
Releasors will issue Shebar IRS 1099 forms for the respective payments.
Shebar agrees and covenants to indemnify and hold Releasors harmless for any tax
liability that they may incur for not making tax deductions, together with any
2
<PAGE>
interest and penalties assessed thereon, which may be assessed by the Internal
Revenue Service or the Massachusetts Department of Revenue arising from the
payment made to Shebar pursuant to this Agreement. This method of payment
represents a good faith assessment by all parties of the appropriate tax and
other treatment of such amounts.
Simultaneously with delivery to counsel for Releasors of: (1) a fully
executed counterpart of this Agreement; and (2) a fully executed Stipulation of
Dismissal With Prejudice (a copy of which is attached hereto as Exhibit D),
Releasors shall make the first payment referred to above.
The payments to Shebar and/or his counsel are in full and final settlement
of all matters, claims and damages of any nature arising out of Shebar's
relationship with Releasors at any time, whether or not asserted to date.
3. No Liability
------------
The parties dispute and deny any liability whatsoever for their alleged
claims and/or damages. This settlement is entered into by the parties for the
purpose of avoiding litigation fees and costs.
4. Re-employment or Reinstatement
------------------------------
Shebar has not, does not, and will not seek employment with Releasors, and
hereby forever releases and discharges them from any and all liability to
reinstate or re-employ him in any capacity and any and all claims of a right to
reinstatement, and/or any claims whatsoever, of any name or nature, arising out
of or related to Shebar's seeking re-employment or reinstatement.
5. General Release and Covenant Not To Sue
---------------------------------------
a. Except with respect to any rights, obligations or duties arising
out of this Agreement, all of which are expressly excluded from this Settlement
Agreement, General Release and Covenant Not To Sue, Shebar , and anyone else
claiming by, through or under him, hereby fully, forever, irrevocably and
unconditionally: (a) release, remise, and discharge Releasors and/or Caprius,
Inc. ("Caprius") (their directors, shareholders, officers, employees, agents,
servants, affiliates, subsidiaries, and parent corporation) of and from, and (b)
agree and covenant not to institute, submit, file or bring, or permit to be
instituted, submitted, filed or brought on his behalf, either singly or
collectively, against Releasors and/or Caprius in any court, administrative
agency, or other forum, any and all manner of claims, counterclaims, charges,
complaints, demands, actions, causes of action, suits, rights, debts, dues, sums
of money, costs, losses, accounts, reckonings, covenants, contracts,
controversies, agreements, promises, leases, doings, omissions, damages,
executions, obligations, liabilities, and expenses (including attorneys' fees
and costs, expert witness fees and costs, consultants' fees and costs), of every
3
<PAGE>
kind and nature whatsoever, whether known or unknown, either at law, in equity,
or mixed, which he ever had, now has, or can, shall, or may have in the future
against Releasors and/or Caprius by reason of, on account of, or arising out of
any matter or thing which has happened, developed, or occurred before the
signing of this Agreement, including, but not limited to: all claims and/or
causes of action which were made and/or which could have been made in the Civil
Action; any suits in tort or contract, and any claims or suits for physical
injury or personal injury; any claims for intentional or negligent infliction of
emotional distress; any claims for loss of consortium; any claims for breach of
employment contract; any claims for wrongful termination of employment whether
in contract or tort; any claims for defamation or injury to reputation; any
claims for interference with contractual or advantageous relations, whether
prospective or existing; any claims for violations of the Massachusetts Civil
Rights Act, M.G.L. c.12, Section 11I; any claims arising out of, based on, or
connected with Shebar's employment by Releasors and/or Caprius and the
termination of that employment, including without limitation, any causes of
action or claims for unlawful employment discrimination or retaliation arising
under or based on M.G.L. c.151B, Section 1 et seq.; M.G.L. c.93, Section 102,
Section 103; M.G.L. c.214, Section 1C; Title VII of the Civil Rights Act of
1964, as amended, 42 U.S.C. Section 2000e et seq.; The Americans with
Disabilities Act, 42 U.S.C. Section 12101; the Civil Rights Act of 1866; 42
U.S.C. Section 1981-88; Sections 503 and 504 of the Rehabilitation Act of 1973,
as amended; 29 U.S.C. Sections 793 and 794; and any other state or federal equal
employment opportunity law, public policy, order or regulation affecting or
regulating the claims or rights of employees; and all claims for attorneys' fees
and costs.
It is expressly agreed and understood that this Release is a General
Release. Shebar further agrees not to institute any charge, complaint or lawsuit
to challenge the validity of this Settlement Agreement, General Release and
Covenant Not To Sue or the circumstances surrounding its execution.
Shebar declares and represents that any damages or losses that may have
been sustained by him may not be fully known to him and may be more numerous and
more serious than he now believes or expects and, in executing this Agreement it
is understood and agreed that he relies wholly upon his own judgment of the
future development, progress and result of said damages and losses, both known
and unknown, and that he has not been influenced to any extent whatsoever in the
making of this release by any representations or statements regarding such
damages and losses or the legal liability therefor, or regarding any other
matters, made by Releasors and/or Caprius or by any person or persons
representing them, and that he accepts the terms herein in full settlement and
satisfaction of all claims or demands whatsoever for all losses and damages to
him, both known and unknown.
Shebar further represents and warrants that he has not filed any
complaints, charges or claims for relief against Releasors and/or Caprius with
any other local, state or federal court or administrative agency.
4
<PAGE>
b. Except with respect to any rights, obligations or duties arising out
of this Agreement, all of which are expressly excluded from this Settlement
Agreement, General Release and Covenant Not To Sue, Releasors and/or Caprius,
and anyone else claiming by, through or under them, hereby fully, forever,
irrevocably and unconditionally: (a) release, remise, and discharge Shebar
(their heirs administrators, executors, successors and assigns) of and from, and
(b) agree and covenant not to institute, submit, file or bring, or permit to be
instituted, submitted, filed or brought on his behalf, either singly or
collectively, against Shebar in any court, administrative agency, or other
forum, any and all manner of claims, counterclaims, charges, complaints,
demands, actions, causes of action, suits, rights, debts, dues, sums of money,
costs, losses, accounts, reckonings, covenants, contracts, controversies,
agreements, promises, leases, doings, omissions, damages, executions,
obligations, liabilities, and expenses (including attorneys' fees and costs,
expert witness fees and costs, consultants' fees and costs), of every kind and
nature whatsoever, whether known or unknown, either at law, in equity, or mixed,
which they ever had, now have, or can, shall, or may have in the future against
Shebar by reason of, on account of, or arising out of any matter or thing which
has happened, developed, or occurred before the signing of this Agreement,
including, but not limited to: all claims and/or causes of action which were
made and/or which could have been made in the Civil Action; any suits in tort or
contract, and any claims or suits for breach of employment contract; any claims
for defamation or injury to reputation; any claims for interference with
contractual or advantageous relations, whether prospective or existing; any
claims arising out of, based on, or connected with Shebar's employment by
Releasors and/or Caprius and the termination of that employment; all claims
arising under or based on and any other state or federal law, public policy,
order or regulation affecting or regulating the claims or rights of employees;
and all claims for attorneys' fees and costs.
It is expressly agreed and understood that this Release is a General
Release. Releasors and/or Caprius further agree not to institute any charge,
complaint or lawsuit to challenge the validity of this Settlement Agreement,
General Release and Covenant Not To Sue or the circumstances surrounding its
execution.
Relesors and/or Caprius declare or represent that any damages or losses
that may have been sustained by them may not be fully known to them and may be
more numerous and more serious than they now believes or expects and, in
executing this Agreement it is understood and agreed that they rely wholly upon
their own judgment of the future development, progress and result of said
damages and losses, both known and unknown, and that they have not been
influenced to any extent whatsoever in the making of this release by any
representations or statements regarding such damages and losses or the legal
liability therefor, or regarding any other matters, made by Shebar or by any
person or persons representing him, and that they accept the terms herein in
full settlement and satisfaction of all claims or demands whatsoever for all
losses and damages to them, both known and unknown.
5
<PAGE>
Releasors and/or Caprius further represent and warrant that they have not
filed any complaints, charges or claims for relief against Shebar with any other
local, state or federal court or administrative agency.
Notwithstanding the forgoing, Releasors and/or Caprius do not release
Shebar from any claims or liabilities for which Releasors and/or Caprius may be
liable arising out of any criminal fraud or other violations of criminal law
committed by him during the course of his employment. Caprius and/or Releasors
are not presently aware of any such criminal fraud or other violations of
criminal law and specifically agree that this paragraph does not exempt from the
general release any conduct alleged in the lawsuit or conduct of a civil nature.
6. Nature of Agreement
-------------------
It is understood and agreed by the parties hereto that this Agreement is a
settlement of disputed claims and that this Agreement does not constitute an
admission of liability or wrongdoing on the part of any of the parties to said
Agreement.
7. Breach
------
In the event that Shebar institutes legal proceedings for breach of this
Agreement, or any provision thereof, the parties agree that his sole remedy
available shall be enforcement of the terms of this Agreement and/or a claim for
damages resulting from a breach of this Agreement, but that under no
circumstances shall Shebar be entitled to revive, reassert or assert any claims
released or abandoned under this Agreement, or to seek an award of attorneys'
fees and costs in connection with any released, abandoned, dismissed or
previously identified
If the payments under this agreement are not timely made, all remaining
payments are deemed to be accelerated, and Releasors will be liable for Shebar's
attorney's fees.
8. Representation
--------------
Shebar represents and agrees that by the form of this Agreement, he has
discussed all aspects of this Agreement with an attorney prior to executing the
Agreement, has carefully read and fully understands all of the provisions of
this Agreement, is voluntarily entering into this Agreement, and has been given
a reasonable period of time within which to consider the Agreement.
9. Applicable Law
--------------
This Agreement shall be deemed to be made and entered into in the
Commonwealth of Massachusetts, and shall in all respects be interpreted,
enforced and governed under the laws of said Commonwealth. The language of all
6
<PAGE>
parts of this Agreement shall in all cases be construed as a whole, according to
its fair meaning, and not strictly for or against any of the parties. The terms
of this Agreement are contractual in nature, and not a mere recital, and they
shall take effect as a sealed document.
