Schedule 13D

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MQv2dQprLtbDnVj7gsG/gZq6Esesxg8dzQUtxZcPc2o54myH8ym0PbTqiimqoRAm tiArWXUQCTFuLZugBLFTzw== 0001193125-10-016178.txt : 20100129 0001193125-10-016178.hdr.sgml : 20100129 20100129060207 ACCESSION NUMBER: 0001193125-10-016178 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 20100129 DATE AS OF CHANGE: 20100129 GROUP MEMBERS: FRED C. SANDS GROUP MEMBERS: THE FRED C. SANDS CHILDREN'S TRUST GROUP MEMBERS: THE FRED C. SANDS FAMILY REVOCABLE TRUST SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CAPRIUS INC CENTRAL INDEX KEY: 0000722567 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 222457487 STATE OF INCORPORATION: DE FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-35271 FILM NUMBER: 10555567 BUSINESS ADDRESS: STREET 1: ONE UNIVERSITY PLAZA, SUITE 400 CITY: HACKENSACK STATE: NJ ZIP: 07601 BUSINESS PHONE: 201-342-0900 MAIL ADDRESS: STREET 1: ONE UNIVERSITY PLAZA, SUITE 400 CITY: HACKENSACK STATE: NJ ZIP: 07601 FORMER COMPANY: FORMER CONFORMED NAME: ADVANCED NMR SYSTEMS INC DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Vintage Capital Group, LLC CENTRAL INDEX KEY: 0001481914 IRS NUMBER: 954816338 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 11611 SAN VICENTE BOULEVARD STREET 2: 10TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90049 BUSINESS PHONE: 310-979-9090 MAIL ADDRESS: STREET 1: 11611 SAN VICENTE BOULEVARD STREET 2: 10TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90049 SC 13D 1 dsc13d.htm SCHEDULE 13D Schedule 13D

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. __)*

Caprius, Inc.

(Name of Issuer)

Common Stock, par value $0.01 per share

(Title of Class of Securities)

14066K206

(CUSIP number)

Vintage Capital Group, LLC

Attention: Fred C. Sands

11611 San Vicente Blvd., 10th Floor

Los Angeles, California 90049

(310) 979-9090

(Name, Address and Telephone Number of Person

Authorized to Receive Notices and Communications)

January 22, 2010

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this statement because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ¨

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page.

The information required in the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

SCHEDULE 13D


CUSIP No. 14066K206
1	NAME OF REPORTING PERSON Vintage Capital Group, LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) x (b) ¨
3	SEC USE ONLY
4	SOURCE OF FUNDS WC (See Item 3)
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(e) ¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
Number Of Shares Beneficially Owned By Each Reporting Person With		7	SOLE VOTING POWER
		8	SHARED VOTING POWER 25,602,333 (See Item 5)
		9	SOLE DISPOSITIVE POWER
		10	SHARED DISPOSITIVE POWER 25,602,333 (See Item 5)
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,602,333 (See Item 5)
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ¨
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 40% (See Item 5)
14	TYPE OF REPORTING PERSON OO

SCHEDULE 13D


CUSIP No. 14066K206
1	NAME OF REPORTING PERSON The Fred C. Sands Children’s Trust
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) x (b) ¨
3	SEC USE ONLY
4	SOURCE OF FUNDS WC (See Item 3)
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(e) ¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION California
Number Of Shares Beneficially Owned By Each Reporting Person With		7	SOLE VOTING POWER
		8	SHARED VOTING POWER 25,602,333 (See Item 5)
		9	SOLE DISPOSITIVE POWER
		10	SHARED DISPOSITIVE POWER 25,602,333 (See Item 5)
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,602,333 (See Item 5)
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ¨
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 40% (See Item 5)
14	TYPE OF REPORTING PERSON OO

SCHEDULE 13D


CUSIP No. 14066K206
1	NAME OF REPORTING PERSON The Fred C. Sands Family Revocable Trust
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) x (b) ¨
3	SEC USE ONLY
4	SOURCE OF FUNDS WC (See Item 3)
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(e) ¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION California
Number Of Shares Beneficially Owned By Each Reporting Person With		7	SOLE VOTING POWER
		8	SHARED VOTING POWER 25,602,333 (See Item 5)
		9	SOLE DISPOSITIVE POWER
		10	SHARED DISPOSITIVE POWER 25,602,333 (See Item 5)
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,602,333 (See Item 5)
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ¨
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 40% (See Item 5)
14	TYPE OF REPORTING PERSON OO

SCHEDULE 13D


CUSIP No. 14066K206
1	NAME OF REPORTING PERSON Fred C. Sands
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) x (b) ¨
3	SEC USE ONLY
4	SOURCE OF FUNDS WC (See Item 3)
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(e) ¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION United States
Number Of Shares Beneficially Owned By Each Reporting Person With		7	SOLE VOTING POWER
		8	SHARED VOTING POWER 25,602,333 (See Item 5)
		9	SOLE DISPOSITIVE POWER
		10	SHARED DISPOSITIVE POWER 25,602,333 (See Item 5)
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,602,333 (See Item 5)
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ¨
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 40% (See Item 5)
14	TYPE OF REPORTING PERSON IN

Item 1.

Security and Issuer.

This Schedule 13D relates to the common stock, par value $0.01 per share (the “Shares”), of Caprius, Inc., a Delaware corporation (the “Issuer”). The principal executive office of the Issuer is located at 10 Forest Avenue, Suite 220, Paramus, New Jersey 07652.

Item 2.

Identity and Background.

This Schedule 13D is being filed pursuant to a Joint Reporting Agreement, dated January 29, 2010, a copy of which is attached hereto as Exhibit 1, by and among Vintage Capital Group, LLC, a Delaware limited liability company (“Vintage”), The Fred C. Sands Children’s Trust (the “Children’s Trust”), The Fred C. Sands Family Revocable Trust (the “Family Trust” and, collectively with the Children’s Trust, the “Trusts”), and Fred C. Sands (“Mr. Sands” and, collectively with Vintage and the Trusts, the “Reporting Persons”).

(a), (b), (c) and (f)

(1) Vintage. Vintage is a limited liability company organized under the laws of the State of Delaware. The address of the principal place of business of Vintage is 11611 San Vicente Blvd., 10th Floor, Los Angeles, California 90049. The principal business of Vintage is the acquisition and development of commercial real estate and principal investing in distressed companies and other special situations.

(2) The Children’s Trust. The Children’s Trust owns 15% of the membership interests of Vintage. Mr. Sands is the trustee of the Children’s Trust. The Children’s Trust is governed by the laws of the State of California. The address of the principal place of business of the Children’s Trust is c/o Mr. Sands, Trustee, 11611 San Vicente Blvd., 10th Floor, Los Angeles, California 90049. The principal business of the Children’s Trust is to manage the assets of the Children’s Trust on behalf of the beneficiaries thereof.

(3) The Family Trust. The Family Trust owns 85% of the membership interests of Vintage. Mr. Sands is the trustee of the Family Trust. The Family Trust is governed by the laws of the State of California. The address of the principal place of business of the Family Trust is c/o Mr. Sands, Trustee, 11611 San Vicente Blvd., 10th Floor, Los Angeles, California 90049. The principal business of the Family Trust is to manage the assets of the Family Trust on behalf of the beneficiaries thereof.

(4) Mr. Sands. Mr. Sands, a United States citizen, is the trustee of each of the Children’s Trust and the Family Trust and the manager of Vintage. The address of the principal place of business of Mr. Sands is 11611 San Vicente Blvd., 10th Floor, Los Angeles, California 90049. The present principal occupation or employment of Mr. Sands is to serve as the Chairman of Vintage Real Estate, LLC, a firm specializing in the acquisition and redevelopment of under-performing regional malls and large shopping centers, the Chairman of Vintage Fund Management, LLC, a private investment fund investing in established lower middle market businesses through structured growth equity investments, and manager of Vintage. The address of the principal place of business of each of the foregoing is 11611 San Vicente Blvd., 10th Floor, Los Angeles, California 90049.

(d) During the last five years, none of the Reporting Persons has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

(e) During the last five years, none of the Reporting Persons was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

Item 3.

Source and Amount of Funds or Other Consideration.

Pursuant to a Securities Purchase and Sale Agreement, Senior Secured Promissory Note, Security Agreement, Pledge Agreement and Patent Security Agreement, each dated as of September 16, 2009, and an additional Patent Security Agreement, dated as of December 16, 2009, by and among the Issuer, certain subsidiaries of the Issuer and Vintage, copies of which are attached hereto as Exhibits 2 through 7, respectively, the Issuer issued and sold to Vintage a Senior Secured Promissory Note in the principal amount of up to $3,000,000 (the “Note”). As part of the same transaction, the Issuer agreed, pursuant to a post-closing condition, to issue and sell to Vintage a warrant exercisable into 40% of the Shares on a fully diluted basis as of the date of exercise (the “Warrant”). The Warrant was issued and sold to Vintage on January 22, 2010 (the “Warrant Sale Date”), pursuant to a Warrant Purchase Agreement, Registration Rights Agreement and Equity Rights Agreement. The Warrant, Warrant Purchase Agreement, Registration Rights Agreement and Equity Rights Agreement are attached hereto as Exhibits 8 through 11, respectively. As of the Warrant Sale Date, the Warrant was immediately exercisable into 25,602,333 Shares. (The Note together with the Warrant are collectively referred to herein as the “Securities”.)

The purchase price of the Warrant was $0.01 and was funded from Vintage’s working capital.

Item 4.

Purpose of Transaction.

Vintage acquired the Securities for investment purposes only in its ordinary course of business. In connection with the foregoing, and as may be appropriate from time to time, Vintage will consider the feasibility and advisability of various alternative courses of action with respect to its investment in the Issuer, including, without limitation: (a) the acquisition or disposition by Vintage of the Warrant, additional warrants, or Shares; (b) the purchase of additional debt securities from the Issuer or the disposition of the Note; (c) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries; (d) a sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries; (e) changes in the present board of directors or management of the Issuer; (f) a material change in the present capitalization or dividend policy of the Issuer; (g) other material changes in the Issuer’s business or corporate structure; (h) changes in the Issuer’s certificate of incorporation or bylaws or other actions that may impede the acquisition of control of the Issuer by any person; (i) causing any class of the Issuer’s securities to be listed or delisted from a national securities exchange or authorized or ceased to be quoted in an inter-dealer quotation system of a registered national securities association; (j) causing a class of equity securities of the Issuer to become eligible for registration or termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or (k) any action similar to those enumerated above. Except as described in this Item 4 of Schedule 13D, the Reporting Persons do not currently have any plans or proposals that relate to or would result in any of the actions specified in clause (a) through (k) of this Item 4 of Schedule 13D.

Vintage reserves the right, based on all relevant factors and subject to applicable law or other restrictions, at any time and from time to time, to acquire additional Securities, including Shares, dispose of some or all of its Securities, in each case in open market or private transactions, block sales or otherwise, and review or reconsider its position, change its purpose, take other actions (including actions that could involve one or more of the types of transactions or have one or more of the results described in clauses (a) through (k) of the foregoing paragraph of this Item 4 of Schedule 13D) or formulate and implement plans or proposals with respect to any of the foregoing. Except as set forth in this Schedule 13D, no contract, arrangement, relationship or understanding (either oral or written) exists among the Reporting Persons as to the acquisition, disposition, voting or holding of the Securities.

Vintage intends to review its investment in the Issuer from time to time on the basis of various factors, including the Issuer’s business, financial condition, results of operations and prospects, general economic and industry conditions, the securities markets in general and those for the Issuer’s stock in particular, as well as other developments.

Item 5.

Interest in Securities of the Issuer.

(a) and (b)

As of January 22, 2010, Vintage beneficially owned 25,602,333 Shares, representing approximately 40% of the Shares outstanding as reported to Vintage by the Issuer.

As of January 22, 2010, the Trusts, through their control in the aggregate of 100% of the membership interests of Vintage, had shared voting and dispositive power with respect to all 25,602,333 Shares owned beneficially by Vintage, representing approximately 40% of the Shares outstanding as reported to Vintage by the Issuer.

As of January 22, 2010, Mr. Sands, through his control of each of the Trusts, as trustee, as settler of the Family Trust, and as manager of Vintage, had shared voting and dispositive power with respect to all 25,602,333 Shares owned beneficially by Vintage, representing approximately 40% of the Shares outstanding as reported to Vintage by the Issuer.

(c)

Mr. Sands and the Trusts each disclaim beneficial ownership of the Shares and the Warrant owned by Vintage.

Information with respect to all transactions in the Shares beneficially owned by the Reporting Persons that were effected during the past sixty days is set forth in Item 3 and incorporated herein by reference.

Item 6.

Contracts, Arrangements, Understandings or Relationships with Respect to the Securities of the Issuer.

On September 16, 2009, the Issuer and its subsidiaries entered into a Securities Purchase and Sale Agreement (together with all collateral documents and promissory notes thereunder, the “Loan Facility”) with Vintage, whereby Vintage extended a loan facility to the Issuer.

Interest on advances under the Loan Facility accrues at the rate of 14% per annum (subject to a default rate of 17% per annum currently in effect), payable monthly in cash or in kind, subject to certain limitations set forth in the Loan Facility. Advances under the Loan Facility, including any subsequent fundings, are secured by the grant to Vintage of a first priority lien, pledge and security interest in substantially all of the Issuer’s assets. Fees to Vintage related to the initial funding of the Loan Facility totaled approximately $254,000. In connection with the Loan Facility, the Issuer entered into an Investment Monitoring Agreement with Vintage providing for an Operating Committee initially comprised of two executive officers and directors of the Issuer, and two persons selected by Vintage. The Operating Committee is to review budgets, strategic planning, financial performance and similar matters, and the Operating Committee has the right to make recommendations to the Issuer’s Board of Directors. The Investment Monitoring Agreement is attached hereto as Exhibit 12.

Information relating to the issuance of the Warrant relating to the Loan Facility is set forth in Item 3.

Item 7.

Material to be filed as Exhibits.

Exhibit 1 – Joint Filing Agreement, dated as of January 29, 2010, by and among the Reporting Persons.

Exhibit 2 – Securities Purchase and Sale Agreement, dated as of September 16, 2009, by and among the Issuer, M.C.M. Environmental Technologies, Inc., M.C.M. Environmental Technologies Ltd., and Vintage.

Exhibit 3 – Senior Secured Promissory Note, dated as of September 16, 2009, by and among the Issuer, M.C.M. Environmental Technologies, Inc., M.C.M. Environmental Technologies Ltd., and Vintage.

Exhibit 4 – Security Agreement, dated as of September 16, 2009, by and among the Issuer, M.C.M. Environmental Technologies, Inc., M.C.M. Environmental Technologies Ltd., and Vintage.

Exhibit 5 – Pledge Agreement, dated as of September 16, 2009, by and among the Issuer, M.C.M. Environmental Technologies, Inc., M.C.M. Environmental Technologies Ltd., and Vintage.

Exhibit 6 – Patent Security Agreement, dated as of September 16, 2009, by and among the Issuer, M.C.M. Environmental Technologies, Inc., M.C.M. Environmental Technologies Ltd., and Vintage.

Exhibit 7 – Patent Security Agreement, dated as of December 16, 2009, by and among the Issuer, M.C.M. Environmental Technologies, Inc., M.C.M. Environmental Technologies Ltd., and Vintage.

Exhibit 8 – Warrant, dated as of January 22, 2010, by and among the Issuer, M.C.M. Environmental Technologies, Inc., M.C.M. Environmental Technologies Ltd., and Vintage.

Exhibit 9 – Warrant Purchase Agreement, dated as of January 22, 2010, by and among the Issuer, M.C.M. Environmental Technologies, Inc., M.C.M. Environmental Technologies Ltd., and Vintage.

Exhibit 10 – Registration Rights Agreement, dated as of January 22, 2010, by and among the Issuer, M.C.M. Environmental Technologies, Inc., M.C.M. Environmental Technologies Ltd., and Vintage.

Exhibit 11 – Equity Rights Agreement, dated as of January 22, 2010, by and among the Issuer, M.C.M. Environmental Technologies, Inc., M.C.M. Environmental Technologies Ltd., and Vintage.

Exhibit 12 – Investment Monitoring Agreement, dated as of September 16, 2009, by and between the Issuer and Vintage.

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.


Date: January 29, 2010	VINTAGE CAPITAL GROUP, LLC

	By:	/s/ Fred C. Sands
		Name:	Fred C. Sands
		Title:	Manager

Date: January 29, 2010	THE FRED C. SANDS CHILDREN’S TRUST

	By:	/s/ Fred C. Sands
		Name:	Fred C. Sands
		Title:	Trustee

Date: January 29, 2010	THE FRED C. SANDS FAMILY REVOCABLE TRUST

	By:	/s/ Fred C. Sands
		Name:	Fred C. Sands
		Title:	Trustee

Date: January 29, 2010	FRED C. SANDS

	By:	/s/ Fred C. Sands

EX-99.1 2 dex991.htm JOINT FILING AGREEMENT Joint Filing Agreement

Exhibit 1

JOINT FILING AGREEMENT

January 29, 2010

In accordance with Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended, the undersigned agree to the joint filing on behalf of each of them of a Statement on Schedule 13D, dated January 29, 2010 (including amendments thereto), with respect to the shares of common stock of Caprius, Inc. and further agree that this Joint Filing Agreement be included as an exhibit to such Schedule 13D.

In evidence thereof, the undersigned, being duly authorized, have executed this Joint Filing Agreement as of January 29, 2010.


Date: January 29, 2010	VINTAGE CAPITAL GROUP, LLC

	By:	/s/ Fred C. Sands
		Name:	Fred C. Sands
		Title:	Manager

Date: January 29, 2010	THE FRED C. SANDS CHILDREN’S TRUST

	By:	/s/ Fred C. Sands
		Name:	Fred C. Sands
		Title:	Trustee

Date: January 29, 2010	THE FRED C. SANDS FAMILY REVOCABLE TRUST

	By:	/s/ Fred C. Sands
		Name:	Fred C. Sands
		Title:	Trustee

Date: January 29, 2010	FRED C. SANDS

	By:	/s/ Fred C. Sands

EX-99.2 3 dex992.htm SECURITIES PURCHASE AND SALE AGREEMENT Securities Purchase and Sale Agreement

Exhibit 2

Execution Version

SECURITIES PURCHASE AND SALE AGREEMENT

by and among

CAPRIUS, INC.,

M.C.M. ENVIRONMENTAL TECHNOLOGIES, INC.,

and

M.C.M. ENVIRONMENTAL TECHNOLOGIES LTD.

and

VINTAGE CAPITAL GROUP, LLC

Senior Secured Promissory Note Due 2010

Dated as of September 16, 2009

TABLE OF CONTENTS


1. DEFINITIONS; COLLATERAL DEFINITIONS; ACCOUNTING TERMS		1

1.1	Definitions	1
1.2	Accounting Terms and Computations	15
1.3	Covenants	15
1.4	Captions; Construction and Interpretation	15
1.5	Determinations	15

2. PURCHASE AND SALE OF THE NOTE		15

2.1	Authorization	15
2.2	Closing	15
2.3	Closing Actions	16
2.4	Fees and Expenses	16
2.5	Funding, Use of Proceeds	17
2.6	Joint and Several Liability of the Borrowers	18
2.7	Administrative Borrower	19

3. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS		20

3.1	Organization and Qualification	20
3.2	Corporate or Other Power	21
3.3	Authorization; Binding Obligations	21
3.4	Subsidiaries	21
3.5	Conflict with Other Instruments; Existing Defaults	21
3.6	Governmental and Other Third Party Consents	22
3.7	Capitalization	22
3.8	Names; Business Locations	23
3.9	Financial Statements	23
3.10	Absence of Certain Changes	24
3.11	Material Contracts	26
3.12	Existing Indebtedness; Existing Liens; Investments	27
3.13	Litigation	28
3.14	Transactions With Affiliates	28
3.15	Compliance With Laws; Operating Licenses	29
3.16	Real Property	29
3.17	Employee Benefit Plans; ERISA	29
3.18	Taxes	30
3.19	Title to Property; Liens	31
3.20	Environmental Matters	31
3.21	Intellectual Property	32
3.22	Labor Relations	34
3.23	Employment Agreements	34
3.24	Employees and Contractors	35
3.25	Employment Matters	35


3.26	Insurance	35
3.27	Business Relationships	36
3.28	Solvency	36
3.29	Depository and Other Accounts	36
3.30	Brokers; Certain Expenses	36
3.31	No Event of Default	37
3.32	Financial Sophistication	37
3.33	Equipment and Other Personal Property	37
3.34	Inventory	37
3.35	Accounts	38
3.36	Disclosure	38
3.37	Projections	38

4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER		38

4.1	Organization and Qualification	38
4.2	Corporate or Other Power	38
4.3	Authorization; Binding Obligations	39
4.4	Financial Sophistication	39

5. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER		39

5.1	Representations and Warranties; No Default	39
5.2	Purchase Permitted By Applicable Laws; No Conflicts	39
5.3	No Injunction, Order or Suit	40
5.4	Delivery of Certain Closing Documents	40
5.5	Delivery of Corporate Documents	41
5.6	Insurance	42
5.7	Third-Party Consents	42
5.8	Financial Statements	42
5.9	Due Diligence; Environmental Investigations	42
5.10	No Material Adverse Change	42
5.11	No Change in the Markets	42
5.12	Disclosure	42
5.13	Proceedings Satisfactory	42

6. POST-CLOSING OBLIGATIONS OF THE BORROWERS		43

6.1	Patents	43
6.2	Other Collateral Documents	43
6.3	Warrant	43
6.4	Sassoon Settlement Amount	44
6.5	Payroll Taxes	44
6.6	Consent of the Office of the Chief Scientist	44
6.7	Morgan Employment Agreement	44
6.8	A.G.M. Tefen Liens	44
6.9	Deposit Account Control Agreements	44



7. ACTIONS AND DOCUMENTS RELATING TO THE COLLATERAL		44

8. INDEMNIFICATION; FEES AND EXPENSES		45

8.1	Transfer Taxes	45
8.2	Losses	45
8.3	Indemnification Procedures	46
8.4	Contribution	46

9. AFFIRMATIVE COVENANTS		47

9.1	Payment of Note and Other Obligations	47
9.2	Performance of Investment Documents	47
9.3	Notices	47
9.4	Books and Records; Financial Statements	48
9.5	Guarantor Financial Statements	49
9.6	Landlord, Distributor and Storage Agreements	50
9.7	Subsidiaries	50
9.8	Compliance with Laws; Consents	50
9.9	Legal Existence	50
9.10	Maintenance of Properties	50
9.11	Insurance	51
9.12	Payment of Obligations	51
9.13	Compliance with Material Contracts	51
9.14	Environmental Matters	52
9.15	Future Information	52
9.16	Further Assurances	52
9.17	Management by Key Management Personnel	52
9.18	Legal and Capital Structure	53
9.19	Purchaser Costs, Fees and Expenses	53
9.20	Manufacturing Source	53
9.21	Unit Sales	53

10. NEGATIVE COVENANTS		54

10.1	Mergers; Consolidations; Acquisitions; Structural Changes	54
10.2	Loans	54
10.3	Indebtedness	54
10.4	Affiliate Transactions	54
10.5	Limitation on Liens	55
10.6	Payments and Amendments of Subordinated Debt	55
10.7	Distributions	56
10.8	Disposition of Assets	56
10.9	Additional Securities	56
10.10	[Reserved]	56
10.11	Restricted Investment	56
10.12	Subsidiaries and Joint Ventures	56

iii


10.13	Tax Consolidation	56
10.14	Organizational Documents	56
10.15	Fiscal Year End	56
10.16	Limitations on Payment Restrictions Affecting Subsidiaries	57
10.17	Change in Business	57
10.18	Subordination	57
10.19	Accounting Changes	57
10.20	[Reserved]	57
10.21	Hazardous Substances	57
10.22	No Solicitation or Negotiation	57
10.23	Employment Agreements	59
10.24	No Securities or Options Granted	59
10.25	Advances	59
10.26	M.C.M. UK	59
10.27	Sales of Inventory	59

11. DEFAULTS AND REMEDIES		59

11.1	Events of Default	59
11.2	Acceleration	62
11.3	Set Off and Sharing of Payments	62
11.4	Other Remedies	62
11.5	Appointment of Receiver	63
11.6	Waiver of Past Defaults	63

12. WAIVER		63

13. POWER OF ATTORNEY		63

14. MISCELLANEOUS		64

14.1	Survival of Representations and Warranties; Purchaser Investigation	64
14.2	Consent to Amendments	64
14.3	Entire Agreement	64
14.4	Severability	65
14.5	Successors and Assigns; Assignments	65
14.6	Certain Agreements of the Borrowers	65
14.7	Notices	66
14.8	Counterparts	66
14.9	Governing Law	67
14.10	Limitation of Liability	67
14.11	Publicity	67
14.12	Waiver of Trial by Jury	67
14.13	Cumulative Effect; Conflict of Terms	67
14.14	Time of Essence	68
14.15	Interpretation	68



14.16	Consent to Forum	68
14.17	Judicial Reference	68

EXHIBITS


Exhibit A	—	Form of Note

Exhibit B	—	‘654 Patent Assignment

Exhibit C	—	Form of Patent Security Agreement

Exhibit D	—	Form of Pledge Agreement

Exhibit E	—	Form of Investment Monitoring Agreement

Exhibit F	—	Form of Security Agreement

Exhibit G	—	Form of Disbursement Request

SECURITIES PURCHASE AND SALE AGREEMENT

THIS SECURITIES PURCHASE AND SALE AGREEMENT is entered into as of September 16, 2009 (this “Agreement”), by and among CAPRIUS, INC., a Delaware corporation (“Caprius”), M.C.M. ENVIRONMENTAL TECHNOLOGIES, INC., a Delaware corporation (“M.C.M.”), and M.C.M. ENVIRONMENTAL TECHNOLOGIES LTD., an Israeli corporation (“M.C.M. Israel”) (Caprius, M.C.M. and M.C.M. Israel may be individually referred to as a “Borrower” and collectively referred to as the “Borrowers”), and VINTAGE CAPITAL GROUP, LLC, a Delaware limited liability company (together with its successors and assigns, the “Purchaser”).

R E C I T A L S

A. The Borrowers are engaged in the business of designing, manufacturing and distributing chemical-based onsite medical waste treatment technologies (the “Business”);

B. The Borrowers are obtaining financing from the Purchaser hereunder (the “Financing”) for general corporate purposes;

C. In connection with the Financing, the Borrowers jointly and severally desire to sell to the Purchaser a Note in substantially the form attached hereto as Exhibit A (as amended, restated, supplemented, replaced or otherwise modified from time to time, the “Note”), and the Purchaser desires to purchase such Note, on the terms and subject to the conditions set forth herein;

D. To induce the Purchaser to provide the Financing, and in consideration therefor, each Borrower has entered or will enter into other Investment Documents, under which, among other things, the Borrowers have granted or will grant to the Purchaser certain investment monitoring and other rights with respect to the Borrowers in connection with the transactions contemplated by this Agreement; and

E. To further induce the Purchaser to provide the Financing, and in consideration therefor, each Borrower has granted to the Purchaser a security interest in all of such Borrower’s right, title and interest in all of its respective assets pursuant to certain Collateral Documents to be entered into in connection with the transactions contemplated by this Agreement.

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 hereby agree as follows:

1.	DEFINITIONS; COLLATERAL DEFINITIONS; ACCOUNTING TERMS

1.1 Definitions. For purposes of this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to the singular and the plural forms thereof):

“‘391 Patent” means United States Patent 6,494,391.

“‘654 Patent” means United States Patent 5,620,654.

“Accounts” shall mean all accounts, contract rights, chattel paper, instruments and documents, whether now owned or hereafter created or acquired by any of the Borrowers, or in which any of the Borrowers now has or hereafter acquires any interest.

“Administrative Borrower” shall have the meaning specified in Section 2.7.

“Advance” shall mean an advance of funds made by the Purchaser to or on behalf of the Borrowers pursuant to Section 2.5, the amount of which shall be added to the aggregate principal balance outstanding under the Note.

“Affiliate,” when used with respect to a specified Person, shall mean a Person (other than a Subsidiary): (i) which directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the specified Person; (ii) which beneficially owns or holds 5% or more of any class of the Voting Stock of the specified Person; or (iii) 5% or more of the Voting Stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held by the specified Person or a Subsidiary of the specified Person. “Affiliate” when used with respect to any of the Borrowers shall also include a member of the Immediate Family of any Existing Stockholder or any trustee of any Existing Stockholder.

“Agreement” shall mean this Agreement, together with the exhibits and the Disclosure Schedules hereto, in each case as amended, restated, supplemented or otherwise modified from time to time.

“Annual Financial Projections” shall have the meaning specified in Section 9.4.

“Applicable Laws” shall mean all applicable provisions of all (i) constitutions, treaties, statutes, laws, rules, regulations and ordinances of any Governmental Authority and all common law duties, (ii) Consents of any Governmental Authority and (iii) orders, decisions, rulings, judgments, directives or decrees of any Governmental Authority.

“Assignee” shall have the meaning specified in Section 14.5.

“Assignment” shall mean an assignment or other transfer of the Note pursuant to the terms of the Note.

“Audit Report” shall have the meaning specified in Section 9.4.

“Bankruptcy Laws” shall mean Title 11 of the United States Code (11 U.S.C. Section 101, et seq.), as amended from time to time, and any other federal or state law relating to bankruptcy, insolvency or reorganization or for the relief of debtors.

“Benefit Plan” shall mean any of the following: (i) each termination or severance agreement involving any Borrower, on the one hand, and any of its respective employees, on the other hand, (ii) all employee benefit plans, as defined in ERISA Section 3(3), and (iii) all other profit-sharing, bonus, stock option, stock purchase, stock bonus, restricted stock, stock appreciation right, phantom stock, vacation pay, holiday pay, tuition reimbursement, scholarship, severance, dependent care assistance, excess benefit, incentive compensation, salary continuation, supplemental retirement, employee loan or loan guarantee program, split dollar, cafeteria plan, and other compensation arrangements; in each case maintained or contributed to by any Borrower for the benefit of their respective employees (or former employees) and/or their beneficiaries. An arrangement will not fail to be a Benefit Plan simply because it only covers one individual, or because any Borrower’s obligations under such arrangement arise by reason of its being a “successor employer” under Applicable Laws. Furthermore, a Voluntary Employees’ Beneficiary Association under Section 501(c)(9) of the Code will be considered a Benefit Plan for this purpose.

“Board of Directors” shall mean, with respect to any Person, the board of directors (or similar governing body) of such Person.

“Borrower” and “Borrowers” shall have the meaning specified in the preamble.

“Borrowers’ Representatives” shall have the meaning specified in Section 10.22(a).

“Business” shall have the meaning specified in Recital A.

“Business Day” shall mean any day that is not a Saturday, a Sunday or a day on which banking institutions in the city of Los Angeles, California are authorized or required by law to close.

“Capital Expenditures” shall mean, for any period, all expenditures of the Borrowers (whether paid in cash, accrued or financed by the incurrence of Indebtedness) during such period, including all Capital Lease Obligations, for any property, plant, equipment or other fixed assets, or for improvements thereto, or for replacements, substitutions or additions thereto, that have a useful life of more than one (1) year or are required to be capitalized on the consolidated balance sheet of the Borrowers in accordance with GAAP.

“Capital Lease” shall mean any lease or agreement of any Borrower for the right to use property (whether real, personal or mixed) which has been or is required to be capitalized on the consolidated balance sheet of such Borrower in accordance with GAAP.

“Capitalized Lease Obligations” shall mean any Indebtedness represented by obligations under a Capital Lease.

“Caprius” shall have the meaning specified in the preamble.

“Change in Control” shall mean, after the date hereof, the occurrence of one or more of the following events:

(a) any “person” or “group” (as such terms are used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within

the meaning of Rule 13d-5(b)(1) of the Exchange Act, becomes the “beneficial owner” (as such term is defined in Rule 13d-3 of the Exchange Act (provided, that a Person will be deemed to have “beneficial ownership” of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time)), directly or indirectly of 5% or more of Caprius;

(b) the sale, transfer, assignment, lease, conveyance or other disposition, directly or indirectly, of all or substantially all of the assets of any Borrower shall have occurred or shall have been approved by the Board of Directors of any Borrower or its stockholders;

(c) any Borrower merges, consolidates or amalgamates with or into any other Person, or any other such Person merges, consolidates or amalgamates with or into any Borrower;

(d) the Board of Directors or the stockholders of any Borrower shall have approved any plan or proposal for the liquidation or dissolution of such Borrower;

(e) Prior to the payment of the Sassoon Settlement Amount, Caprius ceases to own and control, directly or indirectly, 96.66% of the issued and outstanding shares of capital stock (or other equity interests) of M.C.M. or 100% of the issued and outstanding shares of capital stock (or other equity interests) of any other Subsidiary;

(f) Following payment of the Sassoon Settlement Amount, Caprius ceases to own and control, directly or indirectly, 100% of the issued and outstanding shares of capital stock (or other equity interests) of any Subsidiary (other than as a result of a merger of any Subsidiary of Caprius into Caprius or another domestic Subsidiary of Caprius permitted pursuant to Section 10.1);

(g) M.C.M. ceases to own and control directly or indirectly, 100% of the issued and outstanding shares of capital stock (or other equity interests) of M.C.M. Israel or M.C.M. UK (other than as a result of a merger of either such entity into Caprius or M.C.M.); or

(h) Dwight Morgan shall cease to be an executive officer of the Borrowers; provided, however, if such officer ceases to be an executive officer, the Borrowers may propose to Purchaser a replacement within ninety (90) days of such event, and if such replacement is acceptable to Purchaser (with such acceptance not to be unreasonably withheld or delayed) no Change in Control shall be deemed to have occurred.

“Charter Documents” shall mean with respect to any Person, its certificate of incorporation, articles of incorporation, bylaws, certificate of formation, partnership agreement, regulations, operating agreement and al other comparable organizational documents.

“Closing” shall have the meaning specified in Section 2.3.

“Closing Date” shall have the meaning specified in Section 2.3.

“Closing Fee” shall have the meaning specified in Section 2.4.

“Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor statute, and the treasury regulations promulgated thereunder, as in effect from time to time.

“Collateral” shall mean the collateral under the Collateral Documents, however defined, and wherever located.

“Collateral Documents” shall mean, collectively, the Security Agreement, the Pledge Agreement, the UCC financing statements, any Guaranty, any Patent Security Agreement and any landlord waivers and consents, notices of security interest in deposit accounts, deposit account control agreements, fixture filings, patent, trademark and copyright filings, assignments, or acknowledgments and other agreements, instruments and documents delivered from time to time in connection therewith or otherwise to secure the Obligations or any other obligations of the Borrowers or any other Person under this Agreement, the Note or any other Investment Document, including, but not limited to, any guarantees or pledge agreements subsequently executed by any Borrower pursuant to Section 9.8, in each case as amended, restated, supplemented or otherwise modified from time to time.

“Common Stock” shall mean shares of common stock of Caprius.

“Consent” shall mean any consent, approval, authorization, waiver, permit, grant, franchise, license, exemption or order of, or any registration, certificate, qualification, declaration or filing with, or any notice to, any Person, including, without limitation, any Governmental Authority.

“Consent of the Office of the Chief Scientist” shall mean that certain consent issued to the Borrowers by the Office of the Chief Scientist of the State of Israel, in form and substance satisfactory to the Purchaser in its sole and absolute discretion.

“Consolidated” means the consolidation in accordance with GAAP of the accounts or other items as to which such term applies.

“Contingent Obligations” shall mean, with respect to any Person, any obligation, or arrangement, direct or indirect, contingent or otherwise, of such Person (i) with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (collectively, the “Primary Obligations”) of another Person, including, without limitation, any direct or indirect guarantee of such Indebtedness (other than any endorsement for collection or deposit in the ordinary course of business) or any other direct or indirect obligation, by agreement or otherwise, to purchase or repurchase any such Primary Obligation or any property constituting direct or indirect security therefor, or to provide funds for the payment or discharge of any such Primary Obligation (whether in the form of loans, advances, or purchases of property, securities or services, capital contributions, dividends or otherwise), letters of credit and reimbursement obligations for letters of credit, (ii) to provide funds to maintain the financial condition of any other Person, (iii) otherwise to indemnify or hold harmless the holders of Primary Obligations of another Person against loss in respect thereof or (iv) in connection with any synthetic lease or other off-balance sheet lease transaction. The amount of any Contingent Obligation under clauses (i) and (ii) above shall be the maximum amount guaranteed or otherwise supported by the Contingent Obligation.

“Convertible Securities” shall mean, with respect to any Person, any rights, options, warrants, securities or other obligations issued or issuable by such Person or any other Person that are exercisable or exchangeable for, or convertible into, any Securities of such Person.

“Default” shall mean any Event of Default or any event or condition which, with the giving of notice or the lapse of time or both, becomes an Event of Default.

“Disbursement Request” shall mean a disbursement request in substantially the form attached hereto as Exhibit G.

“Disclosure Schedules” shall have the meaning specified in the introductory paragraph of Section 3.

“Distribution” shall mean and include, in respect of any Person, (i) the payment of any dividends or other distributions on Securities (except distributions payable in common stock or equivalent equity securities of non-corporate issuers, if applicable), (ii) the redemption or acquisition of Securities of such Person, as the case may be, and (iii) any payment or prepayment of principal of, premium (if any) or interest, fees or other charges on or with respect to or any redemption, purchase or other acquisition for value, retirement, defeasance or sinking fund or similar payment with respect to any Indebtedness that is subordinated to the Note, the PIK Notes, or any payment in violation of the subordination provisions of any Indebtedness that is subordinated to the Note or the PIK Notes, except regularly scheduled or required principal payments (other than any required change of control or asset proceeds payments) or interest payments on such Indebtedness as permitted by such subordination provisions.

“Employment Agreements” shall mean any Employment Agreements, in form and substance satisfactory to the Purchaser in its sole and absolute discretion, by and between a Borrower and its executive officers.

“Environmental Conditions” shall mean any Release of any Hazardous Materials (whether or not such Release constituted at the time thereof a violation of any Environmental Laws) or any violation of any Environmental Law as a result of which any Environmental Person has or may become liable to any Person or by reason of which the business, condition or operations of such Environmental Person or any of its assets or properties may suffer or be subjected to any Lien or liability.

“Environmental Laws” shall mean all Applicable Laws relating to Hazardous Materials or the protection of human health or the environment, including all requirements pertaining to reporting, permitting, investigating or remediating Releases or threatened Releases of Hazardous Materials into the environment, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials. Without limiting the generality of the foregoing, the term “Environmental Laws” shall include the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601, et seq.) (“CERCLA”), the Hazardous Materials Transportation Act (49 U.S.C. § 1801, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901, et seq.), the Federal Clean Water Act (33 U.S.C. § 1251, et seq.), the Clean Air Act (42 U.S.C. § 7401, et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601, et seq.) and the Occupational Safety and Health Act

(29 U.S.C. § 651, et seq.), as such laws may be amended from time to time, and any other present or future federal, state, local or foreign statute, ordinance, rule, regulation, order, judgment, decree, permit, license or request or binding determination of, or agreement with, any Governmental Authority relating to or imposing liability or establishing standards of conduct for the protection of human health or safety or the environment.

“Environmental Persons” shall mean, collectively (i) all Borrowers and any of their Affiliates, (ii) any other Person in which any of the Persons listed in clause (i) above was at any time, or is, a partner, joint venturer, member or other participant, and (iii) any predecessor or former partnership, joint venture, trust, association, corporation, limited liability company or other Person, whether in existence as of the date hereof or at any time prior to the date hereof, the assets, properties, liabilities or obligations of which have been acquired or assumed by any of the Persons listed in clause (i) above or to which any of the Persons listed in clause (i) above has succeeded. Environmental Persons shall not include any individuals.

“Equipment” shall have the meaning ascribed to such term under the UCC.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute, including the rules and regulations promulgated thereunder, in each case as amended from time to time.

“Event of Default” shall have the meaning specified in Section 11.1.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder.

“Existing Stockholders” shall mean the record owners of Caprius’ capital stock as of the Closing Date.

“Facility Fee” shall have the meaning specified in Section 2.4.

“Financial Statements” shall have the meaning specified in Section 3.9.

“Financing” shall have the meaning specified in Recital B.

“Fiscal Quarter” shall mean any of the four quarters of a Fiscal Year.

“Fiscal Year” shall mean the fiscal year ending September 30.

“Fully Diluted Basis” shall mean, at any time, a basis that includes all Securities of a Person issued and outstanding at such time and all additional Securities of that Person which would be issued upon the conversion, purchase, exchange or exercise of all Securities of the Person (a) outstanding at such time or (b) authorized to be issued under any stock option or similar plan, and where the number issued is measured on a Fully Diluted Basis including in the denominator the new Securities to be issued.

“GAAP” shall mean generally accepted accounting principles and practices set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, all as in effect from time to time, applied on a basis consistent with prior periods.

“Governmental Authority” shall mean any nation or government, and any state or political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any court, tribunal or public or private arbitrator(s) of competent jurisdiction, and any self-regulatory organization.

“Guaranty” means a guarantee of the Obligations in form and substance satisfactory to the Purchaser in its sole and absolute discretion.

“Hazardous Materials” or “Hazardous Substances” shall mean any substance (i) the presence of which requires investigation or remediation under any Applicable Laws, (ii) that is defined or becomes defined as a “hazardous waste” or “hazardous substance” under any Applicable Laws (including, without limitation, all Environmental Laws), (iii) that is toxic, explosive, corrosive, inflammable, infectious, radioactive, carcinogenic, mutagenic, biohazardous or otherwise hazardous and is or becomes regulated by any Governmental Authority, (iv) the presence of which on any real property causes or threatens to cause a nuisance upon or decrease in value of the real property or to adjacent properties or poses or threatens to pose a hazard to any real property or to the health or safety of Persons on or about any real property, or (v) that contains gasoline or other petroleum hydrocarbons, polychlorinated biphenyls or asbestos.

“Holder” shall mean any Person (including, without limitation, the Purchaser) in whose name: (i) the Note, (ii) any new note issued in connection with any partial Assignment of the Note, or (iii) any PIK Notes issued or deemed issued under the Note, is registered in the register required to be maintained by the Borrowers pursuant to Section 8 of the Note.

“Immediate Family” of a Person includes such Person’s spouse, and any of such Person’s parents, children and grandchildren, siblings and in-laws.

“Indebtedness” shall mean, without duplications, (i) indebtedness arising from the lending of money by any Person to any Borrower, (ii) indebtedness, whether or not in any such case arising from the lending by any Person of money to any Borrower, (A) which is represented by notes payable or drafts accepted that evidence extensions of credit, (B) which constitute obligations evidenced by bonds, debentures, notes or similar instruments, or (C) upon which interest charges are customarily paid, or that was issued or assumed as full or partial payment for Property (other than accounts payable incurred in the ordinary course of business and not past due by more than one hundred eighty (180) days), businesses or assets, (iii) any Capitalized Lease Obligation, (iv) reimbursement obligations with respect to letters of credit or guaranties of letters of credit and (v) indebtedness of any Borrower under any guaranty of obligations that would constitute indebtedness under clauses (i) through (iii) hereof, if owed directly by such Borrower.

“Indemnified Parties” shall have the meaning specified in Section 8.2.

“Initial Approved Budget” shall have the meaning specified in Section 2.5.

“Initial Term” shall mean the period from the Closing Date through the earliest of (a) the issuance of the Warrant in accordance with the terms hereof, (b) the ninetieth (90th) day following the Closing Date and (c) the occurrence of an Event of Default that has not been waived by the Purchaser in its sole and absolute discretion.

“Initial Term Maximum Availability” shall mean $1,000,000.

“Intellectual Property” shall mean all intellectual property, including, without limitation, (i) inventions, whether or not patentable, whether or not reduced to practice, and whether or not yet made the subject of a pending patent application or applications, (ii) ideas, discoveries and conceptions of potentially patentable subject matter, including, without limitation, any patent disclosures, whether or not reduced to practice and whether or not yet made the subject of a pending patent application or applications, (iii) national (including the United States) and multinational statutory invention registrations, patents, patent registrations and patent applications (including all reissues, divisions, continuations, continuations-in-part, extensions and reexaminations) and all rights therein provided by international treaties or conventions and all improvements to the inventions disclosed in each such registration, patent or application, (iv) trademarks, service marks, domain names, trade dress, logos, trade names and corporate names, whether or not registered, including all common law rights, and registrations and applications for registration thereof, including, without limitation, all marks registered in the United States Patent and Trademark Office, the trademark offices of the states and other territories of the United States of America, and the trademark offices of other nations throughout the world, and all rights therein provided by international treaties or conventions, (v) copyrights (registered or otherwise) and registrations and applications for registration thereof, (vi) computer software, databases, works of authorship, mask works, source codes, object codes, methodologies, (vii) trade secrets and confidential, technical and business information (including ideas, formulas, compositions, inventions, and conceptions of inventions whether patentable or unpatentable and whether or not reduced to practice), (viii) whether or not confidential, technology (including know-how and show-how), manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, models, plans, proposals, technical data, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information, (ix) copies and tangible embodiments of all the foregoing, in whatever form or medium, (x) all rights to obtain and rights to apply for patents, and to register trademarks and copyrights, and (xi) all rights to sue or recover and retain damages and costs and attorneys’ fees for present and past infringement of any of the foregoing.

