INVESTMENT MONITORING AGREEMENT
Exhibit
10.7
Execution
Version
THIS
INVESTMENT MONITORING AGREEMENT (this “Agreement”), dated as
of September 16, 2009, is entered into by and between CAPRIUS, INC., a
Delaware corporation (the “Company”), and
Vintage Capital Group, LLC, a Delaware limited liability company (together with
its successors and assigns, “Investor”). Capitalized
terms not defined herein shall have the same meaning ascribed to them in the
Securities Purchase Agreement (as defined below).
R
E C I T A L S
A. Investor
has agreed to enter into that certain Securities Purchase and Sale Agreement,
dated as of the date hereof (as the same may be amended, restated, supplemented
or otherwise modified from time to time, the “Securities Purchase
Agreement”), pursuant to which Investor has agreed, among other things,
to purchase the Note, upon the terms and conditions set forth in the Securities
Purchase Agreement. Investor desires to monitor its investment in the
Note pursuant to the terms and conditions set forth herein.
B. The
Company acknowledges Investor’s desire to monitor such investment in the Note,
and the Company desires to have the benefits to be derived from Investor’s
review of the Company’s financial condition and performance as provided in this
Agreement, including, without limitation, the benefits of establishing an
Operating Committee as provided herein.
A
G R E E M E N T
NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Term. This
Agreement shall terminate on the earliest to occur of the
following:
(a) the
date upon which Investor, together with its Affiliates, collectively own less
than 10% of the outstanding principal amount of the Note (including the
outstanding principal amount of any PIK Notes issued or deemed issued under the
Note); or
(b) notice
from Investor that it desires to terminate this Agreement;
provided, however, that the
termination of this Agreement shall not affect in any way the Company’s
obligation to pay any fees payable to Investor in consideration of the services
provided hereunder as set forth in a separate agreement between the Company and
Investor, to the extent any such obligation is independent of this Agreement or
arose prior to such termination, or its obligation to indemnify Investor or any
of its employees, officers, partners, principals, Affiliates, agents, attorneys,
accountants and representatives pursuant to Section 5 hereof
or under any other agreement or arrangement or the terms of its organizational
or governing documents.
2. Investment Monitoring
Activities. The Company hereby establishes an Operating
Committee (the “Operating
Committee,”) which shall at all times be comprised of two representatives
of the Company, initially, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and two
representatives selected by Investor, initially, ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇
▇▇▇▇▇▇▇. The Operating Committee shall not constitute a committee
designated by the Board of Directors of the Company pursuant to the Company’s
Bylaws or Section 141 of the Delaware Corporations Code, and no such person
shall have any authority in their capacities as a member of the Operating
Committee to act in the name of or on behalf of the Company. However,
the Operating Committee shall have the right to make suggestions and to
recommend actions to the Board of Directors of the Company (the “Board”) or to any
committee of the Board, either in writing or by attending, through a
representative, a meeting of the Board or such committee. Within
five (5) Business Days of the delivery of the financial information
required pursuant to the terms of the Securities Purchase Agreement, and, if
circumstances warrant, at other times during normal business hours as Investor
may reasonably request, the Operating Committee shall meet to discuss such
information and to review the Company’s performance. The financial
officers of the Company and other members of senior management, as required,
shall be available at each meeting of the Operating Committee to review the
financial information and discuss other matters. Meetings may be
conducted by telephone or other means of simultaneous communication so long as
each of the persons attending can hear each of the other persons attending the
meeting.
3. Additional
Services. With a view towards enhancing the operating
performance of the Company and obtaining the return on investment sought by
Investor, the Operating Committee shall, among other things:
(a) review
the Company’s annual operating and capital budget;
(b) analyze
budgeted versus actual performance;
(c) review
strategic planning for the Company;
(d) analyze
working capital management;
(e) review
cash flow performance in relationship to the Company’s financial
arrangements;
(f) monitor
compliance with all outstanding financial obligations; and
(g) review
operating expenses.
The
Operating Committee also shall consider such additional matters concerning the
operations of the Company as the Company shall deem advisable and reasonably
request from time to time.
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4. Other Monitoring
Activities. During the term of this Agreement, the Company
shall provide Investor’s representatives on the Operating Committee with any
financial or other information reasonably requested by such Investor
representatives. Additionally, the Company shall make available to
Investor’s representatives on the Operating Committee an opportunity to meet in
person with officers, directors and other employees of the Company and its
Subsidiaries upon reasonable request, and to conduct telephonic conferences with
Investor’s representatives after the Company delivers any information reports
under the Securities Purchase Agreement; provided, that, in
each case, the parties hereby agree that in person meetings of the Operating
Committee shall take place on a more frequent basis than monthly if reasonably
requested by Investor or its representatives where, in Investor’s or its
representatives’ determination, the circumstances warrant, taking into account
the Company’s and its respective Subsidiaries’ performance or pending
transactions. The Company will provide Investor’s representatives on
the Operating Committee electronic copies of management reports regularly
received by the Chief Executive Officer or President of the Company to the
extent Investor may reasonably request. In addition, Investor’s
representatives on the Operating Committee shall be authorized to meet with the
Company’s lenders at any reasonable time during normal business hours and from
time to time.