10. Severability
------------
Should any provision of this Agreement be declared, or be determined by any
court or administrative agency to be illegal or invalid, the validity of the
remaining parts, terms or provisions shall not be affected thereby and said
illegal or invalid part, term, or provision shall be deemed not to be a part of
this Agreement.
11. Voluntary and Reasonable
------------------------
The parties have fully discussed and reviewed the terms of this Agreement
with their counsel. Based upon that review and discussion, the parties hereby
acknowledge that they understand the terms of this Agreement and that they are
entering into this Agreement voluntarily and in full settlement of all claims
because they believe the settlement to be fair and reasonable.
Shebar further states that he has carefully read the foregoing Agreement,
consulted with his counsel regarding the Agreement, knows the contents of the
Agreement, freely and voluntarily assents to all of the terms and conditions of
the Agreement, and signs the Agreement as his own free act.
12. Entire Agreement
----------------
This Agreement sets forth the entire agreement between the parties hereto,
and fully supersedes any and all prior agreements or understandings between the
parties hereto pertaining to the subject matter hereof. Shebar agrees that he
does not sign this Agreement in reliance upon any representation or statement
made by Releasors or their counsel. This Agreement may not be changed orally or
otherwise, but only by agreement in writing of concurrent or subsequent date,
signed by a duly authorized representative of the parties hereof. This Agreement
may be executed in counterpart originals.
7
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seals
to this Settlement Agreement, General Release and Covenant Not To Sue, as of the
date written above.
-------------------------------
Eric T. Shebar, M.D.
-------------------------------
MVA Rehabilitation Associates
-------------------------------
MDI Rehab, Inc.
-------------------------------
Middlesex MRI Center, Inc.
Dated: December , 1999
----
Commonwealth of Massachusetts
County of
----------------
On this the day of December, 1999 before me, a Notary Public in
--------
and for said county and state, personally appeared Eric T. Shebar, M.D., who
subscribed his name to the foregoing Settlement Agreement, General Release and
Covenant Not To Sue, and acknowledged the execution thereof to be his voluntary
act and deed.
-----------------------------------
Notary Public
My Commission Expires:
8
<PAGE>
State of New Jersey
County of
----------------
On this the day of December, 1999, before me, a Notary Public in
--------
and for said county and state, personally appeared of MVA
-----------------
Rehabilitation Associates, who subscribed his name to the foregoing Settlement
Agreement, General Release and Covenant Not To Sue, and acknowledged the
execution thereof to be his voluntary act and deed.
-----------------------------------
Notary Public
My Commission Expires:
State of New Jersey
County of
----------------
On this the day of December, 1999, before me, a Notary Public in
--------
and for said county and state, personally appeared of MDI
-----------------
Rehab, Inc., who subscribed his name to the foregoing Settlement Agreement,
General Release and Covenant Not To Sue, and acknowledged the execution thereof
to be his voluntary act and deed.
-----------------------------------
Notary Public
My Commission Expires:
State of New Jersey
County of
-----------------
On this the day of December, 1999, before me, a Notary Public in
--------
and for said county and state, personally appeared of MRI
-----------------
Center, Inc., who subscribed his name to the foregoing Settlement Agreement,
General Release and Covenant Not To Sue, and acknowledged the execution thereof
to be his voluntary act and deed.
-----------------------------------
Notary Public
My Commission Expires:
9
EXHIBIT 10.15
CAPRIUS, INC.
-------------
UNSECURED PROMISSORY NOTE
-------------------------
$ December 6, 1999
-----------------
(Principal Amount)
CAPRIUS, INC., a Delaware corporation (herein called the "Company",
which term shall also include its successors and assigns), for value
received, hereby promises to pay to the order of or
--------------------------
registered assigns (the "Holder") on February 29, 2000, the principal sum of
($ ), with interest payable at
- ------------------------------------ ------
maturity at the rate of eleven (11%) percent per annum from the date hereof
until the principal hereof shall become due and payable, and subject to earlier
prepayment, both principal and interest to be payable at the principal office of
the Company at One Parker Plaza, Fort Lee, New Jersey, 07024 or at such other
location as the Company and the Holder may agree upon in writing.
This Note is one of a duly authorized issue of Notes of the Company
limited in aggregate principal amount to $600,000.
This Note is issued with a detachable common stock purchase warrant
evidencing the right initially to purchase one share of Common Stock of
the Company for each $2.00 initial principal amount of this Note, at an initial
exercise price of Twenty Cents ($0.20) per share (the "Warrant").
1. DEFINITION OF TERMS
----------------------
For purposes of this Note, unless the context otherwise requires:
1.1 Business Day. Business Day shall mean a day other than a
------------
Saturday, Sunday or a day when banking institutions in New York City are
authorized by law, regulation or order to remain closed.
1.2 Common Stock. Common Stock shall mean the Company's Common Stock,
------------
$.01 par value, or such securities in which the Common Stock may be exchanged.
1.3 Holder of Record. Holder of Record shall mean in connection with
----------------
any Note the payee thereof unless a subsequent holders shall have presented to
the Company such Note, duly assigned to him and delivered to the Company a
written notice of his acquisition of the Note and designated in writing an
address to which payments and notices in respect of the Note shall be mailed,
in which case the term shall mean such subsequent holder.
1
<PAGE>
1.4 Maturity. As used herein the terms "maturity" and "Maturity"
--------
shall mean February 29, 2000 or such earlier or later date on which the
principal amount of this Note becomes payable hereunder.
1.5 Notes. Notes shall mean, collectively, this Note and the other
-----
Notes of a duly authorized issue of notes of the Company limited in aggregate
principal amount to $600,000, maturing on the same date bearing interest at the
same rate and on the same dates, and otherwise of substantially like tenor
(except for principal amount and name of payee) as this Note.
1.6 Person. Person shall mean any individual, corporation,
------
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
2. PREPAYMENT OF NOTE
---------------------
2.1 Note to Be Callable for Prepayment. The Company shall have the
----------------------------------
right, subject to compliance with the provisions of this Article 2, to call
this Note for prepayment at any time (herein referred to as the "Prepayment
Date"), either in whole or in part, at the principal amount so to be prepaid,
together with accrued interest thereon to the date fixed for such prepayment.
2.2 Notice of Call for Prepayment. Notice of call for prepayment of
-----------------------------
this Note or any portion hereof shall be given to the Holder of Record at his
address as specified in Section 6.2 at least three (3) days prior to the date
fixed for such prepayment. Upon notice of call for prepayment being given as
aforesaid, the Company covenants and agrees that it will prepay on the date
therein fixed for prepayment the entire principal amount of this Note or the
portion hereof, as the case may be, so called for prepayment as hereinabove
provided, and will pay all accrued and unpaid interest on the principal amount
being prepaid.
2.3 Allocation Among Holders. If less than the entire principal
------------------------
amount of all Notes at the time outstanding shall be called for prepayment at
any time, the Company will allocate the principal amount so called for
prepayment among the holders of all Notes in proportion, as nearly as may be,
to the aggregate principal amount of Notes then held by the respective holders
thereof. In any such allocation (i) the Company may, according to such method
as it shall deem proper in its discretion, make such adjustments by increasing
or decreasing by not more than $1,000 the amount which would be allocable on
the basis of exact proportion to any holders, as may be necessary to the end
that the principal amount so allocated shall be in each instance an integral
multiple of $1,000 and (ii) the Company shall not be required to allocate any
amount to any holder to which the amount allocable on the basis of the exact
proportion would be less than $1,000.
2.4 Prepayment of Portion of Note. Upon any prepayment of a portion
-----------------------------
of the principal amount of this Note, the Holder, at his option, (i) may
require the Company to execute and deliver at the expense of the Company a new
Note dated as of the date to which interest on this Note has been paid, and
2
<PAGE>
payable to such person or persons as may be designated by the Holder, for the
aggregate principal amount of this Note then remaining unpaid, upon surrender
of this Note and payment of applicable transfer taxes, if any, or (ii) may
present this Note to the Company for notation hereon of the payment of the
portion of the principal amount of this Note so prepaid.
2.5 Note to Become Due on Date Called for Prepayment. If this Note
------------------------------------------------
or a portion hereof is called for prepayment as herein provided, then this Note
or such portion shall become due and payable on the date of prepayment stated
in such notice and shall cease to bear interest on and after such date, unless,
upon presentation, the Company shall fail to prepay this Note or such portion,
as the case may be.
2.6 Private Placement and Prepayment of Note. If the Company shall
----------------------------------------
close a private placement of its Common Stock and/or indebtedness for which
the gross proceeds are at least $600,000, prior to the maturity of the Note,
the Company shall apply the net cash proceeds of such placement (after payment
of all related expenses) toward prepayment of all the Notes in accordance with
this Article 2. The Company shall effect the prepayment required by this Section
within five (5) Business Days after its receipt of the net proceeds from the
placement.
3. COVENANTS OF THE COMPANY
---------------------------
The Company agrees, and covenants that until such time as this
Note has been paid in full the Company will comply with the following covenants:
3.1 Payment of Principal and Interest. The Company will duly and
---------------------------------
punctually pay the principal of and interest on this Note in accordance with
the terms of this Note.
3.2 Maintenance of Office or Agency. The Company will maintain an
-------------------------------
office in the State of New Jersey where this Note may be presented or
surrendered for payment, where this Note may be surrendered for transfer or
exchange and where notices and demands to or upon the Company in respect of
this Note may be served. The Company will give prompt written notice to the
Holder of the location, and of any change in the location, of such office.
3.3 Payment of Taxes and Other Claims. The Company will pay or
---------------------------------
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or upon its income, profits or property, and (ii) all lawful
claims for labor, materials and supplies which, if unpaid, might by law become
a lien upon its property; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
3.4 Maintenance of Properties. The Company will cause all its
-------------------------
properties used or useful in the conduct of its business to be maintained and
kept in good condition, repair and working order and supplied with all
necessary equipment and will cause to be made all necessary repairs, renewals,
3
<PAGE>
replacements and improvements thereof, all as in the judgment of the Company
may be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
operation and maintenance of any of its properties if such discontinuance is,
in the judgment of the Company, desirable in the conduct of its business and
not disadvantageous in any material respect to the Holder.