“Inventory” shall have the meaning specified in Section 3.34.

“Investment Documents” shall mean, collectively, this Agreement, the Note, the PIK Notes, the Collateral Documents, the Investment Monitoring Agreement and all other agreements, instruments, certificates, closing and other letters and other documents executed and/or delivered in connection herewith or therewith, in each case as amended, restated, supplemented or otherwise modified from time to time.

“Investment Monitoring Agreement” shall mean that certain Investment Monitoring Agreement, of even date herewith, by and among the Borrowers and the Purchaser, as amended, restated, supplemented or otherwise modified from time to time, in substantially the form attached hereto as Exhibit E.

“Investments” shall mean, as applied to any Person, (i) any direct or indirect acquisition by such Person of Securities, other securities or other interests of, or investments in, any other Person, or all or any substantial part of the business or assets of any other Person, and (ii) any direct or indirect loan, guarantee, gift, advance or capital contribution by such Person to any other Person.

“Judgment” shall mean any money judgments, writs of attachment or similar processes, which are issued or rendered against any Borrower, or any of their respective Property (i) in the case of money judgments, in an amount of $10,000 or more for any single judgment, attachment or process or $50,000 or more for all such judgments, attachments or processes in the aggregate, in each case in excess of any applicable insurance with respect to which the insurer has admitted liability, and (ii) in the case of non-monetary judgments, such judgment or judgments (in the aggregate) which would reasonably be expected to have a Material Adverse Effect, in each case which judgment is not stayed, released, insured, bonded or discharged within forty-five (45) days of filing.

“Key Management Personnel” shall have the meaning specified in Section 9.18.

“Knowledge” means the knowledge of the officers of any Borrower after reasonable inquiry into the subject matter.

“Lien” shall mean any lien (statutory or other), pledge, mortgage, deed of trust, assignment, deposit arrangement, priority, security interest, option charge or encumbrance or other preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a lessor under a Capital Lease having substantially the same economic effect), any agreement to give or refrain from giving any lien, pledge, mortgage, security interest, option charge or other encumbrance of any kind, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing or existence of any financing statement or other similar form of notice under the laws of any jurisdiction or any security agreement authorizing any Person to file such a financing statement, whether arising by contract, operation of law, or otherwise.

“Losses” shall have the meaning specified in Section 8.2.

“Material Adverse Effect” or “Material Adverse Change” shall mean any material adverse effect on or material adverse change in, as the case may be, (A) the business, assets, liabilities, condition (financial or otherwise), properties (whether real, personal, or otherwise), results of operations, value or performance of the Borrowers, taken as a whole, (B) the ability of any Borrower to perform or observe its obligations under this Agreement or any other Investment Document to which it is a party or (C) the legality, binding effect, validity or enforceability of this Agreement or any other Investment Document or the perfection or priority of any Lien granted under any Collateral Document.

“Material Contracts” shall have the meaning specified in Section 3.11.

“M.C.M.” shall have the meaning specified in the preamble.

“M.C.M. Israel” shall have the meaning specified in the preamble.

“M.C.M. UK” means M.C.M. Environmental Technologies (U.K.), Ltd., a United Kingdom corporation.

“Monthly Reporting Package” shall have the meaning specified in Section 9.4.

“Multiemployer Plan” shall have the meaning ascribed to such term by ERISA.

“Note” shall have the meaning specified in Recital C.

“Obligations” shall mean any and all present and future loans, Advances, Indebtedness, claims, guarantees, liabilities or obligations of the Borrowers, or of any other Person for or on behalf of the Borrowers, owing to the Purchaser, or any of their Affiliates or any Indemnified Party, of whatever nature, character or description, arising under or in connection with this Agreement, the Note, any PIK Notes, the Collateral Documents and any other Investment Document or otherwise, any and all agreements, instruments or other documents heretofore or hereafter executed or delivered in connection with any of the foregoing, in each case whether due or not due, direct or indirect, joint and/or several, absolute or contingent, voluntary or involuntary, liquidated or unliquidated, determined or undetermined, now or hereafter existing, amended, renewed, extended, replaced, exchanged, restated, refinanced, refunded or restructured, whether or not from time to time decreased or extinguished and later increased, created or incurred, whether for principal, interest, premiums, fees, costs, expenses (including, without limitation, attorneys’ fees, costs and expenses) or other amounts incurred for administration, collection, enforcement or otherwise, whether or not arising after the commencement of any proceeding under the Bankruptcy Laws (including, without limitation, post-petition interest) and whether or not allowed or allowable as a claim in any such proceeding, and whether or not recovery of any such obligation or liability may be barred by any statute of limitations or such Indebtedness, claim, liability or obligation may otherwise be unenforceable.

“Operating Licenses” shall mean, collectively, all licenses, franchises, permits, consents, approvals, registrations, certificates and authorizations of all Governmental Authorities necessary or advisable to the conduct of the Business.

“Other Debt Document” shall mean any agreement, instrument or other document evidencing or governing any Indebtedness of any Borrower, other than the Note, the PIK Notes and any other Investment Document.

“Patent Security Agreement” shall mean a patent security agreement, as amended, restated, supplemented or otherwise modified from time to time, in substantially the form attached hereto as Exhibit C.

“Permitted Liens”, with respect to any Borrower, shall have the meaning set forth in Section 10.5.

“Permitted Third Party Refinancing” shall have the meaning specified in Section 10.22(c).

“Person” shall mean any individual, trustee, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, or other entity or any Governmental Authority.

“PIK Notes” shall mean those subordinated secured promissory notes of equal tenor to the Note issued or deemed issued pursuant to the terms of the Note.

“Pledge Agreement” shall mean that certain Pledge Agreement of even date herewith by and among the Borrowers and the Purchaser, as amended, restated, supplemented or otherwise modified from time to time, in substantially the form attached hereto as Exhibit D.

“Premises” shall mean any and all Real Property, including all buildings and improvements now or hereafter located thereon and all appurtenances thereto, now or hereafter owned, leased, occupied or used by the Borrowers.

“Prohibited Acquisition” shall have the meaning specified in Section 10.22(a).

“Prohibited Financing” shall have the meaning specified in Section 10.22(b).

“Projections” means the forecasted Consolidated (i) balance sheets, (ii) profit and loss statements, (iii) cash flow statements, (iv) capitalization statements of the Borrowers, all prepared on a consistent basis with the historical financial statements of the Borrowers, together with appropriate supporting details and a statement of underlying assumptions.

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

“Purchaser” shall have the meaning specified in the preamble.

“Purchaser Closing Period” shall have the meaning specified in Section 10.22(c).

“Real Property” shall mean any and all real property now or hereafter owned, leased or operated by any Borrower.

“Refinancing Fee” shall have the meaning specified in Section 2.4.

“Release” shall mean any release (whether threatened or actual), migration, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, seeping, leaching, dumping or disposing into the environment or the workplace of any Hazardous Materials, and otherwise as defined in any Environmental Laws.

“Reportable Event” shall mean any of the events set forth in Section 4043 of ERISA.

“Requisite Holders” shall have the meaning specified in Section 14.2.

“Restricted Investment” shall mean any Investments in any Person that are made without the prior written approval of the Purchaser, other than (i) Investments by any Borrower in another Borrower and (ii) Investments which represent Capital Expenditures permitted hereunder.

“Right of First Refusal” shall have the meaning specified in Section 10.22(c).

“Sale and Leaseback Transaction” shall mean any transaction in which any Borrower becomes liable, directly or indirectly, with respect to any lease, whether an operating lease or a Capital Lease, of any property (whether real, personal or mixed), whether now owned or hereafter acquired, (i) which any Borrower has sold or transferred or is to sell or transfer to any other Person or (ii) which any Borrower intends to use for substantially the same purposes as any other property which has been or is to be sold or transferred by any Borrower to any other Person in connection with such lease.

“Sassoon Settlement Amount” shall mean that certain payment in the amount of $90,000 to be made by the Borrowers pursuant to the terms of the Sassoon Settlement Agreement.

“Sassoon Settlement Agreement” shall mean that certain Release and Settlement Agreement, dated as of June 22, 2009, by and among Andre Sassoon and Andre Sassoon International, Inc., on the one hand, and M.C.M., Caprius and George Aaron, on the other hand, as amended.

“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, all as the same shall be in effect from time to time.

“Security” shall mean all shares of stock, partnership interests, membership interests or units or other ownership interests in any other Person and all warrants, options or other rights to subscribe for or purchase, or obligations to issue, the same, any Convertible Securities of such Person, including, without limitation, any options or similar rights issued or issuable under any employee stock option plan, pension plan or other employee benefit plan of such Person, or any plan for, or other rights to, phantom stock or other arrangement intended to result in payments by such Person which track or reflect the value (or change in value) of the same.

“Security Agreement” shall mean that certain Security Agreement, dated as of the date hereof, by and among the Borrowers and the Purchaser, as amended, restated, supplemented or otherwise modified from time to time, in substantially the form attached hereto as Exhibit F.

“Site” shall mean any real property previously, currently or hereafter owned, leased or operated by any Environmental Person in connection with the operation of the Business.

“Solvent” shall mean, with respect to any Person, on the date of determination, that (i) the present fair saleable value of the assets of such Person in an arm’s-length transaction will exceed the amount that will be required to be paid on or with respect to the probable liability on the existing debts (whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent) of such Person as they become absolute and matured, (ii) the sum of the debts (whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent) of such Person will not exceed all of the property of such Person at a fair valuation, and (iii) such Person

does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature. For purposes of the preceding sentence, the amount of Contingent Obligations at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that are reasonably expected to become an actual or matured liability.

“Stockholder Consent” shall mean a written consent, duly executed and delivered by the holders of at least sixty-six percent (66%) of each class of preferred stock of Caprius that is outstanding immediately prior to the Closing, pursuant to which such preferred stockholders acknowledge and consent to the consummation of the transactions contemplated by this Agreement and the other Investment Documents.

“Subordinated Debt” shall mean any Indebtedness of any Borrower that is subordinated to the Obligations in a manner reasonably satisfactory to the Purchaser and contains terms, including, without limitation, payment terms, reasonably satisfactory to the Purchaser.

“Subsequent Approved Budget” shall have the meaning set forth in Section 2.5.

“Subsequent Term” shall mean the period from the termination of the Initial Term, other than as a result of the occurrence of an Event of Default that has not been waived by the Purchaser in its sole and absolute discretion, through the earlier of (a) the Maturity Date (as such term is defined in the Note) and (b) the occurrence of an Event of Default that has not been waived by the Purchaser in its sole and absolute discretion; provided, however, that the Subsequent Term shall not commence to the extent that an Event of Default has occurred and is continuing as of the date such period otherwise would have commenced.

“Subsequent Term Maximum Availability” shall mean $2,000,000.

“Subsidiary” and “Subsidiaries” shall mean, with respect to any specified Person, any other Person of which more than fifty percent (50%) of the total voting power of Securities entitled to vote (without regard to the occurrence of any contingency) in the election of directors (or other Persons performing similar functions) are at the time directly or indirectly owned by such specified Person or such specified Person otherwise controls such other Person. Unless otherwise indicated, the term “Subsidiary” refers to any direct or indirect Subsidiary of Caprius that may be formed or acquired in the future.

“Tax” or “Taxes” shall mean any present and future income, excise, sales, use, stamp or franchise taxes and any other taxes, fees, duties, levies, or other charges of any nature whatsoever imposed by any taxing Governmental Authority, whether federal, state, local or foreign, together with any interest and penalties thereon.

“Third Party Intellectual Property Rights” shall have the meaning set forth in Section 3.21.

“UCC” shall mean the Uniform Commercial Code as in effect in the State of New York from time to time.

“Voting Stock” of a Person shall mean all classes of Securities of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees (or persons performing similar functions) thereof.

“Warrant” shall have the meaning specified in Section 6.3.

1.2 Accounting Terms and Computations. For purposes of this Agreement, (i) all accounting terms used in this Agreement that are not expressly defined herein have the meanings given to them under GAAP, (ii) all computations made pursuant to this Agreement or any other Investment Document shall be made in accordance with GAAP, (iii) all financial statements and other financial information to be delivered by the Borrowers hereunder or under any other Investment Document shall be prepared in accordance with GAAP, except that any interim financial statements or other financial information which are unaudited may be subject to year-end audit adjustments and may omit footnotes and (iv) all computations, financial statements and other financial information of the Borrowers hereunder shall be determined on a consolidated basis in accordance with GAAP.

1.3 Covenants. All covenants and agreements under this Agreement shall each be given independent effect so that if a particular action or condition is not permitted by any such covenant, the fact that it would be permitted by another covenant, by an exception thereto, or be otherwise within the limitations thereof, shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists.

1.4 Captions; Construction and Interpretation. The captions in this Agreement are for convenience of reference only, do not constitute a part of this Agreement and are not to be considered in construing or interpreting this Agreement. All section, preamble, recital, exhibit, schedule, disclosure schedule, annex, clause and party references are to this Agreement unless otherwise stated. No party, nor its counsel, shall be deemed the drafter of this Agreement for purposes of construing the provisions of this Agreement, and all provisions of this Agreement shall be construed in accordance with their fair meaning, and not strictly for or against any party.

1.5 Determinations. Any determination or calculation contemplated by this Agreement or any other Investment Document that is made by the Purchaser shall be final and conclusive and binding upon the Borrowers in the absence of manifest error.

2.	PURCHASE AND SALE OF THE NOTE

2.1 Authorization. The Borrowers have authorized the issuance and sale to the Purchaser of the Note, in substantially the form of Exhibit A, on the terms and subject to the conditions set forth herein. The Borrowers have each also authorized the grant to the Purchaser of a first-priority security interest in all of their respective Properties in accordance with the Collateral Documents, subject only to Permitted Liens.

2.2 Closing. Subject to the satisfaction or valid waiver of the conditions set forth in Section 5 hereof, the closing of the purchase and sale of the Note described in Section 2.1 above (the “Closing”) shall take place at the offices of Klee, Tuchin, Bogdanoff & Stern LLP, 1999 Avenue of the Stars, 39th Floor, Los Angeles, California, on the Business Day after which all conditions to Closing set forth herein are satisfied or waived, or at such other time, date and place as the Borrowers and the Purchaser otherwise may agree (the “Closing Date”).

2.3 Closing Actions. At the Closing, the Borrowers shall deliver the executed Note to the Purchaser and the Purchaser shall make the Advances described in Section 2.4 and as requested pursuant to Section 2.5.

2.4 Fees and Expenses.

2.4.1 The Borrowers shall jointly and severally pay to the Purchaser a fee equal to $250,000 (the “Closing Fee”) in connection with the issuance and sale of the Note under this Agreement. The Closing Fee shall be fully earned as of the date hereof and shall be due and payable in full on the Closing Date. The Borrowers acknowledge and agree that they shall be deemed to have requested an Advance on the Closing Date in an amount equal to the Closing Fee. Such Closing Fee shall be in addition to any other amounts the Borrowers may owe to the Purchaser or its Affiliates from time to time under any Investment Document or any other agreement or arrangement, and shall not reduce the Initial Term Maximum Availability or the Subsequent Term Maximum Availability. Notwithstanding the foregoing, upon the issuance of the Warrant to the Purchaser and so long as no Event of Default has occurred and is continuing or would result therefrom, the Purchaser shall waive its right to payment of $125,000 of the Closing Fee and such amount shall be deemed to be refunded to the Borrowers.

2.4.2 The Borrowers shall jointly and severally pay to the Purchaser a fee equal to $60,000 (the “Facility Fee”) in connection with the issuance and sale of the Note under this Agreement. The Facility Fee shall be fully earned as of the date hereof and shall be due and payable in full on the date that is ninety (90) days after the Closing Date. The Borrowers acknowledge and agree that they shall be deemed to have requested an Advance on the ninetieth (90th) day after the Closing Date in an amount equal to the Facility Fee. Such Facility Fee shall be in addition to any other amounts the Borrowers may owe to the Purchaser or its Affiliates from time to time under any Investment Document or any other agreement or arrangement.

2.4.3 On the Closing Date, the Borrowers shall jointly and severally pay or cause to be paid all of the Purchaser’s reasonable fees, costs and expenses, including all fees, costs and expenses of the Purchaser’s legal counsel, incurred in connection with the evaluation, negotiation and documentation of the transactions contemplated by the Investment Documents. The Borrowers acknowledge and agree that they shall be deemed to have requested an Advance on the Closing Date in an amount equal to such fees, costs and expenses. Such fees, costs and expenses shall be in addition to any other amounts the Borrowers may owe to the Purchaser or its Affiliates from time to time under any Investment Document or any other agreement or arrangement.

2.4.4 If the Note is paid in full at any time on or after the Maturity Date, other than in connection with a refinancing with the Purchaser or its Affiliates, the Borrowers shall jointly and severally pay to the Purchaser a fee equal to $125,000 (the “Refinancing Fee”) in connection with such payment in full, the Refinancing Fee shall be fully earned as of the date hereof and shall be due and payable in full on the date of any such payment in full. Such Refinancing Fee shall be in addition to any other amounts the Borrowers may owe to the Purchaser or its Affiliates from time to time under any Investment Document or any other agreement or arrangement.

2.5 Funding, Use of Proceeds.

2.5.1 Attached hereto as Schedule 2.5(a) is a budget for the Borrowers prepared by the Borrowers for the Initial Term, which has been approved by the Purchaser (the “Initial Approved Budget”). From time to time during the Initial Term, the Administrative Borrower may request that the Purchaser fund Advances under the Note to or on behalf of the Borrowers, which request shall be in the form of a Disbursement Request and specify the principal amount of the proposed Advance and the item(s) in the Initial Approved Budget to which the request relates. The Purchaser shall fund Disbursement Requests not later than three (3) Business Days following receipt thereof; provided, that any Disbursement Request received by the Purchaser after 11:00 a.m. (Los Angeles time) on any Business Day (or received at any time on a day that is not a Business Day) shall be deemed to have been received on the next succeeding Business Day. The Purchaser shall not be obligated to fund any Advance requested while an Event of Default has occurred and is continuing unless it elects to do so in its sole and absolute discretion. In no event during the Initial Term shall (a) the Administrative Borrower request an Advance for any item(s) other than in accordance with the Initial Approved Budget, (b) the Administrative Borrower request any Advances more frequently than on the Closing Date and each two week anniversary of the Closing Date and (c) the aggregate amount of Advances under the Note (exclusive of Advances deemed to be requested pursuant to Section 2.4) made during the Initial Term exceed the Initial Term Maximum Availability.

2.5.2 Attached hereto as Schedule 2.5(b) is a budget for the Borrowers prepared by the Borrowers for the Subsequent Term which has been approved by the Purchaser (the “Subsequent Approved Budget”). From time to time during the Subsequent Term, if any, the Administrative Borrower may request that the Purchaser fund Advances under the Note to or on behalf of the Borrowers, which request shall be in the form of a Disbursement Request and specify the principal amount of the proposed Advance and the item(s) in the Subsequent Approved Budget to which the request relates. The Purchaser shall fund Disbursement Requests not later than three (3) Business Days following receipt thereof; provided, that any Disbursement Request received by the Purchaser after 11:00 a.m. (Los Angeles time) on any Business Day (or received at any time on a day that is not a Business Day) shall be deemed to have been received on the next succeeding Business Day. The Purchaser shall not be obligated to fund any Advance requested while an Event of Default has occurred and is continuing unless it elects to do so in its sole and absolute discretion. In no event during the Subsequent Term, if any, shall (a) the Administrative Borrower request an Advance for any item(s) other than in accordance with the Subsequent Approved Budget, (b) the Administrative Borrower request any Advances more frequently than on the first day of the Subsequent Term and each two week anniversary thereof and (c) the aggregate amount of Advances under the Note made during the Subsequent Term exceed the Subsequent Term Maximum Availability.

2.6 Joint and Several Liability of the Borrowers.

2.6.1 Notwithstanding anything in this Agreement or any other Investment Document to the contrary, each of the Borrowers hereby accepts joint and several liability hereunder and under the other Investment Documents in consideration of the financial accommodations to be provided by the Purchaser under this Agreement and the other Investment Documents, for the mutual benefit, directly and indirectly, of each of the Borrowers and in consideration of the undertakings of the other Borrowers to accept joint and several liability for the Obligations. Each of the Borrowers, jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers, with respect to the payment and performance of all of the Obligations (including, without limitation, any Obligations arising under this Section 2.6), it being the intention of the parties hereto that all of the Obligations shall be the joint and several obligations of each of the Borrowers without preferences or distinction among them. If and to the extent that any of the Borrowers shall fail to make any payment with respect to any of the Obligations as and when due or to perform any of the Obligations in accordance with the terms thereof, then in each such event the other Borrowers will make such payment with respect to, or perform, such Obligation. Subject to the terms and conditions hereof, the Obligations of each of the Borrowers under the provisions of this Section 2.6 constitute the absolute and unconditional, full recourse Obligations of each of the Borrowers, enforceable against each such Borrower to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Agreement, the other Investment Documents or any other circumstances whatsoever.

2.6.2 The provisions of this Section 2.6 are made for the benefit of the Purchaser and its successors and assigns, and may be enforced by them from time to time against any or all of the Borrowers as often as occasion therefor may arise and without requirement on the part of the Purchaser or such successors or assigns first to marshal any of its or their claims or to exercise any of its or their rights against any of the other Borrowers or to exhaust any remedies available to it or them against any of the other Borrowers or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this Section 2.6 shall remain in effect until all of the Obligations shall have been paid in full or otherwise fully satisfied.

2.6.3 Each of the Borrowers hereby agrees that it will not enforce any of its rights of contribution or subrogation against the other Borrowers with respect to any liability incurred by it hereunder or under any of the other Investment Documents, any payments made by it to the Purchaser with respect to any of the Obligations or any Collateral, until such time as all of the Obligations have been paid in full in cash. Any claim which any Borrower may have against any other Borrower with respect to any payments to the Purchaser hereunder or under any other Investment Documents are hereby expressly made subordinate and junior in right of payment, without limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior payment in full in cash of the Obligations.

2.6.4 The liability of each Borrower hereunder shall be irrevocable, absolute and unconditional irrespective of, and each Borrower hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any or all of the following:

(a) any lack of validity or enforceability of any Investment Document or any agreement or instrument relating thereto;

(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from any Investment Document, including, without limitation, any increase in the Obligations resulting from the extension of additional credit to any Borrower or otherwise;

(c) any taking, exchange, release or non-perfection of any Collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Obligations;

(d) the existence of any claim, set-off, defense or other right that any Borrower may have at any time against any Person, including, without limitation, the Purchaser;

(e) any change, restructuring or termination of the corporate, limited liability company or partnership structure or existence of any Borrower; or

(f) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Purchaser that might otherwise constitute a defense available to, or a discharge of, any Borrower or any other guarantor or surety.

2.6.5 Each Borrower hereby waives (a) promptness and diligence, (b) notice of acceptance and any other notice with respect to any of the Obligations and this Section 2.6 and any requirement that the Purchaser exhaust any right or take any action against any Borrower or any other Person or any Collateral, (c) any right to compel or direct the Purchaser to seek payment or recovery of any amounts owed under this Section 2.6 from any one particular fund or source or to exhaust any right or take any action against any other Borrower, any other Person or any Collateral, (d) any requirement that the Purchaser protect, secure, perfect or insure any security interest or Lien on any property subject thereto or exhaust any right to take any action against any Borrower, any other Person or any Collateral, and (e) any other defense available to any Borrower. Each Borrower agrees that the Purchaser shall have no obligation to marshal any assets in favor of any Guarantor or against, or in payment of, any or all of the Obligations. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated herein and that the waiver set forth in this Section 2.6 is knowingly made in contemplation of such benefits. Each Borrower hereby waives any right to revoke this Section 2.6, and acknowledges that this Section 2.6 is continuing in nature and applies to all Obligations, whether existing now or in the future.

This Section 2.6 shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by the Purchaser, or any other Person upon the insolvency, bankruptcy or reorganization of any Borrower or otherwise, all as though such payment had not been made.

2.7 Administrative Borrower. Each Borrower hereby irrevocably appoints Caprius as the borrowing agent for all the Borrowers (the “Administrative Borrower”), which appointment shall remain in full force and effect unless and until the Purchaser shall have received prior written notice signed by each Borrower that such appointment has been revoked and that another Borrower has been appointed Administrative Borrower. Each Borrower hereby irrevocably

appoints and authorizes the Administrative Borrower (a) to provide the Purchaser with all Disbursement Requests and other notices with respect to Advances obtained for the benefit of any Borrower and (b) to take such action as the Administrative Borrower deems appropriate on its behalf to obtain Advances. It is understood that the handling of the loan account of the Borrowers in a combined fashion, as more fully set forth herein, is done solely as an accommodation to the Borrowers in order to utilize the collective borrowing powers of the Borrowers in the most efficient and economical manner and at their request, and that the Purchaser shall not incur liability to any Borrower as a result hereof. Each Borrower expects to derive benefit, directly or indirectly, from the handling of its loan account in a combined fashion since the successful operation of each Borrower is dependent upon the continued successful performance of the integrated group. To induce the Purchaser to do so, and in consideration thereof, each Borrower hereby jointly and severally agrees to indemnify the Purchaser and to hold the Purchaser harmless against any and all liability, cost, expense, loss or claim of damage or injury, made against the Purchaser by any Borrower or by any third party whosoever, arising from or incurred by reason of (a) the handling of the Borrowers’ loan account as herein provided or (b) the Purchaser’s relying on any instructions of the Administrative Borrower, except that the Borrowers will have no liability to the Purchaser under this Section 2.7 with respect to any liability to the extent that such liability has been caused by the Purchaser’s willful misconduct or gross negligence.

3.	REPRESENTATIONS AND WARRANTIES OF THE BORROWERS

In connection with the following representations and warranties, the Borrowers have delivered to the Purchaser disclosure schedules as attached hereto (the “Disclosure Schedules”), arranged in numbered parts corresponding to the numbering in this Agreement of the following representations and warranties. The information disclosed in any numbered part shall be deemed to relate to and to qualify the particular representation or warranty set forth in the corresponding numbered section in this Agreement. Information disclosed that is applicable to more than one numbered section shall be clearly cross-referenced, provided that the information may be deemed to relate to another numbered section, notwithstanding the absence of a cross-reference, if it is clear from the nature of the information disclosed that another representation or warranty should be modified by such disclosure. To induce the Purchaser to purchase the Note under this Agreement and to consummate the transactions contemplated hereby and by the other Investment Documents, the Borrowers, jointly and severally, represent and warrant to the Purchaser that, except as expressly set forth in the respective Disclosure Schedules:

3.1 Organization and Qualification. Each Borrower is duly organized, validly existing and in good standing under the laws of the state of its organization. Each Borrower has all requisite power and authority, and all Operating Licenses, necessary to own or lease and operate its properties and assets and to carry on its business as now conducted and as proposed to be conducted, is duly qualified or licensed to do business in each jurisdiction in which the character of the properties or assets owned, leased or operated by them or the nature of the activities conducted makes such qualification or licensing necessary, except where the failure to be so qualified or licensed could not reasonably be expected to result in a Material Adverse Effect. Schedule 3.1 shows the jurisdiction of organization of each Borrower and the jurisdictions in which it is qualified to do business.

3.2 Corporate or Other Power. Each Borrower has the requisite power and authority to execute, deliver and perform their respective obligations under this Agreement and all other Investment Documents to which it is a party, including, without limitation, the power and authority to issue, sell, and deliver the Note to be issued and sold by such Borrower to the Purchaser hereunder and grant the security interests as set forth herein and in the applicable Collateral Documents.

3.3 Authorization; Binding Obligations. The execution, delivery and performance of this Agreement and each of the other Investment Documents to which any Borrower is a party, the issuance, sale, and delivery of the Note by the Borrowers as contemplated hereunder, and the consummation of the other transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of the Borrowers, as applicable, and by the stockholders and Boards of Directors of the Borrowers, as applicable. This Agreement has been duly executed and delivered by the Borrowers and, at the Closing, each of the other Investment Documents will be duly executed and delivered by the Borrowers to the extent that any of them is a party thereto. This Agreement is, and each other Investment Document will at the Closing be, a legal, valid and binding obligation of the Borrowers to the extent that any of them is a party thereto, enforceable against the Borrowers in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.

3.4 Subsidiaries. Except as described in Schedule 3.4, the Borrowers have no Subsidiaries and own or hold no securities of any other Person. The Borrowers do not have any joint venture relationships or hold any partnership interests.

3.5 Conflict with Other Instruments; Existing Defaults.

3.5.1 The execution, delivery and performance of this Agreement and of each other Investment Document to which any Borrower is a party, the issuance, sale, and delivery by the Borrowers of the Note, and the consummation of the other transactions contemplated hereby and thereby do not and will not (i) violate or conflict with (A) the Charter Documents of any Borrower, in each case as in effect on the date hereof, (B) any term of any lease, credit agreement, indenture, note, mortgage, instrument or other agreement to which any Borrower is a party or by which any of its or their properties or assets are bound (including, without limitation, any Material Contract or Other Debt Document), or any agreement with respect to Intellectual Property, which violation or conflict, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (C) any Applicable Laws, or (ii) result in, or require, the creation or imposition of any Lien upon or with respect to any of the assets or properties now owned or hereafter acquired by any Borrower.

3.5.2 After giving effect to the consummation of the transactions contemplated hereby, no Borrower is in default, breach or violation of (i) its Charter Documents, as in effect as of the date hereof, (ii) any lease, credit agreement, indenture, note, mortgage, instrument or other agreement to which it is a party or by which any of its properties or assets are bound (including, without limitation, any Material Contract or Other Debt Document or any agreement with respect to Intellectual Property) or (iii) any Applicable Laws, the violation of which could reasonably be expected to have a Material Adverse Effect and the Borrowers will not be in breach of violation

thereof both before and after giving effect to the issuance of the Note and the consummation of the transactions contemplated hereby and by the other Investment Documents. Without limiting the generality of the foregoing, after giving effect to the consummation of the transactions contemplated hereby, there does not exist any “default” or “event of default” (in each case as defined in any Other Debt Document) or any default under any other credit or financing agreement to which any Borrower is a party or by which any of their respective properties or assets are bound.

3.5.3 No Indebtedness of any Borrower ranks senior to or pari passu with the Indebtedness evidenced by the Note.

3.6 Governmental and Other Third Party Consents. Except for the Consents listed in Schedule 3.6, no Borrower is required to obtain any Consent from, or is required to make any declaration or filing with, any Governmental Authority or any other Person (including shareholders or partners) in connection with the execution, delivery and performance of this Agreement or any other Investment Document, including, without limitation, the issuance, sale, and delivery of the Note, or for the purpose of maintaining in full force and effect any Operating Licenses. Each of the Consents which have been obtained or made in connection with the execution, delivery and performance of this Agreement or any other Investment Document is in full force and effect. The time within which any administrative or judicial appeal, reconsideration, rehearing or other review of any such Consent from any Governmental Authority may be taken or instituted has lapsed, and no such appeal, reconsideration or rehearing or other review has been taken or instituted.

3.7 Capitalization.

3.7.1 Schedule 3.7(a) sets forth a true, correct and complete description of the authorized Securities and Convertible Securities of each Borrower and the number of shares or securities of each class of Securities that is issued and outstanding prior to the consummation of the transactions set forth in this Agreement and shows the record and beneficial owners of shares issued by each Borrower. Schedule 3.7(a) also sets forth the number of shares of common stock of the Borrowers as of such time on a Fully Diluted Basis assuming the exercise or conversion in full of all Convertible Securities.

3.7.2 Schedule 3.7(b) sets forth a true, correct and complete description of the authorized Securities and Convertible Securities of each Borrower and the number of shares or securities of each class of Securities that will be issued and outstanding after the Closing Date, giving effect to the transactions set forth in this Agreement, including the anticipated record and beneficial owners of such Securities. Schedule 3.7(b) also sets forth the number of shares of common stock of the Borrowers as of such time on a Fully Diluted Basis assuming the exercise or conversion in full of all Convertible Securities.

3.7.3 Except as set forth on Schedule 3.7(c), (i) all of the issued and outstanding ownership interests or shares of capital stock, as applicable, of each Borrower have been duly authorized and are validly issued, fully paid and non-assessable, and are free and clear of any Liens and other restrictions including any restrictions on the right to vote, sell or otherwise dispose of such interests or capital stock other than restrictions under applicable securities laws

and the holders thereof do not have any preemptive or other similar rights to subscribe for or to purchase any such interests or capital stock, (ii) except for the Investment Documents, there are (A) no voting trusts or other agreements or undertakings with respect to the voting of the Securities of any Borrower and (B) no agreements to which the Borrowers or any of their respective stockholders, directors or officers, is a party granting any other Person any rights of first offer or first refusal, registration rights or “drag-along,” “tag-along” or similar rights with respect to any transfer of any Securities of the Borrowers to which any Borrower is a party or of which any Borrower has Knowledge, (iii) no obligations (whether fixed or contingent) on the part of any Borrower, any of their respective directors or officers, or any other Person exist with respect to the purchase, repurchase or redemption of any outstanding Securities of any Borrower, (iv) no additional ownership interests or shares of capital stock of the Borrowers will become issuable to any Person pursuant to any “anti-dilution” provisions of any such issued and outstanding Security of a Borrower on account of the issuance of the Note, and (v) no Borrower has issued any Convertible Securities or authorized the issuance of any Convertible Securities. All Securities of each Borrower that have been issued have been issued and offered in compliance in all material respects with all applicable federal and state securities laws.

3.8 Names; Business Locations.

3.8.1 No Borrower has been known as or has used any legal, fictitious or trade names, except those listed on Schedule 3.8 hereto. Except as set forth on Schedule 3.8, no Borrower has been the surviving entity of a merger or consolidation or has acquired all or substantially all of the assets of any Person.

3.8.2 Each Borrower’s chief executive office and other places of business as of the date hereof are as listed on Schedule 3.8 hereto. During the preceding one-year period, none of the Borrowers has had an office or place of business other than as listed on Schedule 3.8. The Borrowers do not maintain Collateral at any client site or other location other than those listed on Schedule 3.8. Except as shown on Schedule 3.8, as of the date hereof, no Inventory is stored with a bailee, distributor, warehouseman or similar party, nor is any Inventory consigned to any Person.

3.9 Financial Statements. The Borrowers have delivered to the Purchaser, and attached as Schedule 3.9(a) are, true and complete copies of (a) the unaudited consolidated balance sheets of the Borrowers as of September 30, 2008, and the related statements of operations and cash flows for the fiscal years then ended, (b) the unaudited consolidated balance sheet of the Borrowers as of June 30, 2009, and the related statements of operations and cash flows for the five-month period then ended (collectively, the “Financial Statements”). The Financial Statements (i) present fully and fairly the financial position and results of operations of the respective Borrowers, as applicable, as of the dates of such statements and for the periods covered thereby and (ii) except as set forth on Schedule 3.9(b), were prepared in accordance with GAAP, applied on a consistent basis with past practice throughout the periods covered thereby. Except as set forth on Schedule 3.9, there is no Contingent Obligation or other liability material to any Borrower that is not reflected on the face of the balance sheets of the Borrowers referenced above, other than liabilities incurred in the ordinary course of business since that date consistent with past practice.

3.10 Absence of Certain Changes. Except as set forth on Schedule 3.10 or with respect to the transactions set forth in this Agreement, since September 30, 2008, through the date of this Agreement and, if later, the Closing, there has not been:

3.10.1 Any transaction involving any Borrower not in the ordinary course of business, including, without limitation, any sale of any assets or properties (other than the sale of inventory in the ordinary course of business);

3.10.2 Any declaration, setting aside or payment of any dividend or other distribution or payment (whether in cash, stock or property) with respect to the Securities of any Borrower, or any redemption, purchase or other acquisition of Securities of any Borrower, or (other than salary payments in the ordinary course of business) any payment to any stockholder of any Borrower not in his, her or its capacity as a stockholder;

3.10.3 Any damage, destruction or loss whether or not covered by insurance, to any material assets or properties of any Borrower;

3.10.4 Any Material Adverse Change with respect to any Borrower;

3.10.5 Any loan or advance made by any Borrower to any Person, except normal travel advances or other reasonable business expense advances made in the ordinary course of business to its own employees;

3.10.6 Any Indebtedness incurred by any Borrower or any commitment to incur Indebtedness entered into by any Borrower;

3.10.7 Any commitments to make Capital Expenditures by a Borrower with amounts to be paid post-Closing in excess of $10,000 individually or $50,000 in the aggregate;

3.10.8 Any indemnity or other claims made by any Borrower (or the resolution of any pending claims) with respect to or in connection with any acquisition or sale or other disposition, whether direct or indirect, of the Securities, business or assets of any other Person;

3.10.9 Any amendment or other modification to the Charter Document of any Borrower;

3.10.10 The formation or creation of any direct or indirect Subsidiary of any Borrower, or the disposition of the Securities or assets of any Borrower;

3.10.11 Any waiver by any Borrower of a valuable right or of Indebtedness owed to it;

3.10.12 Any payment, satisfaction, discharge or cancellation of any material debt or claim of any Borrower other than in the ordinary course of business consistent with past practices;

3.10.13 Any amendment, modification or termination of any Material Contract or any material agreement to which any Borrower is a party or by which any Borrower or any of their assets or properties may be bound or subject or of any employment or consulting agreement;

3.10.14 Any material change in the Contingent Obligations of any Borrower, by way of guaranty or otherwise;

3.10.15 Any mortgage, pledge or Lien encumbering any of the assets or properties of any Borrower, or any assumption of, or taking any assets or properties subject to, any liability, except for Permitted Liens;

3.10.16 Any resignation by, or termination of the employment of, any director or officer of any Borrower;

3.10.17 Any Investment by any Borrower in the Securities of any Person;

3.10.18 Any payment of management, consulting or similar fees by any Borrower to any of their respective Affiliates;

3.10.19 Any offer, issuance or sale of any Securities of any Borrower;

3.10.20 Any alteration or change in any Borrower’s credit guidelines and policies, charge-off policies or accounting methods, quality control procedures, hiring procedures, or policies or manner of preparing its financial statements or maintaining its books of account;

3.10.21 Any increase in, or commitment to increase, the salaries, wages, bonuses or other compensation or benefits (including commissions) payable or to become payable to any officer or non-officer other employee of any Borrower, other than increases in salaries and wages for employees in the ordinary course of business consistent with past practices;

3.10.22 Any adoption by any Borrower of any new Benefit Plan or amendment to any Benefit Plan to provide any new or additional plans, programs, contracts, benefits or arrangements involving direct or indirect compensation to any officer, director, employee, former employee, or their dependents or beneficiaries, of any Borrower;

3.10.23 Any settlement of any litigation, entry of a consent decree or entry of any judgment against any Borrower with an aggregate value of $50,000 or more;

3.10.24 Any revaluation by any Borrower of any of their respective assets, including without limitation, any write-offs, increases in any reserves except in the ordinary course of business consistent with past practice or any write-up or write-down of the value of, inventory, property, plant, equipment, or any other asset (including as a result of the impairment of goodwill);

3.10.25 Any proceeding or other steps for the dissolution, winding up, reorganization or bankruptcy by any Borrower;

3.10.26 Any revaluation or repricing of any Securities of any Borrower; or

3.10.27 Any agreement to do any of the foregoing.

3.11 Material Contracts.

3.11.1 Schedule 3.11 sets forth a true, correct and complete list, as of the date hereof, of all contracts, commitments, licenses, agreements, obligations or arrangements, whether oral or written, formal or informal, to which a Borrower is a party (or intends to become a party) or to which any of their respective assets or properties is bound:

(a) under which a Borrower leases personal property from or to third parties under Capital Leases or under operating leases which involve payments in excess of $25,000 per annum;

(b) for the purchase or sale of products or other personal property or for the furnishing or receipt of services (A) which calls for performance over a period of more than one (1) year, (B) which involves payments of more than $50,000 in the aggregate or (C) in which a Borrower has agreed to purchase a minimum quantity of goods or services or has agreed to purchase goods or services exclusively from any Person which involves payments in excess of $50,000, but excluding purchase orders or sales contracts which are revocable by the applicable Borrower;

(c) (A) granting representation, marketing or distribution rights or (B) relating to Intellectual Property (including, without limitation, license, franchise or similar agreements);

(d) establishing or maintaining any partnership, joint venture or strategic alliance or pursuant to which any Borrower has purchased the assets, business or Securities of any other Person during the last three (3) years;

(e) under which there is or may be imposed a security interest or other Lien on any of its assets, whether tangible or intangible (other than the security interests or Liens granted in favor of the Purchaser);

(f) concerning any non-competition or non-solicitation obligations entered into outside the ordinary course of business;

(g) under which a Borrower is or would be restricted from carrying on its Business or any part thereof, or from competing in any line of business or with any Person;

(h) with officers, directors, employees or consultants of any Borrower;

(i) resulting in or providing for the creation of any Lien (including any lease notifications) other than any Permitted Lien;

(j) involving any Affiliates of any Borrower;

(k) under which the consequences of a default or termination could reasonably be likely to have a Material Adverse Effect or result in an Event of Default; and

(l) not entered into in the ordinary course of business and not otherwise disclosed on Schedule 3.11 in response to any of the foregoing clauses.

All of the contracts, commitments, licenses, agreements, obligations or arrangements described in clauses (a) through (l) above, together with the real property leases, subleases, licenses and other interests described in Section 3.16, whether entered into prior to, on or after the Closing Date, are collectively referred to herein as the “Material Contracts.”

3.11.2 Each Material Contract existing as of the date hereof is a legal, valid and binding obligation of each applicable Borrower that is a party thereto, on the one hand, and to the Knowledge of the Borrowers, the other parties thereto, on the other hand, enforceable against each of them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or conveyance or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability and is in full force and effect. The parties to each Material Contract are in substantial compliance with the terms thereof, and no default or event of default by any Borrower or, to the Knowledge of the Borrowers, any other party thereto exists thereunder.

3.11.3 No Borrower is a party to any contract, commitment, license, agreement, obligation or arrangement that restricts it from carrying on its Business or any part thereof, or from competing in any line of business or with any other Person.

3.12 Existing Indebtedness; Existing Liens; Investments.

3.12.1 Schedule 3.12(a) sets forth a true, correct and complete list, and describes, as of the date or dates indicated therein, as applicable:

(a) all Indebtedness of the Borrowers showing, as to each Indebtedness, the payee thereof and the total amount outstanding (by principal, interest and other amounts, if applicable);

(b) all Liens (except Permitted Liens) in respect of any property or assets of the Borrowers showing, as to each Lien, the name of the grantor and secured party, the Indebtedness secured thereby, the name of the debtor (if different from the grantor) and the assets or other property covered by such Lien;

(d) all UCC financing statements naming any Borrower as a debtor, showing, as to each financing statement, the basis for the filing; and

(e) a trade payables aging schedule for the Borrowers as of August 31, 2009.

3.12.2 Except as set forth on Schedule 3.12(b), (i) no Borrower has on the date hereof any material Contingent Obligations, liabilities for Taxes, liabilities for product defects or under warranties, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments; (ii) no Borrower is obligated as surety or indemnitor under

any surety or similar bond or other contract issued or entered into to assure payment, performance or completion of performance of any undertaking or obligation of any Person; and (iii) no Borrower is a party or subject to any contract or agreement which restricts its right or ability to incur Indebtedness.

3.12.3 Immediately following the Closing, no Borrower will have any Indebtedness, whether accrued, absolute, contingent or otherwise, except as set forth on Schedule 3.12(c).

3.13 Litigation. Except as set forth on Schedule 3.13, there are no actions, suits, arbitration proceedings, investigations, inquiries or other proceedings, whether brought by or against any Borrower, whether governmental or non-governmental, before any Governmental Authority pending or, to the Knowledge of any Borrower, threatened against, relating to or affecting any Borrower, or any officer, director or employee thereof in his or her capacity as such, or any of its or their respective assets, properties or businesses or this Agreement, any Investment Document or the transactions contemplated thereby. There is not in effect any order, judgment, decree, injunction or ruling of any Governmental Authority against, relating to or affecting any Borrower or any officer, director or employee thereof in his or her capacity as such. None of the Borrowers is in default under any order, judgment, decree, injunction or ruling of any Governmental Authority, or subject to or a party to any order, judgment, decree or ruling arising out of any action, suit or proceeding under any Applicable Laws.