5. Indemnification. If
Investor becomes involved in any capacity in any claim, action, proceeding or
investigation brought by or against any person or entity in connection with any
matter involving this Agreement, the Operating Committee or Investor’s (or its
Affiliates) role in monitoring any investment in the Company, the Company shall
indemnify and hold Investor and its employees, officers, partners, principals,
Affiliates, agents, attorneys, accountants and representatives harmless from and
against any and all costs, expenses, fees, liabilities, claims, damages and
losses, including attorneys’ fees and the cost and expenses of any investigation
and preparation, incurred in connection therewith (“Losses”) to the
maximum extent permitted by law. If for any reason the foregoing
indemnification is not available for any reason or is not sufficient to hold
Investor and its respective employees, officers, partners, principals,
Affiliates, agents, attorneys, accountants and representatives harmless, then
the Company and/or Parent shall contribute to the amount of all costs, expenses,
fees, liabilities, claims, damages and losses paid or payable by Investor or its
respective employees, officers, partners, principals, Affiliates, agents,
attorneys, accountants and representatives, in such proportion as is appropriate
to reflect not only the relative benefits received by the Company, on the one
hand, and Investor, on the other hand, but also the relative fault of each, as
well as any other equitable considerations, including the extent to which any
such Losses are determined by a court of competent jurisdiction in a final,
non-appealable judgment to have arisen from an act or omission by Investor that
constitutes a material and willful breach by Investor of this
Agreement. The Company’s reimbursement, indemnity and contribution
and compensatory obligations shall be in addition to any liability or
obligations the Company may otherwise have at law or under any other agreement,
and such obligations shall extend, upon the same terms, to all of Investor’s
employees, officers, partners, principals, Affiliates, agents, attorneys,
accountants and representatives. This Section 5 shall
survive indefinitely the termination of this Agreement.
6. Confidentiality. Other
than in accordance with Section 14.6 of the Securities Purchase Agreement
and as set forth below, Investor shall keep confidential any confidential and
proprietary information regarding the Company provided to it by the Company
during the performance of the monitoring activities hereunder and shall not
trade on or use any such information except in connection with monitoring its
and its Affiliates’ investment in the Company; provided, however, that
Investor may disclose, trade on or use, as applicable, any such
information:
(a) to
any of Investor’s employees, officers, partners, Affiliates, agents, attorneys,
accountants and representatives;
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(b) upon
the order of any court or administrative agency or as otherwise required by
law;
(c) upon
the request, order or demand of a governmental or administrative agency to
provide information to it;
(d) that
is in the public domain by reason of prior publication not attributable to any
act or omission of Investor or its respective employees, officers, partners,
Affiliates, agents, attorneys, accountants and representatives; and
(e) in
connection with the exercise of any remedy under the Securities Purchase
Agreement or any other agreement to which Investor is a party.
Investor
acknowledges that, to the extent any of the Company’s securities are at any time
publicly traded, possession of the information obtained pursuant to this
Agreement may constitute the possession of material non-public information and
the possession of that information or the use restriction set forth herein may
preclude Investor from buying or selling such publicly traded
securities.
Notwithstanding
anything in this Section 6 to the contrary, any use and trading
restrictions set forth herein shall in no event apply to the purchase or sale by
Investor or its Affiliates of the Warrant, any preferred stock of the Company,
or any common stock of the Company pursuant to a tender offer by Investor or its
Affiliates for all or substantially all of the common stock of the
Company.
7. Non-Exclusive. Nothing
in this Agreement shall restrict Investor or any person affiliated with it from
any other activity, including, without limitation, the providing of services
similar to those provided to the Company hereunder to other persons or
entities.
8. Fees and
Expenses. During the term of this Agreement, the Company shall
pay to Investor an investment monitoring fee of $50,000 per annum, payable
monthly, and shall reimburse Investor for all fees, expenses and costs incurred
by Investor (including, without limitation, by Investor’s employees, officers,
partners, principals, Affiliates, agents, attorneys, accountants and
representatives) and Investor’s representatives on the Operating Committee in
connection with monitoring Investor’s investment in the Company in accordance
with the provisions hereof, including, without limitation, travel expenses
incurred in connection with attending meetings of the Operating
Committee.
9. Modification. No
waiver or modification of this Agreement shall be binding unless it is in
writing signed by the parties hereto.
10. Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. Facsimile or PDF signatures delivered hereunder shall be
deemed original signatures.
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11. Governing
Law. In all respects, including all matters of construction,
validity and performance, this Agreement and the rights and obligations arising
hereunder shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York applicable to contracts made and performed in
such state, without regard to principles thereof regarding conflicts of
laws.
12. Dispute
Resolution. The dispute resolution procedures in the
Securities Purchase Agreement shall apply to all disputes arising hereunder
(including those relating to payment of costs associated with any dispute), and
such procedures are incorporated in this document by this
reference.
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IN
WITNESS WHEREOF, the parties hereto have caused this Investment Monitoring
Agreement to be executed and delivered by their duly authorized representatives
as of the date first above written.
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COMPANY:
CAPRIUS,
INC.,
a
Delaware corporation
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By:
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Name:
▇▇▇▇▇▇ ▇▇▇▇▇▇
Title:
Chief Executive
Officer
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INVESTOR:
VINTAGE
CAPITAL GROUP, LLC,
a
Delaware limited liability company
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By:
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/s/▇▇▇▇ ▇.
▇▇▇▇▇
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Name:
▇▇▇▇ ▇. ▇▇▇▇▇
Title:
Chairman
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