3.5 Corporate Existence. The Company will do or cause to be done all
-------------------
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchise; provided, however,
that the Company shall not be required to preserve any right or franchise if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the
loss thereof is not disadvantageous in any material respect to the Holder.
3.6 Financial Statements. The Company shall send to each Holder a
--------------------
copy of all financial statements and other reports it sends to the holders of
its Common Stock.
3.7 Consolidation, Merger, Conveyance or Transfer. The Company shall
---------------------------------------------
not consolidate with or merge into any other corporation or convey or transfer
its properties and assets substantially as an entirety to any Person (excluding
a sale of the Strax Division), unless:
(a) the corporation formed by such consolidation into which the
Company is merged or the Person which acquires by conveyance or transfer the
properties and assets of the Company substantially as an entirety shall be a
corporation organized and existing under the laws of the United States of
America or any State or the District of Columbia, and shall expressly assume
the due and punctual payment of the principal of and interest on all the Notes;
and
(b) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing.
4. REMEDIES
-----------
4.1 Events of Default. "Event of Default", wherever used herein
-----------------
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Note for a
period of five (5) Business Days after it becomes due and payable; or
(2) default in the payment of the principal of any Note at its
Maturity; or
4
<PAGE>
(3) default in the performance, or breach, of any covenant of the
Company in this Note (other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in this Section specifically
dealt with), and continuance of such default or breach for a period of
ten (10) Business Days after there has been given, by registered or
certified mail, to the Company by the Holders of at least 51% in
principal amount of the outstanding Notes, a written notice specifying
such default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder; or
(4) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment
or composition of or in respect of the Company under the Federal Bankruptcy
Code or any other applicable Federal or State law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance
of any such decree or order unstayed and in effect for a period of sixty
(60) consecutive days; or
(5) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of
a petition or answer or consent seeking reorganization or relief under
the Federal Bankruptcy Code or any other applicable Federal or State
law, or the consent by it to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or of any substantial part
of its property, or the making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of corporate
action by the Company in furtherance of any such action; or
(6) the Company shall be in default in the payment of in excess of
$200,000 of money borrowed in any one transaction or pursuant to any one
agreement, the lender thereof shall have exercised its rights to
declare said sum due and payable and such default shall not have been
cured or contested in good faith for a period of sixty (60) days after
such declaration; or
(7) the Company shall have entered against it a final judgment by
a court having jurisdiction which, if satisfied, would have a material
adverse effect on the financial condition of the Company;
then and in each and every case, unless the principal of all of the Notes shall
have already become due and payable, the holders of not less than 51% in
aggregate principal amount of the Notes at the time outstanding may by notice in
writing to the Company declare the unpaid balance of all the Notes to be
forthwith due and payable, and thereupon such balance, including the principal
of the Notes and accrued interest thereon, shall become so due and payable
without presentation, protest or further demand or notice of any kind, all of
which are hereby expressly waived.
5
<PAGE>
4.2 Enforcement of Remedies. In case any one or more of the Events
-----------------------
of Default specified in Section 4.1 shall have occurred and be continuing, the
Holder may proceed to protect and enforce his rights either by suit in equity or
by action at law, for the specific performance of any covenant or provision
contained herein, or proceed to enforce payment of such Note or to enforce any
other legal or equitable right of the Holder of such Note; provided, however,
that, except for enforcement of the payment of principal or interest on the
Notes, said Holder shall be a Holder of Record of, or shall be joined in such
proceeding by other Holders of Record who together with him hold at least 51%
in aggregate principal amount of all Notes at the time outstanding.
4.3 Notice to Holders of Record. If any Holder of a Note shall
---------------------------
demand payment thereof or take any other action of which the Company shall have
actual knowledge in respect of an alleged default or Event of Default, the
Company will forth with give written, notice, specifying such action and nature
of the alleged default or Event of Default, to each Holder of Record of the
Notes then outstanding.
4.4 Waiver by Company. To the extent permitted by applicable law,
-----------------
the Company hereby agrees to waive, and does hereby absolutely and irrevocably
waive and relinquish the benefit and advantage of any valuation, stay,
appraisement, extension or redemption laws now existing or which may hereafter
exist, which, but for this provision might be applicable to any sale made under
the judgment, order or decree of any court or otherwise, based on the Notes or
any claim for interest on the Notes or any foreclosure thereunder.
4.5 Amendments and Waivers. No course of dealing between the Company
----------------------
and any holder of the Notes and no delay on the part of any holder of the Notes
in exercising any rights under the Notes shall operate as a waiver of the rights
of any holder of the Notes. No covenant or other provision of the Notes nor any
default or Event of Default in connection therewith may be waived otherwise than
by a written instrument signed by the party so waiving such covenant or other
provision or default or Event of Default. Any provision of the Notes to the
contrary notwithstanding, changes in or additions to the Notes may be made, and
compliance with any term, convenant, condition or provision set forth in the
Notes may be omitted or waived (either generally or in a particular instance and
either retroactively or prospectively), and any default or Event of Default and
the consequences thereof may be waived, by a consent or consents in writing
signed by the Holders of Record of at least 51% in aggregate principal amount of
all Notes at the time outstanding; provided, however, that (i) the Company shall
deliver copies of the form of such consent or consents to any Holder of Record
who did not execute the same; (ii) no such consent shall be effective to reduce
the principal of or rate of interest payable on any Notes, or to postpone the
date fixed for the payment of the principal thereof, or any installment of
interest thereon, without the consent of the Holder of Record of each Note so
affected; (iii) no such consent shall be effective to change the percentage of
principal amount of the Notes, the consent of the holders of which is required
under this Section 5.5, without the consent of the Holders of Record of all
Notes at the time outstanding; and (iv) no such consent shall extend to or
impair any obligation not expressly waived or impair any right consequent
thereon. Any consent may be given subject to satisfaction of conditions stated
therein.
6
<PAGE>
4.6 Cost and Expense of Collection. The Company covenants and agrees
------------------------------
that if default be made in any payment or prepayment of principal of, or
interest on, the Notes, it will, to the extent permitted under applicable law,
pay to the holder or holders of the Notes such further amount as shall be
sufficient to cover the cost or expense of collection, including reasonable
compensation to the attorneys of the Holder for all services rendered in that
connection.
5. PAYMENT; EXCHANGE AND TRANSFER; LOST NOTES
---------------------------------------------
5.1 Payments. Interest and principal to be paid in respect of this
--------
Note shall be paid at the place provided herein, without any presentment or
notation of payment, and the amount of principal so paid on this Note shall be
regarded as having been retired and cancelled at the time of payment. The
Holder of Record shall, however, at the place of payment of this Note at any
time during its regular business hours on any day when a payment of principal
is due, permit the Company to make appropriate notation hereon of the amount
of principal which has been paid on this Note, if the Company at least fifteen
(15) days in advance shall have in writing requested permission to make such
notation. The Holder of Record of this Note, before any transfer hereof, shall
make a notation hereon of all principal payments theretofore made hereon, and
shall in writing notify the Company of the name and address of the respect to
which interest and transferee. Any Note with respect to which interest and
principal has been fully paid shall be surrendered to the Company and shall be
retired and cancelled.
5.2 Exchange and Transfer. The Holder of Record of any of the Notes
---------------------
may, prior to maturity or prepayment thereof, surrender any Notes held by him
for exchange, at the office designated by the Company pursuant to Section 3.2.
Within a reasonable time thereafter and without expense (other than transfer
taxes, if any) to such Holder of Record, the Company shall issue in exchange
thereof, or in exchange for the portion thereof not surrendered in payment as
aforesaid (as the case may be), in such denominations and made payable to such
person or persons, or order, as such Holder of Record shall designate, a Note
or Notes for the same aggregate principal amount as the unpaid principal amount
of the Note or Notes so surrendered, having the same maturity and rate of
interest, containing the same provisions and subject to the same terms and
conditions as the Note or Notes as surrendered.
5.3 Lost, etc., Notes. Upon receipt by the Company of evidence
-----------------
satisfactory to it of the loss, theft, destruction or mutilation of this Note,
and (in case of loss, theft or destruction) of indemnity satisfactory to it,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Note, if mutilated, the
Company will make and deliver a new Note of like tenor in lieu of such Note.
6. MISCELLANEOUS PROVISIONS
---------------------------
6.1 Benefits. This Note shall be binding upon the Company and its
--------
successors and assigns and shall inure to the benefit of the Holder and its
successors and assigns.
7
<PAGE>
6.2 Addresses of Parties. All communications provided for herein or
--------------------
with reference to this Note shall be deemed to have been sufficiently given or
served for all purposes if sent by certified or registered mail, postage and
purposes if sent by certified or registered mail, postage and charges prepaid,
to the following addresses: if to the Company, at its office, 1 Parker Plaza,
Fort Lee, New Jersey 07024, Attention: President, or at any other address
designated by the Company in writing to the Holder of Record of this Note; and
if to any Holder of Record of the Note, as specified in writing to the Company
by an initial or successor Holder of Record.
6.3 Governing Law. This Note shall be deemed to be a contract made
-------------
under, and to be construed in accordance with, the laws of the State of New
Jersey, without giving effect to conflicts of law.
6.4 Section Headings. The descriptive section headings herein have
----------------
been inserted for convenience only and shall not be deemed to limit or
otherwise affect the construction of any provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed in its corporate name by its President, under its corporate seal,
attested by its Secretary, and dated the day and year first above written.
CAPRIUS, INC.
By: /s/ George Aaron
----------------------------
George Aaron, President
ATTEST:
/s/ Jonathan Joels
- ---------------------------------
Jonathan Joels, Secretary
8
EXHIBIT 10.16.1
CAPRIUS, INC.