3.14 Transactions With Affiliates.

3.14.1 Except as set forth on Schedule 3.14(a) or as contemplated by this Agreement:

(a) no Borrower is indebted, directly or indirectly, to any of its own officers or directors, the officers or directors of its Affiliates, any Affiliate, or to any members of the Immediate Families of such officers or directors, except for, in the case of employees and officers, compensation payable in the ordinary course of business and reasonable expenses accrued in the ordinary course of business consistent with past practices;

(b) no Affiliate, employee, officer or director of any Borrower, and no member or members of their Immediate Families, is (A) indebted to a Borrower in any amount whatsoever or (B) has any direct or indirect ownership interests in any Person which competes, directly or indirectly, with a Borrower; and

3.14.2 Except for interests in employee benefit plans and as set forth on Schedule 3.14(b), no officer, director, employee or Affiliate of any Borrower, and no member of the Immediate Families of any of the foregoing, has any direct or indirect interest in any contract, commitment, license, agreement, obligation or arrangement to which any Borrower is a party or by which it or its assets are bound.

3.15 Compliance With Laws; Operating Licenses. Except as set forth on Schedule 3.15, each Borrower and its respective properties, operations and assets, is in material compliance with all Applicable Laws (including, without limitation, securities laws). There are no outstanding citations, notices or orders of noncompliance issued to any Borrower under any Applicable Law. Each of the Borrowers has established and maintains an adequate monitoring system to ensure that it remains in compliance in all material respects with all federal, state and local rules, laws and regulations applicable to it, including all laws and regulations relating to employment and employment discrimination. No Inventory has been produced in violation of the Fair Labor Standards Act (29 U.S.C. § 201, et. seq.), as amended. To the Knowledge of the Borrowers, no officer, agent, employee or other Person acting on behalf of any Borrower has, directly or indirectly, violated any Applicable Laws in so acting. None of the Borrowers is an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended. Each Borrower has all material Operating Licenses required under Applicable Laws to own its assets or conduct its businesses as now conducted and as proposed to be conducted. All such Operating Licenses of the Borrowers are validly issued and in full force and effect, and each Borrower has fulfilled and performed in all material respects its obligations with respect thereto and has full power and authority to operate thereunder.

3.16 Real Property.

3.16.1 The Borrowers do not own any Real Property.

3.16.2 Schedule 3.16 sets forth a complete and correct description of all leases, subleases or licenses of any real property to which any Borrower will be a party immediately after the Closing. The Borrowers have delivered to the Purchaser true, correct and complete copies of the leases listed on Schedule 3.16. No Borrower leases or otherwise holds or uses any other real property. With respect to each such lease:

(a) there are no disputes, oral agreements or forbearance programs in effect as to any such lease, sublease or license and, to the Knowledge of the Borrowers, neither the Borrower nor the landlord party to such lease, license or sublease is in material breach or default thereunder; and

(b) no Borrower has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the leases, subleases or licenses listed on Schedule 3.16.

3.16.3 No Consent of any party to such lease is required in connection with the consummation of the transactions contemplated by this Agreement, the Note or the other Investment Documents, including, without limitation, the issuance, sale, and delivery of the Note, and no such event shall be prohibited by, or shall constitute a default under, such lease.

3.17 Employee Benefit Plans; ERISA.

3.17.1 Schedule 3.17 sets forth a true, correct and complete list of all Benefit Plans of the Borrowers as of the date hereof;

3.17.2 The Borrowers are in compliance in all material respects with the requirements of ERISA and the regulations promulgated thereunder with respect to each Benefit Plan. No fact or situation that would reasonably be expected to result in a Material Adverse Change in the financial condition of any Borrower exists in connection with any Benefit Plan.

3.17.3 All costs of administering and contributions required to be made to each Benefit Plan under the terms of that Benefit Plan, ERISA, the Code, or any other Applicable Law have been timely made by the Borrowers and are fully deductible in the year for which they were paid. All other amounts that should be accrued to date as liabilities of the Borrowers under or with respect to each Benefit Plan (including administrative expenses and incurred but not reported claims) for the current plan year of each such plan have been recorded on the books of the Borrowers. There is and will be no material liability of any Borrower (i) with respect to any Benefit Plan that has previously been terminated by any Borrower or any predecessor Person under any Multiemployer Plan or (ii) under any insurance policy or similar arrangement procured in connection with any Benefit Plan in the nature of a retroactive rate adjustment, loss sharing arrangement, or other liability.

3.17.4 No circumstance exists and no event (including any action or any failure to take any action) has occurred with respect to any Benefit Plan currently or formerly maintained by the Borrowers, or any predecessor Persons, or to which the Borrowers or any predecessor Persons is or has been required to contribute, that could subject the Borrowers to any liability (including any penalty for failure to timely file any required report with any governmental agency) or Lien under ERISA or the Code which would reasonably be expected to have a Material Adverse Effect, nor will the transactions contemplated by this Agreement give rise to any such liability or Lien.

3.18 Taxes.

3.18.1 The Borrowers have each filed within the required time periods (after giving effect to any permitted extensions) all federal, state and other Tax returns required to have been filed by it or them, and have each paid all Taxes which were due and payable by it or them, other than Taxes that are being contested in good faith and for which reserves have been properly established. The federal tax identification number of each Borrower is set forth on Schedule 3.18(a). The provision for taxes on the books of each Borrower is adequate for all years not closed by applicable statutes, and for the current fiscal year.

3.18.2 Other than as set forth on Schedule 3.18(b), the Borrowers have withheld and paid all Taxes required to be withheld and paid by them in connection with amounts paid or owing to any employee, creditor, stockholder, or other third party.

3.18.3 (i) No Borrower has been advised that any Tax returns have been or are being audited by any Governmental Authority, (ii) there are no agreements, waivers or other arrangements providing for an extension of time with respect to the assessment of any Taxes or deficiency against the Borrowers, (iii) there are no actions, suits, proceedings or claims now pending by or against any Borrower in respect of any Taxes or assessments, and (iv) there is no pending or, to the Knowledge of any Borrower, threatened audit or investigation of any Borrower by any Governmental Authority relating to any Taxes or assessments, or any claims for additional Taxes or assessments asserted by any Governmental Authority.

3.18.4 No Borrower is a party to or bound by any tax sharing, tax indemnity or tax allocation agreement or other similar arrangement.

3.18.5 No Borrower has ever been taxed as an “S” Corporation.

3.19 Title to Property; Liens. Except as set forth on Schedule 3.19, each of the Borrowers has valid and subsisting leasehold interests in all of their respective Real Property, and has good title to or right to use all of the Collateral and all of their respective other Property, tangible and intangible, in each case, free and clear of all Liens except Permitted Liens. Each Borrower has paid or discharged all lawful claims (other than those being contested in good faith by appropriate proceedings) which, if unpaid, might become a Lien against any of their respective Properties that is not a Permitted Lien. The Liens granted to the Purchaser under the Collateral Documents are first priority Liens, subject only to Permitted Liens. Each Borrower enjoys quiet possession under all leases to which it is a party as lessee, and all of such leases are valid, subsisting and in full force and effect. None of such leases contain any provision restricting the incurrence of indebtedness by the lessee or any unusual or burdensome provision adversely affecting the current and proposed operations of any Borrower. Each Borrower owns or has a valid right to use all assets, properties, rights and Operating Licenses necessary to conduct the Business that is being conducted and as proposed to be conducted by the Borrowers.

3.20 Environmental Matters.

3.20.1 Except as set forth in Schedule 3.20:

(a) Each Environmental Person and each Site is in compliance with all, and no Environmental Person has any liability under, any Environmental Laws, and no Hazardous Materials are being used by any Borrower on any Real Property in violation of any Environmental Law;

(b) No Release has occurred at any Site, and there are no present or past Environmental Conditions in any way relating to any Environmental Person, any Site or the business or operations of any Environmental Person;

(c) No Environmental Person is a “potentially responsible party” within the meaning of CERCLA with respect to any federal, state, local or foreign environmental clean-up site or with respect to investigations or corrective actions under any Environmental Laws for such a clean-up site;

(d) No Environmental Person has received notice of any alleged, actual or potential responsibility, inquiry, investigation or administrative or judicial proceeding regarding (A) any Release by any Environmental Person at any Site or other location or (B) any violation of or non-compliance by any Environmental Person with the conditions of any license or permit required under any Environmental Laws or the provisions of any Environmental Laws. No Environmental Person has received notice of any other claim, demand or action by any Person alleging any actual or threatened injury or damage to any Person, property, natural resources or the environment arising from or relating to any Release, transportation or disposal of any Hazardous Materials; and

(e) Each Environmental Person has furnished all notices and warnings, made all reports and has kept and maintained all records required by, and in material compliance with, all Environmental Laws, including, without limitation, any notices and Consents required under any Environmental Laws in connection with the consummation of the transactions contemplated by the Investment Documents.

3.20.2 Schedule 3.20 sets forth a true, correct and complete list of all environmental site assessments, audits, studies or reports available to the Borrowers relating to any Environmental Condition or relating to the business, condition or operations of all Environmental Persons. The Borrowers have delivered to the Purchaser true, correct and complete copies of all such environmental site assessments, audits, studies or reports.

3.20.3 None of the items set forth on Schedule 3.20 could reasonably be expected to, individually or in the aggregate have a Material Adverse Effect on any Borrower to which such item relates.

3.21 Intellectual Property.

3.21.1 The Borrowers own, license or otherwise possess legally enforceable rights to use all Intellectual Property currently used in the Business or as the Business is proposed to be conducted. Schedule 3.21 contains a true, correct and complete list of (i) all patents, trademarks, trade names, service marks, copyrights and licenses that are owned, used or licensed by the Borrowers, (ii) the registration number, date of registration and jurisdiction of registration thereof, (iii) the name of the registered owner and, if different, the user or users thereof and (iv) any applications for any of the foregoing.

3.21.2 The Borrowers have provided to the Purchaser (i) all material documents, if any, relative to patents and patent applications and all registered and unregistered trademarks, trade names and service marks, registered and unregistered copyrights, and maskworks owned by the Borrowers and included in the Intellectual Property, including the jurisdictions in which each such Intellectual Property right has been issued or registered or in which any application for such issuance and registration has been filed, (ii) all licenses, sublicenses and other agreements as to which any Borrower is a party and pursuant to which any person is authorized to use any Intellectual Property, and (iii) all licenses, sublicenses and other agreements as to which any Borrower is a party and pursuant to which any of the Borrowers is authorized to use any third party patents, trademarks or copyrights, including software, or any other third party Intellectual Property (“Third Party Intellectual Property Rights”) which are or are presently expected to be incorporated in, or are or expected to form a part of any existing or proposed product of any Borrower, or which are or are presently expected to be utilized in the development, modification or support of any existing or proposed product of the Borrower.

3.21.3 To the Knowledge of the Borrowers, there is no unauthorized use, disclosure, infringement or misappropriation of any Intellectual Property, any trade secret material to any Borrower or any Third Party Intellectual Property Right to the extent licensed by

or through any Borrower, by any third party. None of the Borrowers or, to the Knowledge of the Borrowers, any of their respective employees has entered into any agreement to indemnify any other person against any charge of infringement of any Intellectual Property, other than indemnification provisions arising in the ordinary course of business, such as those in purchase orders, invoices or similar sales-related documents.

3.21.4 No Borrower is, or will be as a result of the execution and delivery of this Agreement or the performance of its obligations under this Agreement, in material breach of any license, sublicense or other agreement currently used in, or material to, the Intellectual Property or Third Party Intellectual Property Rights.

3.21.5 All patents, registered trademarks, service marks and copyrights held by the Borrowers are validly issued and presently subsisting. Since June 1, 2004, no Borrower (i) has been subjected to any suit, action or proceeding which involves a claim of infringement of any patents, trademarks, service marks, copyrights or violation of any trade secret or other proprietary or Intellectual Property right of any third party and (ii) has brought any action, suit or proceeding for infringement of Intellectual Property or breach of any license or agreement involving Intellectual Property against any third party. The manufacture, marketing, licensing or sale of the products and services of the Borrowers as currently conducted and proposed to be conducted does not, to the Knowledge of the Borrowers, infringe any patent, trademark, service mark, copyright, trade secret or other proprietary right of any third party.

3.21.6 The Borrowers have taken steps which they believe to be sufficient to protect and preserve the confidentiality of all material Intellectual Property not otherwise protected by patents, or patent applications or copyright. All use, disclosure or appropriation by any Borrower of such Intellectual Property owned by any Borrower by or to a third party has been pursuant to written agreements between the Borrowers, respectively, and such third party except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect. All use, disclosure or appropriation of such Intellectual Property not owned by the Borrowers has been pursuant to binding agreements between the Borrowers, respectively, and the owner of such Intellectual Property, or is otherwise lawful.

3.21.7 Except as set forth on Schedule 3.21, each Borrower’s (i) patents, trademarks and service marks are registered with the U.S. Patent and Trademark Office and (ii) license agreements and similar arrangements relating to its Inventory (A) permit, and do not restrict, the assignment by that Borrower to the Purchaser, or any other Person designated by the Purchaser, of all of that Borrower’s rights, title and interest pertaining to such license agreement or such similar arrangement and (B) would permit the continued use by that Borrower, or the Purchaser or any assignee thereof, of such license agreement or such similar arrangement and the right to sell Inventory subject to such license agreement for a period of no less than twelve (12) months after a default or breach of such agreement or arrangement. The consummation and performance of the transactions and actions contemplated by this Agreement and the other Investment Documents, including without limitation, the exercise by the Purchaser of any of their rights or remedies under Section 11, will not result in the termination or impairment of any Borrower’s ownership or rights relating to its Intellectual Property, except for such Intellectual Property rights the loss or impairment of which would not reasonably be expected to have a Material Adverse Effect. Except as would not reasonably be expected to have a Material

Adverse Effect, (a) no Borrower is in breach of, or default under, any term of any license or sublicense with respect to any of its Intellectual Property and (b) to the Knowledge of each Borrower, no other party to such license or sublicense is in breach thereof or default thereunder, and such license is valid and enforceable.

3.21.8 All Intellectual Property is currently in compliance with all applicable legal requirements and no Intellectual Property has been or is now involved in any interference, reissue, reexamination or opposing proceeding in the U.S. Patent and Trademark Office or in the U.S. Copyright Office, as applicable.

3.21.9 None of Beni Mosenson (a/k/a Benjamin Mosenson and Benjamin Mesenson), Yuri Litinsky, Ilan Mark or Moledet, Kfar Bnei Brith, Moshav Shitufi Paklai Ltd. has transferred any of his or its respective rights in and to the ‘654 Patent to any other Person, and no other Person is entitled to claim any right in and to the ‘654 Patent.

3.22 Labor Relations.

3.22.1 Except as would not reasonably be expected to have a Material Adverse Effect or as set forth on Schedule 3.22, each of the Borrowers is in full compliance with the Fair Labor Standards Act (29 U.S.C. § 201, et seq.), all state wage and hour laws and all workers’ compensation laws and other Applicable Laws relating to employment and is not engaged in any unfair labor practice.

3.22.2 There are no labor strikes, lockouts, slowdowns, work stoppage or charges of unfair labor practices, and there are no material labor disputes, grievances, complaints or arbitration proceedings, pending or materially affecting any Borrower nor, to the Knowledge of any Borrower, is there any basis therefor or threat thereof.

3.22.3 Except as set forth in Schedule 3.22, none of the Borrowers is bound by or subject to any written or oral, express or implied, contract, commitment or arrangement with any labor union or other employee organization, and no labor union or other employee organization has requested or sought to represent any of the employees, representatives or agents of any Borrower.

3.22.4 No Borrower is aware of any labor union or other employee organization activity involving employees of any Borrower.

3.22.5 There are no petitions pending before the National Labor Relations Board in connection with any pending claim for union representation.

3.22.6 There is no fact or circumstance which could, with the passage of time or otherwise, cause this representation and warranty to be no longer true and correct.

3.23 Employment Agreements. Schedule 3.23 sets forth a true, correct and complete list of all employment contracts or agreements, agency, independent contractor and sales representative agreements, golden parachute agreements, change of control agreements and employee-related non-competition and non-solicitation agreements, in each case to which any Borrower is a party. Each Borrower has previously delivered to the Purchaser true, correct and

complete copies of all such agreements, including all amendments thereto. Each such agreement is in writing, is a valid and binding agreement enforceable against the respective parties thereto in accordance with its terms, and no Borrower nor any other Person that is a party to any such agreement is in breach of, or in default with respect to, any of its obligations thereunder, nor is any Borrower aware of any facts or circumstances which might give rise to any breach or default thereunder which could reasonably be expected to have a Material Adverse Effect.

3.24 Employees and Contractors. Attached hereto as Schedule 3.24 is a list of the names, current annual rates of salary, accrued vacation times, date of hire and location of all the present employees and contractors of each Borrower who provide services in connection with Business of the Borrowers. Except as set forth on Schedule 3.24, none of such persons has received an increase in salary or other compensation from any Borrower since September 30, 2008, other than a standard annual increase consistent with past practice. Except as set forth on Schedule 3.24, there are no employment or consulting contracts or arrangements, including pensions, bonus or profit sharing plans, or other severance or termination contracts or arrangements which constitute contractual obligations of any Borrower not terminable on thirty (30) days’ notice. To the Knowledge of the Borrowers, no employee or contractor is in violation of any of its obligations to, or any employment agreement with, a prior employer. No key employee or contractor of any Borrower has left such Borrower since September 30, 2008, and no current key employee or contractor has notified any Borrower of any present or future intention to terminate his or her employment with such Borrower. The Borrowers have made available to the Purchaser true and correct copies of all performance reviews conducted of its executive officers.

3.25 Employment Matters. The Borrowers are in compliance in all material respects with all provisions of Applicable Laws pertaining to the employment and termination of employees, the hiring and termination of contractors, and the immigration of foreign nationals, and no Borrower is a party to any action, lawsuit, complaint or proceeding involving a violation or alleged violation of any Applicable Laws. Except as set forth on Schedule 3.25 hereto, no employee, contractor or Governmental Authority has brought or threatened an action, claim, lawsuit or proceeding against any Borrower with respect to any matter arising out of, relating to or in connection with such employee’s or contractor’s employment by any Borrower.

3.26 Insurance. Schedule 3.26 sets forth a true and complete list of all liability and other insurance coverage (including, without limitation, product liability and product recall insurance) insuring each Borrower against losses arising out of or related to their respective businesses, which list accurately describes the coverage carried and the expiration dates of such policies. Each Borrower is covered by insurance in scope and amount customary and reasonable for the business in which they are engaged and will be so covered after consummation of the transactions contemplated hereby and under the Agreement. The insurance policies listed on Schedule 3.26 constitute insurance protection against liability, claims and risks occurring in the ordinary course of business customarily included within comprehensive liability coverage and at amounts and levels customarily maintained for a business of this type. All such policies are in full force and effect.

3.27 Business Relationships.

3.27.1 Except as set forth on Schedule 3.27, after giving effect to the consummation of the transactions contemplated hereby, there exists no actual or, to the Knowledge of any Borrower, threatened termination, cancellation or limitation of, or any adverse modification or change in, the business relationship proposed to be conducted by any Borrower with any material customers of any Borrower, and to the Knowledge of the Borrowers there exists no present condition or state of facts or circumstances which could materially and adversely affect the Borrowers or prevent the Borrowers from conducting business with their respective material suppliers and customers after the consummation of the transactions contemplated by this Agreement in substantially the same manner in which it has been heretofore conducted.

3.27.2 To the Knowledge of the Borrowers, no Borrower and no officer, agent, employee or other Person acting on behalf of any Borrower has, directly or indirectly, (i) used any corporate fund for unlawful contributions, unlawful gifts or other unlawful expenses relating to political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds, (iii) established or maintained any unlawful or unrecorded records, or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment, or other payment of a similar or comparable nature, to any Person, public or private, regardless of form, whether in money, property or services, to obtain favorable treatment in securing business or to obtain special concessions, or to pay for favorable treatment for business secured or for special concessions already obtained. No Borrower has participated in any illegal boycott or other similar illegal practices affecting any of its actual or potential clients or customers.

3.28 Solvency. After giving effect to the consummation of the transactions contemplated hereby, the Borrowers will be Solvent on a consolidated basis. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated by this Agreement and the other Investment Documents with the intent to hinder, delay or defraud either present or future creditors of each Borrower.

3.29 Depository and Other Accounts. Schedule 3.29 sets forth a true and complete list of all banks and other financial institutions and depositories at which the Borrowers maintain, or will maintain, deposit accounts, spread accounts, yield supplement reserve accounts, operating accounts, trust accounts, trust receivable accounts or other accounts of any kind or nature into which funds of the Borrowers are deposited from time to time. Schedule 3.29 correctly identifies the name and address of each such bank, financial institution and depository, the name in which each account is held, and the account number for each such account. The Borrowers will notify the Purchaser and supplement Schedule 3.29 as new accounts are established within five (5) Business Days thereof.

3.30 Brokers; Certain Expenses. Except as set forth in Schedule 3.30 or with respect to the Purchaser, no Borrower nor any Affiliate of any Borrower has paid or is obligated to pay any fee or commission to any broker, finder, investment banker or other intermediary, in connection with this Agreement, any other Investment Document or any of the transactions contemplated hereby or thereby. Immediately upon the Closing of the transactions contemplated hereby, no

Borrower nor any Affiliate of any Borrower is bound by any agreement or commitment for the provision of commercial or investment banking or financial advisory services with respect to any mergers, acquisitions, advisory service, recapitalization, issuance of debt or equity securities or other capital or financing transactions involving any Borrower.

3.31 No Event of Default. No event has occurred and no condition exists that would upon or after execution of this Agreement and the other Investment Documents constitute a “Default” or an “Event of Default” under this Agreement, the Note, the Warrant, the other Investment Documents or any Other Debt Document. Except as set forth on Schedule 3.31, after giving effect to the transactions contemplated by this Agreement, no Borrower is in default in (and no event has occurred and no condition exists which constitutes, or which with the passage of time or the giving of notice or both would constitute, a default in) the payment of any Indebtedness to any Person.

3.32 Financial Sophistication. Each of the Borrowers, by reason of its own business and financial experience or that of its professional advisors, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of issuing the Note, as applicable, and has the capacity to protect its own interests in connection with the transactions contemplated by this Agreement.

3.33 Equipment and Other Personal Property. The Equipment and other personal property of the Borrowers is in good operating condition and repair, and all necessary replacements of and repairs thereto shall be made so that the operating efficiency thereof shall be maintained and preserved, reasonable wear and tear excepted, except where the failure to so maintain the same could not reasonably be expected to have a Material Adverse Effect. No Borrower will permit any Equipment or other personal property to become affixed to any Real Property leased to any Borrower so that an interest arises therein under the real estate laws of the applicable jurisdiction unless the landlord of such Real Property has executed a landlord waiver or leasehold mortgage in favor of and in form reasonably acceptable to the Purchaser, and no Borrower will permit any of the Equipment or other personal property to become an accession to any personal Property other than Equipment or other personal property that is subject to first priority Liens (except for Permitted Liens) in favor of the Purchaser.

3.34 Inventory. After considering reserves, all inventories of raw material, purchased parts materials, work in process, finished products, goods, spare parts, replacement and component parts, and office and other supplies used or to be distributed, licensed or sold in connection with the business of the Borrowers consistent with past practice (“Inventory”) (a) was acquired in the ordinary course of business, (b) is of good and merchantable quality, and (c) consists substantially of a quality, quantity and condition useable, leasable or saleable in the ordinary course of business. No Borrower is under any liability or obligation with respect to the return of inventory in the possession of distributors, wholesalers, retailers or other customers in excess of established reserves. Except as set forth on Schedule 3.34, no Borrower holds any Inventory on consignment, or holds title to or ownership of any Inventory in the possession of others.

3.35 Accounts. All Accounts of the Borrowers represent amounts due for services performed or sales actually made in the ordinary course of business and properly reflect the amounts due. No counterclaims or offsetting claims with respect to presently outstanding Accounts are pending or threatened and such Accounts are fully collectible in their stated amount, net of applicable reserves for bad debt. No part of the Accounts is contingent upon performance by the Borrowers or any other party of any obligation, and no agreements for deductions or discounts have been made with respect to any part of the Accounts. No portion of the Accounts represents amounts due for goods consigned by any Borrower and no agreements have been made allowing for the return of goods represented by the Accounts, or any portion thereof.

3.36 Disclosure.

3.36.1 No representation, warranty or other statement of any Borrower contained in this Agreement and the Disclosure Schedules, taken as a whole, is, or will be, untrue with respect to any material fact or omits, or will omit, to state a material fact necessary in order to make the statement made herein or therein, in light of the circumstances in which such statement was made, not misleading.

3.36.2 There are no facts or circumstances existing which could reasonably be expected to have a Material Adverse Effect, either individually or in the aggregate.

3.37 Projections. The latest assumptions underlying all Projections, furnished by or on behalf of any Borrower, to the Purchaser prior to the date hereof (i) were made in good faith and (ii) are reasonable under the circumstances. No Borrower is aware of any facts or information that would lead it to believe that such projections are materially incorrect or misleading (affirmatively or by omission) in any respect.

All representations and warranties of the Borrowers contained in this Agreement or any of the other Investment Documents (other than Section 3.37) shall survive the execution, delivery and acceptance thereof by the Purchaser and the Closing through the indefeasible payment in full of the Note and the PIK Notes. The representation and warranty set forth in Section 3.37 shall expire and be of no further force and effect at Closing. The Borrowers’ representations and warranties herein (including as made or qualified in the Schedules hereto) are made by the respective Borrowers in a corporate capacity, without personal liability to the Borrowers’ directors or officers, or the Borrowers’ signatories, other than with respect to fraudulent or criminal activity with respect to the transactions contemplated hereby.

4.	REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser hereby represents and warrants to the Borrowers as follows:

4.1 Organization and Qualification. The Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.

4.2 Corporate or Other Power. The Purchaser has the requisite power and authority to execute, deliver and perform its obligations under this Agreement and each other Investment Documents to which it is a party.

4.3 Authorization; Binding Obligations. The execution, delivery and performance of this Agreement and each of the other Investment Documents to which the Purchaser is a party, and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and, at the Closing, each of the other Investment Documents will be duly executed and delivered by the Purchaser to the extent that it is a party thereto. This Agreement is, and each other Investment Document will at the Closing be, a legal, valid and binding obligation of the Purchaser to the extent that it is a party thereto, enforceable against the Purchaser in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.

4.4 Financial Sophistication. The Purchaser, by reason of its own business and financial experience or that of its professional advisors, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of investing in the Note and has the capacity to protect its own interests in connection with the transactions contemplated by this Agreement.

5.	CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER

The obligations of the Purchaser to consummate the transactions contemplated hereby, including, without limitation, to purchase the Note as provided herein, are subject to the satisfaction, prior to or at the Closing, of the conditions set forth in this Section 5; provided, however, that any or all of such conditions may be waived, in whole or in part, by the Purchaser in its sole and absolute discretion:

5.1 Representations and Warranties; No Default. Each representation and warranty made by the Borrowers in this Agreement shall be true and correct in all material respects (without giving effect to any materiality qualifiers) as of the date made and as of the Closing Date, with the same effect as if made on and as of the Closing Date. Each of the covenants, agreements and obligations of the Borrowers under this Agreement to be performed or satisfied by it or them on or prior to the Closing Date shall have been performed or satisfied by it or them on or before the date hereof. No Default or Event of Default shall exist as of the Closing or result from the execution and delivery of this Agreement or any other Investment Document or the issuance, sale, and delivery of the Note or the consummation of the other transactions contemplated by this Agreement. The Borrowers shall each have delivered to the Purchaser an officers’ certificate, signed by the Chief Executive Officer or the Chief Financial Officer of each Borrower, respectively, dated as of the Closing Date, on behalf of each Borrower, to such effect and to the effect that each of the conditions set forth in this Section 5 have been satisfied and fulfilled.

5.2 Purchase Permitted By Applicable Laws; No Conflicts. The consummation of the transactions contemplated by this Agreement or the other Investment Documents shall not be prohibited by or violate, result in a breach, default or adverse change of the rights of the parties under any Applicable Laws or Material Contract and shall not subject any party to any Tax, penalty or liability, under or pursuant to any Applicable Laws, and shall not be enjoined (temporarily or permanently) under, or prohibited by or contrary to, any injunction, order, decree

or ruling. Without limiting the generality of the foregoing, the consummation of the transactions contemplated hereby shall otherwise comply with all applicable requirements of federal securities and state securities or “blue sky” laws.

5.3 No Injunction, Order or Suit. There shall not have been issued any injunction, order, decree or ruling that prohibits or limits any of the transactions contemplated by this Agreement or the other Investment Documents, and there shall not be any action, suit, proceeding or investigation pending or, to the Knowledge of the Borrowers, threatened that (a) draws into question the validity, legality or enforceability of this Agreement or the other Investment Documents or the consummation of the transactions contemplated hereby or thereby or (b) might result, in the judgment of the Purchaser, (i) in the imposition of a penalty if any Investment Document was delivered as contemplated hereunder or (ii) in any Material Adverse Change.

5.4 Delivery of Certain Closing Documents. The Borrowers shall have delivered to the Purchaser the following closing documents, each dated as of the Closing Date and in form and substance satisfactory to the Purchaser in its sole and absolute discretion:

5.4.1 This Agreement, duly executed by the Borrowers together with the exhibits and Disclosure Schedules;

5.4.2 The Note duly executed by the Borrowers;

5.4.3 The Collateral Documents described in Section 7, duly executed by the Borrowers;

5.4.4 The Investment Monitoring Agreement, duly executed by the Borrowers;

5.4.5 A compliance certificate signed by the Chief Executive Officer or the Chief Financial Officer of the Borrowers, certifying on behalf of the Borrowers that he or she has reviewed this Agreement and the other Investment Documents and that, since September 30, 2008 or as set forth on the Schedules to this Agreement (i) no event or condition has occurred or is existing that could have a Material Adverse Effect on the Borrowers or any of its Subsidiaries, (ii) to the best of such officer’s Knowledge, there has been no material adverse change in the industry in which Borrowers or any of its Subsidiaries operates, (iii) no litigation or other action before any Governmental Authority has been commenced that, if successful, reasonably could have a Material Adverse Effect on Borrowers or any of its Subsidiaries, as the case may be, or reasonably could challenge or materially delay the consummation of any of the transactions contemplated by this Agreement or any other Investment Document, and (iv) there has been no material increase in liabilities, liquidated or contingent, and no material decrease in the assets of Borrowers or any of its Subsidiaries that is not set forth or fairly disclosed in the Financial Statements;

5.4.6 A Stockholder Consent duly executed by the holders of at least sixty-six percent (66%) of each class of preferred stock of Caprius outstanding immediately prior to the Closing;

5.4.7 A payoff letter duly executed by Special Situations Private Equity Fund, L.P.;

5.4.8 Evidence, in form and substance satisfactory to the Purchaser, that the Liens described on Schedule 5.4(h) have been released and terminated as of record;

5.4.9 Evidence, satisfactory to the Purchaser in its sole and absolute discretion, that all right, title and interest in and to the ‘391 Patent shall have been transferred and assigned to M.C.M.;

5.4.10 An opinion of counsel to the Borrowers, in form and substance satisfactory to the Purchaser in its sole and absolute discretion, which shall include, without limitation, an opinion that the Borrower has a first priority perfected security interest in the Collateral;

5.4.11 Releases of the security agreements currently of record at the United States Patent and Trademark Office (other than any such documents in favor of the Purchaser);

5.4.12 Evidence, in form and substance satisfactory to the Purchaser, that the assignments of the ‘654 Patent by each of Beni Mosenson (a/k/a Benjamin Mosenson and Benjamin Mesenson) and Moledet, Kfar Bnei Brith, Moshav Shitufi Paklai Ltd. to M.C.M. Israel have been duly recorded in the United States Patent and Trademark Office;

5.4.13 Documents, satisfactory to the Purchaser in its sole and absolute discretion, whereby each of Yuri Litinsky and Ilan Mark (a) disclaim any inventorship in any invention described or claimed in the ‘654 Patent and (b) disclaim any ownership interest in or to the ‘654 Patent; and

5.4.14 Such other documents as the Purchaser may reasonably request.

5.5 Delivery of Corporate Documents. The Borrowers shall have delivered to the Purchaser the following for each Borrower:

5.5.1 Copies of its Charter Documents as amended through the Closing Date, certified by its Secretary as being in full force and effect as of the Closing Date;

5.5.2 A good standing certificate (or foreign qualification certificate), issued by the jurisdiction of its incorporation or organization, dated as of the most recent practicable date prior to the Closing Date;

5.5.3 Good standing certificates (or foreign qualification certificates) from each jurisdiction in which it is required to be qualified to transact business as a foreign corporation or other entity, in each case dated as of the most recent practicable date prior to the Closing Date;

5.5.4 Resolutions or consents of (i) its Board of Directors, (ii) the holders of more than 66% of the outstanding shares of each series of preferred stock of Caprius, and (iii) the stockholder of M.C.M. Israel, and copies of any actions taken by written consent by any such board of directors or stockholders without a meeting), approving and authorizing the execution, delivery and performance of this Agreement and the other Investment Documents to which it is a

party, and, to the extent applicable, approving and authorizing the issuance, sale, and delivery of the Note, certified by its Secretary as being in full force and effect as of the Closing Date;

5.5.5 Incumbency certificates of its officers who are authorized to execute, deliver and perform this Agreement, the other Investment Documents and any other agreements, instruments, certificate or other documents required to be executed by it in connection herewith; and

5.5.6 Such other documents as the Purchaser may reasonably request.

5.6 Insurance. The Borrowers shall have delivered to the Purchaser certificates of liability insurance, including coverage for property damage and general liability, with respect to the insurance policies maintained by the Borrowers as of the Closing Date, together with additional insured and loss payee endorsements in favor of the Purchaser on behalf of the Purchaser, all in form and substance satisfactory to the Purchaser in its sole and absolute discretion.

5.7 Third-Party Consents. The Borrowers shall have obtained any Consents required to be obtained from all Governmental Authorities and other Persons in connection with the transactions contemplated by this Agreement (including, without limitation, the Consents listed on Schedule 3.6), and the Purchaser shall have approved the terms and conditions thereof, and all applicable waiting periods shall have expired.

5.8 Financial Statements. The Purchaser shall have received and been satisfied with its review of the Financial Statements.

5.9 Due Diligence; Environmental Investigations. The Purchaser shall have completed its due diligence investigation of the Borrowers and their Affiliates to the sole satisfaction of the Purchaser.

5.10 No Material Adverse Change. No Material Adverse Change that, taken as a whole, calls into question either the Projections provided to the Purchaser or the long-term prospects of the Borrowers shall have occurred in the sole judgment of the Purchaser since September 30, 2008.

5.11 No Change in the Markets. No change or disruption in the financial and capital markets that could affect the purchase of the Note shall have occurred.

5.12 Disclosure. The Purchaser shall not have become aware of any facts or circumstances which are materially and adversely inconsistent with any projections, information or matters disclosed to the Purchaser in connection with the purchase of the Note.

5.13 Proceedings Satisfactory. All proceedings taken prior to or at the Closing in connection with the issuance, sale, and delivery of the Note and the consummation of the other transactions contemplated hereby, and all papers and other documents relating thereto, shall be in form and substance reasonably satisfactory to the Purchaser and its counsel, and the Purchaser shall have received copies of such documents and papers, all in form and substance reasonably satisfactory to the Purchaser and its counsel, all such documents, where appropriate, to be

counterpart originals and/or certified by proper authorities, corporate officials and other Persons. Without limiting the generality of the foregoing, the Borrowers shall have made such arrangements as may be requested by the Purchaser to ensure that Advances are applied only in the manner set forth in the Initial Approved Budget or the Subsequent Approved Budget, as applicable.

6.	POST-CLOSING OBLIGATIONS OF THE BORROWERS

6.1 Patents.

6.1.1 So long as the right to obtain patent protection has not been lost as of thirty (30) days after the Closing Date, the Borrowers shall timely prepare and file applications for patents on three improvements on the M.C.M. technology identified as (i) e-Link, (ii) active recipe management, and, (iii) mobile medical waste treatment system for use at sea. For the purposes hereof the term “timely” means prior to the one (1) year anniversary of the first sale, offer for sale or public use of each of the three improvements, respectively.

6.1.2 Within forty-five (45) days after the Closing Date, the Borrowers shall deliver to the Purchaser:

(a) Upon the fulfillment of the obligation set forth in Section 6.6, an executed assignment of all right, title and interest in and to the ‘654 Patent owned by M.C.M Israel to M.C.M. in substantially the form attached hereto as Exhibit B; and

(b) An executed Patent Security Agreement covering the ‘654 Patent.

6.2 Other Collateral Documents. The Borrowers shall cooperate with the Purchaser to promptly execute and deliver such other Collateral Documents and documents relating to the Collateral (including deposit account control agreements, Intellectual Property security agreements and landlord waivers) as the Purchaser may request in form and substance acceptable to the Purchaser in its sole and absolute discretion.

6.3 Warrant. Within ninety (90) days after the Closing Date, Caprius shall (a) issue to the Purchaser a warrant (the “Warrant”) to purchase 40% of the outstanding capital stock of Caprius on a Fully Diluted Basis and (b) amend Caprius’ Charter Documents to provide sufficient authorized but unissued shares of Common Stock to be reserved for issuance upon the exercise of the Warrant, such Common Stock to be registered under the Securities Act promptly, but in no event later than two hundred ten (210) days after the Warrant is issued. Caprius shall take all such actions as are necessary or requested by the Purchaser in connection with the foregoing, all in form and substance satisfactory to the Purchaser in its sole and absolute discretion, including executing and delivering, and causing the stockholders of Caprius to execute and deliver, a registration rights agreement and an investor rights agreement in form and substance satisfactory to the Purchaser in its sole and absolute discretion.

6.4 Sassoon Settlement Amount.

6.4.1 On or prior to the payment date set forth therein, but in no event later than October 23, 2009, the Borrowers shall pay the Sassoon Settlement Amount pursuant to the terms of the amended Sassoon Settlement Agreement.

6.4.2 Immediately upon payment of the Sassoon Settlement Amount pursuant to the terms of the Sassoon Settlement Agreement, the Borrowers shall cause all shares of common stock of any of the Borrowers or M.C.M. UK in the possession of the Sassoon Parties or any of their respective agents (as defined, and as further described, in the Sassoon Settlement Agreement), and all ownership and other interests therein, to be transferred and assigned to the Borrowers.

6.5 Payroll Taxes. Within three (3) Business Days after the Closing Date, the Borrowers shall pay all taxes set forth on Schedule 3.18(b) to its payroll agent.

6.6 Consent of the Office of the Chief Scientist. Within forty-five (45) days after the Closing Date, the Borrowers shall have delivered to the Purchaser the Consent of the Office of the Chief Scientist.

6.7 Morgan Employment Agreement. Within thirty (30) days after the Closing Date, the Borrowers shall have delivered to the Purchaser an Employment Agreement, duly executed by Caprius and Dwight Morgan.

6.8 A.G.M. Tefen Liens. Within forty-five (45) days after the Closing Date, the Borrowers shall have caused the Liens of A.G.M. Tefen Ltd. against M.C.M. Israel to have been released and terminated as of record.

6.9 Deposit Account Control Agreements. Within forty-five (45) days after the Closing Date, the Borrowers shall have delivered to the Purchaser deposit account control agreements, in form and substance satisfactory to the Purchaser in its sole and absolute discretion, with respect to the deposit accounts listed on Schedule 3.29 duly executed by the Borrowers and the applicable depositary bank(s).

7.	ACTIONS AND DOCUMENTS RELATING TO THE COLLATERAL

On or prior to the Closing Date, the Purchaser shall have received the following in form and substance reasonably satisfactory to them:

7.1.1 The Security Agreement and the Pledge Agreement, each duly executed by the Borrowers, together with the exhibits and schedules thereto;

7.1.2 A Patent Security Agreement, duly executed by M.C.M., covering the ‘391 Patent;

7.1.3 UCC-1 Financing Statements or any amendments thereof, naming the Borrowers as debtors, duly authorized by the Borrowers, as requested by the Purchaser;

7.1.4 Evidence that all filings, registrations and recordings have been made in the appropriate governmental offices, and all other action has been taken, which shall be necessary to create, in favor of the Purchaser, a perfected first priority Lien on the Collateral (subject only to Permitted Liens), and filing of completed UCC financing statements, in each case, in the appropriate governmental offices;

7.1.5 Evidence that no Liens on the Collateral exist other than the Permitted Liens and the Liens created by the execution of the Investment Documents, such evidence including, without limitation, the results of searches conducted in the UCC filing records in each of the governmental offices in which UCC financing statements have been, or shall be, filed;

7.1.6 Evidence reasonably satisfactory to the Purchaser that each of the conditions precedent in the Collateral Documents shall have been satisfied.

8.	INDEMNIFICATION; FEES AND EXPENSES

8.1 Transfer Taxes. The Borrowers shall pay all present or future stamp, documentary, excise, property, transfer and other similar Taxes (together in each case with interest and penalties, if any) payable or determined to be payable in connection with the execution and delivery of this Agreement, any payment made hereunder, or the issuance, sale, and delivery of the Note and shall hold harmless the Purchaser from and against any and all liabilities with respect to or resulting from any delay in paying, or omission to pay, such Taxes.

8.2 Losses.

8.2.1 Whether or not the transactions contemplated by this Agreement are consummated, the Borrowers shall jointly and severally indemnify, defend and save and hold harmless the Purchaser and its respective Affiliates, and their respective employees, partners, members, managers, principals, officers, directors, representatives, agents, attorneys, successors and assigns (the “Indemnified Parties”), from and against, and shall pay on demand, any and all losses, claims, damages, liabilities, judgments, expenses and costs, including, without limitation, attorneys’ fees, costs and expenses and other fees, costs and expenses incurred in, and the costs of preparing for, investigating or defending any matter (collectively, “Losses”), incurred by or asserted or awarded against such Indemnified Party in connection with, by reason of, or arising from:

(a) The breach by any Borrower of any representation or warranty set forth in this Agreement or any other Investment Document (or any other document or instrument executed herewith or pursuant hereto);

(b) The failure of any Borrower to fulfill any of its covenants, agreements or undertakings under this Agreement or any other Investment Document (or any other document or instrument executed herewith or pursuant hereto); or

(c) Any third party actions, suits, proceedings or claims brought against any Indemnified Party in connection with, arising out of or with respect to (A) any other matters arising out of or in connection with the transactions contemplated by this Agreement, the Note or any other Investment Document or the Collateral or (B) the business, operations or

affairs of the Borrowers (including, without limitation, any litigation in which any Borrower is involved); provided, however, that no Borrower shall have any liability to any Indemnified Party for any Loss to the extent that such Loss has been caused by such Indemnified Party’s willful misconduct or gross negligence.

8.2.2 The Borrowers shall either pay directly all Losses which they are required to pay hereunder or reimburse any Indemnified Party within ten (10) days after any written request for such payment. The obligations of the Borrowers to the Indemnified Parties under this Section 8 shall be separate obligations to each Indemnified Party, and the liability of the Borrowers to such Indemnified Parties hereunder shall not be extinguished solely because any Indemnified Party is not entitled to indemnity hereunder.

8.2.3 The obligations of the Borrowers to the Indemnified Parties under this Section 8 shall survive (i) the repayment of the Note and any PIK Notes issued or deemed issued thereunder (whether at maturity, by prepayment or acceleration or otherwise), (ii) any transfer of the Note (or PIK Notes) or any interest therein and (iii) the termination of this Agreement or any other Investment Document.

8.3 Indemnification Procedures. Any Person entitled to indemnification under this Section 8 shall (i) give prompt written notice to the Borrowers of any claim with respect to which it is entitled to seek indemnification (provided that the failure to so notify any Borrower shall not relieve any Borrower from any liability which it may have under this Section 8 except to the extent that the Borrower is materially prejudiced by such failure) and (ii) permit the Borrowers (or any of them) to assume the defense of such claim with counsel selected by the Borrowers and reasonably acceptable to the applicable Indemnified Party; provided, however, that any Indemnified Party shall have the right to employ separate counsel and to participate in the defense of such claim and the fees, costs and expenses of such counsel shall be at the expense of such Indemnified Party unless (a) any Borrower has agreed to pay such fees, costs or expenses, (b) the Borrowers have failed to notify the applicable Indemnified Party in writing within ten (10) days of its receipt of such written notice claiming a right to be indemnified that it will assume the defense of such claim and employ counsel reasonably acceptable to the applicable Indemnified Party, or (c) a conflict of interest exists between the applicable Indemnified Party, on the one hand, and the Borrowers, on the other hand, with respect to such claims (in which case, if the applicable Indemnified Party notifies the Borrowers in writing that such Indemnified Party elects to employ separate counsel at the expense of the Borrowers, the Borrowers shall not have the right to assume the defense of such claim on behalf of such Indemnified Party). The Borrowers will not be subject to any liability for any settlement made without their respective consent (but such consent may not be unreasonably conditioned, delayed or withheld). No Indemnified Party may, without the consent of the applicable Borrowers (which consent will not be unreasonably conditioned, delayed or withheld), consent to the entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to the Borrowers of a release from all liability in respect of such claim or litigation.