-------------
SECURED PROMISSORY NOTE
-----------------------
$258,500 December 28, 1999
(Principal Amount)
CAPRIUS, INC., a Delaware corporation (herein called the "Company",
which term shall also include its successors and assigns), for value
received, hereby promises to pay to Jack Nelson or permitted assigns (the
"Holder") on September 1, 2000, the principal sum of Two Hundred Fifty-Eight
Thousand Five Hundred Dollars ($258,500), with interest payable monthly
commencing on February 1, 2000 and on the first day of each succeeding month at
the rate of ten (10%) percent per annum accruing from December 28, 1999 on the
outstanding principal amount until the entire principal shall become paid or
otherwise satisfied, and subject to voluntary prepayment, both principal and
interest to be payable at the principal office of the Company at One Parker
Plaza, Fort Lee, New Jersey 07024, or at such other location as the Company and
the Holder may agree upon in writing.
This Note is one of a duly authorized issue of Notes of the
Company to Jack Nelson and Enrique Levy (the "Nelson/Levy Notes") issued in
conversion of payments due under certain termination and severance agreements
(the "Termination Agreements"), dated as of June 28, 1999, by the Company with
each Nelson and Levy.
1. DEFINITION OF TERMS
----------------------
For purposes of this Note, unless the context otherwise requires:
1.1 Bridge Notes. Bridge Notes shall mean, collectively, the Notes
------------
of a duly authorized issue of notes of the Company limited in aggregate
principal amount to $600,000, maturing on February 29, 2000.
1.2 Business Day. Business Day shall mean a day other than a
------------
Saturday, Sunday or a day when banking institutions in New York City are
authorized by law, regulation or order to remain closed.
1.3 Holder of Record. Holder of Record shall mean in connection
----------------
with any Note the payee thereof unless a subsequent holder shall have presented
to the Company such Note, duly assigned to him and delivered to the Company a
written notice of his acquisition of the Note and designated in writing an
address to which payments and notices in respect of the Note shall be mailed,
in which case the term shall mean such subsequent holder.
<PAGE>
1.4 Maturity. As used herein the terms "maturity" and "Maturity"
--------
shall mean October 1, 2000 or such earlier or later date on which the principal
amount of this Note becomes payable hereunder.
1.5 Person. Person shall mean any individual, corporation,
------
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
2. SECURITY
-----------
2.1 Security Agreement. If the Nelson/Levy Notes are outstanding on
------------------
March 1, 2000, Caprius will grant to the Holder a joint security interest with
the holders of the other outstanding Nelson/Levy Notes in the inventory,
receivables and non-leased equipment of the Strax Division of the Company.
Such security interest shall be pursuant to the terms of a Security Agreement
to be executed among the initial holders of the Nelson/Levy Notes and the
Company and shall become effective only if the Nelson/Levy Notes are
outstanding on March 1, 2000. Between December 28, 1999 and March 1, 2000, the
Company will not grant a security interest to a third party in the assets of
the Strax Division, except (i) in connection with a transaction on which the
net proceeds will be used to prepay all or a portion of the then outstanding
principal and accrued interest on the Nelson/Levy Notes pursuant to Section 3.3
hereof or (ii) in connection with an installment purchase or a capitalized
lease of equipment.
3. PREPAYMENT OF NOTE
---------------------
3.1 Note to Be Callable for Prepayment. The Company shall have the
----------------------------------
right, subject to compliance with the provisions of this Article 3, to call
this Note for prepayment at any time (herein referred to as the "Prepayment
Date"), either in whole or in part, at the principal amount so to be prepaid,
together with accrued interest thereon to the Prepayment Date. Any prepayment
on this Note shall be proportionate to a simultaneous prepayment on the other
Nelson/Levy Notes.
3.2 Notice of Call for Prepayment. Notice of call for prepayment of
-----------------------------
this Note or any portion hereof shall be given to the Holder of Record at his
address in accordance with Section 7.2 hereof at least three (3) Business Days
prior to the Prepayment Date. Upon notice of call for prepayment being given as
aforesaid, the Company shall prepay on the Prepayment Date the entire principal
amount of this Note or the portion hereof, as the case may be, so called for
prepayment as hereinabove provided, and shall pay all accrued and unpaid
interest on the principal amount being prepaid.
3.3 Sale of the Strax Division. (a) If the Company shall sell or
--------------------------
otherwise dispose of the Strax Division (the "Strax Sale") prior to the
Maturity of this Note, the Company shall apply the net cash proceeds of such
Sale (after payment of all commissions, expenses and taxes related to such
Sale) toward prepayment of the Nelson/Levy Notes and the Bridge Notes (if they
are still outstanding) in accordance with this Article 3.
2
<PAGE>
(b) If the net cash proceeds to be received by the Company on a
Strax Sale would be insufficient to pay the outstanding amounts on the
Nelson/Levy Notes and the outstanding Bridge Notes, the Holders of Record of
more than 50% of the outstanding principal amount of the Nelson/Levy Notes must
consent to such Sale. The net cash proceeds from the Strax Sale shall be paid
on a pro rata basis among the outstanding indebtedness on the Nelson/Levy Notes
and the Bridge Notes in accordance with Section 3.3(c) hereof, and the
remaining principal amounts on the Nelson/Levy Notes shall be payable on
September 1, 2000. The Company and the Holders of Record of the Nelson/Levy
Notes shall use their respective best efforts to reach agreement to secure such
remaining principal amounts.
(c) The Company shall effect the prepayment required by this
Section within ten (10) Business Days after its receipt of the net proceeds
from the Strax Sale. If less than the entire principal amount of the
Nelson/Levy Notes and the Bridge Notes at the time outstanding shall be called
for prepayment, upon the Strax Sale in accordance with Section 3.3(b) hereof,
the Company shall allocate the principal amount so called for prepayment among
the Holders of the Nelson/Levy and Bridge Notes in proportion, as nearly as may
be, to the aggregate principal amount of Notes then held by the respective
holders thereof. In any such allocation (i) the Company may, according to such
method as it shall deem proper in its discretion, make such adjustments by
increasing or decreasing by not more than $1,000 the amount which would be
allocable on the basis of exact proportion to any holders, as may be necessary
to the end that the principal amount so allocated shall be in each instance an
integral multiple of $1,000 and (ii) the Company shall not be required to
allocate any amount to any holder to which the amount allocable on the basis
of the exact proportion would be less than $1,000.
3.4 Prepayment of Portion of Note. Upon any prepayment of a portion
-----------------------------
of the principal amount of this Note, the Holder, at his option, (i) may
require the Company to execute and deliver at the expense of the Company a new
Note dated as of the date to which interest on this Note has been paid, and
payable to such person or persons as may be designated by the Holder, for the
aggregate principal amount of this Note then remaining unpaid, upon surrender
of this Note and payment of applicable transfer taxes, if any, or (ii) may
present this Note to the Company for notation hereon of the payment of the
portion of the principal amount of this Note so prepaid.
4. COVENANTS OF THE COMPANY
---------------------------
The Company agrees, and covenants that until such time as this
Note has been paid in full the Company will comply with the following covenants:
4.1 Payment of Principal and Interest. The Company will duly and
---------------------------------
punctually pay the principal of and interest on this Note in accordance with
the terms of this Note.
4.2 Maintenance of Office or Agency. The Company will maintain an
-------------------------------
office in the State of New Jersey where this Note may be presented or
surrendered for payment, where this Note may be surrendered for transfer or
exchange and where notices and demands to or upon the Company in respect of
3
<PAGE>
this Note may be served. The Company will give prompt written notice to the
Holder of the location, and of any change in the location, of such office.
4.3 Corporate Existence. The Company will do or cause to be done all
-------------------
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchise; provided, however,
that the Company shall not be required to preserve any right or franchise if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the
loss thereof is not disadvantageous in any material respect to the Holder.
4.4 Consolidation, Merger, Conveyance or Transfer. The Company
---------------------------------------------
shall not consolidate with or merge into any other corporation or convey or
transfer its properties and assets substantially as an entirety to any Person
(excluding a sale of the Strax Division), unless:
(a) the corporation formed by such consolidation into which the
Company is merged or the Person which acquires by conveyance or transfer the
properties and assets of the Company substantially as an entirety shall be a
corporation organized and existing under the laws of the United States of
America or any State or the District of Columbia, and shall expressly assume
the due and punctual payment of the principal of and interest on all the Notes;
and
(b) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing.
5. REMEDIES
-----------
5.1 Events of Default. "Event of Default", wherever used herein
-----------------
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be effected by operation of law pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of principal or any installment of
interest upon this Note for a period of five (5) Business Days after it
becomes due and payable whether at its Maturity or otherwise; or
(2) default in the performance, or breach, of any covenant of the
Company in this Note (other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in this Section specifically
dealt with), or, after its effectiveness, under the Security Agreement;
or
(3) the entry of a decree or order by a court having jurisdiction
in the premises adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company under the
Federal Bankruptcy Code or any other applicable Federal or State law,
or appointing a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or of any substantial part
4
<PAGE>
of its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order unstayed and
in effect for a period of sixty (60) consecutive days; or
(4) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of
a petition or answer or consent seeking reorganization or relief under
the Federal Bankruptcy Code or any other applicable Federal or State
law, or the consent by it to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or of any substantial part
of its property, or the making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of corporate
action by the Company in furtherance of any such action; or
(5) the Company shall have entered against it a final judgment by
a court having jurisdiction which, if satisfied, would have a material
adverse effect on the financial condition of the Company;
then and in each and every case, unless the principal and accrued interest on
this Note shall have already become due and payable, the Holder may by notice in
writing to the Company declare the unpaid balance of this Note to be forthwith
due and payable, and thereupon such balance, including the principal of this
Note and accrued interest thereon, shall become so due and payable without
presentation, protest or further demand or notice of any kind, all of which are
hereby expressly waived.
5.2 Enforcement of Remedies. In case any one or more of the Events
-----------------------
of Default specified in Section 5.1 hereof shall have occurred and be
continuing, the Holder may proceed to protect and enforce his rights either by
suit in equity or by action at law, for the specific performance of any
covenant or provision contained herein, or proceed to enforce payment of this
Note or to enforce any other legal or equitable right of the Holder of this
Note; and under the Security Agreement if it is then in effect.
5.3 Waiver by Company. To the extent permitted by applicable law,
-----------------
the Company hereby agrees to waive, and does hereby absolutely and irrevocably
waive and relinquish the benefit and advantage of any valuation, stay,
appraisement, extension or redemption laws now existing or which may hereafter
exist, which, but for this provision might be applicable to any sale made under
the judgment, order or decree of any court or otherwise, based on this Note or
any claim for interest on this Note or any foreclosure thereunder.
5.4 Amendments and Waivers. No course of dealing between the Company
----------------------
and the Holder of this Note and no delay on the part of the Holder in
exercising any rights hereunder shall operate as a waiver of the rights of the
Holder. No covenant or other provision of this Note nor any default or Event of
Default in connection therewith may be waived otherwise than by a written
instrument signed by the Holder. Any provision of this Note to the contrary
notwithstanding, changes in or additions to this Note may be made, and
5
<PAGE>
compliance with any term, convenant, condition or provision set forth in this
Note may be omitted or waived (either generally or in a particular instance
and either retroactively or prospectively), provided a similar change or
addition is made in the remaining outstanding Nelson/Levy Notes, and any
default or Event of Default and the consequences thereof may be waived.
5.5 Cost and Expense of Collection. The Company covenants and
------------------------------
agrees that if default be made in any payment or prepayment of principal of,
or interest on, the Notes, it will, to the extent permitted under applicable
law, pay to the Holder such further amount as shall be sufficient to cover the
cost or expense of collection, including reasonable compensation to the
attorneys of the Holder for all services rendered in that connection.
6. PAYMENT; EXCHANGE AND TRANSFER; LOST NOTES
---------------------------------------------
6.1 Payments. Interest and principal to be paid in respect of this
--------
Note shall be paid at the place provided herein, without any presentment or
notation of payment, and the amount of principal so paid on this Note shall be
regarded as having been retired and cancelled at the time of payment. The
Holder of Record shall, however, at the place of payment of this Note at any
time during its regular business hours on any day when a payment of principal
is due, permit the Company to make appropriate notation hereon of the amount
of principal which has been paid on this Note. The Holder of Record, before
any transfer hereof, shall make a notation hereon of all principal payments
theretofore made hereon, and shall in writing notify the Company of the name
and address of the respect to which interest and transferee.
6.2 Exchange and Transfer. The Holder of Record of this Note may,
---------------------
prior to maturity or prepayment thereof, surrender the Note held by him for
exchange, at the office designated by the Company pursuant to Section 3.2
hereof. Within a reasonable time thereafter and without expense (other than
transfer taxes, if any) to such Holder of Record, the Company shall issue in
exchange thereof, or in exchange for the portion thereof not surrendered in
payment as aforesaid (as the case may be), in such denominations and made
payable to such person or persons, or order, as such Holder of Record shall
designate, a Note or Notes for the same aggregate principal amount as the
unpaid principal amount of the Note or Notes so surrendered, having the same
maturity and rate of interest, containing the same provisions and subject to
the same terms and conditions as the Note or Notes as surrendered.
6.3 Lost, etc., Notes. Upon receipt by the Company of evidence
-----------------
satisfactory to it of the loss, theft, destruction or mutilation of this Note,
and (in case of loss, theft or destruction) of indemnity satisfactory to it,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Note, if mutilated, the
Company will make and deliver a new Note of like tenor in lieu of such Note.
7. MISCELLANEOUS PROVISIONS
---------------------------
7.1 Benefits. This Note shall be binding upon the Company and its
--------
successors and assigns and shall inure to the benefit of the Holder and his
6
<PAGE>
heirs and administrators, provided that the Holder may transfer all or part of
the unpaid principal amount of this Note to a member of his immediate family
or to a trust of which the Holder or a member of his immediate family is the
beneficiary.
7.2 Addresses of Parties. All communications provided for herein
--------------------
or with reference to this Note shall be deemed to have been sufficiently given
or served for all purposes if sent by certified or registered mail, postage
and purposes if sent by certified or registered mail, postage and charges
prepaid, to the following addresses: if to the Company, at its office, 1 Parker
Plaza, Fort Lee, New Jersey 07024, Attention: President, or at any other
address designated by the Company in writing to the Holder of Record of this
Note; and if to any Holder of Record of the Note, as specified in writing to
the Company by an initial or successor Holder of Record.
7.3 Governing Law. This Note shall be deemed to be a contract made
-------------
under, and to be construed in accordance with, the laws of the State of New
Jersey, without giving effect to conflicts of law.
7.4 Section Headings. The descriptive section headings herein have
----------------
been inserted for convenience only and shall not be deemed to limit or
otherwise affect the construction of any provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed in its corporate name by its President, under its corporate seal,
attested by its Secretary, and dated the day and year first above written.
CAPRIUS, INC.
By: /s/ George Aaron
-------------------------------
George Aaron, President
ATTEST:
/s/ Jonathan Joels
- ---------------------------------
Jonathan Joels, Secretary
7
EXHIBIT 10.16.2
CAPRIUS, INC.
-------------
SECURED PROMISSORY NOTE
-----------------------
$247,500 December 28, 1999
(Principal Amount)
CAPRIUS, INC., a Delaware corporation (herein called the "Company",
which term shall also include its successors and assigns), for value
received, hereby promises to pay to Enrique Levy or permitted assigns (the
"Holder") on September 1, 2000, the principal sum of Two Hundred Forty-Seven
Thousand Five Hundred Dollars ($247,500), with interest payable monthly
commencing on February 1, 2000 and on the first day of each succeeding month at
the rate of ten (10%) percent per annum accruing from December 28, 1999 on the
outstanding principal amount until the entire principal shall become paid or
otherwise satisfied, and subject to voluntary prepayment, both principal and
interest to be payable at the principal office of the Company at One Parker
Plaza, Fort Lee, New Jersey 07024, or at such other location as the Company and
the Holder may agree upon in writing.
This Note is one of a duly authorized issue of Notes of the
Company to Jack Nelson and Enrique Levy (the "Nelson/Levy Notes") issued in
conversion of payments due under certain termination and severance agreements
(the "Termination Agreements"), dated as of June 28, 1999, by the Company with
each Nelson and Levy.
1. DEFINITION OF TERMS
----------------------
For purposes of this Note, unless the context otherwise requires:
1.1 Bridge Notes. Bridge Notes shall mean, collectively, the Notes
------------
of a duly authorized issue of notes of the Company limited in aggregate
principal amount to $600,000, maturing on February 29, 2000.
1.2 Business Day. Business Day shall mean a day other than a
------------
Saturday, Sunday or a day when banking institutions in New York City are
authorized by law, regulation or order to remain closed.
1.3 Holder of Record. Holder of Record shall mean in connection
----------------
with any Note the payee thereof unless a subsequent holder shall have
presented to the Company such Note, duly assigned to him and delivered to
the Company a written notice of his acquisition of the Note and designated in
writing an address to which payments and notices in respect of the Note shall
be mailed, in which case the term shall mean such subsequent holder.
<PAGE>
1.4 Maturity. As used herein the terms "maturity" and "Maturity"
--------
shall mean October 1, 2000 or such earlier or later date on which the principal
amount of this Note becomes payable hereunder.
1.5 Person. Person shall mean any individual, corporation,
------
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
2. SECURITY
-----------
2.1 Security Agreement. If the Nelson/Levy Notes are outstanding
------------------
on March 1, 2000, Caprius will grant to the Holder a joint security interest
with the holders of the other outstanding Nelson/Levy Notes in the inventory,
receivables and non-leased equipment of the Strax Division of the Company.
Such security interest shall be pursuant to the terms of a Security Agreement
to be executed among the initial holders of the Nelson/Levy Notes and the
Company and shall become effective only if the Nelson/Levy Notes are
outstanding on March 1, 2000. Between December 28, 1999 and March 1, 2000, the
Company will not grant a security interest to a third party in the assets of
the Strax Division, except (i) in connection with a transaction on which the
net proceeds will be used to prepay all or a portion of the then outstanding
principal and accrued interest on the Nelson/Levy Notes pursuant to Section 3.3
hereof or (ii) in connection with an installment purchase or a capitalized
lease of equipment.
3. PREPAYMENT OF NOTE
---------------------
3.1 Note to Be Callable for Prepayment. The Company shall have the
----------------------------------
right, subject to compliance with the provisions of this Article 3, to call
this Note for prepayment at any time (herein referred to as the "Prepayment
Date"), either in whole or in part, at the principal amount so to be prepaid,
together with accrued interest thereon to the Prepayment Date. Any prepayment
on this Note shall be proportionate to a simultaneous prepayment on the other
Nelson/Levy Notes.
3.2 Notice of Call for Prepayment. Notice of call for prepayment
-----------------------------
of this Note or any portion hereof shall be given to the Holder of Record at
his address in accordance with Section 7.2 hereof at least three (3) Business
Days prior to the Prepayment Date. Upon notice of call for prepayment being
given as aforesaid, the Company shall prepay on the Prepayment Date the entire
principal amount of this Note or the portion hereof, as the case may be, so
called for prepayment as hereinabove provided, and shall pay all accrued and
unpaid interest on the principal amount being prepaid.
3.3 Sale of the Strax Division. (a) If the Company shall sell or
--------------------------
otherwise dispose of the Strax Division (the "Strax Sale") prior to the
Maturity of this Note, the Company shall apply the net cash proceeds of such
Sale (after payment of all commissions, expenses and taxes related to such
Sale) toward prepayment of the Nelson/Levy Notes and the Bridge Notes (if they
are still outstanding) in accordance with this Article 3.
2
<PAGE>
(b) If the net cash proceeds to be received by the Company on a
Strax Sale would be insufficient to pay the outstanding amounts on the
Nelson/Levy Notes and the outstanding Bridge Notes, the Holders of Record of
more than 50% of the outstanding principal amount of the Nelson/Levy Notes must
consent to such Sale. The net cash proceeds from the Strax Sale shall be paid
on a pro rata basis among the outstanding indebtedness on the Nelson/Levy Notes
and the Bridge Notes in accordance with Section 3.3(c) hereof, and the
remaining principal amounts on the Nelson/Levy Notes shall be payable on
September 1, 2000. The Company and the Holders of Record of the Nelson/Levy
Notes shall use their respective best efforts to reach agreement to secure
such remaining principal amounts.