8.4 Contribution. If the indemnification provided for in this Section 8 is unavailable to the Purchaser or any other Indemnified Party in respect of any Losses, then the Borrowers, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by

the Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Borrowers on the one hand, and the applicable Indemnified Party, on the other hand, in connection with the actions, statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of the Borrowers, on the one hand, and such Indemnified Party, on the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been taken by, or relates to information supplied by, any of the Borrowers or such Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent any such action, statement or omission. The parties agree that it would not be just and equitable if contribution pursuant to this Section 8.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above.

9.	AFFIRMATIVE COVENANTS

As long as the Note or any PIK Note remains outstanding, each Borrower covenants and agrees as follows:

9.1 Payment of Note and Other Obligations. The Borrowers shall fully and timely pay all Obligations owing pursuant to the terms of this Agreement, the Note or any PIK Note (including, without limitation, all principal thereof, premium, if any, and interest thereon) and the other Investment Documents to which they are parties, in each case on the dates and in the manner provided for herein and therein.

9.2 Performance of Investment Documents. The Borrowers shall perform, comply with and observe all of their obligations under this Agreement, the Note, any PIK Note and each other Investment Document.

9.3 Notices. The Borrowers shall promptly notify the Purchaser in writing of the occurrence of any event or the existence of any fact which renders any representation or warranty in this Agreement or any of the other Investment Documents inaccurate, incomplete or misleading in any material respect as of the date made or remade. In addition, the Borrowers agree to provide the Purchaser with (i) ten (10) Business Days’ prior written notice of (A) any change in the legal name or jurisdiction of organization or incorporation of any Borrower, (B) the adoption by any Borrower of any new fictitious name or tradename and (C) any change in the chief executive office of any Borrower, (ii) prompt written notice of any material change in the information disclosed in any schedule or exhibit hereto and (iii) as soon as possible (and in any event within two (2) Business Days) after any Borrower obtains Knowledge thereof, written notice of (A) the occurrence of any event, act, development or condition which constitutes a Default or Event of Default or any “default” or “event of default” under the terms of any Other Debt Documents; (B) the commencement of any litigation against any Borrower involving an amount in excess of $50,000 or any investigation or other proceeding of any Governmental Authority against any Borrower; (C) any other event or development that has resulted in or which could reasonably be expected to have a Material Adverse Effect; or (D) any Judgment, Tax Lien or regulatory action incurred by or entered against any Borrower. Each such notice shall specify in reasonable detail the nature of the event, act, condition, Default, Event of Default, default, event of default, litigation or investigation or other proceeding and what action the Borrower or any other Person is taking or proposes to take to cure the same.

9.4 Books and Records; Financial Statements. The Borrowers shall keep adequate records and books of account with respect to their respective business activities in which proper entries are made in accordance with customary accounting practices reflecting all their respective financial transactions; and cause to be prepared and furnished to the Purchaser, the following, all to be prepared in accordance with GAAP applied on a consistent basis, unless the Borrowers’ certified public accountants concur in any change therein and such change is disclosed to the Purchaser and is consistent with GAAP:

9.4.1 As soon as available, and in no event later than one hundred twenty (120) days after the end of each Fiscal Year, an audited consolidated balance sheet of the Borrowers as of the end of such Fiscal Year, and related audited consolidated statements of operations, stockholders’ equity and cash flows of the Borrowers for such Fiscal Year, setting forth in comparative form the corresponding figures for the immediately preceding Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, and accompanied by a report and an opinion (the “Audit Report”), prepared in accordance with generally accepted auditing standards, by Marcum LLP (or such other firm of independent certified public accountants selected by the Borrowers and reasonably acceptable to the Purchaser) (which opinion shall provide that such consolidated financial statements present fairly, in all material respects, the financial position for the periods indicated in conformity with GAAP, and which opinion shall not be qualified or limited because of a restricted or limited examination by such accountant of any material portion of the records of the Borrowers or otherwise qualified in any respect);

9.4.2 Promptly (and in any event not later than five (5) Business Days) after the issuance of any Audit Report, or series of Audit Reports, a copy (or copies) of such Audit Report(s) (or written summaries of any substantially similar oral reports(s));

9.4.3 Prior to the beginning of each Fiscal Year, a copy of the internal financial projections of the Borrowers for such Fiscal Year (the “Annual Financial Projections”), prepared on a monthly basis and in reasonable detail, which shall include the following: (i) a balance sheet, income statement and cash flow statement for each month of such Fiscal Year; (ii) a capital expenditures budget; (iii) an explanation in reasonable detail of all material changes proposed for the business and its personnel and facilities; (iv) an explanation in reasonable detail of all material assumptions underlying such financial projections, which assumptions shall be believed by the Borrowers to be reasonable; (v) a description of the opportunities to be pursued during such Fiscal Year; and (vi) a description of any incentive compensation expected to be paid to senior management;

9.4.4 Within five (5) Business Days after it is prepared, and in no event later than thirty (30) days after the last day of each calendar month, a monthly financial package for such month (the “Monthly Reporting Package”), all in reasonable detail and prepared in accordance with GAAP, consisting of at least the following:

(a) an income statement for such month on a consolidated and consolidating basis and by division, with comparative information for the applicable Annual Financial Projections and the same month during the immediately preceding Fiscal Year;

(b) a year-to-date income statement for such month on a consolidated and consolidating basis and by division, with comparative information for the applicable Annual Financial Projections and the same year-to-date month during the immediately preceding Fiscal Year;

(c) a cash flow statement for such month, with comparative information for the applicable Annual Financial Projections and the same month during the immediately preceding Fiscal Year;

(d) a year-to-date cash flow statement for such month, with comparative information for the applicable Annual Financial Projections and the same year-to-date period during the immediately preceding Fiscal Year;

(e) a balance sheet as at the end of such month on a consolidated and consolidating basis, with comparative information for the applicable Annual Financial Projections and as at the end of the same month during the immediately preceding Fiscal Year; and

(f) other information, as may be reasonably requested by the Purchaser, to monitor mutually agreeable critical success factors of the Borrowers that need to be achieved in order for the Borrowers to meet the financial projections;

9.4.5 [Reserved];

9.4.6 Promptly upon request (and in any event not later than five (5) Business Days thereafter), such other notices and other information (whether or not in the possession of third parties) concerning the business, operations, financial condition, or affairs of the Borrowers or their Affiliates as the Purchaser may from time to time reasonably request.

Concurrently with the delivery of the financial statements described in Section 9.4.1, the Borrowers shall forward to the Purchaser a copy of any accountants’ letter to the management of the Borrowers that is prepared in connection with such financial statements and also shall cause to be prepared and shall furnish to the Purchaser a certificate of the aforesaid certified public accountants certifying to the Purchaser that, based upon their examination of the financial statements of the Borrowers performed in connection with their examination of said financial statements, they are not aware of any Default or Event of Default, or, if they are aware of such Default or Event of Default, specifying the nature thereof, and acknowledging, in a manner satisfactory to the Purchaser, that they are aware that the Purchaser is relying on such financial statements in making decisions with respect to the Note.

9.5 Guarantor Financial Statements. The Borrowers shall deliver or cause to be delivered to the Purchaser financial statements for each Person that, following the Closing Date, guarantees any Obligations of the Borrowers (to the extent not delivered pursuant to Section 9.4 hereof) in form and substance satisfactory to the Purchaser at such intervals and covering such time periods as the Purchaser may request.

9.6 Landlord, Distributor and Storage Agreements. The Borrowers shall provide the Purchaser with copies of all agreements between any Borrower and any landlord, distributor or warehouseman which owns any premises at which any Inventory may, from time to time, be kept.

9.7 Subsidiaries. Subject to Section 10.12, promptly upon the creation or acquisition of each new Subsidiary, the Borrowers shall cause such Subsidiary to execute and deliver to the Purchaser a Guaranty and a security agreement (or agreements) pursuant to which such Subsidiary jointly and severally guaranties the payment of all Obligations and grants to the Purchaser a first priority Lien (subject only to Permitted Liens) on all of its Properties. Additionally, any Borrower that directly owns equity interests in such Subsidiary shall execute and deliver to the Purchaser a pledge agreement pursuant to which such Borrower shall grant to the Purchaser a first-priority Lien (subject only to Permitted Liens) with respect to all of the issued and outstanding securities of each such Subsidiary. Within five (5) days after the date such Subsidiary becomes a Subsidiary, the Borrowers shall cause such Subsidiary to have executed (if necessary) and filed any UCC-1 financing statements furnished by the Purchaser in each jurisdiction in which such filing is necessary to perfect the security interest of the Purchaser in the Collateral of such Subsidiary and in which the Purchaser requests that such filing be made. Additionally, the Borrowers and such Subsidiary shall have executed and delivered to the Purchaser such other items as reasonably requested by the Purchaser in connection with the foregoing, including resolutions, incumbency and officers’ certificates, opinions of counsel, search reports and other certificates and documents.

9.8 Compliance with Laws; Consents. The Borrowers shall comply in all respects with the requirements of all Applicable Laws, rules, regulations and orders of any Governmental Authority (including all Environmental Laws), the reasonable corporate conduct and business ethics policies of its significant customers, and the terms of any indenture, contract or other instrument to which it may be a party or under which it or its properties may be bound in each case, to the extent that the failure to so comply would reasonably be expected to have a Material Adverse Effect as to the Borrowers. Each Borrower shall obtain and maintain all material licenses, authorizations, consents, filings, exemptions, registrations and other governmental approvals necessary in connection with the execution, delivery and performance of the Investment Documents, the consummation of the transactions therein contemplated or the operation and conduct of its business and ownership of its properties.

9.9 Legal Existence. Each Borrower shall, subject to Section 10.1, maintain and preserve its legal existence, its material Operating Licenses and its other material rights to transact business in each jurisdiction where transacting business or its properties are located and all other material rights, franchises and privileges necessary or desirable in the normal course of its business and operations and the ownership of its properties.

9.10 Maintenance of Properties. Each Borrower shall maintain and preserve all of its Properties necessary or useful in the proper conduct of its business in good working order and condition in accordance with the general practice of other corporations of similar character and size, ordinary wear and tear excepted.

9.11 Insurance. The Borrowers shall carry and maintain in full force and effect, at their own expense and with financially sound and reputable insurance companies, insurance in such amounts, with such deductibles and covering such risks as is customarily carried by companies engaged in the same or similar businesses and owning similar properties in the localities where any Borrower operates, including product liability, comprehensive general liability, fire, extended coverage, business interruption, public liability, property damage, workers’ compensation and directors and officers liability insurance. Insurance on the Collateral shall name the Purchaser as additional insured and as additional loss payee. In the event that a Borrower receives proceeds of insurance with respect to any loss or destruction of Equipment, Inventory or Real Property or business interruption, then (i) the Borrowers shall first use such proceeds to replace or repair the damaged Collateral and (ii) the balance of such proceeds shall be applied to repay the Note. Upon the request of the Purchaser, each Borrower shall furnish the Purchaser from time to time with full information as to the insurance carried by it and, if so requested, copies of all such insurance policies. Each Borrower shall also furnish to the Purchaser from time to time upon the request of the Purchaser a certificate of its insurance broker or other insurance specialist stating that all premiums then due on the policies relating to insurance on the Collateral have been paid, that such policies are in full force and effect and that such insurance coverage and such policies comply with all the requirements of this Section. All insurance policies required under this Section shall provide that they shall not be terminated or canceled nor shall any such policy be materially changed without at least thirty (30) days’ prior written notice to the Borrowers and the Purchaser. Receipt of notice of termination or cancellation of any such insurance policies or reduction of coverages or amounts thereunder shall entitle the Purchaser to renew any such policies, cause the coverages and amounts thereof to be maintained at levels required pursuant to the first sentence of this Section 9.11 or otherwise to obtain similar insurance in place of such policies, in each case at the expense of the Borrowers.

9.12 Payment of Obligations. Each of the Borrowers shall pay and discharge (i) all Taxes, fees, assessments and governmental charges or levies imposed upon it or upon its properties or assets prior to the date on which penalties attach thereto, and all lawful claims for labor, materials and supplies which, if unpaid, might become a Lien upon any properties or assets of any Borrower, except to the extent such Taxes, fees, assessments or governmental charges or levies, or such claims, are being contested in good faith by appropriate proceedings and are adequately reserved against in accordance with GAAP, (ii) all lawful claims (other than those being contested in good faith by appropriate proceedings) which, if unpaid, would by law become a Lien upon its property not constituting a Permitted Lien, and (iii) subject to the terms of this Agreement and the terms of any applicable subordination or intercreditor agreement, all Indebtedness, as and when due and payable.

9.13 Compliance with Material Contracts. Each Borrower shall perform, comply with and observe all material terms and provisions of each of its Material Contracts to be performed, complied with or observed by it, maintain each of its Material Contracts in full force and effect and enforce each of its Material Contracts in accordance with its terms.

9.14 Environmental Matters. The Borrowers shall, upon becoming aware of the presence of any Hazardous Substance in violation of any Environmental Laws or the existence of any environmental liability under applicable Environmental Laws with respect to the Premises, take all actions, at their cost and expense, as shall be necessary or advisable to investigate and clean up the condition of the Premises, including all removal, containment and remedial actions, and restore the Premises to a condition in compliance with applicable Environmental Laws.

9.15 Future Information. All data, certificates, reports, statements, documents and other information furnished to the Purchaser by or on behalf of the Borrowers, any of their respective representatives or agents in connection with this Agreement, the other Investment Documents or the transactions contemplated hereby and thereby, at the time the information is so furnished, taken as a whole, shall not contain any untrue statement of a material fact, shall be complete and correct in all material respects to the extent necessary to give the Purchaser sufficient and accurate knowledge of the subject matter thereof, and shall not omit to state a material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which such information is furnished.

9.16 Further Assurances. Promptly after request by the Purchaser, from time to time after the date hereof, each of the Borrowers shall execute and deliver, and shall use reasonable efforts to cause any other Persons who are required to give their Consent to execute and deliver, such instruments, certificates and documents, and will take all such reasonable actions, for the purposes of implementing or effectuating the provisions of this Agreement, the Note, the Warrant and the other Investment Documents. Upon exercise by the Purchaser of any power, right, privilege or remedy pursuant to this Agreement or any other Investment Document which requires any Consent, each of the Borrowers will execute and deliver, and shall use reasonable efforts to cause any other Persons to execute and deliver, all applications, certifications, instruments and other documents and papers that may be reasonably required to be obtained for such Consent. Promptly upon reasonable request by the Purchaser, each of the Borrowers shall correct any material defect or error that may exist or be discovered in this Agreement, the Note, the Warrant or any other Investment Document or in the execution, acknowledgment, filing or recordation thereof. Promptly upon reasonable request by the Purchaser, each of the Borrowers shall do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust, trust deeds, notices of assignment, transfers, certificates, assurances and other instruments as the Purchaser may require from time to time in order to (i) carry out more effectively the purposes of the Investment Documents, (ii) to the fullest extent permitted by applicable law, subject each Borrowers’ Properties to the Liens now or hereafter intended to be covered by any of the Collateral Documents, (iii) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder and (iv) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the rights granted or now or hereafter intended to be granted to the Purchaser under any Investment Document or under any other instrument executed in connection with any Investment Document to which any Borrower is to be a party.

9.17 Management by Key Management Personnel. The Borrowers shall use commercially reasonable efforts to retain Dwight Morgan as the Chief Executive Officer of the Borrowers (or in such other position with the Borrowers as shall be approved by the Purchaser)

(the “Key Management Personnel”) on a full time basis (or consistent with current levels). The Borrowers shall not hire, terminate or otherwise replace any Key Management Personnel without the prior approval of the Purchaser, which approval shall not be unreasonably withheld, other than termination for “Cause” under the terms of the applicable Employment Agreement.

9.18 Legal and Capital Structure. The Borrowers shall promptly take all such actions necessary to cause an increase in the authorized number of shares of Common Stock of Caprius to an amount satisfactory to the Purchaser in its sole and absolute discretion.

9.19 Purchaser Costs, Fees and Expenses. The Borrowers will pay on demand, all costs and expenses incurred by or on behalf of the Purchaser regardless of whether the transactions contemplated hereby are consummated, including, without limitation, reasonable fees, costs, client charges and expenses of counsel for the Purchaser, accounting, due diligence, periodic field audits, physical counts, valuations, investigations, searches and filings, monitoring of assets, appraisals of Collateral, title searches and reviewing environmental assessments, miscellaneous disbursements, examination, travel, lodging and meals, arising from or relating to: (a) the negotiation, preparation, execution, delivery, performance and administration of this Agreement and the other Investment Documents, (b) any requested amendments, waivers or consents to this Agreement or the other Investment Documents whether or not such documents become effective or are given, (c) the preservation and protection of the Purchaser rights under this Agreement or the other Investment Documents, (d) the filing of any petition, complaint, answer, motion or other pleading by the Purchaser, or the taking of any action in respect of the Collateral or other security, in connection with this Agreement or any other Investment Document, (e) the protection, collection, lease, sale, taking possession of or liquidation of, any Collateral or other security in connection with this Agreement or any other Investment Document, (f) any attempt to enforce any Lien or security interest in any Collateral or other security in connection with this Agreement or any other Investment Document, (g) any attempt to collect from any Borrower, (h) all liabilities and costs arising from or in connection with the past, present or future operations of any Borrower involving any damage to real or personal property or natural resources or harm or injury alleged to have resulted from any Environmental Conditions, (i) any liabilities, costs, fees, fines, penalties or other obligations incurred in connection with the investigation, removal, cleanup and/or remediation of any Hazardous Materials present or arising out of the operations of any facility of any Borrower, or (j) the receipt by the Purchaser of any advice from professionals with respect to any of the foregoing.

9.20 Manufacturing Source. The Borrowers shall establish a manufacturing source based in the United States (or such other location as is mutually agreed to by the Purchaser and the Borrowers), which source shall, within one hundred eighty (180) days following the Closing Date, deliver both a working senior unit and a working junior unit (in each instance, a prototype or a first article unit) to the Borrowers. The Borrowers shall, within two hundred seventy (270) days following the Closing Date, terminate all contracts, agreements and other arrangements with the Israeli manufacturing source.

9.21 Unit Sales. The Borrowers shall, (a) within one hundred eighty (180) days following the Closing Date, recognize revenue with respect to the sale of thirty seven (37) units to independent third party customers on market terms pursuant to arms’ length transactions, (b) within two hundred seventy (270) days following the Closing Date, recognize revenue with

respect to the sale of sixty four (64) units to independent third party customers on market terms pursuant to arms’ length transactions, and (c) within three hundred sixty (360) days following the Closing Date, recognize revenue with respect to the sale of one hundred (100) units to independent third party customers on market terms pursuant to arms’ length transactions. For the purposes hereof, the Borrowers shall be deemed to have “recognized revenue,” (x) with respect to sales to customers inside the United States, when a unit is accepted by the customer in writing, and (y) with respect to sales to customers located outside of the United States, when either (i) a unit departs the factory and said departure is verified by an export manifest or (ii) the customer executes a bill and hold letter agreement.

10.	NEGATIVE COVENANTS

As long as the Note or any PIK Note remains outstanding, each Borrower covenants and agrees as follows:

10.1 Mergers; Consolidations; Acquisitions; Structural Changes. No Borrower shall (a) be acquired, merge, consolidate or amalgamate, or permit any Subsidiary to be acquired, merge, consolidate or amalgamate, with or into any Person or permit any Person to acquire control of any Borrower, (b) acquire, or permit any of their respective Subsidiaries to acquire, all or any substantial part of the Properties of any Person, (c) change, or permit any Subsidiary to change, its state of incorporation or organization or type of Organization, or (d) change, or permit any Subsidiary to change, its legal name, except for mergers of any Subsidiary of Caprius into Caprius or another domestic Subsidiary of Caprius (other than into M.C.M. prior to the payment of the Sassoon Settlement Amount).

10.2 Loans. No Borrower shall make, or permit any Subsidiary to make, any loans or other advances of money, other than for salary, travel advances, advances against commissions and other similar advances in the ordinary course of business to any Person.

10.3 Indebtedness. No Borrower shall, without the prior written consent of the Purchaser, create, incur, assume, or suffer to exist, or permit any Subsidiary to create, incur or suffer to exist, any Indebtedness, except:

10.3.1 Obligations under the Note or any PIK Note; and

10.3.2 Indebtedness existing on the date of this Agreement as set forth on Schedule 10.3.

10.4 Affiliate Transactions. No Borrower shall, without the prior written consent of the Purchaser, enter into, or be a party to, or permit any Subsidiary to enter into or be a party to, any transaction with any Affiliate of any Borrower, except (a) usual and customary employment agreements and indemnification arrangements contained in a Borrower’s or a Subsidiary’s Charter Documents in effect on the date hereof and (b) those transactions in existence on the date hereof and disclosed on Schedule 3.14.

10.5 Limitation on Liens. The Borrowers shall not, without prior written consent of the Purchaser, create or suffer to exist, or permit any Subsidiary to create or suffer to exist, any Lien upon any of its Properties, income or profits, whether now owned or hereafter acquired, except the following (each a “Permitted Lien”):

10.5.1 Liens at any time granted in favor of the Purchaser;

10.5.2 Liens for Taxes (excluding any Lien imposed pursuant to any of the provisions of ERISA) not yet due, or being contested in the manner described in Section 3.18, but only if in the Purchaser’s reasonable judgment such Lien does not adversely affect the Purchaser’s rights or the priority of the Purchaser’s Liens in the Collateral;

10.5.3 Liens arising in the ordinary course of the business of a Borrower by operation of law or regulation, but only if payment in respect of any such Lien is not at the time required and such Liens do not, in the aggregate, materially detract from the value of the Property of the Borrowers or materially impair the use thereof in the operation of the business of the Borrowers;

10.5.4 Such other Liens existing on the date of this Agreement and listed on Schedule 10.5 hereto;

10.5.5 So long as no Event of Default has occurred and is continuing, attachment, judgment and other similar non-tax Liens arising in connection with court proceedings, but only if and for so long as the execution or other enforcement of such Liens is and continues to be effectively stayed and bonded on appeal, the validity and amount of the claims secured thereby are being actively contested in good faith and by appropriate lawful proceedings and such Liens do not, in the aggregate, materially detract from the value of the Property of the Borrowers or materially impair the use thereof in the operation of the Borrowers’ businesses;

10.5.6 Reservations, exceptions, easements, rights of way and other similar encumbrances affecting Real Property; provided that, in the Purchaser’s sole judgment, such exceptions do not in the aggregate materially detract from the value of such Property or materially interfere with the use of such Property in the ordinary course of the Borrowers’ business, and if such Property constitutes Collateral, the Purchaser has consented thereto; and

10.5.7 Such other Liens as the Purchaser may hereafter approve in writing.

10.6 Payments and Amendments of Subordinated Debt. The Borrowers shall not:

10.6.1 Make or permit any Subsidiary to make any payment of any part or all of any Subordinated Debt or take any other action or omit to take any other action in respect of any Subordinated Debt; or

10.6.2 Agree to (i) any amendment or other modification of the subordination provisions of any documentation evidencing or relating to any Subordinated Debt or (ii) any other amendment or other modification to any documentation evidencing any Subordinated Debt that would increase the interest rate applicable thereto, accelerate the maturity date of any payment owing in respect thereof (including any redemption, prepayment or defeasance provision or the Borrower’s obligation to pay cash interest) or otherwise modify any of the provisions of such Subordinated Debt.

10.7 Distributions. The Borrowers shall not, without prior written consent of the Purchaser, declare or make, or permit any Subsidiary to declare or make, any Distributions (other than Distributions made to any Borrower by a Subsidiary, other than M.C.M. UK, when no Default or Event of Default exists).

10.8 Disposition of Assets. The Borrowers shall not, without prior written consent of the Purchaser, sell, lease or otherwise dispose of any of, or permit any Subsidiary to sell, lease or otherwise dispose of any of, its Properties, including any disposition of Property as part of a Sale and Leaseback Transaction or securitization transaction or the sale of any stock of a Subsidiary, to or in favor of any Person, except for:

10.8.1 so long as no Event of Default has occurred and is continuing, sales of Inventory in the ordinary course of business;

10.8.2 so long as no Event of Default has occurred and is continuing, sales of equipment or other fixed assets used by any Borrower in the conduct of its business to the extent that the proceeds from such sale are used to purchase newer, functionally equivalent equipment or fixed assets, as the case may be, which are used by such Borrower in the conduct of its business;

10.8.3 transfers of Property to any Borrower by a Subsidiary of such Borrower; and

10.8.4 dispositions expressly authorized by this Agreement.

10.9 Additional Securities. Other than the Warrant, no Borrower shall issue or create any Security, including, without limitation, any Security that provides for redemption, a right to repurchase exercisable at the holder’s option, creation of a sinking fund or a cash dividend payable prior to the maturity of the Note and the payment in full of the Obligations.

10.10 [Reserved].

10.11 Restricted Investment. The Borrowers shall not make or have, or permit any Subsidiary to make or have, any Restricted Investment.

10.12 Subsidiaries and Joint Ventures. Following the Closing Date, the Borrowers shall not create, acquire or otherwise suffer to exist any Subsidiary or joint venture arrangement.

10.13 Tax Consolidation. The Borrowers shall not file or consent to the filing of any consolidated income tax return with any Person not a Borrower, other than M.C.M. UK.

10.14 Organizational Documents. The Borrowers shall not agree to, or suffer to occur, any amendment, supplement or addition to its or any of their respective Subsidiaries’ Charter Documents. The Borrowers shall not enter into any new or amend any existing stockholder agreement.

10.15 Fiscal Year End. The Borrowers shall not change, or permit any Subsidiary to change, its Fiscal Year.

10.16 Limitations on Payment Restrictions Affecting Subsidiaries. The Borrowers shall not permit any Subsidiary to grant or otherwise agree to or suffer to exist any consensual restrictions on the ability of such Subsidiary to pay dividends and make other distributions to the Borrowers, or to pay any Indebtedness owed to the Borrowers or transfer properties and assets to the Borrowers except as set forth in this Agreement.

10.17 Change in Business. The Borrowers shall not engage in any material line of business substantially different from the Business carried on by them at the date hereof.

10.18 Subordination. The Borrowers shall not, directly or indirectly, contingently or otherwise, create, incur, assume, guaranty, suffer to exist or become or remain liable with respect to any Indebtedness that is pari passu with or senior in right of payment to the Indebtedness evidenced by the Note.

10.19 Accounting Changes. The Borrowers shall not (i) make any significant change in accounting treatment or reporting practices, except as required by GAAP, in which event the Borrowers shall deliver to the Purchaser a certificate signed by its Chief Financial Officer describing the change, or (ii) restate any of their financial statements for prior periods, other than in connection with the adoption of a change in accounting principle.

10.20 [Reserved].

10.21 Hazardous Substances. The Borrowers shall not use, generate, manufacture, install, treat, Release, store or dispose of any Hazardous Substances, except in material compliance with all applicable Environmental Laws.

10.22 No Solicitation or Negotiation.

10.22.1 From and after the Closing Date, the Borrowers shall not, nor will they authorize or permit any of their respective directors, officers or other employees, contractors, Affiliates or any investment banker, attorney or other advisor, representative or agent retained by it (collectively, the “Borrowers’ Representatives”), to directly or indirectly, (i) solicit, initiate, encourage or induce the making, submission or announcement of an offer, proposal or transaction (whether in the form of a merger, consolidation, asset sale or other form of transaction) for the acquisition of all or any part of the Business (whether by stock sale, asset sale, merger or otherwise) (any of the foregoing, a “Prohibited Acquisition”), (ii) participate or engage in any discussions or negotiations with any such Person regarding a Prohibited Acquisition, (iii) furnish to any such Person any information relating to the Borrowers or the Business, or afford access to the business, properties, assets, books or records of any Borrower to any such Person that has made or could reasonably be expected to make a Prohibited Acquisition, or (iv) take any other action intended to assist or facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, a Prohibited Acquisition, (v) approve, endorse or recommend a Prohibited Acquisition, or (vi) enter into any letter of intent or similar agreement contemplating or otherwise relating to a Prohibited Acquisition. The Borrowers shall immediately cease and cause to be terminated any existing or previously conducted activities, discussions or negotiations with any parties with respect to any Prohibited Acquisition. The Borrowers shall notify the Purchaser with reasonable promptness

(but in no event later than two (2) Business Days thereafter) if any such inquiries or proposals are received by, any such information or access is requested from, or any such negotiations or discussions are sought to be initiated or continued with, any of them.

10.22.2 From and after the Closing Date through the one year anniversary of the Closing Date, the Borrowers shall not, nor will they authorize or permit any Borrowers’ Representative to, directly or indirectly, (i) solicit, initiate, encourage or induce the making, submission or announcement of the incurrence or refinancing of any Indebtedness by any Person other than Purchaser (any of the foregoing, a “Prohibited Financing”), (ii) participate or engage in any discussions or negotiations with any such Person regarding a Prohibited Financing, (iii) furnish to any such Person any information relating to the Borrowers or the Business, or afford access to the business, properties, assets, books or records of any Borrower to any such Person that has made or could reasonably be expected to make a Prohibited Financing, or (iv) take any other action intended to assist or facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, a Prohibited Financing, (v) approve, endorse or recommend a Prohibited Financing, or (vi) enter into any letter of intent or similar agreement contemplating or otherwise relating to a Prohibited Financing. The Borrowers shall immediately cease and cause to be terminated any existing or previously conducted activities, discussions or negotiations with any parties with respect to any Prohibited Financing. The Borrowers shall notify the Purchaser with reasonable promptness (but in no event later than two (2) Business Days thereafter) if any such inquiries or proposals are received by, any such information or access is requested from, or any such negotiations or discussions are sought to be initiated or continued with, any of them.

10.22.3 Provided that no Event of Default has occurred and is continuing, from and after the one year anniversary of the Closing Date through the Maturity Date, the Borrowers and the Borrowers’ Representatives may (i) solicit, initiate, encourage or induce the making, submission or announcement of a Prohibited Financing, (ii) participate or engage in any discussions or negotiations with any Person regarding a Prohibited Financing, (iii) furnish to any such Person any information relating to the Borrowers or the Business, or afford access to the business, properties, assets, books or records of any Borrower to any such Person that has made or could reasonably be expected to make a Prohibited Financing, or (iv) take any other action intended to assist or facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, a Prohibited Financing, (v) approve, endorse or recommend a Prohibited Financing, or (vi) enter into any letter of intent or similar agreement contemplating or otherwise relating to a Prohibited Financing (any such otherwise Prohibited Financing, a “Permitted Third Party Refinancing”) . The Borrowers shall notify the Purchaser with reasonable promptness (but in no event later than two (2) Business Days thereafter) if any such inquiries or proposals are received by, any such information or access is requested from, or any such negotiations or discussions are sought to be initiated or continued with, any of them. Notwithstanding the foregoing, in the event that the Borrowers seek to enter into a Permitted Third Party Refinancing pursuant to this Section 10.22.3, the Borrowers shall first offer to the Purchaser, in writing, a right of first refusal to provide such Permitted Third Party Refinancing on the same terms and conditions as are offered to the Borrowers by a third Person (the “Right of First Refusal”). Any Permitted Third Party Refinancing shall be made subject to the rights and obligations set forth in this Agreement. In the event that the Borrowers offer the Right of First Refusal to the Purchaser, the Purchaser shall promptly, and in writing, accept or reject such offer.

If the Purchaser shall fail to accept such offer within five (5) Business Days after the Purchaser’s receipt of such written offer, the Borrowers shall be free to complete such Permitted Third Party Refinancing with such Third Person to the extent otherwise permitted under this Agreement; provided, that such Permitted Third Party Refinancing shall close on the Maturity Date; provided, further, that the proceeds of such Permitted Third Party Refinancing shall be used to pay all amounts then outstanding under the Note, the PIK Notes and the other Investment Documents in full in cash. If the Purchaser accepts such offer, the Permitted Refinancing shall close no later than the earlier of (A) fifteen (15) Business Days after the Purchaser’s acceptance and (B) the Maturity Date (the “Purchaser Closing Period”). If such Permitted Third Party Refinancing with the Purchaser does not close within the Purchaser Closing Period, the Purchaser shall no longer have a Right of First Refusal with respect to such proposed Permitted Third Party Refinancing.

10.23 Employment Agreements. The Borrowers shall not, and shall not permit any Borrower to (i) amend the terms of the Employment Agreements or (ii) increase the salary (excluding performance bonus) of any executive officer by an amount greater than the annual change in the consumer price index without the prior written consent of the Purchaser.

10.24 No Securities or Options Granted. Without the prior written consent of Purchaser, which may be conditioned on the grant to the Purchaser of the Warrant, no Borrower shall issue or grant securities, options or Convertible Securities to any Person.

10.25 Advances. The Borrowers shall not use the proceeds of any Advance for any purpose other than as set forth in the Disbursement Request related to such Advance.

10.26 M.C.M. UK. Other than transfers not to exceed ten thousand dollars ($10,000) in the aggregate each Fiscal Year solely for the purpose of paying license and similar fees, the Borrowers shall not transfer any asset (including, without limitation, any cash or cash equivalent), contract, obligation or otherwise to M.C.M. UK. M.C.M. UK shall not enter into any contract, agreement, or other arrangement whatsoever, own any assets (other than licenses necessary to sell Inventory in the United Kingdom), or conduct or engage in business of any kind or nature whatsoever, whether consistent with past practice or otherwise.

10.27 Sales of Inventory. The Borrowers shall cause M.C.M. to be the seller-of-record of all Inventory of the Borrowers and all accounts receivable of the Business shall be due and payable solely to M.C.M.

11.	DEFAULTS AND REMEDIES

11.1 Events of Default. The occurrence of any one or more of the following events, acts or occurrences shall constitute an event of default (each an “Event of Default”):

11.1.1 (i) Any Borrower shall fail to pay as and when due (whether at stated maturity, upon acceleration or demand or required prepayment or otherwise) any principal, interest and annual renewal fee payable under the Note (and any PIK Notes issued or deemed issued thereunder) or (ii) any Borrower shall fail to make any other payment of any other amounts (including, without limitation, fees, costs or expenses) payable under this Agreement, the Note (or any PIK Notes) or any other Investment Document (whether at stated maturity, upon acceleration or demand or required prepayment or otherwise) and with respect to such other amounts in clause (ii) shall fail to make payments within ten (10) day’s written notice thereof;

11.1.2 Any Borrower shall breach or fail to perform, comply with or observe any agreement, covenant or obligation required to be performed by it under this Agreement, the Note, any Collateral Document or any other Investment Document (other than the agreements, covenants or obligations expressly covered by Section 11.1.1);

11.1.3 [Reserved];

11.1.4 Any representation, warranty or other statement made or furnished to the Purchaser by or on behalf of any Borrower under this Agreement or any other Investment Document or any instrument, certificate or financial statement furnished in compliance with or in reference thereto shall be false or misleading or incorrect in any material respect when made (or deemed made);

11.1.5 Except as to those obligations disputed in good faith, provided written notice of such dispute has been provided to the Purchaser, (i) any Borrower shall default in the payment (whether at stated maturity, upon acceleration or demand or required prepayment or otherwise), beyond any period of grace provided therefor, of any principal of or interest on any other Indebtedness with a principal amount in excess of $10,000 individually or in the aggregate, or (ii) any other breach or default (or other event or condition) shall occur under any agreement, indenture or instrument evidencing or governing any such other Indebtedness or any Other Debt Document, if (A) the payment or maturity of such Indebtedness is accelerated in consequence of such Event of Default, (B) demand for payment of such Indebtedness is made, or (C) any collection action in respect thereof is commenced.

11.1.6 Any Investment Document, or any material provision thereof, shall cease to be in full force and effect (other than as a result of the Purchaser’s actions), valid and enforceable, for any reason other than in accordance with its terms, or any Borrower shall contest or purport to repudiate or disavow any of its obligations under or the validity or enforceability of any Investment Document or any material provision thereof, including by operation of law, or any Collateral Document or financing statement shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority lien on (subject only to Permitted Liens), or security interest in, the Collateral purported to be covered thereby;

11.1.7 Any Borrower shall cease to be Solvent or there shall be commenced against any Borrower an involuntary case seeking the liquidation or reorganization of such Person under the Bankruptcy Laws or any similar proceeding under any other Applicable Laws or an involuntary case or proceeding seeking the appointment of a receiver, custodian, trustee or similar official for it, or to take possession of all or a substantial portion of its property or to operate all or a substantial portion of its business, and any of the following events occur: (i) any such Person consents to such involuntary case or proceeding or fails to diligently contest it in good faith, (ii) the petition commencing the involuntary case or proceeding is not timely controverted, (iii) the petition commencing the involuntary case or proceeding remains undismissed and unstayed for a period of sixty (60) days, or (iv) an order for relief shall have been issued or entered therein or a receiver, custodian, trustee or similar official appointed;

11.1.8 Any Borrower (i) shall make any offer of settlement, extension or composition to its unsecured creditors generally, or institute a voluntary case seeking liquidation or reorganization under the Bankruptcy Laws or any similar proceeding under any other Applicable Laws, or shall consent thereto, (ii) shall consent to the conversion of an involuntary case to a voluntary case, (iii) shall file a petition, answer a complaint or otherwise institute any proceeding seeking, or shall consent or acquiesce to the appointment of, a receiver, custodian, trustee or similar official for it, or to take possession of all or a substantial portion of its property or to operate all or a substantial portion of its business, (iv) shall make a general assignment for the benefit of creditors, (v) shall generally not pay its debts as they become due or shall admit in writing its inability to pay its debts generally, or (vi) the Board of Directors of any such Person (or any committee thereof) adopts any resolution or otherwise authorizes action to approve any of the foregoing;

11.1.9 Any Borrower shall suffer any Judgment that is not satisfied within thirty (30) days after becoming final and not subject to appeal or review;

11.1.10 There shall occur any material loss, theft, damage or destruction of any of the Collateral such that the aggregate value of such Collateral minus the amount of such Collateral covered by the proceeds from the Borrower’s insurance policies exceeds $15,000;

11.1.11 There shall occur a cessation of a substantial part of the business of any Borrower for a period which significantly and adversely affects such Borrower’s capacity to continue its business on a profitable basis; or any Borrower shall suffer the loss or revocation of any license or permit now held or hereafter acquired by such Borrower which is necessary to the continued or lawful operation of its business; or any Borrower shall be enjoined, restrained or in any way prevented by court, governmental or administrative order from conducting all or any material part of its business affairs; or any material lease or agreement pursuant to which any Borrower leases, uses or occupies any Property shall be canceled or terminated prior to the expiration of its stated term; or any material part of the Collateral shall be taken through condemnation or the value of such Property shall be impaired through condemnation;

11.1.12 A Reportable Event shall occur which, in the Purchaser’s determination, constitutes grounds for the termination by the Pension Benefit Guaranty Corporation of any Benefit Plan or for the appointment by the appropriate United States district court of a trustee for any Benefit Plan, or if any Benefit Plan shall be terminated or any such trustee shall be requested or appointed, or if any Borrower is in “default” (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan resulting from such Borrower’s complete or partial withdrawal from such Benefit Plan and any such event would reasonably be expected to have a Material Adverse Effect;

11.1.13 Any Borrower shall be criminally indicted or convicted under any law that could lead to a forfeiture of any Property of any Borrower which would be reasonably expected to have a Material Adverse Effect or a material and adverse impact on the reputation or goodwill of any Borrower;

11.1.14 There shall occur any Change in Control or any Material Adverse Change;

11.1.15 Any order, decree, fine, citation or penalty shall be entered against or imposed upon any of the Borrowers or any of the Real Properties with respect to an Environmental Condition where the cost of compliance or the amount of such fine or penalty is reasonably expected, individually or in the aggregate, to exceed $10,000, and such amount is not paid in full within forty-five (45) days of entry or imposition; or

11.1.16 Any Tax assessment Lien equal to or in excess of $50,000 shall be entered against any Borrower, or any Tax assessment Lien in an amount less than $50,000 shall not have been removed within thirty (30) days of entry.

Any adjustments in the interest rate under the Note (or any PIK Notes) or other remedies available to the Purchaser hereunder or thereunder shall begin to apply immediately upon the occurrence of an Event of Default or, in the case of Sections 11.1.7 and 11.1.8 above, immediately prior to an Event of Default, in each case unless and until such Event of Default has been waived by the Purchaser in its sole and absolute discretion.

11.2 Acceleration. If any Event of Default (other than an Event of Default specified in Sections 11.1.7 or 11.1.8) occurs and is continuing, the Purchaser may, upon one (1) Business Day’s prior written notice to the Borrowers, declare all outstanding principal of, premium, if any, accrued and unpaid interest on, and all other amounts under the Note, and all other Obligations, to be due and payable. Upon any such declaration of acceleration, such principal, premium, if any, interest and other amounts shall become immediately due and payable. If an Event of Default specified in Sections 11.1.7 or 11.1.8 occurs, all outstanding principal of, premium, if any, accrued and unpaid interest on, and all other amounts under the Note, and all other Obligations, shall become immediately due and payable without any declaration or other act on the part of the Purchaser. The Borrowers hereby waive all presentment for payment, demand and notice of demand, protest, notice of protest and notice of dishonor, notice of nonpayment, diligence and all other notices of any kind to which it may be entitled under Applicable Laws or otherwise.

11.3 Set Off and Sharing of Payments. In addition to any rights now or hereafter granted under any Applicable Law and not by way of limitation of any such rights, during the continuance of any Event of Default, upon one (1) Business Day’s prior written notice to the Borrowers, the Purchaser is hereby authorized by the Borrowers at any time or from time to time, with reasonably prompt subsequent notice to the Borrowers (any prior or contemporaneous notice to the Borrowers being hereby expressly waived) to set off and to appropriate and to apply any and all (a) balances held by the Purchaser at its offices for the account of any Borrower (regardless of whether such balances are then due to such Borrower), and (b) other property at any time held or owing by the Purchaser or any Affiliate thereof to or for the credit or for the account of any Borrower, against and on account of any of the Obligations.

11.4 Other Remedies. If any Default or Event of Default shall occur and be continuing, the Purchaser may proceed to protect and enforce the Purchaser’s rights and remedies under this Agreement and any other Investment Document by exercising all rights and remedies available under this Agreement, any other Investment Document or Applicable Laws (including, without limitation, the UCC), either by suit in equity or by action at law, or both, whether for the collection of principal of or interest on the Note (and any PIK Notes), to enforce

the specific performance of any covenant or other term contained in this Agreement or any other Investment Document. No remedy conferred in this Agreement upon the Purchaser is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to every other remedy conferred herein or now or hereafter existing at law or in equity or by statute or otherwise.

11.5 Appointment of Receiver. In addition to all other rights, powers and remedies that the Purchaser has under this Agreement, any other Investment Document or Applicable Laws, the Purchaser shall, upon the occurrence of an Event of Default, be entitled (to the extent permitted by Applicable Laws), and the Borrowers hereby consent in advance, to the appointment of a receiver by any court of competent jurisdiction to take control of the Borrowers for the purpose of operating and thereafter selling any Borrower to satisfy obligations to creditors, including the Purchaser.

11.6 Waiver of Past Defaults. The Purchaser may, by written notice to the Borrowers, waive any specified Default or Event of Default and its consequences with respect to this Agreement, the Note or any other Investment Document; provided, however, that no such waiver will extend to any subsequent or other Default or Event of Default or impair any rights of the Purchaser which may arise as a result of such other Default or Event of Default.

12.

WAIVER

The Purchaser may (a) extend the time for the performance of any of the obligations or other acts of the Borrowers, (b) waive any inaccuracies in the representations or warranties of the Borrowers or (c) waive compliance with any of the conditions, covenants or agreements of the Borrowers contained herein. Any such extension or waiver shall be valid only if set forth in an instrument signed by the Purchaser. Any waiver of the breach of any term or condition shall not be construed as a waiver of any other breach or as a subsequent waiver of the same term or condition, or as a waiver of any other term or condition of this Agreement, the Note, any PIK Note or any other Investment Document. The failure by the Purchaser to assert, or any delay by the Purchaser in asserting any of its rights under this Agreement, the Note, any PIK Note, or any other Investment Document shall not constitute a waiver of any such rights and no single or partial exercise of any such right shall preclude any other or further exercise thereof or the exercise of any other right.