(c) The Company shall effect the prepayment required by this
Section within ten (10) Business Days after its receipt of the net proceeds
from the Strax Sale. If less than the entire principal amount of the
Nelson/Levy Notes and the Bridge Notes at the time outstanding shall be called
for prepayment, upon the Strax Sale in accordance with Section 3.3(b) hereof,
the Company shall allocate the principal amount so called for prepayment among
the Holders of the Nelson/Levy and Bridge Notes in proportion, as nearly as
may be, to the aggregate principal amount of Notes then held by the
respective holders thereof. In any such allocation (i) the Company may,
according to such method as it shall deem proper in its discretion, make such
adjustments by increasing or decreasing by not more than $1,000 the amount
which would be allocable on the basis of exact proportion to any holders, as
may be necessary to the end that the principal amount so allocated shall be
in each instance an integral multiple of $1,000 and (ii) the Company shall not
be required to allocate any amount to any holder to which the amount allocable
on the basis of the exact proportion would be less than $1,000.
3.4 Prepayment of Portion of Note. Upon any prepayment of a portion
-----------------------------
of the principal amount of this Note, the Holder, at his option, (i) may
require the Company to execute and deliver at the expense of the Company a new
Note dated as of the date to which interest on this Note has been paid, and
payable to such person or persons as may be designated by the Holder, for the
aggregate principal amount of this Note then remaining unpaid, upon surrender
of this Note and payment of applicable transfer taxes, if any, or (ii) may
present this Note to the Company for notation hereon of the payment of the
portion of the principal amount of this Note so prepaid.
4. COVENANTS OF THE COMPANY
---------------------------
The Company agrees, and covenants that until such time as this
Note has been paid in full the Company will comply with the following covenants:
4.1 Payment of Principal and Interest. The Company will duly and
---------------------------------
punctually pay the principal of and interest on this Note in accordance with
the terms of this Note.
4.2 Maintenance of Office or Agency. The Company will maintain an
-------------------------------
office in the State of New Jersey where this Note may be presented or
surrendered for payment, where this Note may be surrendered for transfer or
exchange and where notices and demands to or upon the Company in respect of
this Note may be served. The Company will give prompt written notice to the
Holder of the location, and of any change in the location, of such office.
4.3 Corporate Existence. The Company will do or cause to be done
-------------------
all things necessary to preserve and keep in full force and effect its
corporate existence, rights (charter and statutory) and franchise; provided,
however, that the Company shall not be required to preserve any right or
franchise if the Board of Directors shall determine that the preservation
3
<PAGE>
thereof is no longer desirable in the conduct of the business of the Company
and that the loss thereof is not disadvantageous in any material respect to
the Holder.
4.4 Consolidation, Merger, Conveyance or Transfer. The Company
---------------------------------------------
shall not consolidate with or merge into any other corporation or convey or
transfer its properties and assets substantially as an entirety to any Person
(excluding a sale of the Strax Division), unless:
(a) the corporation formed by such consolidation into which the
Company is merged or the Person which acquires by conveyance or transfer the
properties and assets of the Company substantially as an entirety shall be a
corporation organized and existing under the laws of the United States of
America or any State or the District of Columbia, and shall expressly assume
the due and punctual payment of the principal of and interest on all the
Notes; and
(b) immediately after giving effect to such transaction, no Event
of Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing.
5. REMEDIES
-----------
5.1 Events of Default. "Event of Default", wherever used herein
-----------------
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be effected by operation of law pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of principal or any installment
of interest upon this Note for a period of five (5) Business Days after
it becomes due and payable whether at its Maturity or otherwise; or
(2) default in the performance, or breach, of any covenant of
the Company in this Note (other than a covenant or warranty a default in
whose performance or whose breach is elsewhere in this Section specifically
dealt with), or, after its effectiveness, under the Security Agreement;
or
(3) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Company under the Federal Bankruptcy Code or any other applicable
Federal or State law, or appointing a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Company or of
4
<PAGE>
any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of sixty (60) consecutive days;
or
(4) the institution by the Company of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or
relief under the Federal Bankruptcy Code or any other applicable Federal
or State law, or the consent by it to the filing of any such petition or
to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such action; or
(5) the Company shall have entered against it a final judgment by a
court having jurisdiction which, if satisfied, would have a material
adverse effect on the financial condition of the Company;
then and in each and every case, unless the principal and accrued interest on
this Note shall have already become due and payable, the Holder may by notice in
writing to the Company declare the unpaid balance of this Note to be forthwith
due and payable, and thereupon such balance, including the principal of this
Note and accrued interest thereon, shall become so due and payable without
presentation, protest or further demand or notice of any kind, all of which are
hereby expressly waived.
5.2 Enforcement of Remedies. In case any one or more of the Events
-----------------------
of Default specified in Section 5.1 hereof shall have occurred and be
continuing, the Holder may proceed to protect and enforce his rights either by
suit in equity or by action at law, for the specific performance of any
covenant or provision contained herein, or proceed to enforce payment of this
Note or to enforce any other legal or equitable right of the Holder of this
Note; and under the Security Agreement if it is then in effect.
5.3 Waiver by Company. To the extent permitted by applicable law,
-----------------
the Company hereby agrees to waive, and does hereby absolutely and irrevocably
waive and relinquish the benefit and advantage of any valuation, stay,
appraisement, extension or redemption laws now existing or which may hereafter
exist, which, but for this provision might be applicable to any sale made
under the judgment, order or decree of any court or otherwise, based on this
Note or any claim for interest on this Note or any foreclosure thereunder.
5.4 Amendments and Waivers. No course of dealing between the
----------------------
Company and the Holder of this Note and no delay on the part of the Holder in
exercising any rights hereunder shall operate as a waiver of the rights of the
Holder. No covenant or other provision of this Note nor any default or Event
of Default in connection therewith may be waived otherwise than by a written
instrument signed by the Holder. Any provision of this Note to the contrary
notwithstanding, changes in or additions to this Note may be made, and
compliance with any term, convenant, condition or provision set forth in this
5
<PAGE>
Note may be omitted or waived (either generally or in a particular instance
and either retroactively or prospectively), provided a similar change or
addition is made in the remaining outstanding Nelson/Levy Notes, and any
default or Event of Default and the consequences thereof may be waived.
5.5 Cost and Expense of Collection. The Company covenants and
------------------------------
agrees that if
default be made in any payment or prepayment of principal of, or interest on,
the Notes, it will, to the extent permitted under applicable law, pay to the
Holder such further amount as shall be sufficient to cover the cost or expense
of collection, including reasonable compensation to the attorneys of the Holder
for all services rendered in that connection.
6. PAYMENT; EXCHANGE AND TRANSFER; LOST NOTES
---------------------------------------------
6.1 Payments. Interest and principal to be paid in respect of this
--------
Note shall be paid at the place provided herein, without any presentment or
notation of payment, and the amount of principal so paid on this Note shall be
regarded as having been retired and cancelled at the time of payment. The
Holder of Record shall, however, at the place of payment of this Note at any
time during its regular business hours on any day when a payment of principal
is due, permit the Company to make appropriate notation hereon of the amount
of principal which has been paid on this Note. The Holder of Record, before
any transfer hereof, shall make a notation hereon of all principal payments
theretofore made hereon, and shall in writing notify the Company of the name
and address of the respect to which interest and transferee.
6.2 Exchange and Transfer. The Holder of Record of this Note may,
---------------------
prior to maturity or prepayment thereof, surrender the Note held by him for
exchange, at the office designated by the Company pursuant to Section 3.2
hereof. Within a reasonable time thereafter and without expense (other than
transfer taxes, if any) to such Holder of Record, the Company shall issue in
exchange thereof, or in exchange for the portion thereof not surrendered in
payment as aforesaid (as the case may be), in such denominations and made
payable to such person or persons, or order, as such Holder of Record shall
designate, a Note or Notes for the same aggregate principal amount as the
unpaid principal amount of the Note or Notes so surrendered, having the same
maturity and rate of interest, containing the same provisions and subject to
the same terms and conditions as the Note or Notes as surrendered.
6.3 Lost, etc., Notes. Upon receipt by the Company of evidence
-----------------
satisfactory to it of the loss, theft, destruction or mutilation of this Note,
and (in case of loss, theft or destruction) of indemnity satisfactory to it,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Note, if mutilated, the
Company will make and deliver a new Note of like tenor in lieu of such Note.
7. MISCELLANEOUS PROVISIONS
---------------------------
7.1 Benefits. This Note shall be binding upon the Company and its
--------
successors and assigns and shall inure to the benefit of the Holder and his
heirs and administrators, provided that the Holder may transfer all or part
6
<PAGE>
of the unpaid principal amount of this Note to a member of his immediate
family or to a trust of which the Holder or a member of his immediate family
is the beneficiary.
7.2 Addresses of Parties. All communications provided for herein
--------------------
or with reference to this Note shall be deemed to have been sufficiently
given or served for all purposes if sent by certified or registered mail,
postage and purposes if sent by certified or registered mail, postage and
charges prepaid, to the following addresses: if to the Company, at its office,
1 Parker Plaza, Fort Lee, New Jersey 07024, Attention: President, or at any
other address designated by the Company in writing to the Holder of Record of
this Note; and if to any Holder of Record of the Note, as specified in writing
to the Company by an initial or successor Holder of Record.
7.3 Governing Law. This Note shall be deemed to be a contract made
-------------
under, and to be construed in accordance with, the laws of the State of New
Jersey, without giving effect to conflicts of law.
7.4 Section Headings. The descriptive section headings herein have
----------------
been inserted for convenience only and shall not be deemed to limit or
otherwise affect the construction of any provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed in its corporate name by its President, under its corporate seal,
attested by its Secretary, and dated the day and year first above written.
CAPRIUS, INC.
By: /s/ George Aaron
-------------------------------
George Aaron, President
ATTEST:
/s/ Jonathan Joels
- ---------------------------------
Jonathan Joels, Secretary
7
EXHIBIT 10.16.3
SECURITY AGREEMENT
------------------
AGREEMENT, dated as of December 28, 1999, by CAPRIUS, INC., a Delaware
corporation ("the Company"), in favor of Enrique Levy (the "Agent"), acting in
his capacity as agent for the holders (the "Holders") of the Secured Promissory
Notes, dated December 28, 1999 (the "Nelson/Levy Notes"), issued by the Company
to the Holders.
W I T N E S S E T H
-------------------
WHEREAS, the Company and the Holders agreed to the issuance of the
Nelson/Levy Notes in exchange for certain obligations of the Company to the
Holders;
WHEREAS, the Holders requested in the event the Nelson/Levy Notes are
not repaid by March 1, 2000, from that date until repayment in full the Company
secure its obligations under the Nelson/Levy Notes by the grant of the security
interest provided for herein, and the Company is willing to grant such security
interest;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
- --------- -----------
All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural. All
references to the Company, the Agent and the Lenders pursuant to the definitions
set forth in the recitals hereto, or to any other person herein, shall include
their respective successors, assigns, heirs and administrators. The words
"hereof', "herein", "hereunder", "this Agreement" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not any
particular provision of this Agreement and as this Agreement now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced. An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 7.3 hereof. Any
accounting term used herein unless otherwise defined in this Agreement shall
have the meanings customarily given to such term in accordance with GAAP. For
purposes of this Agreement, the following terms shall have the respective
meanings given to them below:
1.1 "Accounts" shall mean all rights outstanding as of March 1, 2000
and future rights of the Strax Division to payment for goods sold or leased or
for services rendered, which are not evidenced by instruments or chattel paper,
and whether or not earned by performance.
1.2 "Collateral" shall have the meaning set forth in Section 2 hereof.
<PAGE>
1.3 "Equipment" shall mean all of the Strax Division's owned as of
March 1, 2000 and thereafter acquired equipment, machinery, computers and
computer hardware and software (whether owned or licensed), vehicles, tools,
furniture, fixtures, all attachments, accessions and property now or hereafter
affixed thereto or used in connection therewith, and substitutions and
replacements thereof, wherever located, except any leased property.
1.4 "Event of Default" shall have the meaning set forth in Section
6.1 hereof.
1.5 "Financing Agreements" shall mean, collectively, this Agreement,
the Nelson/Levy Notes and all other agreements, documents and instruments now
or at any time hereafter executed and/or delivered by the Company, the Holders
or the Agent in connection with the Financing Agreements, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.6 "Inventory" shall mean all of the Strax Division's owned as of
March 1, 2000 and thereafter existing or acquired raw materials, work in
process, finished goods and all other inventory of whatsoever kind or nature,
wherever located.
1.7 "Obligations" shall mean any and all obligations, liabilities and
indebtedness of every kind, nature and description owing by the Company to the
Holders, including principal, interest, costs and expenses, however evidenced,
as arising under the Nelson/Levy Notes or this Agreement.
1.8 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Internal Revenue Code of
1986, as amended), business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any Government or any
agency or instrumentality or political subdivision thereof.
1.9 "Records" shall mean all of the Strax Division's books as of
March 1, 2000 and future books of account of every kind or nature, purchase
and sale agreements, invoices, ledger cards, bills of lading and other
shipping evidence, statements, correspondence, memoranda, credit files and
other data relating to the Collateral or any account debtor, together with the
tapes, disks, diskettes and other data and software storage media and devices,
file cabinets or containers in or on which the foregoing are stored (including
any rights of the Strax Division with respect to the foregoing maintained with
or by any other person).
1.10 "Strax Division" shall mean The Strax Institute, a division of
the Company.
SECTION 2. GRANT OF SECURITY INTEREST
- --------- --------------------------
In the event any principal or interest on the Nelson/Levy Notes is
outstanding on March 1, 2000, to secure payment and performance of the
Nelson/Levy Notes, as of March 1, 2000, the Company shall grant to the Holders a
continuing security interest in, and shall assign to the Lenders as security,
the following property and interests in property, whether owned as of March 1,
2000 or thereafter acquired or existing, and wherever located (collectively, the
"Collateral"):
2.1 Accounts;
2
<PAGE>
2.2 all contract rights, general intangibles (including, but not
limited to, tax and duty refunds, registered and unregistered patents,
trademarks, service marks, copyrights, trade names, applications for the
foregoing, trade secrets, goodwill, processes, customer lists, licenses,
whether as licensor or licensee, choses in action and other claims and
existing and future leasehold interests in equipment, real estate and
fixtures), chattel paper, documents, instruments, letters of credit, bankers'
acceptances and guaranties outstanding as of March 1, 2000 and thereafter
obtained;
2.3 Inventory;
2.4 Equipment;
2.5 Records; and
2.6 all products and proceeds of the foregoing, in any form,
including, without limitation, insurance proceeds and any claims against third
parties for loss or damage to or destruction of any or all of the foregoing.
SECTION 3. COLLATERAL COVENANTS
- ---------- --------------------
The Collateral covenants in this Section 3 shall be effective as of
March 1, 2000 upon the effectiveness, if at all, of the security interest
granted herein.
3.1 Accounts Covenants.
(a) The Agent shall have the right at any time or times
thereafter, to verify the validity, amount or any other matter relating to
any Account or other Collateral, by mail, telephone, facsimile transmission
or otherwise.
(b) The Agent may, at any time or times that an Event of Default
exists or has occurred and is continuing on or after March 1, 2000, (i) notify
any or all account debtors that the Accounts have been assigned to the Agent
and that the Holders have a security interest therein and the Agent, on behalf
of the Holders may direct any or all accounts debtors to make payment of
Accounts directly to the Agent, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Accounts or other obligations included in
the Collateral and thereby discharge or release the account debtor or any other
party or parties in any way liable for payment thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Accounts or
such other obligations, but without any duty to do so, and the Agent shall not
be liable for its failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action the Holders may deem necessary or desirable for the
protection of the Holders' interests. At any time that such an Event of Default
exists or has occurred and is continuing, at the Agent's request, all invoices
and statements sent to any account debtor shall state that the Accounts and such
other obligations have been assigned to the Agent and are payable directly and
only to the Agent and the Company shall deliver to the Agent such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as the Agent may require.
3
<PAGE>
3.2 Inventory Covenants. With respect to the Inventory on and after
March 1, 2000: (a) the Company shall at all times maintain inventory records,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, the cost therefor and daily withdrawals
therefrom and additions thereto; (b) the Company shall not remove any Inventory
from the locations set forth or permitted herein, without the prior written
consent of the Agent, except for sales of Inventory in the ordinary course of
Strax Division's business and except to move Inventory directly from one
location set forth or permitted herein to another such location; (c) the Company
agrees that the Strax Division shall use, store and maintain the Inventory,
with all reasonable care and caution and in accordance with applicable standards
of any insurance and in conformity with applicable laws; (d) the Company assumes
all responsibility and liability arising from or relating to the use, sale or
other disposition of the Inventory; and (e) the Company shall keep the Inventory
in good and marketable condition.
3.3 Equipment Covenants. With respect to the Equipment on and after
March 1, 2000: (a) the Strax Division shall keep the Equipment in good order,
repair, running and marketable condition (ordinary wear and tear excepted); (b)
the Strax Division shall use the Equipment with all reasonable care and caution
and in accordance with applicable standards of any insurance and in conformity
with all applicable laws; (c) the Equipment is and shall be used in the Strax
Division's business and not for personal, family, household or farming use; (d)
the Strax Division shall not remove any Equipment from the locations set forth
or permitted herein, except to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of the Strax
Division or to move Equipment directly from one location set forth or permitted
herein to another such location or to sell or dispose any Equipment which is no
longer usable or operable, and except for the movement of motor vehicles used by
or for the benefit of the Company in the ordinary course of business; (e) the
Equipment is now and shall remain personal property and the Company shall not
permit any of the Equipment to be or become a part of or affixed to real
property; and (f) the Company assumes all responsibility and liability arising
from the use of the Equipment.
3.4 Power of Attorney. If at any time after February 28, 2000 an Event
of Default exists or has occurred and is then continuing, the Company shall
irrevocably designate and appoint the Agent as the Company's true and lawful
attorney-in-fact, and authorize the Agent, in the Company's or the Agent's name,
to do all acts and things which are necessary, in the Agent's determination, to
fulfill the Company's obligations under this Agreement and the other Financing
Agreements. The Company hereby releases the Agent from any liabilities arising
from any act or acts under this power of attorney and in furtherance thereof,
whether of omission or commission, except as a result of the Agent's own
negligence or misconduct as determined pursuant to a final non-appealable order
of a court of competent jurisdiction.
3.5 Access to Premises. From time to time after March 1, 2000, at the
cost and expense of the Agent, if an Event of Default has occurred and is
continuing (a) the Agent or his designee shall have complete access to all of
the Strax Division's premises during normal business hours and after notice
received by the Company not less than three (3) business days prior to the date
of the proposed visit, for the purposes of inspecting, verifying and auditing
the Collateral and all of the Strax Division's books and records, including,
4
<PAGE>
without limitation, the Records, (b) on not less than three (3) business days
prior notice the Company shall furnish to the Agent such copies of such books
and records or extracts therefrom as the Agent may request, and (c) during
normal business hours the Agent may use Strax Division personnel, equipment,
supplies and premises as may be reasonably necessary for the collection of
Accounts and realization of other Collateral.
SECTION 4. REPRESENTATIONS AND WARRANTIES
- ---------- ------------------------------
The Company hereby represents and warrants to the Lenders the following
(which shall survive the execution and delivery of this Agreement):
4.1 Corporate Existence, Power. The Company is a corporation duly
organized and in good standing under the laws of the State of Delaware and is
duly qualified as a foreign corporation and in good standing in the State of
Florida.