13.	POWER OF ATTORNEY

The Borrowers hereby irrevocably designate, make, constitute and appoint the Purchaser (and all Persons designated by the Purchaser), effective upon the occurrence of an Event of Default until such time as such Event of Default has been waived by the Purchaser in its sole and absolute discretion, as the true and lawful attorney (and attorney-in-fact) of each Borrower to endorse the applicable Borrower’s name on any checks, notes, acceptances, drafts, money orders or any other evidence of payment or proceeds of the Collateral which come into the possession of the Purchaser or under the Purchaser’s control, at such time or times as the Purchaser is required to do so in order to preserve its rights under any Collateral Document, but at the cost and expense of the Borrowers. The power of attorney granted hereby shall constitute a power coupled with an interest and shall be irrevocable.

14.	MISCELLANEOUS

14.1 Survival of Representations and Warranties; Purchaser Investigation. All representations, warranties, covenants and agreements of the Borrowers (or any one of them) contained herein, or made in writing by or on behalf of them pursuant hereto or in connection herewith, shall survive the execution and delivery of this Agreement, the issuance and delivery of the Note, the repayment of the Note and the due diligence or other investigation of the Borrowers and their Affiliates made by and on behalf of the Purchaser for a period of one (1) year after indefeasible payment in full of the Note and the PIK Notes. The Borrowers hereby agree that neither the Purchaser’s review of the books and records or condition (financial or otherwise), business, assets, properties, operations or prospects of any Person, nor any other due diligence investigation conducted by or on behalf of the Purchaser, shall be deemed to modify the representations and warranties of the Borrowers contained in this Agreement or any other Investment Document or to constitute knowledge by the Purchaser of the existence or absence of any facts or any other matters so as so reduce the Purchaser’s right to rely on the accuracy of the representations and warranties of the Borrowers contained in this Agreement or any other Investment Document.

14.2 Consent to Amendments. No amendment, supplement or other modification to this Agreement or any other Investment Document shall be effective unless in writing and signed by Holders holding in the aggregate 70% of the then outstanding principal amount of the Note (the “Requisite Holders”), and the Borrowers may not take any action herein prohibited, or omit to perform any act herein required to be performed by them, unless the Borrowers shall have obtained the prior written consent of the Requisite Holders to such action or omission. No course of dealing between the Borrowers, on the one hand, and the Purchaser (or any successor or assignee thereof), on the other hand, nor any delay in exercising any rights hereunder or under the Note, the PIK Notes or any other Investment Document shall operate as a waiver of any rights of the Purchaser (or any other Holder). Notwithstanding the foregoing, no amendment, supplement or modification shall be binding on any Holder without that Holder’s express written consent if such amendment, supplement or modification would (a) change the principal due or amount of interest payable on the Note whether as a result of prepayment or at maturity; (b) extend the time for payment of any Obligation; (c) release any Borrower from any Obligations; (d) amend the provisions of this Section 14.2; or (e) amend the terms of any defined term in Section 1 that would have the effect of implementing an amendment otherwise prohibited by clauses (a) through (d) hereof.

14.3 Entire Agreement. This Agreement, together with the exhibits and the Disclosure Schedules which are all incorporated herein by this reference and are an integral part of this Agreement, the Note, any PIK Note, and the other Investment Documents constitute the full and entire agreement and understanding between and among the Purchaser and the Borrowers relating to the subject matter hereof and thereof, and supersede all prior oral and written, and all contemporaneous oral agreements and understandings relating to the subject matter hereof. If any words have been added or deleted in this Agreement or any related document as compared to any prior draft thereof, this Agreement and the related documents shall be construed without reference to such prior drafts and no implication shall be made regarding any such additions or deletions.

14.4 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provisions in any other jurisdiction.

14.5 Successors and Assigns; Assignments. This Agreement shall inure to the benefit of, and be binding upon, the parties and their respective successors and permitted assigns. No Borrower shall assign any of its rights and obligations hereunder or any interest herein or therein without the prior written consent of the Requisite Holders. The Purchaser may, at any time and from time to time without the consent of any Borrower, assign, transfer or delegate to one or more Persons (each an “Assignee”) all or any part of its right, title and interest in and to this Agreement and the other Investment Documents, including, without limitation, all or any part of the Obligations, subject to compliance with applicable federal and state securities laws; provided, however, that, in any privately negotiated transaction involving a sale or assignment of any such right, title or interest, the transferor shall obtain from the Assignee in writing investment intent representations which would be customarily obtained in transactions of such nature; and provided further, that the Borrowers or the Purchaser, as applicable, shall continue to deal solely and directly with the transferor in connection with any right, title or interest so assigned until written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Borrowers and the Purchaser.

14.6 Certain Agreements of the Borrowers. Each Borrower agrees that (a) it will use reasonable best efforts to cooperate with the Purchaser in any manner reasonably requested by the Purchaser to effect the sale of participation in or assignments of any of the Investment Documents or any portion thereof or interest therein, including, without limitation, assisting in the preparation of appropriate disclosure documents and making members of management available at reasonable times to meet with and answer questions of potential assignees and participants, and (b) the Purchaser may disclose credit information regarding any Borrower to any potential participant or assignee, provided that such potential participant or assignee agrees to keep such information confidential.

14.7 Notices. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given at the earliest of (a) the date received, (b) one (1) Business Day after being sent by a nationally recognized overnight courier for next Business Day delivery, with receipt acknowledged, or (c) five (5) Business Days after being mailed, postage prepaid, by certified mail, return receipt requested, addressed as follows:

If to the Purchaser, to:

Vintage Capital Group, LLC

11611 San Vicente Boulevard, 10th Floor

Los Angeles, CA 90049

Attention: Thomas Webster

Telephone: (310) 979-9090

Telecopier: (310) 207-0035

E-Mail: twebster@vintage-vfm.com

With a copy to:

Klee, Tuchin, Bogdanoff & Stern LLP

1999 Avenue of the Stars, 39th Floor

Los Angeles, CA 90067

Attention: Ronn S. Davids

Telephone: (310) 407-4095

Telecopier: (310) 407-9090

E-Mail: RDavids@ktbslaw.com

If to any Borrower, to:

Caprius, Inc.

10 Forest Avenue, Suite 220

Paramus, NJ 07652

Attention: Dwight Morgan

Telephone: (201) 342-0900

Telecopier: (866) 405-4918

E-Mail: dmorgan@mcmetech.com

With a copy to:

Carter Ledyard & Milburn LLP

2 Wall Street

New York, NY 10005

Attention: Bruce A. Rich

Telephone: (212) 238-8895

Telecopier: (212) 732-3232

E-Mail: rich@clm.com

or at such other address or addresses as the Purchaser or the Borrowers, as the case may be, may specify by written notice given in accordance with this Section 14.7.

14.8 Counterparts. This Agreement may be executed in two or more counterparts and by facsimile or PDF, each of which shall be deemed, and as effective as, an original, but all of which together shall constitute one instrument.

14.9 Governing Law. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

14.10 Limitation of Liability. No claim shall be made by any Borrower or any of its or their Affiliates against the Purchaser, any of its Affiliates or any of its respective partners, members, mangers, principals, directors, officers, employees, agents, representatives, attorneys, accountants or advisors, for any special, indirect, consequential, incidental or punitive damages in respect of any claim for breach of contract or under any other theory of liability arising out of or related to the transactions contemplated by this Agreement or any other Investment Document, or any act, omission or event occurring in connection therewith. Each of the Borrowers hereby waives, releases and agrees not to sue upon any claim for such damages, whether or not accrued and whether or not known or suspected to exist in its favor.

14.11 Publicity. The Borrowers and their respective Affiliates will consult with the Purchaser before issuing, and provide the Purchaser reasonably ample time and opportunity to review and comment upon, and use reasonable efforts to agree on the form and substance of, any press release or other public statement with respect to the transactions contemplated by this Agreement, and shall not issue any such press release or make such other public announcement prior to such consultation, except as required under Applicable Laws. The parties agree that any press release to be issued with respect to the transactions contemplated by this Agreement shall be in the form agreed to by the parties. The Borrowers hereby consent to the preparation and publication by the Purchaser of an advertisement “tombstone” publicly disclosing the closing of the transactions contemplated by this Agreement.

14.12 Waiver of Trial by Jury. TO THE EXTENT PERMITTED AND ENFORCEABLE UNDER APPLICABLE LAW, EACH OF THE BORROWERS AND THE PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR OTHER PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS AGREEMENT, ANY OTHER INVESTMENT DOCUMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS OF THE PURCHASER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS.

14.13 Cumulative Effect; Conflict of Terms. The provisions of the Investment Documents are hereby made cumulative with the provisions of this Agreement. Except as otherwise provided in any of the other Investment Documents by specific reference to the applicable provision of this Agreement, if any provision contained in this Agreement is in direct conflict with, or inconsistent with, any provision in any of the other Investment Documents, the provision contained in this Agreement shall govern and control.

14.14 Time of Essence. Time is of the essence of this Agreement, the Note, the PIK Note, and the other Investment Documents and Collateral Documents.

14.15 Interpretation. No provision of this Agreement or any of the other Investment Documents or Collateral Documents shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or dictated such provision.

14.16 Consent to Forum. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF THE BORROWERS OR THE PURCHASER, EACH OF THE BORROWERS HEREBY CONSENTS AND AGREES THAT THE SUPERIOR COURT OF LOS ANGELES COUNTY, CALIFORNIA, OR, AT THE PURCHASER’S OPTION, THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE BORROWERS ON THE ONE HAND AND THE PURCHASER ON THE OTHER HAND PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. THE BORROWERS EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE BORROWERS HEREBY WAIVE ANY OBJECTION WHICH THE BORROWERS MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWER’S ACTUAL RECEIPT THEREOF OR FIVE (5) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF THE PURCHASER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY THE PURCHASER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

14.17 Judicial Reference. IN THE EVENT THE WAIVER PROVIDED IN SECTION 14.12 IS DEEMED INEFFECTIVE, TO GIVE EFFECT TO THE PARTIES’ DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE OR RETIRED JUDGE APPLYING THE APPLICABLE LAW, THE PARTIES AGREE TO REFER, FOR A COMPLETE AND FINAL ADJUDICATION, ANY AND ALL ISSUES OF FACT OR LAW INVOLVED IN ANY LITIGATION OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, ALL DISCOVERY AND LAW AND MOTION MATTERS, PRETRIAL MOTIONS, TRIAL MATTERS AND POST-TRIAL MOTIONS (E.G. MOTIONS FOR

RECONSIDERATION, NEW TRIAL AND TO TAX COSTS, ATTORNEY FEES, COSTS AND EXPENSES AND PREJUDGMENT INTEREST)) UP TO AND INCLUDING FINAL JUDGMENT, BROUGHT TO RESOLVE ANY DISPUTE (WHETHER SOUNDING IN CONTRACT, TORT, UNDER ANY STATUTE OR OTHERWISE) BETWEEN AND AMONG ANY OF THE PARTIES HERETO, TO A JUDICIAL REFEREE WHO SHALL BE APPOINTED UNDER A GENERAL REFERENCE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638. THE REFEREE’S DECISION WOULD STAND AS THE DECISION OF THE COURT, WITH JUDGMENT TO BE ENTERED ON HIS/HER STATEMENT OF DECISION IN THE SAME MANNER AS IF THE ACTION HAD BEEN TRIED BY THE COURT. THE PARTIES HERETO SHALL SELECT A SINGLE NEUTRAL REFEREE, WHO SHALL BE A RETIRED STATE OR FEDERAL JUDGE WITH AT LEAST FIVE YEARS OF JUDICIAL EXPERIENCE IN CIVIL MATTERS. IN THE EVENT THAT THE PARTIES HERETO CANNOT AGREE UPON A REFEREE, THE REFEREE SHALL BE APPOINTED BY THE COURT. WITHOUT LIMITING OR AFFECTING ANY INDEMNITIES AVAILABLE TO THE PURCHASER, THE PURCHASER, ON THE ONE HAND, AND THE BORROWERS, ON THE OTHER HAND, SHALL EQUALLY BEAR THE FEES AND EXPENSES OF THE REFEREE (50% BY THE PURCHASER AND 50% BY THE BORROWERS) UNLESS THE REFEREE OTHERWISE PROVIDES IN THE STATEMENT OF DECISION.

IN WITNESS WHEREOF, the parties have caused this Securities Purchase and Sale Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.



BORROWERS: CAPRIUS, INC.

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

M.C.M. ENVIRONMENTAL TECHNOLOGIES, INC.

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

M.C.M. ENVIRONMENTAL TECHNOLOGIES LTD.

By:	/s/ George Aaron
	Name:	George Aaron
	Title:	Chairman

[SIGNATURE PAGE TO SECURITIES PURCHASE AND SALE AGREEMENT]

PAGE 1



PURCHASER: VINTAGE CAPITAL GROUP, LLC

By:	/s/ Fred C. Sands
	Name:	Fred C. Sands
	Title:	Chairman

[SIGNATURE PAGE TO SECURITIES PURCHASE AND SALE AGREEMENT]

PAGE 2

EX-99.3 4 dex993.htm SENIOR SECURED PROMISSORY NOTE Senior Secured Promissory Note

Exhibit 3

Execution Version

THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF SUCH STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION.

SENIOR SECURED PROMISSORY NOTE

September 16, 2009

FOR VALUE RECEIVED, CAPRIUS, INC., a Delaware corporation (“Caprius”), M.C.M. ENVIRONMENTAL TECHNOLOGIES, INC., a Delaware corporation (“M.C.M.”), and M.C.M. ENVIRONMENTAL TECHNOLOGIES LTD., an Israeli corporation (“M.C.M. Israel” and, together with Caprius and M.C.M., each a “Borrower” and, collectively, the “Borrowers”), jointly and severally hereby promise to pay to the order of VINTAGE CAPITAL GROUP, LLC, a Delaware limited liability company (the “Purchaser”), or any registered permitted assigns of the Purchaser (together with the Purchaser, the “Holder”), the aggregate principal amount of all Advances as shall have been funded in accordance with the terms of the Purchase Agreement (as defined below) in immediately available funds and in lawful money of the United States of America, together with interest thereon, all as provided in this Senior Secured Promissory Note (this “Note”). This Note is being issued in connection with the consummation of the transactions contemplated by the Securities Purchase and Sale Agreement, dated of even date herewith, among the Borrowers and the Purchaser (the “Purchase Agreement”). All capitalized terms used and not otherwise defined in this Note shall have the meanings set forth in the Purchase Agreement.

1. Payment of Interest; Default Rate.

(a) So long as no Event of Default shall have occurred and be continuing, the Borrowers shall pay interest on the unpaid principal balance of, and accrued unpaid interest on, this Note from the date hereof until fully paid as follows:

(i) Interest. Interest on the outstanding principal balance of this Note shall be payable at a rate equal to fourteen percent (14%) per annum by issuing additional senior notes of like tenor, in an amount equal to 100% of the interest payment due on such Interest Payment Date (as defined below), and including the same terms and other provisions contained in this Note (including without limitation the interest terms contained in this Section 1) (each, a “PIK Note”), with the principal amount of each such additional note equal to the amount of such interest payment. Any PIK Note not actually issued shall be deemed issued on the applicable Interest Payment Date (as defined below) and shall be payable in full on the Maturity Date, as provided in Section 2.

(b) If any Event of Default shall occur and be continuing, then, in addition to the rights and remedies available to the Holder under the Purchase Agreement, this Note, and all applicable laws, the Borrowers shall pay interest in cash on the unpaid principal balance of, accrued and unpaid interest on, and all other amounts owing under this Note and the PIK Notes at a rate per annum equal to the then applicable rate per annum, plus three percent (3%) (the “Default Rate”).

(c) Interest on this Note shall be payable monthly in arrears on the first Business Day of each calendar month (or portion thereof), commencing on November 1, 2009 (each, an “Interest Payment Date”) and continuing on the first Business Day of each calendar month thereafter until all principal, interest and other amounts owing under this Note are paid in full. Interest shall be computed on the basis of the actual number of days elapsed over a 360-day year, including the first and the last day.

2. Payment of Principal; Maturity Date. The Borrowers agree jointly and severally to pay in full (a) the entire outstanding principal balance of this Note and the PIK Notes, (b) all accrued and unpaid interest on this Note and the PIK Notes, and (c) all other unpaid amounts owing under this Note and the PIK Notes, on December 16, 2010 (the “Maturity Date”). This Note may not be prepaid except as provided in Section 3.

3. Prepayment.

(a) Except as provided in Section 3(b), the Borrowers shall not prepay all or any portion of the principal amount of this Note at any time prior to the Maturity Date.

(b) Within three (3) Business Days after any Disposition (as defined below) by any Borrower or its Subsidiaries, the Borrowers shall prepay, without premium or penalty, the outstanding principal amount of this Note in an amount equal to one hundred percent (100%) of the proceeds of such Disposition, net of reasonable costs and expenses actually incurred by such Borrower or its Subsidiaries in connection therewith, to the extent such net proceeds exceed Fifty Thousand Dollars ($50,000). Nothing contained in this Section 3 shall permit any Borrower or its Subsidiaries to make a Disposition of any property other than as specifically permitted under the Purchase Agreement. As used in this Note, “Disposition” means any transaction, or series of related transactions, pursuant to which any Borrower or any of its Subsidiaries sells, assigns, transfers or otherwise disposes of any property or asset (whether now owned or hereafter acquired) to any other Person, in each case, whether or not the consideration therefor consists of cash, securities or other assets owned by the acquiring Person, excluding (A) any sales of Inventory in the ordinary course of business, (B) transfers or other dispositions between and among the Borrowers and their Subsidiaries to the extent permitted by the terms of the Purchase Agreement, and (C) the transfer of leasehold interests to any lessor upon the termination of such lease.

(c) Each prepayment of principal shall be accompanied by the prepayment of accrued interest to the date of such payment on the amount prepaid. Notwithstanding any provision to the contrary herein, any payment, when made, shall be applied first to the payment of all accrued and unpaid fees, expenses and costs under any Investment Document, next to the payment of all interest and other amounts owed hereunder then accrued on the unpaid balance of the principal and the balance of such payment, after paying such interest and premiums, shall be applied in reduction of the unpaid balance of the principal.

4. Security. The Borrowers’ due and punctual performance of this Note is secured by the collateral pursuant to the Security Agreement and the Pledge Agreement.

5. Manner of Payment. Payments of principal, interest and other amounts due under this Note shall be made no later than 11:00 a.m. (Los Angeles time) on the date when due and in lawful money of the United States of America and (by wire transfer in funds immediately available at the place of payment or by check as long as the funds are immediately available at such time on the due date of the payment) to such account as the Holder may designate in writing to the Borrowers from time to time (or such other place of payment as the Holder may designate in writing). All such payments shall be made without any deduction whatsoever, including, without limitation, any deduction for set-off, recoupment, counterclaim or taxes. Any payments received after 11:00 a.m. (Los Angeles time) shall be deemed to have been received on the next succeeding Business Day. Any payments due hereunder which are due on a day which is not a Business Day shall be payable on the immediately succeeding Business Day, together with all accrued and unpaid interest through the due date of payment. All payments received shall be applied first to any costs of collection or other accrued but unpaid fees, expenses and costs under any Investment Document, next to accrued and unpaid interest payable in cash, next, to accrued PIK Interest, next to principal on the PIK Notes, and last, to principal on the Note.

6. Maximum Lawful Rate of Interest. The rate of interest payable under this Note shall in no event exceed the maximum rate permissible under applicable law. If the rate of interest payable on this Note is ever reduced as a result of this Section 6 and at any time thereafter the maximum rate permitted under applicable law exceeds the rate of interest provided for in this Note, then the rate provided for in this Note shall be increased to the maximum rate provided for under applicable law for such period as is required so that the total amount of interest received by the Holder is that which would have been received by the Holder but for the operation of the first sentence of this Section 6.

7. Waivers. The Borrowers hereby waive presentment for payment, demand and notice of demand, protest, notice of protest and notice of dishonor, notice of nonpayment, diligence and all other notices of any kind whatsoever to which they may be entitled under applicable law or otherwise (except for notices to which the Borrowers are expressly entitled under this Note) and, to the full extent permitted by law, the right to plead any statute of limitations as a defense, in any suit or collection proceeding brought against the Borrowers. No delay or omission on the part of the Holder in exercising any rights under this Note shall operate as a waiver of such right or any other right.

8. Registration of Notes. The Borrowers shall maintain at its principal executive office a register in which it shall register this Note, any assignments of this Note or any other notes issued hereunder and any other notes issued upon surrender hereof and thereof. At the option of the Holder, this Note may be exchanged for one or more new notes of like tenor in the principal denominations requested by the Holder, and the Borrowers shall, within five (5) Business Days after the surrender of this Note at Caprius’ principal executive offices, deliver to the Holder such new note or notes. In addition, each assignment of this Note, in whole or in part, shall be registered on the register immediately following the surrender of this Note at Caprius’ principal executive offices.

9. Persons Deemed Owners; Participations. Prior to due presentment in aggregate for registration of any assignment, the Borrowers may treat the person or entity in whose name any Note is registered as the owner and the Holder of such Note for all purposes whatsoever, and the Borrowers shall not be affected by notice to the contrary. Subject to the preceding sentence, the Holder may grant to any other person or entity (each, a “Participant”), without the Borrowers’ consent, participations from time to time in this Note on such terms and conditions as may be determined by the Holder in its sole and absolute discretion, subject to applicable federal and state securities laws. Notwithstanding anything to the contrary contained herein or otherwise, nothing in this Note, the Purchase Agreement or any related document or otherwise shall confer upon a Participant any rights under the Purchase Agreement or any related document, and the Holder shall retain all rights with respect to the administration, waiver, amendment, collection and enforcement of, compliance with and consent to the terms and provisions of this Note, the Purchase Agreement and any other related document.

10. Assignment and Transfer. Subject to applicable law, the Purchaser may, at any time and from time to time and without the consent of the Borrowers, assign or transfer to one or more Persons or entities all or any portion of the principal balance of this Note.

11. Loss, Theft, Destruction or Mutilation of this Note. Upon receipt of evidence reasonably satisfactory to the Borrowers of the loss, theft, destruction or mutilation of this Note and, in the case of any such loss, theft, destruction or mutilation, upon receipt of an indemnity agreement or other indemnity reasonably satisfactory to the Borrowers or, in the case of any such mutilation, upon surrender and cancellation of such mutilated Note, the Borrowers shall issue and deliver within five (5) business days a new Note, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Note.

12. Extension of Time. The Holder may, at its sole option, extend the time for payment of this Note, postpone the enforcement hereof, or grant any other indulgence without affecting or diminishing the Holder’s right to full recourse against the Borrowers hereunder, which right is expressly reserved. Any such extension, postponement, waiver or other indulgence shall only be effective if in writing and signed by the Holder.

13. Governing Law. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

14. Captions; Construction and Interpretation. The captions contained in this Note are for convenience of reference only, do not constitute a part of this Note and are not to be considered in construing or interpreting this Note. The Borrowers and the Holder have each been represented by counsel in the negotiation and drafting of this Note, and neither any Borrower nor the Holder nor their respective counsel shall be deemed the drafter of this Note for purposes of construing the provisions of this Note. All provisions of this Note shall be construed in accordance with their fair meaning, and not strictly for or against any Borrower or the Holder.

15. Consent to California Jurisdiction and Exclusive Jurisdiction of California Courts. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF ANY BORROWER OR THE HOLDER, EACH BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE COURTS OF CALIFORNIA, OR, AT THE HOLDER’S OPTION, THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE BORROWERS ON THE ONE HAND AND THE HOLDER ON THE OTHER HAND PERTAINING TO THIS NOTE OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE. EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH BORROWER HEREBY WAIVES ANY OBJECTION WHICH SUCH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO ANY BORROWER AT THE ADDRESS SET FORTH IN THE PURCHASE AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWER’S ACTUAL RECEIPT THEREOF OR THE NEXT BUSINESS DAY IF SENT BY A NATIONALLY RECOGNIZED OVERNIGHT COURIER FOR NEXT BUSINESS DAY DELIVERY. NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF THE HOLDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY THE HOLDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS NOTE TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

16. Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, EACH BORROWER AND THE HOLDER (BY ACCEPTANCE HEREOF) HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER PROCEEDING BROUGHT TO RESOLVE ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATING TO THIS NOTE, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION, SUIT OR OTHER PROCEEDING.

IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed and delivered by their duly authorized representatives on the date first above written.



BORROWER: CAPRIUS, INC., a Delaware corporation

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

M.C.M. ENVIRONMENTAL TECHNOLOGIES, INC., a Delaware corporation

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

M.C.M. ENVIRONMENTAL TECHNOLOGIES LTD., an Israeli corporation

By:	/s/ George Aaron
	Name:	George Aaron
	Title:	Chairman

[SIGNATURE PAGE TO SENIOR SECURED PROMISSORY NOTE]

EX-99.4 5 dex994.htm SECURITY AGREEMENT Security Agreement

Exhibit 4

Execution Version

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Security Agreement”) dated as of September 16, 2009, is made by and among CAPRIUS, INC., a Delaware corporation (“Caprius”), M.C.M. ENVIRONMENTAL TECHNOLOGIES, INC., a Delaware corporation (“M.C.M.”), M.C.M. ENVIRONMENTAL TECHNOLOGIES LTD., an Israeli corporation (“M.C.M. Israel”), the Additional Obligors (as defined in Section 14(k)) (together with Caprius, M.C.M. and M.C.M. Israel, collectively, the “Obligors” and each (including Caprius, M.C.M. and M.C.M. Israel) individually, an “Obligor”), VINTAGE CAPITAL GROUP, LLC, a Delaware limited liability company (together with its successors and assigns, collectively, the “Secured Party”), as an inducement to the Secured Party to enter into that certain Securities Purchase and Sale Agreement of even date herewith (as may be amended, restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”) and the transactions contemplated thereby. All Capitalized terms used and not defined herein shall have the respective meanings assigned to them in the Purchase Agreement.

AGREEMENT

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Obligors and the Secured Party hereby agree as follows:

1. DEFINITIONS. Except as otherwise provided herein, terms defined in the Purchase Agreement or the UCC shall have the same meanings when used herein. As used herein, the term:

“Collateral” shall have the meaning set forth in Section 2.

“Liquidation Costs” means the reasonable costs and out of pocket expenses incurred by the Secured Party in obtaining possession of any Collateral, in storage and preparation for sale, lease or other disposition of any Collateral, in the sale, lease, or other disposition of any or all of the Collateral, and/or otherwise incurred in foreclosing on any of the Collateral, including, without limitation, (a) reasonable attorneys’ fees and legal expenses, (b) transportation and storage costs, (c) advertising costs, (d) sale commissions, (e) sales tax and license fees, (f) costs for improving or repairing any of the Collateral, and (g) costs for preservation and protection of any of the Collateral.

“Obligations” shall have the meaning set forth in Section 3.

“Permitted Encumbrances” means liens for taxes and assessments not yet due and payable or, if due and payable, those being contested in good faith by appropriate proceedings and for which appropriate reserves are maintained, security interests and liens created by the Investment Documents, Permitted Liens, and security interests and liens permitted pursuant to Section 10.5 of the Purchase Agreement.

“UCC” means the Uniform Commercial Code as in effect in the State of New York on the date of this Security Agreement.

2. GRANT OF SECURITY INTEREST. Each Obligor hereby grants to the Secured Party a security interest in all personal property of that Obligor, wherever located, now owned or hereafter acquired or created, including, without limitation, all of the following, each as defined in the UCC unless otherwise defined below (the “Collateral”):

(a) Accounts;

(b) Certificated Securities;

(d) Commercial Tort Claims;

(e) Computer Hardware and Software and all rights with respect thereto, including, any and all licenses, options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights, renewal rights and indemnifications, and any substitutions, replacements, additions or model conversions of any of the foregoing;

(f) Contract Rights;

(g) Deposit Accounts;

(h) Documents;

(i) Electronic Chattel Paper;

(j) Equipment;

(k) Financial Assets;

(l) Fixtures;

(m) General Intangibles, including Payment Intangibles and Software;

(n) Goods (including all of its Equipment, Fixtures and Inventory), and all accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor;

(o) Instruments;

(p) Patents, patent applications, trademarks, trademark applications, copyrights, copyright applications, and all other intellectual property, including without limitation, those patents, patent applications, trademarks, trademark applications, copyrights and copyright applications identified on Annex 1 attached hereto;

(q) Inventory;

(r) Investment Property;

(s) Money (of every jurisdiction whatsoever);

(t) Letter-of-Credit Rights;

(u) Security Entitlements;

(v) Supporting Obligations;

(w) Uncertificated Securities; and

(x) to the extent not included in the foregoing, all other personal property of any kind or description;

together with all books, records, writings, databases, information and other property relating to, used or useful in connection with, or evidencing, embodying, incorporating or referring to any of the foregoing; and all Proceeds, products, offspring, rents, issues, profits and returns of and from any of the foregoing; provided that to the extent that the provisions of any license, permit, lease or contract expressly prohibit (which prohibition is enforceable under applicable law) any assignment thereof, and the grant of security interest therein, the Secured Party will not enforce the security interest in that Obligor’s rights under such license, permit, lease or contract (other than in respect of the Proceeds thereof) for so long as such prohibition continues, it being understood that upon request of the Secured Party, such Obligor will in good faith use reasonable efforts to obtain consent for the creation of a security interest in favor of the Secured Party (and to enforcement by the Secured Party of such security interest) in the Obligor’s rights under such license, permit, lease or contract.

3. DEBTS SECURED. The security interest granted by this Security Agreement shall secure the prompt payment and performance of all of the Obligors’ present and future debts, obligations, and liabilities of whatever nature to the Secured Party, including, without limitation, (a) the Note and any PIK Notes (as defined in the Note) issued or deemed to be issued pursuant to the Note, (b) all obligations of each Obligor arising from or relating to the Investment Documents, including, without limitation, this Security Agreement, and (c) transactions in which the documents evidencing the indebtedness refer to this grant of security interest as providing security therefor (collectively, the “Obligations”).

Each of the Obligors and the Secured Party expressly acknowledge their mutual intent that the security interest created by this Security Agreement secure the prompt and indefeasible payment and performance of payment and performance of any and all Obligations without any limitation whatsoever.

4. LOCATION OF THE OBLIGORS AND COLLATERAL. Each Obligor jointly and severally represents and warrants that:

(a) Annex 2 attached hereto correctly and completely sets forth its full and correct legal name, type of organization, jurisdiction of organization, organizational ID number (if applicable), chief executive office and mailing address as of the date of this Security Agreement.

(b) Annex 2 attached hereto correctly and completely sets forth the location of its Accounts as of the date of this Security Agreement.

(d) Annex 2 attached hereto correctly and completely sets forth each location of its Equipment as of the date hereof.

Each Obligor agrees that it will not change its state of organization or any of the above referenced locations or create any new locations for such items or matters without giving the Secured Party at least thirty (30) days’ prior written notice thereof. In addition, each Obligor agrees that it will not (i) change its name, federal employer identification number, organizational identification number, corporate structure or identity, or (ii) create or operate under any new fictitious name without giving the Secured Party at least thirty (30) days’ prior written notice thereof.

5. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL. Each Obligor jointly and severally represents and warrants that:

(a) One or more of the Obligors is the sole owner of the Collateral.

(b) The Collateral is not subject to any security interest, lien, prior assignment, or other encumbrance of any nature whatsoever except Permitted Encumbrances. M.C.M. Israel represents and warrants that it received an assignment of the entire right, title and interest in and to United States Patent 5,620,654 on November 17, 1998, and that it has not assigned any interest in or to such patent prior to the date hereof.

(c) The Accounts, Instruments and Chattel Paper are bona fide obligations of the obligors identified therein for the amount identified therein or as otherwise disclosed in writing to the Secured Party by the Obligors, except for normal and customary disputes which arise in the ordinary course of business and which are not expected to affect a material portion of such obligations.

(d) To the knowledge of the Obligors, there are no defenses or setoffs to payment of the Accounts, Instruments or Chattel Paper which can be asserted by way of defense or counterclaim against the Obligors or the Secured Party, except for normal and customary disputes which arise in the ordinary course of business and which are not expected to affect a material portion of such obligations.

(e) There is presently no default or delinquency in any payment of the Accounts, Instruments or Chattel Paper (except, with respect to the Accounts, any default or delinquency which has been reserved against by the Obligors in accordance with generally accepted accounting principles) and, to its knowledge, such Collateral is expected to be timely paid in full by the obligor, except for normal and customary disputes which arise in the ordinary course of business and which are not expected to affect a material portion of such obligations.

(f) The Obligors have no knowledge of any fact or circumstance which would materially impair the ability of any obligor on the Accounts, Instruments or Chattel Paper to timely perform its obligations thereunder, except those which arise in the ordinary course of business and which are not expected to affect a material portion of such obligations in the aggregate.

(g) Any services performed or goods sold giving rise to the Accounts, Instruments or Chattel Paper have been rendered or sold in material compliance with applicable laws, ordinances, rules, and regulations.

(h) There have been no extensions, modifications, or other agreements relating to payment of the Accounts, Instruments or Chattel Paper (except, with respect to the Instruments and Chattel Paper, as shown upon the face thereof or as otherwise disclosed in writing to the Secured Party by such Obligor), except those granted in the ordinary course of business and which are not expected to affect a material portion of such obligations.

(i) As of the date hereof, the Obligors do not possess a Commercial Tort Claim.

6. COVENANTS CONCERNING COLLATERAL. Each Obligor jointly and severally covenants that:

(a) the Obligors will keep the Collateral free and clear of any and all security interests, liens, assignments or other encumbrances, except Permitted Encumbrances and no Obligor shall enter into any licenses with respect to the Collateral, except in the ordinary course of business.

(b) the Obligors shall promptly notify the Secured Party in writing upon incurring or otherwise obtaining a Commercial Tort Claim after the Closing Date against any third party and, upon reasonable request of the Secured Party, promptly enter into an amendment to this Security Agreement and do such other acts or things deemed appropriate by the Secured Party to give the Secured Party a security interest in any such Commercial Tort Claim.

(c) the Obligors shall (i) promptly notify the Secured Party in writing upon acquiring or otherwise obtaining any material Collateral after the date hereof consisting of Deposit Accounts, Investment Property, Letter of Credit Rights or Electronic Chattel Paper and, upon the request of the Secured Party, promptly execute such other documents, and do such other acts or things reasonably deemed appropriate by the Secured Party to deliver to the Secured Party control with respect to such Collateral, and (ii) promptly notify the Secured Party in writing upon acquiring or otherwise obtaining any material Collateral after the date hereof consisting of Documents or Instruments and, upon the request of the Secured Party, will promptly execute such other documents, and do such other acts or things reasonably deemed appropriate by the Secured Party to deliver to the Secured Party possession of such Documents which are negotiable Instruments, and, with respect to nonnegotiable Instruments, to have such nonnegotiable Instruments issued in the name of the Secured Party; and with respect to Collateral in the possession of a third party, other than Certificated Securities and Goods covered by a Document, obtain an acknowledgment from the third party that it is holding the Collateral on behalf of the Secured Party.

(d) the Obligors shall keep the Equipment in good repair, ordinary wear and tear and obsolescence excepted, and be responsible for any loss or damage to the Equipment. The Obligors shall pay when due all taxes, license fees and other charges on the Equipment. The Obligors shall not sell or in any way dispose of the Equipment except in the ordinary course of business or as permitted in the Purchase Agreement, this Security Agreement or by the Secured Party in writing. The Obligors shall not misuse, conceal or permit the Equipment to be used unlawfully or for hire or contrary to the provisions of any insurance coverage. Risk of loss of the Equipment shall be on the Obligors at all times unless the Secured Party takes possession of the Equipment. Loss of or damage to the Equipment or any part thereof shall not release the Obligors from any of the obligations secured by the Equipment. The Secured Party or its representatives may, at any time and from time to time upon reasonable notice and without unreasonable disruption of any Obligor’s business, enter any premises where the Equipment is located and inspect, audit and check the Equipment.

(e) the Obligors shall insure the Equipment, at their sole expense, against loss, damage, theft, and such other risks as the Secured Party may request to the full insurable value thereof with insurance companies and policies reasonably satisfactory to the Secured Party. Proceeds from such insurance shall be payable to the Secured Party as an additional insured and such policies shall provide for a minimum thirty (30) days written cancellation notice to the Secured Party. Upon request, copies of such policies or certificates attesting to such coverage shall be delivered to the Secured Party. Insurance proceeds may be applied by the Secured Party toward payment of any Obligation secured by this Security Agreement, whether or not due, in such order of application as the Secured Party may elect.

(f) the Obligors shall insure the Inventory at the Obligors’ expense against loss, damage, theft, and such other risks as the Secured Party may reasonably request to the full insurable value thereof with insurance companies and policies reasonably satisfactory to the Secured Party. Proceeds from such insurance shall be payable to the Secured Party as an additional insured and such policies shall provide for a minimum thirty (30) days written cancellation notice to the Secured Party. Upon request, copies of such policies or certificates attesting to such coverage shall be delivered to the Secured Party. Insurance proceeds may be applied by the Secured Party toward payment of any Obligation secured by this Security Agreement, in such order of application as the Secured Party may elect.

(g) the Obligors will at all times keep accurate and complete records of the Inventory and the Accounts. The Secured Party or its representatives may, at any time and from time to time upon reasonable notice and without unreasonable disruption of any Obligor’s business, enter any premises where the Inventory and the records pertaining to the Accounts are located and inspect, audit, check, copy, and otherwise review the Inventory and the Accounts.

(h) so long as no Obligor is in default hereunder or under any Obligation secured hereby, the Obligors shall have the right to sell or otherwise dispose of the Inventory in the ordinary course of business. No other disposition of the Inventory may be made without the prior written consent of the Secured Party.

(i) the Obligors shall use diligent and good faith efforts to collect the Accounts. Until written notice is given by the Secured Party following an uncured default under this Security Agreement, the Obligors are authorized to collect the Accounts in a commercially reasonable manner. The Secured Party following an uncured default under this Security Agreement, may terminate such authority whereupon the Secured Party is authorized by the Obligors, without further act, to notify any and all account debtors to make payment thereon directly to the Secured Party, and to take possession of all proceeds from the Accounts, and to take any action which the Obligors might or could take to collect the Accounts, including the right to make any compromise, discharge, or extension of the Accounts. Upon request of the Secured Party following an uncured default under this Security Agreement, the Obligors agree to execute and deliver to the Secured Party a written notice to the account debtors of any Obligor instructing said account debtors to pay the Secured Party. The Obligors further agree to execute and deliver to the Secured Party following an uncured default under this Security Agreement all other notices and similar documents requested by the Secured Party to facilitate collection of the Accounts.

(j) all reasonable costs of collection of the Accounts, including reasonable attorneys’ fees and legal expenses, shall be borne solely by the Obligors, whether such costs are incurred by or for the account of the Obligors or the Secured Party. In the event the Secured Party elects to undertake direct collection of the Accounts, the Obligors agree to deliver to the Secured Party, if so requested, all books, records, and documents in the possession of any Obligor or under the control of any Obligor as may relate to the Accounts or as may be helpful to facilitate such collection. The Secured Party shall have no obligation to cause an attorneys’ demand letter to be sent, to file any lawsuit, or to take any other legal action in collection of the Accounts. It is agreed that collection of the Accounts in a commercially reasonable manner does not require that any such legal action be taken.

(k) each Obligor does hereby make, constitute, and appoint the Secured Party and its designees as such Obligor’s true and lawful attorney in fact, with full power of substitution, such power to be exercised following and during the continuance of an uncured default under this Security Agreement in the following manner: (1) the Secured Party may receive and open all mail addressed to such Obligor and remove therefrom any cash, notes, checks, acceptances, drafts, money orders or other instruments in payment of the Accounts; (2) the Secured Party may cause mail relating to the Inventory and Accounts to be delivered to a designated address of the Secured Party where the Secured Party may open all such mail and remove therefrom any cash, notes, checks, acceptances, drafts, money orders, or other instruments in payment of the Accounts; (3) the Secured Party may endorse such Obligor’s name upon such notes, checks, acceptances, drafts, money orders, or other forms of payment; (4) the Secured Party may settle or adjust disputes or claims in respect to the Accounts for amounts and upon such terms as the Secured Party, in its sole discretion and in good faith, deems to be advisable, in such case crediting such Obligor with only the proceeds received and collected by the Secured Party after deduction of the Secured Party’s costs, including reasonable attorneys’ fees and legal expenses; and (5) the Secured Party may do any and all other things necessary or proper to carry out the intent of this Security Agreement and to perfect and protect the liens and rights of the Secured Party created under this Security Agreement.

(l) the Obligors shall use diligent and good faith efforts to collect the Instruments and Chattel Paper. Until written notice is given by the Secured Party following an uncured default under this Security Agreement, the Obligors are authorized to collect such Collateral in a commercially reasonable manner. Upon written notice by the Secured Party to the Obligors following an uncured default under this Security Agreement, the Secured Party may at any time terminate such authority. Upon such termination, the Secured Party is authorized by the Obligors, without further act, to notify in writing any and all obligors on that Collateral to make payment thereon directly to the Secured Party, to take possession of all proceeds from any such payments, and to take any action which an Obligor might or could take to collect that Collateral, including the right to make any compromise, discharge or extension of that Collateral. Upon request of the Secured Party following and during continuance of an uncured default under this Security Agreement, the Obligors agree to execute and deliver to the Secured Party a written notice to the obligors on such Collateral instructing said obligors to pay the Secured Party. The Obligors further agree to execute and deliver to the Secured Party all other written notices and similar documents requested by the Secured Party following an uncured default under this Security Agreement to facilitate collection of that Collateral.

Each Obligor hereby irrevocably makes, constitutes, and appoints the Secured Party and its designees as such Obligor’s true and lawful attorney in fact, following and during continuance of an uncured default under this Security Agreement, with full power of substitution, to endorse such Obligor’s name upon checks, drafts, money orders, or other forms of payment of the Instruments and Chattel Paper or on any other documents relating to collection of that Collateral.

All reasonable costs of collection of the Instruments and Chattel Paper, including attorneys’ fees and legal expenses, shall be borne solely by the Obligors, whether such costs are incurred by or for the account of the Obligors or the Secured Party. In the event the Secured Party elects to undertake to direct collection of that Collateral, the Obligors agree to deliver to the Secured Party, upon request, all books, records, and documents in the possession of any Obligor or under any Obligor’s control as may relate to that Collateral or as may be helpful to facilitate such collection.

(m) promptly after execution of this Security Agreement, the Obligors shall endorse and deliver to the Secured Party all Instruments and Chattel Paper. Upon creation of any Instruments or Chattel Paper in the future, promptly after creation the applicable Obligors shall endorse and deliver to the Secured Party the Instruments and Chattel Paper.

(n) the Obligors shall, promptly upon obtaining knowledge thereof, report to the Secured Party in writing any default on any Instruments or Chattel Paper, any material claim or dispute asserted by any obligor on any item of that Collateral, and any other material matters that may affect the value, enforceability or collectability of any of that Collateral.

(o) the Obligors shall not, without the Secured Party’s written consent, make any material settlement, compromise or adjustment of any Instruments or Chattel Paper or grant any material discounts, extensions, allowances or credits thereon.

(p) the Obligors will at all times keep accurate and complete records as to the Instruments and Chattel Paper and payments thereon and will allow the Secured Party or its representatives, at any time and from time to time upon reasonable notice and without unreasonable disruption of the business of any Obligor, to inspect, audit, check, copy and otherwise review those records.

(q) the Obligors shall execute all such collateral assignments with respect to all patents, patent applications, trademarks, trademark applications, copyrights and copyright applications as the Secured Party reasonably requests in order to perfect the security interests in such Collateral. The Obligors shall promptly execute for subsequent filing with the U.S. Patent and Trademark Office, such collateral assignments with respect to all existing patents, patent applications, trademarks and trademark applications and, for subsequent filing with the U.S. Copyright Office, such collateral assignments with respect to all copyrights and copyright applications.

7. RIGHT TO PERFORM FOR THE OBLIGORS. The Secured Party may, in its sole discretion and without any duty to do so, elect to discharge taxes, tax liens, security interests, or any other encumbrance upon the Collateral, perform any duty or obligation of the Obligors, pay filing, recording, insurance and other charges payable by the Obligors, or provide insurance as provided herein if the Obligors fails to do so. Any such payments advanced by the Secured Party shall be repaid by the Obligors upon demand, together with interest thereon from the date of the advance until repaid, both before and after judgment, at the Default Rate set forth in the New Notes. The Obligors hereby authorize the Secured Party to file one or more financing statements or continuation statements in respect thereof, and amendments thereto, relating to all or any part of the Collateral without the signature of an Obligor where permitted by law. A photocopy or other reproduction of this Security Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

8. DEFAULT. Time is of the essence of this Security Agreement. The occurrence of any of the following events, and if required, the giving of any notice and passage of the prescribed time period without cure, shall constitute a default under this Security Agreement:

(a) Any representation or warranty made by any Obligor in this Security Agreement is materially false or materially misleading when made;

(b) An Obligor fails in the payment or performance of any obligation, covenant, agreement or liability created by or arising from or related to this Security Agreement; or

Any default under this Security Agreement (other than a default or Event of Default under any of the Investment Documents other than this Security Agreement, which shall be subject to the notice and cure periods set forth therein) shall be subject to the Secured Party first giving the Obligors written notice of such default and the Obligors shall have thirty (30) days from the date of giving such notice to cure such default. If the default is cured within said thirty (30) day period then the Secured Party may not exercise any rights or remedies based upon that default.