4.2 Chief Executive Office: Collateral Locations. The chief executive
office of the Strax Division and the Strax Division's Records concerning
Accounts are located only at the address set forth below and its only other
places of business and are the only locations of the Collateral, and have been
previously disclosed in writing to the Agent, subject to the right of the
Company to establish new locations for the Strax Division in accordance with
Section 5.2 hereof.
4.3 Priority of Liens, Title to Properties. The security interests and
liens being granted to the Agent on behalf of the Lenders under this Agreement
shall when they become effective constitute valid and perfected first priority
liens and security interests in and upon the Collateral, subject to any
preexisting liens under installment sale obligations or capitalized leases of
Equipment. The Company has good and marketable title to all of its properties
and assets comprising the Collateral subject to no liens, mortgages, pledges,
security interests, encumbrances or charges of any kind.
SECTION 5. AFFIRMATIVE AND NEGATIVE COVENANTS
- ---------- -----------------------------------
5.1 Maintenance of Existence. The Company shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business of the Strax Division as presently
or proposed to be conducted. The Company shall give the Agent ten (10) days
prior written notice of any proposed change in its name or the Strax Division's
name, which notice shall set forth the new name and the Company shall deliver to
the Agent a copy of the business certificate for the name change of the Strax
Division as soon as it is available.
5.2 New Collateral Locations. The Strax Division may open any new location
within the continental United States. The Company shall give the Agent written
notice of the intended opening of any such new location and shall execute and
deliver, or cause to be executed and delivered, to the Agent such agreements,
documents, and instruments as the Agent may deem reasonably necessary or
desirable to protect the Holder's interests in the Collateral at such location,
including, without limitation, UCC financing statements.
5
<PAGE>
5.3 Compliance with Laws, Regulations, Etc. The Company shall, at all
times, comply in all material respects with all laws, rules, regulations,
licenses, permits, approvals and orders of any Federal, State or local
governmental authority applicable to it with respect to the Collateral.
5.4 Payment of Taxes and Claims. The Company agrees that the Strax
Division shall duly pay and discharge all taxes, assessments, contributions and
governmental charges upon or against it or its properties or assets, except for
taxes the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to the Company and with respect to
which adequate reserves have been set aside on its books.
5.5 Insurance. The Company shall, at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. The Company shall furnish certificates, policies or endorsements to
the Agent as the Agent shall require as proof of such insurance, certificate.
5.6 Sale of Assets. The Company shall not sell or otherwise dispose
of the Strax Division or substantially all of the assets of the Strax Division
or grant a security interest in the Collateral to someone other than the Holders
unless the net proceeds of such sale are used to the prepay the Nelson/Levy
Notes to the extent as provided therein (other than security interests under
installment sale obligations or capitalized leases of Equipment).
5.7 Further Assurances. At the request of the Agent at any time and
from time to time after March 1, 2000, the Company shall, at its expense, at
any time or times duly execute and deliver, or cause to be duly executed and
delivered, such further agreements, documents and instruments, and do or cause
to be done such further acts as may be necessary or proper to evidence, perfect,
maintain and enforce the security interests being granted and the priority
thereof in the Collateral and to otherwise effectuate the provisions or purposes
of this Agreement or any of the other Financing Agreements.
5.8 Financing Statements. The Company will execute and file such
financing or continuation statements or amendments thereto as the Agent may
reasonably request in order to perfect and preserve the security interests
granted herein. Upon the execution of this Agreement, the Company shall deliver
to Thelen Reid & Priest LLP (the "Escrow Agent") to hold in escrow executed
Forms UCC-1 in form for filing in the States of Florida and New Jersey. If the
security interest herein become effective on March 1, 2000, the Escrow Agent
shall file such Forms UCC-1, and if the security interest does not become
effective on March 1, 2000, the Escrow Agent shall deliver such Forms UCC-1 to
the Company.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES
6.1 Events of Default. The occurrence or existence after February 29, 2002
of any Event of Default under the Nelson/Levy Notes is referred to herein
individually as an "Event of Default", and collectively as "Events of Default".
6
<PAGE>
6.2 Remedies.
(a) At any time an Event of Default exists or has occurred and
is continuing, the Agent shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and
other applicable law, all of which rights and remedies may be exercised without
notice to or consent by the Company, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to the Agent hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in the Agent's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by the Company of this
Agreement or any of the other Financing Agreements. The Agent may, at any time
or times, proceed directly against the Company to collect the Obligations
without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, the Agent may, in his
discretion and without limitation, (i) accelerate the payment of all Obligations
and demand immediate payment thereof to the Agent (provided, that, upon the
occurrence of any Event of Default described in Section 5.1 of the Nelson/Levy
Notes, all Obligations shall automatically become immediately due and payable),
(ii) with or without judicial process or the aid or assistance of others, enter
upon any premises on or in which any of the Collateral may be located and take
possession of the Collateral or complete processing and repair of all or any
portion of the Collateral, (iii) require the Company, at the Company's expense,
to assemble and make available to the Agent any part or all of the Collateral,
(iv) collect, foreclose, receive, appropriate, setoff and realize upon any and
all Collateral, (v) remove any or all of the Collateral from any premises on or
in which the same may be located for the purpose of effecting the sale,
foreclosure or other disposition thereof or for any other purpose, (vi) sell,
transfer, assign, deliver or otherwise dispose of any and all Collateral
(including, without limitation, entering into contracts with respect thereto,
public or private sales) at such prices or terms as would be realized in a bona
fide sale to an unrelated third party, for cash, upon credit or for future
delivery, with the Agent having the right to purchase the whole or any part of
the Collateral at any such public sale. If notice of disposition of Collateral
is required by law, five (5) days prior notice by the Agent to the Company
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall
be deemed to be reasonable notice thereof and the Company waives any other
notice.
(c) The Agent may apply the cash proceeds of Collateral actually
received by the Agent from any sale, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as the Agent may elect, whether or not then due. The Company shall remain liable
to the Agent for the payment of any deficiency with an interest rate of four
percent (4%) per annum and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
SECTION 7. MISCELLANEOUS
7
<PAGE>
7.1 Governing Law. The validity, interpretation and enforcement of
this Agreement shall be governed by the internal laws of the State of New Jersey
(without giving effect to principles of conflicts of law).
7.2 Waiver of Notices. The Company hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Collateral, the Collateral and this Agreement, except such as are
expressly provided for herein. No notice to or demand on the Company which the
Agent may elect to give shall entitle the Company to any other or further notice
or demand in the same, similar or other circumstances.
7.3 Effectiveness and Termination. The security interest granted
herein shall become effective on March 1, 2000 in the event any of the
Nelson/Levy Notes are then outstanding. In the event the Company has repaid all
amounts due under the Nelson/Levy Notes on or before February 29, 2000, this
Agreement shall be a nullity and have no force or effect. This Agreement shall
terminate upon the earlier of the sale of the Strax Division in accordance with
Section 5.6 hereof or the repayment of all amounts due under the Nelson/Levy
Notes. Upon termination the Holders' rights, titles and interest in and to the
Collateral shall be automatically terminated and released.
7.4 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of the
Agent. The Agent shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
the Agent. Any such waiver shall be enforceable only to the extent specifically
set forth therein. A waiver by the Agent of any right, power and/or remedy on
any one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which the Agent would otherwise have on any future occasion,
whether similar in kind or otherwise.
7.5 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to the Agent at his address at 436 Cape May Street,
Englewood, New Jersey 07631 and to the Company at its chief executive office set
forth below, or to such other address as either party may designate by written
notice to the other in accordance with this provision, and (b) deemed to have
been given or made: if delivered in person, immediately upon delivery; if by
telex, telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next business day, one (1) business day after
sending; and if by certified mail, return receipt requested, five (5) days after
mailing.
7.6 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
8
<PAGE>
7.7 Successors. This Agreement shall be binding upon the Company and
its successors and assigns and inure to the benefit of and be enforceable by the
Lenders, the Agent and their successors, assigns, heirs and administrators.
7.8 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered
or to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
IN WITNESS WHEREOF, the Company has caused these presents to be duly
executed as of the day and year first above written.
COMPANY
-------
CAPRIUS, INC.
By:
---------------------------------------
Title:
------------------------------------
CHIEF EXECUTIVE OFFICE:
-----------------------
One Parker Plaza, Fort Lee, New Jersey 07024
AGREED TO:
- ------------------------------------
Enrique Levy, for himself and as
Agent for Jack Nelson
AGREED TO AS TO
SECTION 5.8 HEREOF:
THELEN REID & PRIEST LLP
- --------------------------
9
Exhibit 21
LIST OF REGISTRANT'S ACTIVE SUBSIDIARIES
OPUS DIAGNOSTICS INC.
Delaware Corporation
100% owned
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
No. 33-47517, 33-70834 and 33-78928 of Caprius, Inc. (the "Company") on Form S-8
of our report dated December 7, 1999 on the consolidated financial statements of
the Company and its subsidiaries for the years ended September 30, 1999 and
1998, which contains an explanatory paragraph expressing substantial doubt about
the Company's ability to continue as a going concern, appearing in this Annual
Report on Form 10-KSB of the Company.
BDO Seidman
------------
BDO Seidman, LLP
Boston, Massachusetts
January , 2000
----
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Caprius,
Inc. Form 10-KSB for the period ended September 30, 1999, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000722567
<NAME> CAPRIUS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 116
<SECURITIES> 0
<RECEIVABLES> 564
<ALLOWANCES> (26)
<INVENTORY> 211
<CURRENT-ASSETS> 956
<PP&E> 503
<DEPRECIATION> 151
<TOTAL-ASSETS> 4,353
<CURRENT-LIABILITIES> 2,037
<BONDS> 0
0
2,700
<COMMON> 135
<OTHER-SE> 2,009
<TOTAL-LIABILITY-AND-EQUITY> 4,353
<SALES> 3,274
<TOTAL-REVENUES> 3,274
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,777
<LOSS-PROVISION> (7,503)
<INTEREST-EXPENSE> 135
<INCOME-PRETAX> (7,596)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,596)
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<EPS-BASIC> (.73)
<EPS-DILUTED> (.73)
</TABLE>