No course of dealing or any delay or failure to assert any default shall constitute a waiver of that default or of any prior or subsequent default.

9. REMEDIES. Upon the occurrence and during continuance of any uncured default under this Security Agreement, the Secured Party shall have the following rights and remedies, in addition to all other rights and remedies existing at law, in equity, or by statute or provided in the Investment Documents which may be exercised without notice to, or consent by, the Obligors, except as such notice or consent is expressly provided for hereunder:

(a) The Secured Party shall have all the rights and remedies available under the UCC;

(b) The Secured Party shall have the right to enter upon any premises where the Collateral or records relating thereto may be and take possession of the Collateral and such records;

(c) Upon request of the Secured Party, the Obligors shall, at their own expenses, assemble the Collateral and records relating thereto at a place designated by the Secured Party and tender the Collateral and such records to the Secured Party;

(d) Without notice to any Obligor, the Secured Party may obtain the appointment of a receiver of the business, property and assets of any Obligor and each Obligor hereby consents to the appointment of the Secured Party or such person as the Secured Party may designate as such receiver; and

(e) The Secured Party may sell, lease or otherwise dispose of any or all of the Collateral and, after deducting the Liquidation Costs, apply the remainder to pay, or to hold as a reserve against, the Obligations secured by this Security Agreement.

The Obligors shall be liable for all deficiencies owing on any obligations secured by this Security Agreement after liquidation of the Collateral. The Secured Party shall not have any obligation to clean-up or otherwise prepare any Collateral for sale, lease, or other disposition.

The Secured Party is hereby granted a license or other right, effective upon the occurrence and during continuance of any uncured default under this Security Agreement, to use, without charge, any Obligor’s labels, patents, copyrights, licenses, rights of use of any name, trade secrets, tradenames, trademarks and advertising matter, or any Property of a similar nature, as it pertains to the Collateral, in completing, advertising for sale and selling any Collateral and such Obligor’s rights under all licenses and, to the extent applicable, all franchise agreements shall inure to the Secured Party.

The rights and remedies herein conferred are cumulative and not exclusive of any other rights and remedies and shall be in addition to every other right, power and remedy herein specifically granted or hereafter existing at law, in equity, or by statute which the Secured Party might otherwise have, and any and all such rights and remedies may be exercised from time to time and as often and in such order as the Secured Party may deem expedient. No delay or omission in the exercise of any such right, power or remedy or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver thereof or of any default or to be an acquiescence therein.

Regardless of any breach or default, the Obligors agree to pay all reasonable expenses, including reasonable attorneys’ fees and legal expenses, incurred by the Secured Party in any bankruptcy proceedings of any type involving any Obligor, the Collateral, or this Security Agreement, including, without limitation, expenses incurred in modifying or lifting the automatic stay, determining adequate protection, use of cash collateral, or relating to any plan of reorganization.

10. NOTICES. All notices or demands by any party hereto shall be in writing and shall be sent as provided in the Purchase Agreement.

11. INDEMNIFICATION. Each Obligor jointly and severally agrees to indemnify the Secured Party for any and all claims, costs, losses and liabilities, and for any damages or costs which may be awarded against or incurred by the Secured Party, and for all reasonable attorney fees, legal expenses, and other out-of-pocket expenses incurred by the Secured Party in defending such claims, arising from or related in any manner to the negotiation, execution, or performance by the Secured Party of this Security Agreement, but excluding any claims and liabilities based solely upon the material breach or default by the Secured Party under this Security Agreement or gross negligence or willful misconduct of the Secured Party.

12. TERMINATION. Upon the full and final payment in cash of the Obligations (excluding any inchoate expense reimbursements or indemnification obligations) to the Secured Party and the termination of all commitments of the Secured Party to extend credit to the Obligors, the Secured Party shall promptly terminate and release the security interest of the Secured Party in the Collateral, execute and deliver any necessary financing statement terminations or releases, and return to the Obligors any Collateral that was in the possession of the Secured Party, provided that, with respect to any loss or damage that the Secured Party may incur as a result of dishonored checks or other items of payment received by the Secured Party and applied to the Obligations for the benefit of the Secured Party, the Secured Party, shall, (as determined by the consent of the Requisite Holders as specified under Section 14.2 of the Purchase Agreement), (a) have received a written agreement, executed by the Obligors (as required by the Secured Party, acting at the direction of the Requisite Holders as specified under Section 14.2 of the Purchase Agreement) and by any person whose loans or other advances to the Obligors are used in whole or in part to satisfy the Obligations to the Secured Party, indemnifying the Secured Party from any such loss or damage; or (b) have retained such monetary reserves or Liens on the Collateral for such period of time as the Secured Party

(acting at the direction of the Requisite Holders as specified under Section 14.2 of the Purchase Agreement) may deem necessary to protect the Secured Party from any such loss or damage. All reasonable expenses incurred by the Secured Party in connection with the termination of the security interests granted to the Secured Party in connection with this Security Agreement shall be the sole expense of the Obligors.

13. REINSTATEMENT. Notwithstanding anything to the contrary herein contained, this Security Agreement and the security interest provided for herein shall continue to be effective or be reinstated, as the case may be, if at any time any payment, or any part thereof, of any or all of the Obligations is rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be restored or returned by the Secured Party in connection with any bankruptcy, reorganization or similar proceeding involving any Obligor, any other party liable with respect to the Obligations or otherwise, if the proceeds of any Collateral are required to be returned by the Secured Party under any such circumstances, or if the Secured Party elects to return any such payment or proceeds or any part thereof, all as though such payment had not been made or such proceeds not been received.

14. MISCELLANEOUS.

(a) Any failure or delay by the Secured Party to require strict performance by the Obligors of any of the provisions, warranties, terms and conditions contained herein or in any other agreement, document, or instrument, shall not affect the right of the Secured Party to demand strict compliance and performance therewith, and any waiver of any Event of Default shall not waive or affect any other Event of Default, whether prior or subsequent thereto, and whether of the same or of a different type.

(b) Neither the Secured Party nor its officers, directors, affiliates, partners, principals, employees, representatives, agents, or attorneys, shall be liable to any Obligor for any incidental or consequential damages arising from or relating to any breach of contract, tort, or other wrong in connection with or relating to this Security Agreement or the Collateral.

(c) In the event any term or provision of this Agreement conflicts with any term or provision of the Purchase Agreement, the term or provision of the Purchase Agreement shall control.

(d) IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. THE OBLIGORS AND THE SECURED PARTY REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS TO THE EXTENT PERMITTED AND ENFORCEABLE UNDER APPLICABLE LAW FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, AND SUBJECT TO THE ENFORCEABILITY OF THE FOREGOING WAIVER, A COPY OF THIS SECURITY AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

(f) Any provision of this Security Agreement which is prohibited or unenforceable in any jurisdiction shall be severable and, as to such jurisdiction only, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

(g) All references in this Security Agreement to the singular shall be deemed to include the plural if the context so requires and vice versa. References in the collective or conjunctive shall also include the disjunctive unless the context otherwise clearly requires a different interpretation.

(h) Two or more duplicate originals of this Security Agreement may be signed by the parties, each duplicate of which shall be an original but all of which shall constitute one and the same instrument. Facsimile or PDF signatures delivered hereunder shall be deemed original signatures.

(i) All agreements, representations, warranties and covenants made by the Obligors shall survive the execution and delivery of this Security Agreement, the filing and consummation of any bankruptcy proceedings, and shall continue in effect so long as any obligation to the Secured Party contemplated by this Security Agreement is outstanding and unpaid, notwithstanding any termination of this Security Agreement. All agreements, representations, warranties and covenants in this Security Agreement shall bind the party making the same and its heirs, successors and permitted assigns, and shall be to the benefit of and be enforceable by each party for whom made and their respective heirs, successors and permitted assigns.

(j) This Security Agreement, together with the Investment Documents, constitutes the entire agreement between the Obligors and the Secured Party with respect to the subject matter hereof and all other prior and contemporaneous agreements, arrangements, and understandings between the parties hereto as to the subject matter hereof are, except as otherwise expressly provided herein, rescinded. Except as contemplated by Section 14(k), no provision of the Security Agreement may be waived, modified or supplemented except by an instrument in writing signed by each of the Obligors and the Secured Party. Any modification, supplement or waiver shall be for such period and subject to such conditions as shall be specified in the written instrument effecting the same and shall be binding upon each Obligor and the Secured Party, and any such waiver shall be effective only in the specific instance and for the purpose for which given.

(k) Upon the execution and delivery by any Person of an assumption agreement in substantially the form of Exhibit A hereto as contemplated by Section 9.7 of the Purchase Agreement (each, an “Assumption Agreement”), (i) such Person shall be referred to as an “Additional Obligor” and shall become and be an Obligor hereunder, and each reference in this Security Agreement to an “Obligor” shall also mean and be a reference to such Additional Obligor and (ii) each reference herein to “this Security Agreement”, “hereunder”, “hereof” or words of like import referring to this Security Agreement, and each reference in any other Investment Document to the “Security Agreement” and “thereunder” or “thereof” to the extent referring to this Security Agreement, shall mean and be a reference to this Security Agreement as modified by such Assumption Agreement.

(l) AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF THE OBLIGORS OR THE SECURED PARTY, EACH OF THE OBLIGORS HEREBY CONSENTS AND AGREES THAT THE STATE COURTS OF CALIFORNIA, OR, AT THE OPTION OF THE SECURED PARTY, THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE OBLIGORS AND THE SECURED PARTY PERTAINING TO THIS SECURITY AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS SECURITY AGREEMENT. THE OBLIGORS EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE OBLIGORS HEREBY WAIVE ANY OBJECTION WHICH THE OBLIGORS MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. THE OBLIGORS HEREBY WAIVE PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE OBLIGORS PURSUANT TO SECTION 10 HEREOF AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE OBLIGORS’ ACTUAL RECEIPT THEREOF OR THE NEXT BUSINESS DAY IF SENT BY A NATIONALLY RECOGNIZED COURIER FOR NEXT BUSINESS DAY DELIVERY. NOTHING IN THIS SECURITY AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF THE SECURED PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY THE SECURED PARTY OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS SECURITY AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

(m) IN THE EVENT THE WAIVER PROVIDED IN SECTION 14(e) IS DEEMED INEFFECTIVE, TO GIVE EFFECT TO THE PARTIES’ DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE OR RETIRED JUDGE APPLYING THE APPLICABLE LAW, THE PARTIES AGREE TO REFER, FOR A COMPLETE AND FINAL ADJUDICATION, ANY AND ALL ISSUES OF FACT OR LAW INVOLVED IN ANY LITIGATION OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, ALL DISCOVERY AND LAW AND MOTION MATTERS, PRETRIAL MOTIONS, TRIAL MATTERS AND POST-TRIAL MOTIONS (E.G. MOTIONS FOR RECONSIDERATION, NEW TRIAL AND TO TAX COSTS, ATTORNEY FEES AND PREJUDGMENT INTEREST)) UP TO AND INCLUDING FINAL JUDGMENT, BROUGHT TO RESOLVE ANY DISPUTE (WHETHER SOUNDING IN CONTRACT, TORT, UNDER ANY STATUTE OR OTHERWISE) BETWEEN AND AMONG ANY OF THE PARTIES HERETO, TO A JUDICIAL REFEREE WHO SHALL BE APPOINTED UNDER A GENERAL REFERENCE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638. THE REFEREE’S DECISION WOULD STAND AS THE DECISION OF THE COURT, WITH JUDGMENT TO BE ENTERED ON HIS/HER STATEMENT OF DECISION IN THE SAME MANNER AS IF THE ACTION HAD BEEN TRIED BY THE COURT. THE PARTIES HERETO SHALL SELECT A SINGLE NEUTRAL REFEREE, WHO SHALL BE A RETIRED STATE OR FEDERAL JUDGE WITH AT LEAST FIVE YEARS OF JUDICIAL EXPERIENCE IN CIVIL MATTERS. IN THE EVENT THAT THE PARTIES HERETO CANNOT AGREE UPON A REFEREE, THE REFEREE SHALL BE APPOINTED BY THE COURT. WITHOUT LIMITING OR AFFECTING ANY INDEMNITIES AVAILABLE TO THE SECURED PARTY, THE SECURED PARTY, ON THE ONE HAND, AND THE OBLIGORS, ON THE OTHER HAND, SHALL EQUALLY BEAR THE FEES AND EXPENSES OF THE REFEREE (50% BY THE SECURED PARTY AND 50% BY THE OBLIGORS) UNLESS THE REFEREE OTHERWISE PROVIDES IN THE STATEMENT OF DECISION.

IN WITNESS WHEREOF, the Obligors and the Secured Party have executed this Security Agreement as of the date first written above.


OBLIGORS: CAPRIUS, INC.

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

M.C.M. ENVIRONMENTAL TECHNOLOGIES, INC.

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

M.C.M. ENVIRONMENTAL TECHNOLOGIES LTD.

By:	/s/ George Aaron
	Name:	George Aaron
	Title:	Chairman

[SIGNATURE PAGE TO SECURITY AGREEMENT]

PAGE 1


SECURED PARTY: VINTAGE CAPITAL GROUP, LLC

By:	/s/ Fred C. Sands
	Name:	Fred C. Sands
	Title:	Chairman

[SIGNATURE PAGE TO SECURITY AGREEMENT]

PAGE 2

EXHIBIT A

Form of Assumption Agreement

Vintage Capital Group, LLC, as Secured Party

11611 San Vincente Boulevard, 10th Floor

Los Angeles, CA 90049

Attention: Thomas Webster

Ladies and Gentlemen:

Reference is made to (i) the Securities Purchase and Sale Agreement dated September 16, 2009 (as may be amended, restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”) by and between Caprius, Inc., M.C.M. Environmental Technologies, Inc., M.C.M. Environmental Technologies Ltd., and Vintage Capital Group, LLC, and (ii) the Security Agreement referred to therein (as in effect on the date hereof and as it may hereafter be amended, restated, supplemented or otherwise modified from time to time, together with this Assumption Agreement, being the “Security Agreement”). The capitalized terms defined in the Security Agreement or in the Purchase Agreement and not otherwise defined herein are used herein as therein defined.

Section 14(k) of the Security Agreement provides for additional Persons from time to time to become additional “Obligors” under the Security Agreement and [Name of Additional Obligor], a [insert type of entity] (the “Additional Obligor”) desires to become such an additional “Obligor”. Pursuant to Section 14(k) of the Security Agreement, the Additional Obligor hereby agrees to become an “Obligor” for all purposes of the Security Agreement and hereby supplements Annexes 1 and 2 to the Security Agreement as specified in the attached Appendix A.

Without limiting the generality of the foregoing, as collateral security for the prompt payment in full when due (whether at stated maturity, upon acceleration, on any optional or mandatory prepayment date or otherwise) and performance of the Obligations, the Additional Obligor hereby pledges and grants to the Secured Party a security interest in all of the Additional Obligor’s right, title and interest in and to the Collateral in the same manner and to the same extent as is provided in the Security Agreement.

In addition, the Additional Obligor hereby agrees to perform the covenants and undertakings of an Obligor under the Security Agreement and hereby makes the representations and warranties set forth in the Security Agreement, with respect to itself and its obligations under the Security Agreement.

Delivery of an executed counterpart of a facsimile or PDF signature page to this Assumption Agreement shall be effective as delivery of an original executed counterpart of this Assumption Agreement. All notices to the Additional Obligor with respect to this Assumption Agreement, the Security Agreement or the transactions contemplated by the foregoing shall be in accordance with Section 10 of the Security Agreement and addressed to the Additional Obligor at the address specified below its name on its signature page attached hereto.

This Assumption Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of New York applicable to contracts made and performed in that state (without regard to the choice of law or conflicts of law provisions thereof) and any applicable laws of the United States of America.

The undersigned hereby consents and agrees that the state courts of California, or at the option of the Secured Party, the United States District Court for the Central District of California, shall have exclusive jurisdiction to hear and determine any claims or disputes between the Secured Party and the Additional Obligor pertaining to this Assumption Agreement or the Security Agreement or to any matter arising out of or related to this Assumption Agreement or the Security Agreement. The undersigned expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and the undersigned hereby waives any objection which it may have based upon lack of personal jurisdiction, improper venue or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. The undersigned hereby waives personal service of the summons, complaint and other process issued in any such action or suit and agrees that service of such summons, complaint and other process may be made by registered or certified mail addressed to the undersigned at the address specified under its name on its signature page attached hereto and that service so made shall be deemed completed upon the earlier of the undersigned’s actual receipt thereof or the next Business Day if sent by a nationally recognized courier for next Business Day delivery. Nothing in this Assumption Agreement shall be deemed or operate to affect the right of the Secured Party to serve legal process in any other manner permitted by law, or to preclude the enforcement by the Secured Party of any judgment or order obtained in such forum or the taking of any action under this Assumption Agreement or the Security Agreement to enforce same in any other appropriate forum or jurisdiction.

TO THE EXTENT PERMITTED AND ENFORCEABLE UNDER APPLICABLE LAW, THE UNDERSIGNED HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS ASSUMPTION AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. THE UNDERSIGNED REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS TO THE EXTENT PERMITTED AND ENFORCEABLE UNDER APPLICABLE LAW, FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, AND SUBJECT TO THE ENFORCEABILITY OF THE FOREGOING WAIVER, A COPY OF THIS ASSUMPTION AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

IN THE EVENT THE WAIVER PROVIDED IN THE PRECEDING PARAGRAPH IS DEEMED INEFFECTIVE, TO GIVE EFFECT TO THE PARTIES’ DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE OR RETIRED JUDGE APPLYING THE

EXHIBIT A — PAGE 2

APPLICABLE LAW, THE PARTIES AGREE TO REFER, FOR A COMPLETE AND FINAL ADJUDICATION, ANY AND ALL ISSUES OF FACT OR LAW INVOLVED IN ANY LITIGATION OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, ALL DISCOVERY AND LAW AND MOTION MATTERS, PRETRIAL MOTIONS, TRIAL MATTERS AND POST-TRIAL MOTIONS (E.G. MOTIONS FOR RECONSIDERATION, NEW TRIAL AND TO TAX COSTS, ATTORNEY FEES AND PREJUDGMENT INTEREST)) UP TO AND INCLUDING FINAL JUDGMENT, BROUGHT TO RESOLVE ANY DISPUTE (WHETHER SOUNDING IN CONTRACT, TORT, UNDER ANY STATUTE OR OTHERWISE) BETWEEN AND AMONG ANY OF THE PARTIES HERETO, TO A JUDICIAL REFEREE WHO SHALL BE APPOINTED UNDER A GENERAL REFERENCE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638. THE REFEREE’S DECISION WOULD STAND AS THE DECISION OF THE COURT, WITH JUDGMENT TO BE ENTERED ON HIS/HER STATEMENT OF DECISION IN THE SAME MANNER AS IF THE ACTION HAD BEEN TRIED BY THE COURT. THE PARTIES HERETO SHALL SELECT A SINGLE NEUTRAL REFEREE, WHO SHALL BE A RETIRED STATE OR FEDERAL JUDGE WITH AT LEAST FIVE YEARS OF JUDICIAL EXPERIENCE IN CIVIL MATTERS. IN THE EVENT THAT THE PARTIES HERETO CANNOT AGREE UPON A REFEREE, THE REFEREE SHALL BE APPOINTED BY THE COURT. WITHOUT LIMITING OR AFFECTING ANY INDEMNITIES AVAILABLE TO THE SECURED PARTY, THE SECURED PARTY, ON THE ONE HAND, AND THE OBLIGORS, ON THE OTHER HAND, SHALL EQUALLY BEAR THE FEES AND EXPENSES OF THE REFEREE (50% BY THE SECURED PARTY AND 50% BY THE OBLIGORS) UNLESS THE REFEREE OTHERWISE PROVIDES IN THE STATEMENT OF DECISION.


Very truly yours, [NAME OF ADDITIONAL OBLIGOR]

By:
		Name:
		Title:

Address for Notices:

[_________________________________________]
[_________________________________________]
[_________________________________________]

EXHIBIT A — PAGE 3

EX-99.5 6 dex995.htm PLEDGE AGREEMENT Pledge Agreement

Exhibit 5

Execution Version

PLEDGE AGREEMENT

THIS PLEDGE AGREEMENT (this “Agreement”), dated as of September 16, 2009, is made by and among CAPRIUS, INC., a Delaware corporation (“Caprius”), M.C.M. ENVIRONMENTAL TECHNOLOGIES, INC., a Delaware corporation (“M.C.M.”), M.C.M. ENVIRONMENTAL TECHNOLOGIES LTD., an Israeli corporation (“M.C.M. Israel”), the Additional Pledgors (as defined in Section 14(k)) (together with Caprius, M.C.M. and M.C.M. Israel, collectively, the “Pledgors” and each (including Caprius, M.C.M. and M.C.M. Israel) individually, a “Pledgor”), VINTAGE CAPITAL GROUP, LLC, a Delaware limited liability company (together with its successors and assigns, collectively, the “Secured Party”), as an inducement to the Secured Party to enter into that certain Securities Purchase and Sale Agreement of even date herewith (as may be amended, restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”) and the transactions contemplated thereby. All Capitalized terms used and not defined herein shall have the respective meanings assigned to them in the Purchase Agreement.

A G R E E M E N T

NOW, THEREFORE, in consideration of the mutual promises, covenants, representations, and warranties set forth herein and for other good and valuable consideration, the parties hereto agree as follows:

1. Definitions and Construction.

(a) Definitions. All initially capitalized terms used herein and not otherwise defined herein shall have the meaning ascribed thereto in the Purchase Agreement. As used in this Agreement:

“Agreement” shall have the meaning specified therefor in the preamble hereto.

“Bankruptcy Code” means the United States Bankruptcy Code (11 U.S.C. § 101, et seq.), as amended, and any successor statute.

“Code” means the Uniform Commercial Code as in effect in the State of New York on the date hereof; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to Secured Party’s Liens on any Pledged Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies; provided further that terms used herein which are defined in the Code as in effect on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment thereof except as the Secured Party may otherwise determine.

“Chief Executive Office” means the address of the chief executive office of Pledgor set forth on Schedule B to this Agreement.

“Debt” shall mean all indebtedness for borrowed money owed to any Pledgor, whether or not evidenced by any Instrument, including, without limitation, all indebtedness identified as “Pledged Debt” on Schedule A (or any addendum thereto), the instruments, if any, evidencing any of the foregoing, and all interest, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing.

“Equity Interests” means all shares, units, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company, or equivalent entity, whether voting or nonvoting, including general partner partnership interests, limited partner partnership interests, limited liability company membership interests, common stock, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act); in each case whether constituting “general intangibles” or “investment property” or otherwise under (and as defined in) the Code.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and any successor statute.

“Future Rights” shall mean: (a) all Equity Interests (other than the Pledged Interests existing on the Closing Date) of the Issuers, and all securities convertible or exchangeable into, and all warrants, options, or other rights to purchase, Equity Interests of any Person in which any Pledgor, after the date of this Agreement, acquires a direct equity interest, irrespective of whether such Person is or becomes a Subsidiary of Pledgor; (b) to the extent of each Pledgor’s interest therein, all shares of, all securities convertible or exchangeable into, and all warrants, options, or other rights to purchase Equity Interests of each Issuer; (c) the certificates or instruments representing such additional Equity Interests, convertible or exchangeable securities, warrants, and other rights and all dividends, cash, options, warrants, rights, instruments, and other property or proceeds from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of such Equity Interests; and (d) all Debt (other than the Pledged Debt existing on the Closing Date).

“Holder” and “Holders” shall have the respective meanings specified therefor in Section 3 hereto.

“Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other bankruptcy or insolvency law, assignments for the benefit of creditors, or any other proceeding by or against any person or its assets relating to, formal or informal moratoria, compositions, marshaling, extensions generally with creditors, or seeking reorganization, arrangement, or other similar relief.

“Issuer” and “Issuers” shall mean each of the Persons identified as an Issuer on Schedule A attached hereto (or any addendum thereto), and any successors thereto, whether by merger or otherwise.

“Lender” and “Lenders” shall have the respective meanings specified therefor in the recitals hereto.

“Pledged Collateral” shall mean the Pledged Interests, the Future Rights, the Pledged Debt and the Proceeds, collectively.

“Pledged Debt” shall mean all of the Debt identified as Pledged Debt on Schedule A attached hereto (or any addendum thereto).

“Pledged Interests” shall mean all of the Equity Interests identified as Pledged Interests on Schedule A attached hereto (or any addendum thereto).

“Pledgor” shall have the meaning specified therefor in the preamble hereto.

“Proceeds” shall mean all proceeds (including proceeds of proceeds) of the Pledged Interests, Future Rights and Pledged Debt including all: (a) rights, benefits, distributions, premiums, profits, dividends, interest, cash, instruments, documents of title, accounts, contract rights, inventory, equipment, general intangibles, deposit accounts, chattel paper, and other property from time to time received, receivable, or otherwise distributed in respect of or in exchange for, or as a replacement of or a substitution for, any of the Pledged Interests, Future Rights, Pledged Debt or proceeds thereof (including any cash, Equity Interests, or other securities or instruments issued after any recapitalization, readjustment, reclassification, merger or consolidation with respect to the Issuers and any security entitlements, as defined in the Code, with respect thereto); (b) “proceeds,” as such term is used in the Code; (c) proceeds of any insurance, indemnity, warranty, or guaranty (including guaranties of delivery) payable from time to time with respect to any of the Pledged Interests, Future Rights, Pledged Debt or proceeds thereof; (d) payments (in my form whatsoever) made or due and payable to Pledgor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Pledged Interests, Future Rights, Pledged Debt or proceeds thereof; and (e) other amounts from time to time paid or payable under or in connection with any of the Pledged Interests, Future Rights, Pledged Debt or proceeds thereof.

“Purchase Agreement” shall have the meaning specified therefor in the recitals hereto.

“Secured Obligations” shall mean all of the Pledgors’ present and future debts, obligations, and liabilities of whatever nature to the Secured Party, including, without limitation, (a) the Note and any PIK Notes (as defined in the Note) issued or deemed to be issued pursuant to the Note, (b) all obligations of each Pledgor arising from or relating to the Investment Documents, including, without limitation, this Agreement, and (c) transactions in which the documents evidencing the indebtedness refer to this grant of security interest as providing security therefor.

“Voidable Transfer” shall have the meaning specified therefor in Section 26 hereto.

(b) Construction.

(i) All terms used in this Agreement which are defined in Article 8 or Article 9 of the Code and which are not otherwise defined herein shall have the same meanings herein as set forth therein.

(ii) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. The term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or”. Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights, and (f) any reference herein to the repayment in fill of the Secured Obligations shall mean the repayment in full in cash of all Secured Obligations other than contingent indemnification Secured Obligations. References in this Agreement to “determination” by the Secured Party include honestly made estimates by the Secured Party (in the case of quantitative determinations) and honestly held beliefs by the Secured Party (in the case of qualitative determinations). Any reference in this Agreement or in any of the other Investment Documents to this Agreement or any of the other Investment Documents shall include all alterations, amendments, restatements, changes, extensions, modifications, renewals, replacements, substitutions, and supplements, thereto and thereof, as applicable. In the event of a direct conflict between the terms and provisions of this Agreement and the Purchase Agreement, it is the intention of the parties hereto that such documents shall be read together and construed, to the fullest extent possible, to be in concert with each other. In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of the Purchase Agreement shall control and govern; provided, however, that the inclusion herein of additional obligations on the part of the Pledgors and supplemental rights and remedies in favor of the Secured Party, in each case in respect of the Collateral, shall not be deemed a conflict with the Purchase Agreement. Any reference herein to a Person shall be construed to include such Person’s successors and assigns. Any requirement of a writing contained herein or in the other Investment Documents shall be satisfied by the transmission of a Record and any Record transmitted shall constitute a representation and warranty, as the accuracy and completeness of the information contained therein.

(iii) All of the schedules and exhibits attached to this Agreement shall be deemed incorporated herein by reference.

2. Pledge. As security for the prompt payment and performance of the Secured Obligations in full by Pledgors when due, whether at stated maturity, by acceleration or otherwise (including amounts that would become due but for the operation of the provisions of the Bankruptcy Code), and as security for the prompt performance by each Pledgor of its respective covenants and duties under each Investment Document to which such Pledgor is a

party, each Pledgor hereby pledges, grants, transfers, and assigns to the Secured Party, a security interest in all of such Pledgor’s right, title, and interest in and to the Pledged Collateral. Except as expressly set forth in the Purchase Agreement or any other Investment Document, no Pledgor has any authority, express or implied, to dispose of any item or portion of the Pledged Collateral.

3. Delivery and Registration of Pledged Collateral.

(a) All certificates, instruments or promissory notes representing or evidencing the Pledged Collateral shall be promptly delivered by the Pledgors to the Secured Party or the Secured Party’s designee pursuant hereto at a location designated by the Secured Party and shall be held by or on behalf of the Secured Party pursuant hereto, and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Secured Party.

(b) Upon the occurrence and during the continuance of an Event of Default, the Secured Party shall have the right, at any time in its discretion and without notice to the Pledgors, to transfer to or to register on the books of the Issuers (or of any other Person maintaining records with respect to the Pledged Collateral) in the name of the Secured Party or any of its nominees any or all of the Pledged Collateral. In addition, the Secured Party shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations.

(c) If, at any time and from time to time, any Pledged Collateral (including any certificate or instrument representing or evidencing any Pledged Collateral) is in the possession of a Person other than the Secured Party or a Pledgor (a “Holder”), then the Pledgors shall promptly cause such Pledged Collateral to be delivered into the Secured Party’s possession pursuant to the Code or other applicable law governing the perfection of the Secured Party’s security interest in the Pledged Collateral in the possession of such Holder. Each such notification/instruction and acknowledgment shall be in form and substance satisfactory to the Secured Party.

(d) Any and all Pledged Collateral (including dividends, interest, and other cash distributions) at any time received or held by any Pledgor, shall be segregated from other funds or property of such Pledgor, shall be so received or held in trust for the Secured Party and shall be forthwith delivered to the Secured Party in the same form as so received or held, with any necessary endorsements; provided that cash dividends, cash interest or distributions received by any Pledgor, if and to the extent they are expressly permitted by the Purchase Agreement, may be retained by such Pledgor in accordance with Section 4 and used in the ordinary course of such Pledgor’s business.

(e) If at any time and from time to time any Pledged Collateral consists of an uncertificated security or a security in book entry form, then each Pledgor shall promptly cause such Pledged Collateral to be registered or entered, as the case may be, in the name of the Secured Party, or otherwise cause the security interest held by the Secured Party to be perfected in accordance with applicable law.

4. Voting Rights and Dividends.

(a) So long as (i) no Event of Default shall have occurred and be continuing, or (ii) if an Event of Default has occurred and is continuing, the applicable Pledgor shall not have received the written notice from the Secured Party and described below in Section 4(b), each Pledgor shall be entitled to exercise any and all voting, management and other consensual rights pertaining to the Pledged Collateral applicable to it or any part thereof for any purpose not inconsistent with the terms of the Investment Documents and shall be entitled to receive and retain any cash dividends or distributions paid in respect of the Pledged Collateral if and to the extent they are expressly permitted by the Purchase Agreement.

(b) Upon the occurrence and during the continuation of an Event of Default (i) the Secured Party may, at its option, and in addition to all rights and remedies available to the Secured Party under any other agreement at law, in equity or otherwise, immediately exercise all voting rights and all other ownership or consensual rights in respect to the Pledged Interests owned by such Pledgor, but under no circumstances is the Secured Party obligated by the terms of this Agreement to exercise such rights, and (ii) if the Secured Party duly exercises its right to vote any of such Pledged Interests, each Pledgor hereby appoints the Secured Party as Pledgor’s true and lawful attorney in fact and IRREVOCABLE PROXY to vote such Pledged Interests in any manner the Secured Party deems advisable for or against all matters submitted or which may be submitted to a vote of shareholders, partners or members, as the case may be. The power of attorney granted hereby is coupled with an interest and shall be irrevocable until the termination of this agreement in accordance with Section 25 at which time such power of attorney shall automatically terminate.

(c) For so long as any Pledgor shall have the right to vote the Pledged Interests owned by it, such Pledgor covenants and agrees that it will not, without the prior written consent of the Secured Party, vote or take any consensual action with respect to such Pledged Interests which would materially adversely affect the rights of the Secured Party or the value of the Pledged Interests.

5. Representations and Warranties. Each Pledgor jointly and severally represents and warrants to the Secured Party as follows:

(a) Each Pledgor has taken all steps necessary or appropriate to be informed on a continuing basis of changes or potential changes affecting the Pledged Collateral (including rights of conversion and exchange, rights to subscribe, payment of dividends, reorganizations or recapitalization, tender offers and voting rights), and each Pledgor agrees that the Secured Party shall not have any responsibility or liability for informing any Pledgor of any such changes or potential changes or for taking any action or omitting to take any action with respect thereto;

(b) All of the information herein or hereafter supplied to the Secured Party by or on behalf of any Pledgor in writing with respect to the Pledged Collateral is, or in the case of information hereafter supplied will be, accurate and complete in all material respects;

(c) Each Pledgor is and will be the sole legal and beneficial owner of the Pledged Collateral purported to be owned by such Pledgor (including the Pledged Interests and all other Pledged Collateral acquired by such Pledgor after the date hereof) free and clear of any adverse claim, Lien, or other right, title, or interest of any party, other than the Liens held by the Secured Party;

(d) This Agreement, and the delivery to the Secured Party of the Pledged Interests representing Pledged Collateral to the extent evidenced by a certificate (or the delivery to all Holders of the Pledged Interests representing Pledged Collateral of the notification/instruction referred to in Section 3 of this Agreement), creates a valid, perfected, and first priority security interest in one hundred percent (100%) of the Pledged Interests in favor of the Secured Party securing payment of the Secured Obligations, and all actions necessary to achieve such perfection have been duly taken;

(e) Schedule A to this Agreement (as amended in accordance with the terms hereof) is true and correct and complete in all respects; without limiting the generality of the foregoing: (i) all the Pledged Interests (to the extent designated as such on Schedule A) are in certificated form, and, except to the extent registered in the name of the Secured Party or its nominee pursuant to the provisions of this Agreement, are registered in the name of the applicable Pledgor; and (ii) the Pledged Interests as to each of the Issuers constitute at least the percentage of all the fully diluted issued and outstanding Equity Interests of such Issuer as set forth in Schedule A to this Agreement;

(f) The Pledged Interests that are interests in general partnerships, limited partnerships or limited liability companies (i) are not dealt in or traded on securities exchanges or in securities markets, (ii) do not have terms expressly providing that they are securities governed by Article 8 of the Code, and (iii) are not investment company securities, and are not, therefore, “securities” governed by Article 8 of the Code;

(g) There are no presently existing Future Rights or Proceeds owned by any Pledgor;

(h) The Pledged Interests have been duly authorized and validly issued and are fully paid and nonassessable;

(i) Neither the pledge of the Pledged Collateral pursuant to this Agreement nor the extensions of credit represented by the Secured Obligations violate Regulation T, U or X of the Board of Governors of the Federal Reserve System;

(j) Each direct Subsidiary of each Pledgor is an Issuer of Pledged Interests that have been pledged hereunder;

(k) No consent, approval, authorization or other order or other action by, and no notice to or filing with, any Governmental Authority or any other Person is required (i) for the pledge by any Pledgor of the Pledged Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by any Pledgor, or (ii) for the exercise by the Secured Party of the voting or other rights provided for in this Agreement or the remedies in respect of the Pledged Collateral pursuant to this Agreement, except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally; and

(l) This Agreement has been duly authorized, executed and delivered by each Pledgor and constitutes a legal, valid and binding obligation of each Pledgor enforceable against such Pledgor in accordance with its terms.

6. Further Assurances.

(a) Each Pledgor jointly and severally agrees that from time to time, at its expense, each Pledgor will promptly execute and deliver all further instruments and documents, and take all further action that may be necessary or reasonably desirable, or that the Secured Party may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. Without limiting the generality of the foregoing, each Pledgor will: (i) at the request of the Secured Party, mark conspicuously each of its records pertaining to the Pledged Collateral with a legend, in form and substance reasonably satisfactory to the Secured Party, indicating that such Pledged Collateral is subject to the security interest granted hereby; (ii) authorize such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or reasonably desirable, or as the Secured Party may request, in order to perfect and preserve the security interests granted or purported to be granted hereby; (iii) allow inspection during reasonable hours of the Pledged Collateral by the Secured Party or Persons designated by the Secured Party from time to time hereafter; and (iv) appear in and defend any action or proceeding that may affect such Pledgor’s title to or the Secured Party’s security interest in the Pledged Collateral.

(b) Each Pledgor hereby authorizes the Secured Party to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Pledged Collateral without the signature of such Pledgor where permitted by law. A carbon, photographic, or other reproduction of this Agreement or any financing statement covering the Pledged Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

(c) Each Pledgor will furnish to the Secured Party, upon the request of the Secured Party, (i) a certificate executed by an authorized officer of such Pledgor, and dated as of the date of delivery to the Secured Party, itemizing in such detail as the Secured Party may request, the Pledged Collateral which, as of the date of such certificate, has been delivered to the Secured Party by such Pledgor pursuant to the provisions of this Agreement; and (ii) such statements and schedules further identifying and describing the Pledged Collateral and such other reports in connection with the Pledged Collateral as the Secured Party may request.

(d) Each Pledgor will, upon obtaining ownership of any Future Rights, promptly (and in any event within three (3) Business Days) deliver to the Secured Party a Pledge Amendment, duly executed by such Pledgor, in substantially the form of Schedule C hereto (a “Pledge Amendment”) in respect of any such Future Rights, pursuant to which such Pledgor shall pledge to the Secured Party all of such Future Rights, and in connection with such pledge, with respect to any Pledged Collateral evidenced by certificates or instruments, provide evidence that such Pledgor shall have complied with Section 3 hereof. The Pledge Amendment shall, from and after the delivery thereof constitute part of Schedule A hereto. Each Pledgor hereby authorizes the Secured Party to attach each Pledge Amendment to this Agreement and agrees that

all Pledged interests listed on any Pledge Amendment delivered to the Secured Party shall for all purposes hereunder be considered Pledged Collateral and such Pledgor shall be deemed to have made the representations and warranties set forth in Section 5 hereof with respect to Future Rights.

(e) If any Pledged Interests are or become evidenced by certificates or any other instrument, each Pledgor shall immediately deliver all such certificates or instruments to the Secured Party together with duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Secured Party.

7. Covenants of Pledgors. So long as any of the Secured Obligations shall remain unpaid, each Pledgor jointly and severally covenants and agrees that it will:

(a) Perform each and every covenant in any of the Investment Documents applicable to such Pledgor;

(b) At all times keep at least one complete set of its records concerning substantially all of the Pledged Collateral pledged by each Pledgor hereunder at such Pledgor’s respective Chief Executive Office as set forth in Schedule B hereto, and not change the location of such Chief Executive Office or of such records without giving the Secured Party at least thirty (30) days prior written notice thereof;

(c) Not permit any of the Issuers to: (i) authorize the amendment of or amend the certificate of formation, partnership agreement, limited liability company agreement or other similar governing documents of such Issuer that is a general partnership, limited partnership or limited liability company to provide that the Capital Stock of such Issuer is governed by Article 8 of the Code, or (ii) authorize the issuance of or issue certificates evidencing the Capital Stock of such Issuer that is a general partnership, limited partnership or limited liability company;

(d) To the extent it may lawfully do so, use its best efforts to prevent the Issuers from issuing Future Rights or Proceeds, except for cash dividends and other distributions, if any, that are not prohibited by the terms of the Purchase Agreement to be paid by any Issuer to Pledgor; and

(e) Upon receipt by any Pledgor of any material notice, report, or other communication from any of the Issuers or any Holder relating to all or any part of the Pledged Collateral, deliver a copy of such notice, report or other communication to the Secured Party as soon as possible, but in no event later than five (5) Business Days following the receipt thereof by such Pledgor.

8. The Secured Party as Pledgors’ Attorney-in-Fact.

(a) Each Pledgor hereby irrevocably appoints the Secured Party as such Pledgor’s attorney-in-fact, with full authority in the place and stead of such Pledgor and in the name of such Pledgor, the Secured Party or otherwise, from time to time at the Secured Party’s discretion, to take any action and to execute any instrument that the Secured Party may reasonably deem necessary or advisable to exercise the powers, rights and remedies granted to

the Secured Party hereunder, including: (i) upon the occurrence and during the continuance of an Event of Default, to receive, endorse, and collect all instruments made payable to any Pledgor representing any dividend, interest payment or other distribution in respect of the Pledged Collateral or any part thereof to the extent permitted hereunder and to give full discharge for the same and to execute and file governmental notifications and reporting forms in connection therewith; (ii) to issue any notifications/instructions the Secured Party deems necessary pursuant to Section 3 of this Agreement; (iii) to file any claims or take any action or institute any proceedings which the Secured Party may deem necessary or desirable for the collection of any of the Pledged Collateral of such Pledgor or otherwise to enforce the rights of the Secured Party with respect to any of the Pledged Collateral; or (iv) upon the occurrence and during the continuance of an Event of Default, to arrange for the transfer of the Pledged Collateral on the books of any of the Issuers or any other Person to the name of the Secured Party or to the name of the Secured Party’s nominee.

(b) In addition to the designation of the Secured Party as such Pledgor’s attorney-in-fact in subsection (a), each Pledgor hereby irrevocably appoints the Secured Party as such Pledgor’s agent and attorney-in-fact with power to make, execute and deliver any and all documents and writings which may be necessary or appropriate for approval of, or be required by, any regulatory authority located in any city, county, state or country where such Pledgor or any of the Issuers engage in business, in order to transfer or to more effectively transfer any of the Pledged Interests or otherwise enforce the rights granted hereunder to the Secured Party for the benefit thereof, exercisable only at such time as an Event of Default has occurred and is continuing.

9. Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default:

(a) The Secured Party may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Code (irrespective of whether the Code applies to the affected items of Pledged Collateral), and the Secured Party may also without notice (except as specified below), sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker’s board or at any of the Secured Party’s offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as the Secured Party may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Pledged Collateral. To the maximum extent permitted by applicable law, the Secured Party may be the purchaser of any or all of the Pledged Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold at any such public sale, to use and apply all or any part of the Secured Obligations as a credit on account of the purchase price of any Pledged Collateral payable at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Pledgor, and each Pledgor hereby waives (to the extent permitted by law) all rights of redemption, stay, or appraisal that it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten (10) calendar days notice to such Pledgor of the time and place of any public sale or the time after which a private

sale is to be made shall constitute reasonable notification. The Secured Party shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. To the maximum extent permitted by law, each Pledgor hereby waives any claims against the Secured Party arising because the price at which any Pledged Collateral may have been sold at such a private sale was less than the price that might have been obtained at a public sale, even if the Secured Party accepts the first offer received and does not offer such Pledged Collateral to more than one offeree. All cash proceeds received by the Secured Party in respect of any sale of collection from or other realization upon all or any part of the Pledged Collateral shall be applied against the Secured Obligations in the order set forth in the Note. In the event the proceeds of Pledged Collateral are insufficient to satisfy all of the Secured Obligations in full, the Pledgors shall remain jointly and severally liable for any such deficiency.

(b) Each Pledgor hereby agrees that any sale or other disposition of the Pledged Collateral conducted in conformity with reasonable commercial practices of banks, insurance companies, or other financial institutions in the County of Los Angeles, State of California in disposing of property similar to the Pledged Collateral shall be deemed to be commercially reasonable.

(c) Pledgor hereby acknowledges that the sale by the Secured Party of any Pledged Collateral pursuant to the terms hereof in compliance with the Securities Act, as well as applicable “Blue Sky” or other state securities laws may require strict limitations as to the manner in which the Secured Party or any subsequent transferee of the Pledged Collateral may dispose thereof. Each Pledgor acknowledges and agrees that in order to protect the Secured Party’s interest it may be necessary to sell the Pledged Collateral at a price less than the maximum price attainable if a sale were delayed or were made in another manner, such as a public offering under the Securities Act. Each Pledgor has no objection to a sale made in such a manner and agrees that the Secured Party shall have no obligation to obtain the maximum possible price for the Pledged Collateral. Without limiting the generality of the foregoing, each Pledgor agrees that, upon the occurrence and during the continuation of an Event of Default, the Secured Party may, subject to applicable law, from time to time attempt to sell all or any part of the Pledged Collateral by a private placement, restricting the bidders and prospective purchasers to those who will represent and agree that they are purchasing for investment only and not for distribution. In so doing, the Secured Party may solicit offers to buy the Pledged Collateral or any part thereof for cash, from a limited number of investors deemed by the Secured Party, in its reasonable judgment, to be institutional investors or other responsible parties who might be interested in purchasing the Pledged Collateral. If the Secured Party shall solicit such offers, then the acceptance by the Secured Party of one of the offers shall be deemed to be a commercially reasonable method of disposition of the Pledged Collateral.

(d) If the Secured Party shall determine to exercise its right to sell all or any portion of the Pledged Collateral pursuant to this Section, each Pledgor agrees that, upon request of the Secured Party, such Pledgor will, at its own expense:

(i) use its best efforts to execute and deliver, and cause the Issuers and the directors and officers thereof to execute and deliver, all such instruments and documents, and to do or cause to be done all such other acts and things, as may be necessary, or in the opinion of the Secured Party, advisable to register such Pledged Collateral under the provisions of the Securities Act, and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectuses which, in the opinion of the Secured Party, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto;

(ii) use its best efforts to qualify the Pledged Collateral under the state securities laws or “Blue Sky” laws and to obtain all necessary governmental approvals for the sale of the Pledged Collateral, as requested by the Secured Party;

(iii) cause the Issuers to make available to their respective security holders, as soon as practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act;

(iv) execute and deliver, or cause the officers and directors of the Issuers to execute and deliver, to any person, entity or governmental authority as the Secured Party may deem necessary or appropriate, any and all documents and writings which, in the Secured Party’s reasonable judgment, may be necessary for approval, or be required by, any regulatory authority located in any city, county, state or country where such Pledgor or the Issuers engage in business, in order to transfer or to more effectively transfer the Pledged Interests or otherwise enforce the Secured Party’s rights hereunder; and

(v) do or cause to be done all such other acts and things as may be necessary to make such sale of the Pledged Collateral or any part thereof valid and binding and in compliance with applicable law. Each Pledgor acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section may be specifically enforced.

(e) EACH PLEDGOR EXPRESSLY WAIVES TO THE MAXIMUM EXTENT PERMITTED BY LAW: (i) ANY CONSTITUTIONAL OR OTHER RIGHT TO A JUDICIAL HEARING PRIOR TO THE TIME THE SECURED PARTY DISPOSES OF ALL OR ANY PART OF THE COLLATERAL AS PROVIDED IN THIS SECTION; (ii) ALL RIGHTS OF REDEMPTION, STAY, OR APPRAISAL THAT IT NOW HAS OR MAY AT ANY TIME IN THE FUTURE HAVE UNDER ANY RULE OF LAW OR STATUTE NOW EXISTING OR HEREAFTER ENACTED; AND (iii) EXCEPT AS SET FORTH IN SUBSECTION (a) OF THIS SECTION, ANY REQUIREMENT OF NOTICE, DEMAND, OR ADVERTISEMENT FOR SALE.

10. Application of Proceeds. Upon the occurrence and during the continuance of an Event of Default, any cash held by the Secured Party as Pledged Collateral and all cash proceeds received by the Secured Party in respect of any sale of, collection from, or other realization upon

all or any part of the Pledged Collateral pursuant to the exercise by the Secured Party of its remedies as a secured creditor as provided in Section 9 shall be applied to the Obligations in accordance with the Note.

11. Duties of the Secured Party. So long as the Secured Party complies with its obligations, if any, under the Code, the Secured Party shall not in any way or manner be liable or responsible for: (a) the safekeeping of the Pledged Collateral; (b) any loss or damage thereto occurring or arising in any manner or fashion from any cause; (c) any diminution in the value thereof; or (d) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other Person. All risk of loss, damage, or destruction of the Pledged Collateral shall be borne by the Pledgors. The powers conferred on the Secured Party hereunder are solely to protect its interests in the Pledged Collateral and shall not impose on it any duty to exercise such powers. Except as provided in Section 9-207 of the Code, the Secured Party shall have no duty with respect to the Pledged Collateral or any responsibility for taking any necessary steps to preserve rights against any Persons with respect to any Pledged Collateral.

12. GOVERNING LAW. THIS AGREEMENT AND THE OTHER INVESTMENT DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER INVESTMENT DOCUMENT IN RESPECT OF SUCH OTHER INVESTMENT DOCUMENT) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.

13. CONSENT TO JURISDICTION, SERVICE OF PROCESS AND VENUE. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF THE PLEDGORS OR THE SECURED PARTY, EACH OF THE PLEDGORS HEREBY CONSENTS AND AGREES THAT THE STATE COURTS OF CALIFORNIA, OR, AT THE OPTION OF THE SECURED PARTY, THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE PLEDGORS AND THE SECURED PARTY PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. THE PLEDGORS EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE PLEDGORS HEREBY WAIVE ANY OBJECTION WHICH THE PLEDGORS MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. THE PLEDGORS HEREBY WAIVE PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE PLEDGORS PURSUANT TO SECTION 7 HEREOF AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE PLEDGORS’ ACTUAL RECEIPT THEREOF OR THE NEXT BUSINESS DAY IF SENT BY A NATIONALLY RECOGNIZED COURIER FOR NEXT BUSINESS DAY DELIVERY. NOTHING IN THIS AGREEMENT SHALL BE

DEEMED OR OPERATE TO AFFECT THE RIGHT OF THE SECURED PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY THE SECURED PARTY OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

14. WAIVER OF JURY TRIAL, ETC.

(a) TO THE EXTENT PERMITTED AND ENFORCEABLE UNDER APPLICABLE LAW, EACH PLEDGOR AND THE SECURED PARTY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. THE PLEDGORS AND THE SECURED PARTY REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS TO THE EXTENT PERMITTED AND ENFORCEABLE UNDER APPLICABLE LAW FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, AND SUBJECT TO THE ENFORCEABILITY OF THE FOREGOING WAIVER, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

(b) IN THE EVENT THE WAIVER PROVIDED IN SECTION 14(a) IS DEEMED INEFFECTIVE, TO GIVE EFFECT TO THE PARTIES’ DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE OR RETIRED JUDGE APPLYING THE APPLICABLE LAW, THE PARTIES AGREE TO REFER, FOR A COMPLETE AND FINAL ADJUDICATION, ANY AND ALL ISSUES OF FACT OR LAW INVOLVED IN ANY LITIGATION OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, ALL DISCOVERY AND LAW AND MOTION MATTERS, PRETRIAL MOTIONS, TRIAL MATTERS AND POST-TRIAL MOTIONS (E.G. MOTIONS FOR RECONSIDERATION, NEW TRIAL AND TO TAX COSTS, ATTORNEY FEES AND PREJUDGMENT INTEREST)) UP TO AND INCLUDING FINAL JUDGMENT, BROUGHT TO RESOLVE ANY DISPUTE (WHETHER SOUNDING IN CONTRACT, TORT, UNDER ANY STATUTE OR OTHERWISE) BETWEEN AND AMONG ANY OF THE PARTIES HERETO, TO A JUDICIAL REFEREE WHO SHALL BE APPOINTED UNDER A GENERAL REFERENCE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638. THE REFEREE’S DECISION WOULD STAND AS THE DECISION OF THE COURT, WITH JUDGMENT TO BE ENTERED ON HIS/HER STATEMENT OF DECISION IN THE SAME MANNER AS IF THE ACTION HAD BEEN TRIED BY THE COURT. THE PARTIES HERETO SHALL SELECT A SINGLE NEUTRAL REFEREE, WHO SHALL BE A RETIRED STATE OR FEDERAL JUDGE WITH AT LEAST FIVE YEARS OF JUDICIAL EXPERIENCE IN CIVIL MATTERS. IN THE EVENT THAT THE PARTIES HERETO CANNOT AGREE UPON A REFEREE, THE REFEREE SHALL BE APPOINTED BY THE COURT. WITHOUT LIMITING OR AFFECTING ANY INDEMNITIES AVAILABLE TO THE SECURED PARTY, THE SECURED PARTY, ON THE ONE HAND, AND THE PLEDGORS, ON THE OTHER HAND, SHALL EQUALLY BEAR THE FEES AND

EXPENSES OF THE REFEREE (50% BY THE SECURED PARTY AND 50% BY THE PLEDGORS) UNLESS THE REFEREE OTHERWISE PROVIDES IN THE STATEMENT OF DECISION.

15. Amendments; Etc. No amendment or waiver of any provision of this Agreement nor consent to any departure by any Pledgor herefrom shall in any event be effective unless the same shall be in writing and signed by the Secured Party and such Pledgor and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

16. No Waiver; Remedies, Etc. No remedy under this Agreement, under the Purchase Agreement, or any other Investment Document is intended to be exclusive of any other remedy, but each and every remedy shall be cumulative and in addition to any and every other remedy given under this Agreement, under the Purchase Agreement, or any other Investment Document, and those provided by law. No failure on the part of the Secured Party to exercise, and no delay in exercising any right under this Agreement, any other Investment Document, or otherwise with respect to any of the Secured Obligations, shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Agreement, any other Investment Document, or otherwise with respect to any of the Secured Obligations preclude any other or further exercise thereof or the exercise of any other right. The remedies provided for in this Agreement or otherwise with respect to any of the Secured Obligations are cumulative and not exclusive of any remedies provided by law.

17. Notices. Unless otherwise specifically provided herein, all notices and other communications hereunder to the Secured Party shall be in writing and shall be mailed, sent or delivered in the manner provided for in the Purchase Agreement and all notices and other communications hereunder to any Pledgor shall be in writing and shall be mailed, sent or delivered, in care of such Pledgor, in accordance with the Purchase Agreement.

18. Continuing Security Interest. This Agreement shall create a continuing security interest in the Pledged Collateral and shall: (i) subject to Sections 24 and 25, remain in full force and effect until the payment in full in cash of the Secured Obligations; (ii) be binding upon each Pledgor and its successors and assigns; and (iii) inure to the benefit of the Secured Party and its successors, transferees, and assigns. Subject to Sections 24 and 25, upon the full and final payment in cash of the Secured Obligations, and the full and final termination of any commitment to extend any financial accommodations under the Purchase Agreement, the security interests granted herein shall automatically terminate and all rights to the Pledged Collateral shall revert to the Pledgors.

19. Security Interest Absolute. To the maximum extent permitted by law, all rights of the Secured Party, all security interests hereunder, and all obligations of the Pledgors hereunder, shall be absolute and unconditional, irrespective of:

(a) any lack of validity or enforceability of any of the Secured Obligations or any other agreement or instrument relating thereto, including any of the Investment Documents, any change in the time, manner, or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from any of the Investment Documents or any other agreement or instrument relating thereto;

(b) any exchange, release, or non-perfection of any other collateral, or any release or amendment or waiver of or consent to departure from any Investment Document; or

To the maximum extent permitted by law, each Pledgor hereby waives any right to require the Secured Party to: (A) proceed against or exhaust any security held from Pledgor; or (B) pursue any other remedy in the Secured Party’s power whatsoever.

20. Section Headings. Headings and numbers have been set forth herein for convenience only and shall not constitute a part of this Agreement, or be given any substantive effect. Unless the contrary is compelled by the context, everything contained in each section applies equally to this entire Agreement.

21. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

22. Counterparts; Execution. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same Agreement. Delivery of an executed counterpart of this Agreement by facsimile or electronic mail shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile or electronic mail also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, or binding effect hereof

23. Waiver of Marshaling. Each Pledgor and the Secured Party acknowledges and agrees that in exercising any rights under or with respect to the Pledged Collateral, the Secured Party: (i) is under no obligation to marshal any Pledged Collateral; (ii) may, in its absolute discretion, realize upon the Pledged Collateral in any order and in any manner it so elects; and (iii) shall apply the proceeds of any or all of the Pledged Collateral to the Secured Obligations in accordance with the Purchase Agreement. Each Pledgor and the Secured Party waive any right to require the marshaling of any of the Pledged Collateral.

24. Termination; Release. When the Secured Obligations have been paid in full in accordance with the terms of the Purchase Agreement, this Agreement shall terminate (subject to Section 25) and all rights in the Pledged Collateral shall revert to the Pledgors. The Secured Party, at the request and sole expense of the Pledgors will promptly execute and deliver to the Pledgors the proper instruments as the Pledgors shall reasonably request (including Uniform Commercial Code termination statements) acknowledging the termination of this Agreement, and will duly assign, transfer and deliver to the Pledgors, without recourse, representation or warranty of any kind whatsoever, such of the Pledged Collateral as may be in possession of the Secured Party and has not theretofore been disposed of, applied or released.

25. Revival and Reinstatement of Secured Obligations. If the incurrence or payment of the Secured Obligations by any Pledgor or the transfer by any Pledgor to the Secured Party of any property of such Pledgor should for any reason subsequently be declared to be void or voidable under any state or federal law relating to creditors’ rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, and other voidable or recoverable payments of money or transfers of property (collectively, a “Voidable Transfer”), and if the Secured Party is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof that the Secured Party is required or elects to repay or restore, and as to all reasonable costs, expenses, and attorneys fees of the Secured Party related thereto, the liability of each Pledgor automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made.

26. Interpretation. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against the Secured Party or the Pledgors, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto.

IN WITNESS WHEREOF, the Pledgors and the Secured Party have caused this Agreement to be duly executed and delivered by their respective officers as of the date first written above.


PLEDGORS: CAPRIUS, INC.

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

M.C.M. ENVIRONMENTAL TECHNOLOGIES, INC.

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

M.C.M. ENVIRONMENTAL TECHNOLOGIES LTD.

By:	/s/ George Aaron
	Name:	George Aaron
	Title:	Chairman

[SIGNATURE PAGE TO PLEDGE AGREEMENT]

PAGE 1


SECURED PARTY: VINTAGE CAPITAL GROUP, LLC

By:	/s/ Fred C. Sands
	Name:	Fred C. Sands
	Title:	Chairman

[SIGNATURE PAGE TO PLEDGE AGREEMENT]

PAGE 2

EX-99.6 7 dex996.htm PATENT SECURITY AGREEMENT Patent Security Agreement

Exhibit 6

Execution Version

PATENT SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Patent Security Agreement”) dated as of September 16, 2009, is made by and among CAPRIUS, INC., a Delaware corporation (“Caprius”), M.C.M. ENVIRONMENTAL TECHNOLOGIES, INC., a Delaware corporation (“M.C.M.”), M.C.M. ENVIRONMENTAL TECHNOLOGIES LTD., an Israeli corporation (“M.C.M. Israel”), the Additional Obligors (as defined in Section 14(k)) (together with Caprius, M.C.M. and M.C.M. Israel, collectively, the “Obligors” and each (including Caprius, M.C.M., M.C.M. UK and M.C.M. Israel) individually, an “Obligor”), VINTAGE CAPITAL GROUP, LLC, a Delaware limited liability company (together with its successors and assigns, collectively, the “Secured Party”), as an inducement to the Secured Party to enter into that certain Securities Purchase and Sale Agreement of even date herewith (as may be amended, restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”) and the transactions contemplated thereby. All Capitalized terms used and not defined herein shall have the respective meanings assigned to them in the Purchase Agreement.

A G R E E M E N T

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Obligors and the Secured Party hereby agree as follows:

1. DEFINITIONS. Except as otherwise provided herein, terms defined in the Purchase Agreement or the UCC shall have the same meanings when used herein. As used herein, the term:

“Collateral” shall have the meaning set forth in Section 2.

“Obligations” shall have the meaning set forth in Section 3.

“UCC” means the Uniform Commercial Code as in effect in the State of New York on the date of this Patent Security Agreement.

2. GRANT OF SECURITY INTEREST. Each Obligor hereby grants to the Secured Party a lien and security interest in the following (the “Collateral”):

(a) United States Patent 6,494,391, entitled “Apparatus For Treating Waste, Particularly Medical Waste, to Facilitate Its Disposition”, issued on December 17, 2002 (the “‘391 Patent”); and

(b) Any Contract Rights in, to or under the ‘391 Patent;

together with all Proceeds, products, offspring, rents, issues, profits and returns of and from any of the foregoing.

3. DEBTS SECURED. The security interest granted by this Patent Security Agreement shall secure the prompt payment and performance of all of the Obligors’ present and future debts, obligations, and liabilities of whatever nature to the Secured Party, including, without limitation, (a) the Note and any PIK Notes (as defined in the Note) issued or deemed to be issued pursuant to the Note, (b) all obligations of each Obligor arising from or relating to the Investment Documents, including, without limitation, this Patent Security Agreement, and (c) transactions in which the documents evidencing the indebtedness refer to this grant of security interest as providing security therefor (collectively, the “Obligations”).

Each of the Obligors and the Secured Party expressly acknowledge their mutual intent that the security interest created by this Patent Security Agreement secure the prompt and indefeasible payment and performance of payment and performance of any and all Obligations without any limitation whatsoever.

4. LOCATION OF THE OBLIGORS AND COLLATERAL. Each Obligor jointly and severally represents and warrants that:

(a) Annex 1 attached hereto correctly and completely sets forth its full and correct legal name, type of organization, jurisdiction of organization, organizational ID number (if applicable), chief executive office and mailing address as of the date of this Patent Security Agreement.

(b) Each Obligor agrees that it will not change its state of organization or any of the above referenced locations or create any new locations for such items or matters without giving the Secured Party at least thirty (30) days’ prior written notice thereof. In addition, each Obligor agrees that it will not (i) change its name, federal employer identification number, organizational identification number, corporate structure or identity, or (ii) create or operate under any new fictitious name without giving the Secured Party at least thirty (30) days’ prior written notice thereof.

5. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL. Each Obligor jointly and severally represents and warrants that:

(a) One or more of the Obligors is the sole owner of the Collateral.

(b) The Collateral is not subject to any security interest, lien, prior assignment, or other encumbrance of any nature whatsoever except Permitted Encumbrances.

6. COVENANTS CONCERNING COLLATERAL. Each Obligor jointly and severally covenants that:

(a) The Obligors will keep the Collateral free and clear of any and all security interests, liens, assignments or other encumbrances, except Permitted Encumbrances and no Obligor shall enter into any licenses with respect to the Collateral, except as granted prior to the effective date herein.

(b) The Obligors shall pay the 8th-year Maintenance Fee for the ‘391 Patent by no later than June 17, 2010.

(c) Each Obligor does hereby make, constitute, and appoint the Secured Party and its designees as such Obligor’s true and lawful attorney in fact, with full power of substitution, such power to be exercised following and during the continuance of an uncured default under this Patent Security Agreement to do any and all things necessary or proper to carry out the intent of this Patent Security Agreement and to perfect and protect the liens and rights of the Secured Party created under this Patent Security Agreement.

(d) The Obligors further agree to execute and deliver to the Secured Party all other written notices and similar documents requested by the Secured Party following an uncured default under this Patent Security Agreement, specifically including an assignment of the entire right, title and interest in and to the ‘391 Patent to the Secured Party.

(e) The Obligors shall execute all such collateral assignments with respect to the ‘391 Patent as the Secured Party reasonably requests in order to perfect the security interests in such Collateral. The Obligors shall promptly execute for subsequent filing with the United States Patent and Trademark Office, such collateral assignments with respect to the ‘391 Patent as the Secured Party reasonably requests.

7. RIGHT TO PERFORM FOR THE OBLIGORS. The Secured Party may, in its sole discretion and without any duty to do so, elect to discharge maintenance fee, taxes, tax liens, security interests, or any other encumbrance upon the Collateral, perform any duty or obligation of the Obligors, pay filing, recording, insurance and other charges payable by the Obligors, or provide insurance as provided herein if the Obligors fails to do so. Any such payments advanced by the Secured Party shall be repaid by the Obligors upon demand, together with interest thereon from the date of the advance until repaid, both before and after judgment. The Obligors hereby authorize the Secured Party to file one or more financing statements or continuation statements in respect thereof, and amendments thereto, relating to all or any part of the Collateral without the signature of an Obligor where permitted by law. A photocopy or other reproduction of this Patent Security Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

8. DEFAULT. Time is of the essence of this Patent Security Agreement. The occurrence of any of the following events, and if required, the giving of any notice and passage of the prescribed time period without cure, shall constitute a default under this Patent Security Agreement:

(a) Any representation or warranty made by any Obligor in this Patent Security Agreement is materially false or materially misleading when made;

(b) An Obligor fails in the payment or performance of any obligation, covenant, agreement or liability created by or arising from or related to this Patent Security Agreement; or

Any default under this Patent Security Agreement (other than a default or Event of Default under any of the Investment Documents other than this Patent Security Agreement, which shall be subject to the notice and cure periods set forth therein) shall be subject to the Secured Party first giving the Obligors written notice of such default and the Obligors shall have thirty (30) days from the date of giving such notice to cure such default. If the default is cured within said thirty (30) day period then the Secured Party may not exercise any rights or remedies based upon that default.

No course of dealing or any delay or failure to assert any default shall constitute a waiver of that default or of any prior or subsequent default.

9. REMEDIES. Upon the occurrence and during continuance of any uncured default under this Patent Security Agreement, the Secured Party shall have the following rights and remedies, in addition to all other rights and remedies existing at law, in equity, or by statute or provided in the Investment Documents which may be exercised without notice to, or consent by, the Obligors, except as such notice or consent is expressly provided for hereunder:

(a) The Secured Party shall have all the rights and remedies available under the UCC.

(b) The Obligor shall execute and deliver on the date hereof to the Secured Party a patent assignment in the form attached hereto as Exhibit B pursuant to which all right, title and interest in and to the ‘391 Patent shall be assigned permanently to the Secured Party, which executed assignment shall be held by the Secured Party in escrow unless and until the occurrence of a default under this Patent Security Agreement. From and after the occurrence of a default under this Patent Security Agreement, if any, the Secured Party, may, in its sole and absolute discretion, and without notice to the Obligor, record such assignment with the United States Patent and Trademark Office.

(c) The Secured Party is hereby granted an exclusive license of the right to exclude under the ‘391 Patent, effective upon the occurrence and during the continuance of any uncured default under this Patent Security Agreement, and the right to practice or to sub-license, without charge, under the ‘391 Patent.

In the event of an uncured default pursuant to Section 8 of this Agreement, the Obligors jointly and severally agree to pay all reasonable costs and expenses, including reasonable attorneys’ fees and legal expenses, incurred by the Secured Party in enforcing, or exercising any remedies under, this Patent Security Agreement, and any other rights and remedies. The Obligors additionally jointly and severally agree to pay all Liquidation Costs. Any and all such Liquidation costs and out-of-pocket expenses shall be payable by the Obligors upon demand, together with interest thereon from the date of the advance until repaid, both before and after judgment, at the Default Rate (as defined in the Note). Regardless of any breach or default, the Obligors agree to pay all reasonable expenses, including reasonable attorneys’ fees and legal expenses, incurred by the Secured Party in any bankruptcy proceedings of any type involving any Obligor, the Collateral, or this Patent Security Agreement, including, without limitation, expenses incurred in modifying or lifting the automatic stay, determining adequate protection, use of cash collateral, or relating to any plan of reorganization.

10. NOTICES. All notices or demands by any party hereto shall be in writing and shall be sent as provided in the Purchase Agreement.

11. INDEMNIFICATION. Each Obligor jointly and severally agrees to indemnify the Secured Party for any and all claims, costs, losses and liabilities, and for any damages or costs which may be awarded against or incurred by the Secured Party, and for all reasonable attorney fees, legal expenses, and other out-of-pocket expenses incurred by the Secured Party in defending such claims, arising from or related in any manner to the negotiation, execution, or performance by the Secured Party of this Patent Security Agreement, but excluding any claims and liabilities based solely upon the material breach or default by the Secured Party under this Patent Security Agreement or gross negligence or willful misconduct of the Secured Party.

indemnifying the Secured Party from any such loss or damage; or (b) have retained such monetary reserves or Liens on the Collateral for such period of time as the Secured Party (acting at the direction of the Requisite Holders as specified under Section 14.2 of the Purchase Agreement) may deem necessary to protect the Secured Party from any such loss or damage. All reasonable expenses incurred by the Secured Party in connection with the termination of the security interests granted to the Secured Party in connection with this Patent Security Agreement shall be the sole expense of the Obligors.

13. REINSTATEMENT. Notwithstanding anything to the contrary herein contained, this Patent Security Agreement and the security interest provided for herein shall continue to be effective or be reinstated, as the case may be, if at any time any payment, or any part thereof, of any or all of the Obligations is rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be restored or returned by the Secured Party in connection with any bankruptcy, reorganization or similar proceeding involving any Obligor, any other party liable with respect to the Obligations or otherwise, if the proceeds of any Collateral are required to be returned by the Secured Party under any such circumstances, or if the Secured Party elects to return any such payment or proceeds or any part thereof, all as though such payment had not been made or such proceeds not been received.

14. MISCELLANEOUS.

(c) In the event any term or provision of this Agreement conflicts with any term or provision of the Purchase Agreement, the term or provision of the Purchase Agreement shall control.

(e) TO THE EXTENT PERMITTED AND ENFORCEABLE UNDER APPLICABLE LAW, EACH OBLIGOR AND THE SECURED PARTY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS SECURITY AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. THE OBLIGORS AND THE SECURED PARTY REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS TO THE EXTENT PERMITTED AND ENFORCEABLE UNDER APPLICABLE LAW FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, AND SUBJECT TO THE ENFORCEABILITY OF THE FOREGOING WAIVER, A COPY OF THIS SECURITY AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

(f) Any provision of this Patent Security Agreement which is prohibited or unenforceable in any jurisdiction shall be severable and, as to such jurisdiction only, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

(g) All references in this Patent Security Agreement to the singular shall be deemed to include the plural if the context so requires and vice versa. References in the collective or conjunctive shall also include the disjunctive unless the context otherwise clearly requires a different interpretation.

(h) Two or more duplicate originals of this Patent Security Agreement may be signed by the parties, each duplicate of which shall be an original but all of which shall constitute one and the same instrument. Facsimile or PDF signatures delivered hereunder shall be deemed original signatures.

(i) All agreements, representations, warranties and covenants made by the Obligors shall survive the execution and delivery of this Patent Security Agreement, the filing and consummation of any bankruptcy proceedings, and shall continue in effect so long as any obligation to the Secured Party contemplated by this Patent Security Agreement is outstanding and unpaid, notwithstanding any termination of this Patent Security Agreement. All agreements, representations, warranties and covenants in this Patent Security Agreement shall bind the party making the same and its heirs, successors and permitted assigns, and shall be to the benefit of and be enforceable by each party for whom made and their respective heirs, successors and permitted assigns.

(j) This Patent Security Agreement, together with the Investment Documents, constitutes the entire agreement between the Obligors and the Secured Party with respect to the subject matter hereof and all other prior and contemporaneous agreements, arrangements, and understandings between the parties hereto as to the subject matter hereof are, except as otherwise expressly provided herein, rescinded. Except as contemplated by Section 14(k), no provision of the Patent Security Agreement may be waived, modified or supplemented except by an instrument in writing signed by each of the Obligors and the Secured Party. Any modification, supplement or waiver shall be for such period and subject to such conditions as shall be specified

in the written instrument effecting the same and shall be binding upon each Obligor and the Secured Party, and any such waiver shall be effective only in the specific instance and for the purpose for which given.

(k) Upon the execution and delivery by any Person of an assumption agreement in substantially the form of Exhibit A hereto as contemplated by Section 9.7 of the Purchase Agreement (each, an “Assumption Agreement”), (i) such Person shall be referred to as an “Additional Obligor” and shall become and be an Obligor hereunder, and each reference in this Patent Security Agreement to an “Obligor” shall also mean and be a reference to such Additional Obligor and (ii) each reference herein to “this Patent Security Agreement”, “hereunder”, “hereof” or words of like import referring to this Patent Security Agreement, and each reference in any other Investment Document to the “Patent Security Agreement” and “thereunder” or “thereof” to the extent referring to this Patent Security Agreement, shall mean and be a reference to this Patent Security Agreement as modified by such Assumption Agreement.

IN WITNESS WHEREOF, the Obligors and the Secured Party have executed this Patent Security Agreement as of the date first written above.


OBLIGORS: CAPRIUS, INC.

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

M.C.M. ENVIRONMENTAL TECHNOLOGIES, INC.

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

M.C.M. ENVIRONMENTAL TECHNOLOGIES LTD.

By:	/s/ George Aaron
	Name:	George Aaron
	Title:	Chairman

[SIGNATURE PAGE TO PATENT SECURITY AGREEMENT]

PAGE 1


SECURED PARTY: VINTAGE CAPITAL GROUP, LLC

By:	/s/ Fred C. Sands
	Name:	Fred C. Sands
	Title:	Chairman

[SIGNATURE PAGE TO PATENT SECURITY AGREEMENT]

PAGE 2

EX-99.7 8 dex997.htm PATENT SECURITY AGREEMENT Patent Security Agreement

Exhibit 7

Execution Version

PATENT SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Patent Security Agreement”) dated as of December 16, 2009, is made by and among CAPRIUS, INC., a Delaware corporation (“Caprius”), M.C.M. ENVIRONMENTAL TECHNOLOGIES, INC., a Delaware corporation (“M.C.M.”), M.C.M. ENVIRONMENTAL TECHNOLOGIES LTD., an Israeli corporation (“M.C.M. Israel”), the Additional Obligors (as defined in Section 14(k)) (together with Caprius, M.C.M. and M.C.M. Israel, collectively, the “Obligors” and each (including Caprius, M.C.M., M.C.M. UK and M.C.M. Israel) individually, an “Obligor”), and VINTAGE CAPITAL GROUP, LLC, a Delaware limited liability company (together with its successors and assigns, collectively, the “Secured Party”), pursuant to that certain Securities Purchase and Sale Agreement, dated as of September 16, 2009 (as may be amended, restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”) and the transactions contemplated thereby. All Capitalized terms used and not defined herein shall have the respective meanings assigned to them in the Purchase Agreement.

A G R E E M E N T

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Obligors and the Secured Party hereby agree as follows:

1. DEFINITIONS. Except as otherwise provided herein, terms defined in the Purchase Agreement or the UCC shall have the same meanings when used herein. As used herein, the term:

“Collateral” shall have the meaning set forth in Section 2.

“Obligations” shall have the meaning set forth in Section 3.

“UCC” means the Uniform Commercial Code as in effect in the State of New York on the date of this Patent Security Agreement.

2. GRANT OF SECURITY INTEREST. Each Obligor hereby grants to the Secured Party a lien and security interest in the following (the “Collateral”):

(a) United States Patent 5,620,654, entitled “Method And Equipment for Sanitization of Medical Waste”, issued on April 15, 1997 (the “‘654 Patent”); and

(b) Any Contract Rights in, to or under the ‘654 Patent;

together with all Proceeds, products, offspring, rents, issues, profits and returns of and from any of the foregoing.

4. LOCATION OF THE OBLIGORS AND COLLATERAL. Each Obligor jointly and severally represents and warrants that:

5. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL. Each Obligor jointly and severally represents and warrants that:

(a) One or more of the Obligors is the sole owner of the Collateral.

(b) The Collateral is not subject to any security interest, lien, prior assignment, or other encumbrance of any nature whatsoever except Permitted Encumbrances.

6. COVENANTS CONCERNING COLLATERAL. Each Obligor jointly and severally covenants that:

(b) [Reserved.]

(e) The Obligors shall execute all such collateral assignments with respect to the ‘654 Patent as the Secured Party reasonably requests in order to perfect the security interests in such Collateral. The Obligors shall promptly execute for subsequent filing with the United States Patent and Trademark Office, such collateral assignments with respect to the ‘654 Patent as the Secured Party reasonably requests.

(a) Any representation or warranty made by any Obligor in this Patent Security Agreement is materially false or materially misleading when made;

(b) An Obligor fails in the payment or performance of any obligation, covenant, agreement or liability created by or arising from or related to this Patent Security Agreement; or

No course of dealing or any delay or failure to assert any default shall constitute a waiver of that default or of any prior or subsequent default.

(a) The Secured Party shall have all the rights and remedies available under the UCC.

(b) The Obligor shall execute and deliver on the date hereof to the Secured Party a patent assignment in the form attached hereto as Exhibit B pursuant to which all right, title and interest in and to the ‘654 Patent shall be assigned permanently to the Secured Party, which executed assignment shall be held by the Secured Party in escrow unless and until the occurrence of a default under this Patent Security Agreement. From and after the occurrence of a default under this Patent Security Agreement, if any, the Secured Party, may, in its sole and absolute discretion, and without notice to the Obligor, record such assignment with the United States Patent and Trademark Office.

(c) The Secured Party is hereby granted an exclusive license of the right to exclude under the ‘654 Patent, effective upon the occurrence and during the continuance of any uncured default under this Patent Security Agreement, and the right to practice or to sub-license, without charge, under the ‘654 Patent.

10. NOTICES. All notices or demands by any party hereto shall be in writing and shall be sent as provided in the Purchase Agreement.

11. INDEMNIFICATION. Each Obligor jointly and severally agrees to indemnify the Secured Party for any and all claims, costs, losses and liabilities, and for any damages or costs which may be awarded against or incurred by the Secured Party, and for all reasonable attorney fees, legal expenses, and other out-of-pocket expenses incurred by the Secured Party in defending such claims, arising from or related in any manner to the negotiation, execution, or performance by the Secured Party of this Patent Security Agreement, but excluding any claims and liabilities based solely upon the material breach or default by the Secured Party under this Patent Security Agreement or gross negligence or willful misconduct of the Secured Party.

14. MISCELLANEOUS.

(c) In the event any term or provision of this Agreement conflicts with any term or provision of the Purchase Agreement, the term or provision of the Purchase Agreement shall control.

CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, AND SUBJECT TO THE ENFORCEABILITY OF THE FOREGOING WAIVER, A COPY OF THIS SECURITY AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

this Patent Security Agreement to an “Obligor” shall also mean and be a reference to such Additional Obligor and (ii) each reference herein to “this Patent Security Agreement”, “hereunder”, “hereof” or words of like import referring to this Patent Security Agreement, and each reference in any other Investment Document to the “Patent Security Agreement” and “thereunder” or “thereof” to the extent referring to this Patent Security Agreement, shall mean and be a reference to this Patent Security Agreement as modified by such Assumption Agreement.

NEW TRIAL AND TO TAX COSTS, ATTORNEY FEES AND PREJUDGMENT INTEREST)) UP TO AND INCLUDING FINAL JUDGMENT, BROUGHT TO RESOLVE ANY DISPUTE (WHETHER SOUNDING IN CONTRACT, TORT, UNDER ANY STATUTE OR OTHERWISE) BETWEEN AND AMONG ANY OF THE PARTIES HERETO, TO A JUDICIAL REFEREE WHO SHALL BE APPOINTED UNDER A GENERAL REFERENCE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638. THE REFEREE’S DECISION WOULD STAND AS THE DECISION OF THE COURT, WITH JUDGMENT TO BE ENTERED ON HIS/HER STATEMENT OF DECISION IN THE SAME MANNER AS IF THE ACTION HAD BEEN TRIED BY THE COURT. THE PARTIES HERETO SHALL SELECT A SINGLE NEUTRAL REFEREE, WHO SHALL BE A RETIRED STATE OR FEDERAL JUDGE WITH AT LEAST FIVE YEARS OF JUDICIAL EXPERIENCE IN CIVIL MATTERS. IN THE EVENT THAT THE PARTIES HERETO CANNOT AGREE UPON A REFEREE, THE REFEREE SHALL BE APPOINTED BY THE COURT. WITHOUT LIMITING OR AFFECTING ANY INDEMNITIES AVAILABLE TO THE SECURED PARTY, THE SECURED PARTY, ON THE ONE HAND, AND THE OBLIGORS, ON THE OTHER HAND, SHALL EQUALLY BEAR THE FEES AND EXPENSES OF THE REFEREE (50% BY THE SECURED PARTY AND 50% BY THE OBLIGORS) UNLESS THE REFEREE OTHERWISE PROVIDES IN THE STATEMENT OF DECISION.

IN WITNESS WHEREOF, the Obligors and the Secured Party have executed this Patent Security Agreement as of the date first written above.



OBLIGORS: CAPRIUS, INC.

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

M.C.M. ENVIRONMENTAL TECHNOLOGIES, INC.

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

M.C.M. ENVIRONMENTAL TECHNOLOGIES LTD.

By:	/s/ George Aaron
	Name:	George Aaron
	Title:	Chairman

[SIGNATURE PAGE TO PATENT SECURITY AGREEMENT]

PAGE 1



SECURED PARTY: VINTAGE CAPITAL GROUP, LLC

By:	/s/ Fred C. Sands
	Name:	Fred C. Sands
	Title:	Chairman

[SIGNATURE PAGE TO PATENT SECURITY AGREEMENT]

PAGE 2

EX-99.8 9 dex998.htm WARRANT Warrant

Exhibit 8

WARRANT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF SUCH STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION.


WARRANT NO. 1		January 22, 2010

CAPRIUS, INC.

WARRANT TO PURCHASE SHARES OF COMMON STOCK

FOR VALUE RECEIVED, CAPRIUS, INC., a Delaware corporation (the “Company”), hereby certifies that VINTAGE CAPITAL GROUP, LLC, a Delaware limited liability company (together with its successors or assigns, the “Holder”), is entitled to purchase, on the terms and subject to the conditions contained herein, a number of shares (the “Warrant Shares”) of the Company’s common stock (“Common Stock”) calculated in accordance with Section 2.3, at the per-share exercise price of $0.01 (the “Warrant Purchase Price”), at any time and from time to time during the Exercise Period (as such term is defined below). The number of Warrant Shares and the Warrant Purchase Price are subject to adjustment as provided in Section 3. This Warrant is being issued in accordance with the terms and conditions set forth in that certain Warrant Purchase Agreement, dated as of January 22, 2010, by and between the Company and the Holder, and that certain Securities Purchase and Sale Agreement, dated as of September 16, 2009, by and among the Company, M.C.M. Environmental Technologies, Inc., a Delaware corporation, and M.C.M. Environmental Technologies Ltd., an Israeli corporation, on the one hand, and the Holder, on the other hand (as amended, restated, supplemented or otherwise modified from time to time, the “Securities Purchase Agreement”).

This Warrant is subject to the following terms and conditions:

1. DEFINITIONS

Unless otherwise defined in this Warrant, capitalized terms used and not otherwise defined in this Warrant have the meanings set forth in the Securities Purchase Agreement. In addition, the following capitalized terms have the following meanings:

“Common Stock” has the meaning set forth in the preamble.

“Company” has the meaning set forth in the preamble.

“Convertible Securities” means any Securities or other obligations issued or issuable by the Company or any other Person that are exchangeable for, or convertible into, (i) any Common Stock or (ii) any Securities exchangeable for, or convertible into, any Common Stock.

“Designated Office” has the meaning set forth in Section 2.1.

“Distribution” has the meaning set forth in Section 3.1.

“Distribution Amount” has the meaning set forth in Section 3.1.

“Effective Date” means the issue date of this Warrant.

“Exercise Notice” has the meaning set forth in Section 2.1.

“Exercise Period” means the period commencing on the Effective Date and ending on (and including) the Expiration Date.

“Expiration Date” means January 22, 2017.

“Fully Diluted Basis” means, at any time, a basis that includes (i) all shares of Common Stock of the Company issued and outstanding at such time and (ii) all additional shares of Common Stock of the Company which would be issued or issuable at such time upon the conversion, purchase, exchange or exercise of any then outstanding warrants, preferred stock, debt, options (including under any employee stock option or similar plan), rights, other convertible instruments or other securities convertible into or exchangeable for shares of Common Stock or otherwise entitles the holder to receive shares of Common Stock of the Company.

“Holder” has the meaning set forth in the preamble.

“Other Property” has the meaning set forth in Section 3.2(a).

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the Securities and Exchange Commission thereunder, all as the same shall be in effect from time to time.

“Securities Purchase Agreement” has the meaning set forth in the preamble.

“Warrant” means this Warrant, any amendment or other modification of this Warrant, and any warrants issued upon transfer, division or combination of, or in substitution for, this Warrant or any other such warrant. All such warrants shall at all times be identical as to terms and conditions and date, except as to the number of Warrant Shares for which they may be exercised.

“Warrant Purchase Price” has the meaning set forth in the preamble (as adjusted in accordance with the terms of this Warrant).

“Warrant Shares” has the meaning set forth in the preamble.

2. EXERCISE

2.1 Exercise; Delivery of Certificates. This Warrant may be exercised at the option of the Holder, in whole or in part, at any time and from time to time during the Exercise Period, by (a) delivering to the Company at its principal executive office (the “Designated Office”) (i) a notice of exercise, in substantially the form attached hereto (the “Exercise Notice”), duly completed and signed by the Holder, and (ii) this Warrant, and (b) paying the Warrant Purchase Price pursuant to Section 2.2 for the number of Warrant Shares being purchased. The Warrant Shares being purchased under this Warrant will be deemed to have been issued to the Holder, as the record owner of such Warrant Shares, as of the close of business on the date on which payment therefor is made by the Holder pursuant to Section 2.2, provided that the Exercise Notice and this Warrant have been delivered to the Company. Stock certificates representing the Warrant Shares so purchased shall be delivered to the Holder within three (3) Business Days after this Warrant has been exercised. In the case of a purchase of less than all of the Warrant Shares issuable upon exercise of this Warrant, the Company shall cancel this Warrant and, within three (3) Business Days after this Warrant has been exercised, execute and deliver to the Holder a new Warrant of like tenor representing the number of unexercised Warrant Shares. Each stock certificate representing the number of Warrant Shares purchased or purchasable under this Warrant shall be registered in the name of the Holder or, subject to compliance with Applicable Laws, such other name as shall be designated by the Holder.

2.2 Payment of Warrant Purchase Price. Payment of the Warrant Purchase Price may be made, at the option of the Holder, by (i) check, (ii) wire transfer, (iii) surrender to the Company of a portion of the principal amount of the Note or any PIK Notes, provided, that any accrued but unpaid interest on the surrendered portion of the principal of the Note or any PIK Notes shall be paid in cash by the Company concurrent with delivery of the stock certificate representing the purchased Warrant Shares, or (iv) any combination of the foregoing.

2.3 Calculation of Warrant Shares.

The number of Warrant Shares to be issued upon any exercise of this Warrant shall be calculated on the date of exercise as follows:


Step 1:	A	= C
Step 1:	B	= C

Step 2:	C	* 40% = D

Step 3:	D	* E = F

Where:


A		=		The sum of (i) all shares of Common Stock of the Company issued and outstanding at such time plus (ii) all shares of Common Stock of the Company which would be issued or issuable at such time upon the conversion, purchase, exchange or exercise of any then-outstanding warrants, preferred stock, debt, options, rights, other convertible instruments or other securities convertible into or exchangeable for shares of Common Stock of the Company or that otherwise entitles the holder to receive shares of Common Stock of the Company, other than the then-unexercised portion of this Warrant.


B	=	The sum of (i) 60% plus (ii) the percentage of the Common Stock of the Company on a Fully Diluted Basis for which this Warrant has previously been exercised.

C	=	The number of shares of Common Stock of the Company on a Fully Diluted Basis, including this Warrant.

D	=	The number of shares of Common Stock of the Company subject to this Warrant at such time (without regard to any prior exercise of this Warrant).

E	=	The quotient of (i) the percentage of the Common Stock of the Company on a Fully Diluted Basis for which this Warrant is being exercised at such time divided by (ii) 40%.

F	=	The number of shares of Common Stock issuable to the Holder upon such exercise of this Warrant.

For purposes of reference only, if exercised in full as of the Effective Date, this Warrant would be exercisable for 25,602,333 shares of Common Stock of the Company.

3. DISTRIBUTIONS AND ADJUSTMENTS

The number of Warrant Shares for which this Warrant is exercisable and the Warrant Purchase Price shall be subject to adjustment from time to time as set forth in this Section 3.

3.1 Distribution of Assets or Securities. If the Company makes a distribution (a “Distribution”) to its stockholders (other than in connection with the liquidation, dissolution or winding up of the Company) of any asset (including cash) or security (the total of the assets or securities so distributed, the “Distribution Amount”) other than those referred to in Section 3.2, then, the Holder shall have the right to receive the portion of the Distribution Amount which a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the Distribution would have owned or received immediately after and as a result of such Distribution. Upon the closing of the Distribution, the Company shall distribute such portion of the Distribution Amount to the Holder.

3.2 Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets.

(a) If at any time the Company reorganizes its capital, reclassifies its capital stock, consolidates, merges or combines with or into another Person (where the Company is not the surviving corporation or where there is any change whatsoever in, or distribution with respect to, the outstanding Common Stock), or the Company sells, transfers or otherwise disposes of all or substantially all of its property, assets or business to another Person (including in connection with a going private transaction by the Company), other than in a transaction provided for in Section 3.3, and, pursuant to the terms of such reorganization, reclassification, consolidation, merger, combination, sale, transfer or other disposition of assets, (i) shares of common stock of the successor or acquiring Person or of the Company (if it is the surviving corporation) or (ii) any cash, shares of stock or other securities or property of any nature

whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring Person or the Company (“Other Property”) are to be received by or distributed to the holders of Common Stock who are holders immediately prior to such transaction, then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of Common Stock, common stock of the successor or acquiring Person and/or Other Property which a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event would have owned or received immediately after and as a result of such event.

(b) In case of any such event described in Section 3.2(a), the successor or acquiring Person (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as the Holder may approve in writing (and memorialized by resolutions of the Board of Directors of the Company) in order to provide for adjustments of any shares of common stock of such successor or acquiring Person for which this Warrant thus becomes exercisable, which modifications shall be as equivalent as practicable to the adjustments provided for in this Section 3.2. For purposes of this Section 3, “common stock of the successor or acquiring Person” shall include stock or other equity securities, or securities that are exercisable or exchangeable for or convertible into equity securities, of such corporation, or other securities if such Person is not a corporation, of any class that is not preferred as to dividends or assets over any other class of stock of such corporation or Person and that is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 3.2 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers and other dispositions of assets.

3.3 Dissolution, Total Liquidation or Winding-Up. If at any time there is a voluntary or involuntary dissolution, total liquidation or winding-up of the Company, other than as contemplated by Section 3.2, then the Company shall cause to be mailed (by registered or certified mail, return receipt requested, postage prepaid) to the Holder at the Holder’s address as shown on the Warrant register, at the earliest practicable time (and, in any event, not less than thirty (30) days before any date set for definitive action) written notice of the date on which such dissolution, liquidation or winding-up shall take place, as the case may be. Such notice shall also specify the date as of which the record holders of shares of Common Stock shall be entitled to exchange their shares for securities, money or other property deliverable upon such dissolution, liquidation or winding-up, as the case may be. On such date, the Holder shall be entitled to receive upon surrender of this Warrant the cash or other property, less the Warrant Purchase Price for this Warrant then in effect, that the Holder would have been entitled to receive had this Warrant been exercised and all Warrant Shares issuable upon exercise hereof have been issued immediately prior to such dissolution, liquidation or winding-up. Upon receipt of the cash or other property, any and all rights of the Holder to exercise this Warrant shall terminate in their entirety. If the cash or other property distributable in the dissolution, liquidation or winding-up has a fair market value which is less than the Warrant Purchase Price for this Warrant then in effect, this Warrant shall terminate and be of no further force or effect upon the dissolution, liquidation or winding-up.

3.4 Split, Reverse Split and Additional Securities Issuances. In the event that the Company completes a stock split, stock dividend or reverse stock split, or otherwise issues any additional securities or repurchases any outstanding securities, the number of Warrant Shares to be issued upon exercise of this Warrant shall account for such additional securities or repurchase, and the aggregate Warrant Purchase Price shall remain unchanged.

3.5 [Reserved].

3.6 Other Dilutive Events. If any event occurs as to which the other provisions of this Section 3 are not strictly applicable but as to which the failure to make any adjustment or distribution would not protect the purchase rights represented by this Warrant in accordance with the intent and principles hereof, then, in each such case and unless the Company and the Holder agree on the appropriate adjustment, the Holder may appoint on behalf of the Company an investment banking or accounting firm of recognized national or regional standing which shall give its opinion as to the adjustment, if any, on a basis consistent with the intent and principles established herein, necessary to preserve the purchase rights represented by the Warrant. Upon receipt of such opinion, the Company will mail (by registered or certified mail, return receipt requested, postage prepaid) a copy thereof to the Holder within three (3) Business Days and shall make the adjustments and distributions described therein. To the extent that such investment banking or accounting firm agrees with the adjustment as proposed by the Company to such firm at the time such firm is engaged, the Holder shall bear the fees and expenses of such firm; otherwise, the fees and expenses of such firm shall be borne by the Company.

3.7 Other Provisions Applicable to Distributions and Adjustments. The following provisions shall be applicable to the distributions and adjustments provided for pursuant to this Section 3:

(a) The distributions and adjustments required by this Section 3 shall be made whenever and as often as any specified event requiring such a distribution or adjustment shall occur. For the purpose of any such distribution or adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence.

(b) Whenever the number of shares or type of Securities or Other Property for which this Warrant is exercisable or the Warrant Purchase Price shall be adjusted or recalculated pursuant to this Section 3, the Company shall immediately, but in no event in more than two (2) Business Days after the event giving rise to the adjustment or recalculation, prepare a certificate to be executed by the chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment or recalculation and the method by which such adjustment or recalculation was calculated, specifying the number of shares and type of Securities or Other Property for which this Warrant is exercisable, and any related change in the Warrant Purchase Price, after giving effect to such adjustment, recalculation or change. The Company shall deliver to the Holder (in accordance with the provisions of Section 4.8) a signed copy of the certificate within five (5) Business Days of the event which caused the adjustment or recalculation. The Company shall keep at the Designated Office copies of all such certificates and cause them to be available for inspection at the Designated Office during normal business hours by the Holder or any prospective transferee of this Warrant designated by the Holder.

(c) Except as otherwise provided herein, all subsections of this Section 3 are intended to operate independently of one another (but without duplication). If an event occurs that requires the application of more than one subsection, all applicable subsections shall be given independent effect without duplication.

(d) Notwithstanding any adjustment required by this Section 3, in no event shall the Warrant Purchase Price be less than the par value of the Common Stock.

4. MISCELLANEOUS

4.1 Restrictive Legend. This Warrant, any Warrant issued upon transfer of this Warrant and, unless registered under the Securities Act, any Warrant Shares issued upon exercise of this Warrant or any portion thereof, shall be imprinted with the following legend, in addition to any legend required under applicable state securities laws:

The legend shall be appropriately modified upon issuance of certificates for shares of Common Stock.

Upon request of the holder of a Common Stock certificate, the Company shall issue to that holder a new certificate free of the foregoing legend, if, with such request, such holder provides the Company with a reasonable opinion of counsel reasonably acceptable to the Company to the effect that the securities evidenced by such certificate may be sold without restriction under Rule 144 (or any other rule permitting resales of securities without restriction) promulgated under the Securities Act.

4.2 Holder Entitled to Benefits Under Other Agreements. The Holder of this Warrant (or, if the Warrant has been divided up, the Holders) is entitled to certain rights, benefits and privileges with respect to this Warrant and the Warrant Shares pursuant to the terms of the Securities Purchase Agreement, the Registration Rights Agreement (it being understood that the Warrant Shares constitute “Registrable Securities” thereunder), and certain other Investment Documents.

4.3 Other Covenants. Without limiting the generality of Section 4.2, the Company covenants and agrees that, as long as this Warrant remains outstanding or any Warrant Shares are issuable with respect to this Warrant, the Company will perform all of the following covenants for the express benefit of the Holder: (a) the Warrant Shares shall, upon payment therefore and issuance, be duly authorized, validly issued, fully paid and non-assessable shares of Common Stock; (b) each Holder shall, upon the exercise thereof in accordance with the terms hereof, receive good and marketable title to the Warrant Shares, free and clear of all voting and other trust arrangements to which the Company is a party or by which it is bound, preemptive rights of any stockholder, liens, encumbrances, equities and claims whatsoever, including, but not limited to, all Taxes, Liens and other charges with respect to the issuance thereof except as otherwise provided in the Investment Documents; (c) at all times prior to the Expiration Date, the Company shall have reserved for issuance a sufficient number of authorized but unissued shares of Common Stock, or other securities or property for which this Warrant may then be exercisable, to permit this Warrant (or if this Warrant has been divided, all outstanding Warrants) to be exercised in full; (d) the Company shall deliver to each Holder the information and reports described in Section 9.4 of the Securities Purchase Agreement as contemplated therein; (e) the Company shall extend to the initial Holder the management rights set forth in the Investment Monitoring Agreement or any other agreement between the Holder and the Company to the extent the initial Holder is not already a party thereto; and (f) the Company shall provide each Holder with notice of all corporate actions in the same manner and to the same extent as the stockholders of the Company.

4.4 Issue Tax. The issuance of shares of Common Stock upon the exercise of this Warrant shall be made without charge to the Holder for any issue tax in respect thereof.

4.5 Closing of Books. The Company will at no time close its transfer books against the transfer of this Warrant or of any Warrant Shares in any manner which interferes with the timely exercise hereof.

4.6 No Voting Rights; Limitation of Liability. Except as expressly set forth in this Warrant, nothing contained in this Warrant shall be construed as conferring upon the Holder (a) the right to vote or consent as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matter, (b) the right to receive dividends, except as set forth in Section 3 or (c) any other rights as a stockholder of the Company, except as set forth in Section 3 and in the other Investment Documents. No provisions hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the Warrant Purchase Price or as a stockholder of the Company, whether such liability is asserted by the Company or by its creditors.

4.7 Modification and Waiver. This Warrant and any provision hereof may be modified, changed, waived, discharged or terminated only by an instrument in writing signed by the Company and the Holder.

4.8 Notices. All notices, requests, demands and other communications which are required or may be given under this Warrant shall be in writing and shall be deemed to have been duly given at the earliest of (i) the date received, or (ii) one (1) Business Day after being

sent by a nationally recognized overnight courier for next Business Day delivery, with receipt acknowledged, or (iii) five (5) Business Days after being mailed, postage prepaid, by certified mail, return receipt requested, addressed to the applicable party as set forth in the Securities Purchase Agreement or at such other address or addresses as the Holder or the Company, as the case may be, may specify by written notice given in accordance with this Section 4.8.

4.9 Successors and Assigns.

(a) The Company may not assign any of its rights, or delegate any of its obligations, under this Warrant without the prior written consent of the Holder (which consent may be withheld for any reason or no reason at all). Subject to the requirements of Applicable Laws, the Holder may assign this Warrant and its rights hereunder, and delegate its obligations under this Warrant, in whole or in part, at any time or from time to time, without the consent of the Company. Each such assignment of this Warrant, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the Designated Office, together with appropriate instruments of assignment, duly completed and executed. Upon such surrender, the Company shall, at its own expense, within three (3) Business Days of surrender, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees specified in such assignment and in the denominations specified therein and this Warrant shall promptly be canceled. If any portion of this Warrant is not being assigned, the Company shall, at its own expense, within three (3) Business Days thereafter issue to the Holder a new Warrant evidencing the portion not so assigned. If the Holder assigns this Warrant to one or more Persons, any decisions that the Holder is entitled to make at any time hereunder shall be made by the Holders holding an aggregate of more than fifty percent (50%) of the number of Warrant Shares issuable upon exercise of all of the then-exercisable Warrants.

(b) This Warrant shall be binding upon and inure to the benefit of the Company, the Holder and their respective successors and permitted assigns, and shall include, with respect to the Company, any Person succeeding the Company by merger, consolidation, combination or acquisition of all or substantially all of the Company’s assets, and in such case, except as expressly provided herein and in the Securities Purchase Agreement, all of the obligations of the Company hereunder shall survive such merger, consolidation, combination or acquisition.

4.10 Captions; Construction and Interpretation. The captions in this Warrant are for convenience of reference only, do not constitute a part of this Agreement and are not to be considered in construing or interpreting this Warrant. All section, preamble, recital, exhibit, schedule, disclosure schedule, annex, clause and party references are to this Warrant unless otherwise stated. No party, nor its counsel, shall be deemed the drafter of this Warrant for purposes of construing the provisions of this Warrant, and all provisions of this Warrant shall be construed in accordance with their fair meaning, and not strictly for or against any party.

4.11 Lost Warrant or Certificates. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or of a stock certificate evidencing Warrant Shares and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company or, in the case of any such mutilation, upon surrender and cancellation of this Warrant or stock certificate, the Company shall make and deliver to the Holder, within three (3) Business Days of receipt by the Company of such documentation, a new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate.

4.12 No Impairment. The Company shall not by any action, including, without limitation, amending its charter documents or regulations or through any reorganization, reclassification, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value (if any) of any shares of Common Stock receivable upon the exercise of this Warrant above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may, at any time and from time to time, validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, free and clear of all liens, encumbrances, equities and claims, and (iii) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

4.13 GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

4.14 Remedies. If the Company fails to perform, comply with or observe any covenant or agreement to be performed, complied with or observed by it under this Warrant, the Holder may proceed to protect and enforce its rights by suit in equity or action at law, whether for specific performance of any term contained in this Warrant or for an injunction against the breach of any such term or in aid of the exercise of any power granted in this Warrant or to enforce any other legal or equitable right, or to take any one or more of such actions. The Company hereby agrees that the Holder shall not be required or otherwise obligated to, and hereby waives any right to demand that the Holder, post any performance or other bond in connection with the enforcement of its rights and remedies hereunder. The Company agrees to pay all fees, costs, and expenses, including, without limitation, fees, costs and expenses of attorneys, accountants and other experts retained by the Holder, and all fees, costs and expenses of appeals, incurred or expended by the Holder in connection with the enforcement of this Warrant or the collection of any sums due hereunder, whether or not suit is commenced. None of the rights, powers or remedies conferred under this Warrant shall be mutually exclusive, and each right, power or remedy shall be cumulative and in addition to any other right, power or remedy whether conferred by this Warrant or now or hereafter available at law, in equity, by statute or otherwise.

4.15 WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY AND ENFORCEABLE UNDER APPLICABLE LAW, THE COMPANY AND THE HOLDER (BY ACCEPTANCE HEREOF) HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR OTHER PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS AGREEMENT, ANY OTHER INVESTMENT DOCUMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS OF HOLDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS.

4.16 CONSENT TO FORUM. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF THE COMPANY OR THE HOLDER, THE COMPANY HEREBY CONSENTS AND AGREES THAT THE SUPERIOR COURT OF LOS ANGELES COUNTY, CALIFORNIA, OR, AT THE HOLDER’S OPTION, THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY ON THE ONE HAND AND THE HOLDER ON THE OTHER HAND PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH THE COMPANY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR FIVE (5) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF THE HOLDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY THE HOLDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

4.17 JUDICIAL REFERENCE. IN THE EVENT THE WAIVER PROVIDED IN SECTION 4.15 IS DEEMED INEFFECTIVE, TO GIVE EFFECT TO THE PARTIES’ DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE OR RETIRED JUDGE APPLYING THE APPLICABLE LAW, THE PARTIES AGREE TO REFER, FOR A COMPLETE AND FINAL ADJUDICATION, ANY AND ALL ISSUES OF FACT OR LAW

INVOLVED IN ANY LITIGATION OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, ALL DISCOVERY AND LAW AND MOTION MATTERS, PRETRIAL MOTIONS, TRIAL MATTERS AND POST-TRIAL MOTIONS (E.G. MOTIONS FOR RECONSIDERATION, NEW TRIAL AND TO TAX COSTS, ATTORNEY FEES, EXPENSES, COSTS, AND PREJUDGMENT INTEREST)) UP TO AND INCLUDING FINAL JUDGMENT, BROUGHT TO RESOLVE ANY DISPUTE (WHETHER SOUNDING IN CONTRACT, TORT, UNDER ANY STATUTE OR OTHERWISE) BETWEEN AND AMONG ANY OF THE PARTIES HERETO, TO A JUDICIAL REFEREE WHO SHALL BE APPOINTED UNDER A GENERAL REFERENCE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638. THE REFEREE’S DECISION WOULD STAND AS THE DECISION OF THE COURT, WITH JUDGMENT TO BE ENTERED ON HIS/HER STATEMENT OF DECISION IN THE SAME MANNER AS IF THE ACTION HAD BEEN TRIED BY THE COURT. THE PARTIES HERETO SHALL SELECT A SINGLE NEUTRAL REFEREE, WHO SHALL BE A RETIRED STATE OR FEDERAL JUDGE WITH AT LEAST FIVE YEARS OF JUDICIAL EXPERIENCE IN CIVIL MATTERS. IN THE EVENT THAT THE PARTIES HERETO CANNOT AGREE UPON A REFEREE, THE REFEREE SHALL BE APPOINTED BY THE COURT. WITHOUT LIMITING OR AFFECTING ANY INDEMNITIES AVAILABLE TO THE HOLDER, THE HOLDER, ON THE ONE HAND, AND THE COMPANY, ON THE OTHER HAND, SHALL EQUALLY BEAR THE FEES AND EXPENSES OF THE REFEREE (50% BY THE HOLDER AND 50% BY THE COMPANY) UNLESS THE REFEREE OTHERWISE PROVIDES IN THE STATEMENT OF DECISION.

[Signature pages follow]

IN WITNESS WHEREOF, the parties have caused this Warrant to be executed and issued by their respective duly authorized representative on the date first above written.


CAPRIUS, INC., a Delaware corporation

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

[SIGNATURE PAGE TO WARRANT]

PAGE 1


VINTAGE CAPITAL GROUP, LLC, a Delaware limited liability company

By:	/s/ Fred C. Sands
	Name:	Fred C. Sands
	Title:	Chairman

[SIGNATURE PAGE TO WARRANT]

PAGE 2

EXHIBIT A

CAPRIUS, INC.

Form of Exercise Subscription

(To be signed only upon exercise of this Warrant)

The undersigned hereby irrevocably elects to exercise its Warrant to purchase ( ) shares of Common Stock for an aggregate Warrant Purchase Price of Dollars ($ ).

The Warrant Purchase Price to be paid as follows (check as applicable):

Company check in the amount of $ ;

Wire transfer in the amount of $ ; or

Surrender of $ principal amount of the Note or the PIK Notes.

The undersigned represents that it is acquiring such shares of Common Stock for its own account for investment purposes only and not with a view to or for sale in connection with any distribution thereof, and, as to the undersigned, the representations and warranties of the Holder set forth in Section 4 of the Securities Purchase Agreement are true and correct on the date hereof as if made by the undersigned on this date.



Dated:
				Name of the Holder (must conform precisely to the name specified on the face of the Warrant)


				Signature of authorized representative of the Holder


				Print or type name of authorized representative

				Social Security Number or Employer Tax Identification Number of the Holder:



				Address of the Holder: ______________________________
				______________________________

EX-99.9 10 dex999.htm WARRANT PURCHASE AGREEMENT Warrant Purchase Agreement

Exhibit 9

WARRANT PURCHASE AGREEMENT

by and between

CAPRIUS, INC.

and

VINTAGE CAPITAL GROUP, LLC

Dated as of January 22, 2010

TABLE OF CONTENTS


1. Terms of Warrant		1

1.1	Warrant	1
1.2	Closing	1

2. Representations and Warranties of the Company		2

2.1	Organization, Good Standing, and Qualification	2
2.2	Authorization	2
2.3	Valid Issuance of Capital Stock	2
2.4	Subsidiaries	3
2.5	No Conflicts	3
2.6	Warrant Coverage	3

3. Representations and Warranties of the Purchaser		3

3.1	Authorization	3
3.2	Purchase Entirely for Own Account	3
3.3	Disclosure of Information	4
3.4	Investment Experience	4
3.5	Accredited Investor	4
3.6	Restricted Securities	4
3.7	Further Limitations on Disposition	4
3.8	Legends	4

4. Original Issue Discount Calculation		5

5. California Corporate Securities Law		5

6. Miscellaneous		5

6.1	Successors and Assigns; Assignments	5
6.2	Governing Law	6
6.3	Consent to Forum	6
6.4	Waiver of Trial by Jury	6
6.5	Counterparts	7
6.6	Titles and Subtitles	7
6.7	Notices	7
6.8	Finder’s Fee	8
6.9	Expenses	8
6.10	Entire Agreement; Amendments and Waivers	8
6.11	Severability	9

EXHIBITS


Exhibit A	—	Warrant

Exhibit B	—	Registration Rights Agreement

Exhibit C	—	Equity Rights Agreement

WARRANT PURCHASE AGREEMENT

THIS WARRANT PURCHASE AGREEMENT (“Agreement”) is made as of January 22, 2010, by and between Caprius, Inc., a Delaware corporation (the “Company”), and Vintage Capital Group, LLC, a Delaware limited liability company (the “Purchaser”).

WHEREAS, to induce the Purchaser to enter into that certain Securities Purchase and Sale Agreement, dated as of September 16, 2009 (the “Securities Purchase Agreement”), the Company agreed to issue and sell to the Purchaser a warrant to purchase a number of shares of the Common Stock (as such term is defined herein) of the Company, which shares will represent 40% of the Company’s Common Stock on a Fully Diluted Basis (as defined in the Warrant); and

WHEREAS, all capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Securities Purchase Agreement.

NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

1. Terms of Warrant.

1.1 Warrant. In return for the consideration provided by the Purchaser, the Company shall sell and issue to the Purchaser a warrant to purchase shares of Common Stock (the “Common Stock”) in the form attached hereto as Exhibit A (the “Warrant”). The Warrant shall be exercisable for that number of shares of Common Stock of the Company equal to 40% of the Common Stock of the Company on a Fully Diluted Basis (as defined in the Warrant) (the “Warrant Shares”).

1.2 Closing.

(a) The closing (the “Closing”) of the purchase of the Warrant by the Purchaser in return for the payment to the Company by the Purchaser of $0.01 (the “Purchase Price”) shall take place at the offices of Klee, Tuchin, Bogdanoff & Stern LLP, 1999 Avenue of the Stars, Los Angeles, California 90067, at 10:00 a.m. Los Angeles time, January 22, 2010 or at such other time and place as the Company and the Purchaser mutually agree.

(b) At the Closing:

(i) the Purchaser shall deliver the Purchase Price to the Company and the Company shall deliver to the Purchaser the executed Warrant in return for the consideration provided to the Company;

(ii) the Company shall deliver an executed copy of the Registration Rights Agreement in the form attached hereto as Exhibit B;

(iii) the Company shall deliver an executed copy of the Equity Rights Agreement in the form attached hereto as Exhibit C;

(iv) the Company shall deliver an opinion of counsel to the Company, in form and substance satisfactory to the Purchaser in its sole and absolute discretion, which shall include, without limitation, opinions as to the authorization of the Warrant and the Warrant Shares and the entry into, and enforceability of, this Agreement, the Equity Rights Agreement and the Registration Rights Agreement;

(v) the Company shall deliver a certificate signed by the Chief Executive Officer of the Company, certifying on behalf of the Company (1) that the representations and warranties set forth in Section 2 are true and correct, (2) that all conditions to Closing have been satisfied and (3) as to the capitalization of the Company as of the Closing;

(vi) the Company shall deliver a certified copy of its Certificate of Incorporation as in effect as of the Closing;

(vii) the Company shall deliver a good standing certificate, issued by the State of Delaware, dated as of the most recent practicable date prior to the Closing; and

(viii) the Company shall deliver resolutions or consents of (1) its Board of Directors approving and authorizing the execution, delivery and performance of this Agreement, the Warrant, the Equity Rights Agreement and the Registration Rights Agreement and the amendments to the Company’s Certificate of Incorporation necessary or desirable to comply with the terms and conditions of this Agreement and the Warrant and (2) its stockholders approving and authorizing the amendments to the Company’s Certificate of Incorporation necessary or desirable to comply with the terms and conditions of this Agreement and the Warrant.

2. Representations and Warranties of the Company. In connection with the transactions provided for herein, the Company hereby represents and warrants to the Purchaser that:

2.1 Organization, Good Standing, and Qualification. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on its business or properties.

2.2 Authorization. All corporate action on the part of the Company, its officers, directors, and stockholders necessary for the authorization, execution, and delivery of this Agreement, the performance of all obligations of the Company hereunder, and the authorization, issuance and delivery of the Warrant has been taken. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, issuance (or reservation for issuance) and delivery of the Warrant Shares to be issued upon exercise of the Warrant has been taken.

2.3 Valid Issuance of Capital Stock. The Warrant Shares, when issued, sold, and delivered in accordance with the terms of the Warrant for the consideration expressed therein, will be duly and validly issued, fully paid, and nonassessable and, based in part upon the representations of the Purchaser in this Agreement, will be issued in compliance with all applicable federal and state securities laws.

2.4 Subsidiaries. The Company does not own or hold, directly or indirectly, any stock, partnership interest, membership interest, joint venture interest, ownership interest or other security, investment or interest in any corporation, partnership, limited liability company, joint venture, organization or other entity, other than M.C.M. Environmental Technologies, Inc., M.C.M. Environmental Technologies Ltd., and M.C.M. Environmental Technologies (U.K.) Ltd. (collectively, the “Subsidiaries”).

2.5 No Conflicts. Neither the execution and delivery of this Agreement or the Warrant, or any other agreement related thereto to which the Company or any Subsidiary is a party, nor the consummation of the transaction contemplated hereby or thereby, will (a) violate any provision of the charter, bylaws or similar organizational documents of the Company or any Subsidiary, (b) violate, breach, conflict with or constitute a default (or constitute an event which, with the giving of notice or lapse of time or both, would constitute a default) under, or give rise to any right of termination, cancellation or acceleration under any material agreement, contract, lease, license or document to which the Company or any Subsidiary is a party, (c) violate any order, writ, injunction, decree, law, statute, rule or regulation of any governmental authority applicable to the Company or any Subsidiary or pertaining or relating to the business or any property of the Company, or (d) give rise to a declaration or imposition of any lien upon any share of Common Stock or any property of the Company.

2.6 Warrant Coverage. The Warrant, as of the date hereof, represents 40% of the Common Stock of the Company on a Fully Diluted Basis (as defined in the Warrant) and there are no equity securities of the Company or any Subsidiary outstanding that are not convertible into Common Stock.

3. Representations and Warranties of the Purchaser. In connection with the transactions provided for herein, the Purchaser hereby represents and warrants to the Company that:

3.1 Authorization. This Agreement constitutes the Purchaser’s valid and legally binding obligation, enforceable in accordance with its terms.

3.2 Purchase Entirely for Own Account. The Purchaser acknowledges that this Agreement is made with the Purchaser in reliance upon the Purchaser’s representation to the Company that the Warrant and the Warrant Shares (collectively, the “Securities”) will be acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Purchaser further represents that the Purchaser does not have any contract, undertaking, agreement, or arrangement with any person to sell, transfer, or grant participations to such person or to any third person, with respect to the Securities. The Purchaser represents that it has full power and authority to enter into this Agreement.

3.3 Disclosure of Information. The Purchaser acknowledges that it has received all the information it considers necessary or appropriate for deciding whether to acquire the Securities. The Purchaser further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities.

3.4 Investment Experience. The Purchaser is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Securities. The Purchaser also represents it has not been organized solely for the purpose of acquiring the Securities.

3.5 Accredited Investor. The Purchaser is an “accredited investor” within the meaning of Rule 501 of Regulation D of the Securities and Exchange Commission (the “SEC”), as presently in effect.

3.6 Restricted Securities. The Purchaser understands that the Securities are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act of 1933, as amended (the “Act”), only in certain limited circumstances. In this connection, the Purchaser represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Act.

3.7 Further Limitations on Disposition. Without in any way limiting the representations set forth above, the Purchaser further agrees not to make any disposition of all or any portion of the Securities unless and until:

(a) There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or

(b) (i) The Purchaser shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (ii) if reasonably requested by the Company, the Purchaser shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Act. It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144 except in extraordinary circumstances.

3.8 Legends. It is understood that the Securities shall bear the following legend:

“These securities have not been registered under the Securities Act of 1933. They may not be sold, offered for sale, pledged, hypothecated, or otherwise transferred except pursuant to an effective registration statement under the Securities Act of 1933 or an opinion of counsel satisfactory to the Company that registration is not required under such Act or unless sold pursuant to Rule 144 under such Act.”

4. Original Issue Discount Calculation. To the extent that it is applicable, the Purchaser and the Company shall use reasonable efforts to determine a mutually acceptable original issue discount calculation for the Warrant promptly after Closing. If they are not able to agree, then within ninety (90) days following the Closing Date the Company shall prepare a calculation of the original issue discount attributable to the issuance of the Warrant to the Purchaser, and deliver it to the Purchaser together with supporting statements. The Purchaser shall have thirty (30) days to review the Company’s calculation and if the Purchaser disagrees with the calculation, the Purchaser shall submit its own calculation, together with supporting statements, to the Company. If the parties cannot agree within one hundred and fifty (150) days of the Closing Date on the original issue discount calculation, then the parties agree that the original issue discount shall be determined as set forth in this paragraph by an independent accounting firm mutually acceptable to both the Purchaser and the Company. The independent accounting firm shall select either the Company’ original calculation or the Purchaser’s calculation, and not make a new calculation of original issue discount. Each party agrees to sign any reasonable engagement letter requested by the independent accounting firm related to its determination. The determination of original issue discount in accordance with this Section 4 shall be used by each party hereto in all income tax filings. All fees and expenses of third parties related to the determination of original issue discount shall be paid by the Company.

5. California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

6. Miscellaneous.

6.1 Successors and Assigns; Assignments. This Agreement shall inure to the benefit of, and be binding upon, the parties and their respective successors and permitted assigns. The Company shall not assign any of its rights and obligations hereunder or any interest herein or therein without the prior written consent of the Purchaser. The Purchaser may, at any time and from time to time without the consent of the Company, assign, transfer or delegate to one or more persons (each an “Assignee”) all or any part of its right, title and interest in and to this Agreement and the Warrant, subject to compliance with applicable federal and state securities laws; provided, however, that, in any privately negotiated transaction involving a sale or assignment of any such right, title or interest, the transferor shall obtain from the Assignee in writing investment intent representations which would be customarily obtained in transactions of such nature; and provided further, that the Company shall continue to deal solely and directly with the transferor in connection with any right, title or interest so assigned until written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Company.

6.2 Governing Law. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

6.3 Consent to Forum. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF THE COMPANY OR THE PURCHASER, THE COMPANY HEREBY CONSENTS AND AGREES THAT THE SUPERIOR COURT OF LOS ANGELES COUNTY, CALIFORNIA, OR, AT THE PURCHASER’S OPTION, THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY ON THE ONE HAND AND THE PURCHASER ON THE OTHER HAND PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH THE COMPANY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR FIVE (5) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF THE PURCHASER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY THE PURCHASER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

6.4 Waiver of Trial by Jury. THE COMPANY AND THE PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR OTHER PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS AGREEMENT, THE NOTE, THE WARRANT OR ANY OTHER DOCUMENT RELATED THERETO, THE TRANSACTIONS

CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS OF THE PURCHASER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS.

6.5 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, and effective as, originals.

6.6 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

6.7 Notices. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given (i) if transmitted by telecopier with receipt acknowledged, or (ii) upon delivery, if delivered personally or by recognized commercial courier with receipt acknowledged, or (iii) the next Business Day, if sent by a nationally recognized overnight courier for next Business Day delivery, addressed as follows:

If to the Purchaser:

Vintage Capital Group, LLC

11611 San Vicente Boulevard, 10th Floor

Los Angeles, CA 90049

Attention: Thomas Webster

Telephone: (310) 979-9090

Facsimile: (310) 207-0035

E-Mail: twebster@vintage-vfm.com

With a copy to:

Klee, Tuchin, Bogdanoff & Stern LLP

1999 Avenue of the Stars, 39th Floor

Los Angeles, CA 90067

Attention: Ronn S. Davids

Telephone: (310) 407-4095

Facsimile: (310) 407-9090

E-Mail: RDavids@ktbslaw.com

If to the Company, to:

Caprius, Inc.

10 Forest Avenue, Suite 220

Paramus, NJ 07652

Attention: Dwight Morgan

Telephone: (201) 342-0900

Facsimile: (866) 405-4918

E-Mail: dmorgan@mcmetech.com

With a copy to:

Carter Ledyard & Milburn LLP

2 Wall Street

New York, NY 10005

Attention: Bruce A. Rich

Telephone: (212) 238-8895

Facsimile: (212) 732-3232

E-Mail: rich@clm.com

or at such other address or addresses as the Purchaser or the Company, as the case may be, may specify by written notice given in accordance with this Section 6.6.

6.8 Finder’s Fee. Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. The Purchaser agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which the Purchaser or any of its officers, partners, employees, or representatives is responsible. The Company agrees to indemnify and hold harmless Purchaser from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees, or representatives is responsible.

6.9 Expenses. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs, expenses and necessary disbursements in addition to any other relief to which such party may be entitled. The Company shall bear all costs, expenses and legal fees incurred by it and by the Purchaser with respect to this Agreement, the Warrant and the transactions contemplated hereby.

6.10 Entire Agreement; Amendments and Waivers. This Agreement, the Warrant, the Securities Purchase Agreement, the Investment Documents and the other documents delivered pursuant hereto and thereto constitute the full and entire understanding and agreement between the parties with regard to the subject matter hereof and thereof. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Purchaser.

6.11 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.



CAPRIUS, INC., a Delaware corporation

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

[SIGNATURE PAGE TO WARRANT PURCHASE AGREEMENT]

PAGE 1



VINTAGE CAPITAL GROUP, LLC, a Delaware limited liability company

By:	/s/ Fred C. Sands
	Name:	Fred C. Sands
	Title:	Chairman

[SIGNATURE PAGE TO WARRANT PURCHASE AGREEMENT]

PAGE 2

EX-99.10 11 dex9910.htm REGISTRATION RIGHTS AGREEMENT Registration Rights Agreement

Exhibit 10

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT is entered into as of January 22, 2010, 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, the “Investor”).

R E C I T A L S

A. The Company and the Investor are parties to that certain Securities Purchase and Sale Agreement, dated as of September 16, 2009 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Securities Purchase Agreement”) providing for, among other things, (i) the issuance by the Company and the purchase by the Investor of that certain Note, and (ii) the issuance by the Company and the purchase by the Investor of a warrant (the “Warrant”) to purchase 40% (in the aggregate) of the Company’s common stock (the “Common Stock”) on a Fully Diluted Basis as defined in the Warrant.

B. The Company and the stockholders of the Company will gain substantial direct and indirect benefits from the consummation of the Securities Purchase Agreement and the transactions contemplated thereby.

C. The transactions contemplated by the Securities Purchase Agreement are conditioned upon the extension of the rights set forth herein to the Investor, including the registration rights set forth herein, and the Company desires to extend such rights.

D. All capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Securities Purchase Agreement.

A G R E E M E N T

NOW THEREFORE, in consideration of the foregoing, the parties agree as follows:

1.	Registration Rights.

1.1 Certain Definitions. Except as defined herein, all capitalized terms used and not otherwise defined in this Agreement shall have the meanings set forth in the Securities Purchase Agreement.

As used in this Agreement, the following terms shall have the following respective meanings:

“Commission” shall mean the Securities and Exchange Commission of the United States or any other U.S. federal agency at the time administering the Securities Act.

“Registrable Securities” means (i) any Common Stock issuable or issued on exercise of the Warrant, (ii) any other shares of Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares listed in

clause (i), and (iii) other shares of Common Stock (or securities convertible into Common Stock) that may be acquired by the Investor after the date hereof from time to time. Shares of Common Stock shall only be treated as Registrable Securities if they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, (B) sold in a single transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of that sale, or (C) sold in a sale pursuant to Rule 144 promulgated under the Securities Act, or if such shares of Common Stock could then be sold pursuant to Rule 144 without any limitations on volume or manner of sales.

The terms “register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of that registration statement.

“Registration Expenses” shall mean all fees, costs and expenses, other than Selling Expenses, incurred by the Company in complying with Section 1.2, Section 1.3 and Section 1.4 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company and reasonable fees and disbursements of one counsel retained by the Investor, Blue Sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of and counsel to the Company, which shall be paid in any event by the Company).

“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder, or any similar United States federal statute.

“Selling Expenses” shall mean all underwriting fees, costs and expenses, selling discounts and selling commissions applicable to the securities registered for the account of the Investor.

“Special Registration Statement” shall mean a registration statement relating to any employee benefit plan or with respect to any corporate reorganization or other transaction under Rule 145 of the Securities Act.

1.2 Requested Registrations.

(a) Request for Registration. In case the Company shall receive from the Investor a written request (a “Registration Notice”) that the Company effect any registration, qualification or compliance with respect to Registrable Securities offered to the public having an aggregate offering price of not less than $1,000,000 (as determined in good faith in consultation with a one or more proposed underwriter(s) for an offering), the Company thereupon will use commercially reasonable efforts to effect the registration of the Registrable Securities which the Company has been so requested to register as soon as practicable after the receipt of the Registration Notice (including, without limitation, appropriate qualification under applicable Blue Sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of

such Registrable Securities specified in such request. Notwithstanding the foregoing, the Company shall not be obligated to take any action to effect any registration, qualification or compliance pursuant to this Section 1.2:

(i) prior to one hundred twenty (120) days following the date hereof;

(ii) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

(iii) during the period starting with the date sixty (60) days prior to the Company’s estimated date of filing of, and ending on the date six (6) months immediately following the effective date of, any registration statement pertaining to securities of the Company sold for the account of the Company (other than with respect to a Special Registration Statement), provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective;

(iv) after the Company has effected two (2) registrations pursuant to this Section 1.2, and such registrations have been declared or ordered effective;

(v) during the 120-day period following a registration effected pursuant to this Section 1.2; or

(vi) if the Company shall furnish to the Investor pursuant to this Section 1.2 a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company (the “Board”) it would be seriously detrimental to the Company or its stockholders for a registration statement to then be filed, then the Company’s obligation to use its best efforts to register, qualify or comply under this Section 1.2 shall be deferred for a period not to exceed one hundred twenty (120) days from the date of receipt by the Company of the Registration Notice regarding which the Company has furnished such certificate from the Chief Executive Officer of the Company; provided, however, that the Company shall not utilize this right more than once in any 12-month period.

Subject to the foregoing clauses (i) through (v), the Company shall file a registration statement covering the Registrable Securities so requested to be registered pursuant to this Section 1.2 as soon as practicable (and in any event within sixty (60) days of receipt of the Registration Notice), after receipt of the request by the Investor.

(b) Underwriting. In the event that a registration pursuant to this Section 1.2 is specified in the Registration Notice to be a registered public offering involving an underwriting, the right of the Investor to registration pursuant to Section 1.2 shall be conditioned upon the Investor’s participation in the underwriting arrangements required by this Section 1.2, and the inclusion of the Investor’s Registrable Securities in the underwritten offering to the extent requested shall be limited to the extent provided herein. The Company shall enter into an underwriting agreement in customary form with the managing underwriter selected for the underwriting by the Company, but subject to the reasonable approval of the Investor (which approval may be withheld on the grounds such underwriter’s discount would exceed customary

amounts). Notwithstanding any other provision of this Section 1.2, if the managing underwriter advises the Company in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise the Investor. The number of shares that may be included in the registration and underwriting shall be allocated first, pro rata based upon the amount of Registrable Securities held by the Investor, to the Registrable Securities desired to be sold by the Investor and thereafter any additional shares that may be included in the offering shall be allocated to the Company. To facilitate the allocation of shares in accordance with the above provisions, the Company may round the number of shares allocated to the Investor to the nearest one hundred (100) shares. If the Investor disapproves of the terms of the underwriting, the Investor may elect to withdraw therefrom by written notice to the Company and the managing underwriter, in which case such withdrawal or request for registration shall not count as a registration of Registrable Securities hereunder.

1.3 Company Registrations.

(a) Notice of Registration. If at any time or from time to time the Company shall determine to register any of its securities, either for its own account or the account of a security holder or holders, other than pursuant to a Special Registration Statement, the Company will:

(i) promptly give to the Investor written notice thereof; and

(ii) include in such registration (and any related qualification under Blue Sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request received by the Company within ten (10) Business Days after the Investor’s receipt of the written notice from the Company. Such request shall state the intended method of disposition of the Registrable Securities by the Investor if the intended method of disposition is inconsistent with the Company’s plan of distribution stated therein.

(b) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Investor as a part of the written notice given pursuant to Section 1.3(a)(i). In such event the right of the Investor to registration pursuant to this Section 1.3 shall be conditioned upon the Investor’s participation in the underwritten offering and the inclusion of Registrable Securities in the underwritten offering to the extent provided herein. The Investor shall enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Section 1.3, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriter may limit the Registrable Securities and other securities to be included in the registration. The Company shall so advise the Investor in writing and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated first to the shares desired to be sold by the Company (if the registration has been initiated by the Company) and thereafter any additional shares that may be included in the offering shall be allocated to the Investor pro rata in accordance with the number of shares requested to be included; provided, that if the Note or any PIK Note is then outstanding, at least 35% of the Common Stock in such offering shall be Registrable Securities held by the Investor to the extent Investor holds an adequate number of shares. To facilitate the

allocation of shares in accordance with the above provisions, the Company may round the number of shares allocated to the Investor to the nearest one hundred (100) shares. If the Investor disapproves of the terms of the underwriting, the Investor may elect to withdraw therefrom by written notice to the Company and the managing underwriter, in which case such withdrawal or request for registration shall not count as a registration of Registrable Securities hereunder.

(c) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 1.3 prior to the effectiveness of the registration whether or not the Investor has elected to include Registrable Securities in the registration; provided, however, if the Investor elects to use one of the demand registration rights pursuant to Section 1.2 hereof, then the registration shall be governed by Section 1.2 and it shall not be terminated by the Company without the consent of the Investor.

1.4 Registrations on Form S-3.

(a) Request for Registration. If at any time or from time to time, the Investor requests that the Company file a registration statement on Form S-3 (or any successor form to Form S-3) for a public offering of shares of the Registrable Securities with a reasonably anticipated aggregate price to the public of at least $1,000,000, and the Company is a registrant entitled to use Form S-3 to register such Registrable Securities for that type of offering, the Company will use its best efforts to cause such Registrable Securities to be registered for the offering on that form and to cause those Registrable Securities to be qualified in those jurisdictions as the Investor may reasonably request.

The substantive provisions of Section 1.2(b) shall be applicable to each such registration initiated under this Section 1.4 involving an underwriting.

(b) Limitations. Notwithstanding the foregoing, the Company shall not be obligated to take any action pursuant to this Section 1.4:

(i) prior to one hundred twenty (120) days following the date hereof;

(ii) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting a registration, qualification or compliance, unless the Company is already subject to service in that jurisdiction and except as may be required by the Securities Act;

(iii) if the Company, within thirty (30) days of the receipt of a request under this Section 1.4 from the Investor for a registration under the terms of this Agreement relates, gives notice of its bona fide intention to effect the filing of a registration statement with the Commission within ninety (90) days of receipt of such requests (other than with respect to a Special Registration Statement), or gives notice that it has filed such a registration statement which has not yet been declared effective, in each case for so long as the Company continues to employ reasonable good faith efforts to prepare and file such registration statement (if not already filed) and to cause such registration statement to become effective;

(iv) if the Company has completed such a registration within the prior ninety (90) days; or

(v) if the Company shall furnish to the Investor a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board it would be seriously detrimental to the Company or its stockholders for a registration statement to then be filed, then the Company’s obligation to use its best efforts to file a registration statement shall be deferred for a period not to exceed ninety (90) days from the receipt of requests by the Investor to file the registration; provided, however, that the Company shall not utilize this right more than once in any 12-month period.

1.5 Expenses of Registration.

(a) Registration Expenses. The Company shall bear all Registration Expenses incurred in connection with all registrations pursuant to Sections 1.2, Section 1.3 and Section 1.4. With respect to a registration under either Section 1.2 or Section 1.4, in the event the Investor withdraws a registration request for a registered public offering involving an underwriting, abandons a registration statement or, following an effective registration pursuant to Section 1.2 hereof, does not sell Registrable Securities, then all Registration Expenses in respect of such registration request shall be borne by the Investor; provided, that, if at the time of such withdrawal, the Investor has learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Investor at the time of its request and has withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then all Registration Expenses in respect of such registration request shall be borne by the Company.

(b) Selling Expenses. Unless otherwise stated, all Selling Expenses relating to Registrable Securities registered on behalf of the Investor shall be borne by the Investor.

1.6 Registration and Qualification. If and whenever the Company is required to use its best efforts to effect the registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Company will as expeditiously as is practicable:

(a) prepare and file with the Commission, as soon as practicable, and use all commercially reasonable efforts to cause to become effective, a registration statement under the Securities Act relating to the Registrable Securities to be offered on the form as the Investor, or if not filed pursuant to Section 1.2 or Section 1.4 hereof, the Company, may determine and for which the Company then qualifies;

(b) prepare and file with the Commission any amendments (including post-effective amendments) and supplements to the registration statement and the prospectus used in connection therewith as may be necessary to keep the registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities until the earlier of the time that all of the Registrable Securities have been disposed of in accordance with the intended methods of disposition set forth in the registration statement or the expiration of one hundred eighty (180) days after the registration statement becomes effective; provided, that this 180-day period shall be extended in the case of a registration

pursuant to Section 1.2 hereof for that number of days that equals the number of days elapsing from (i) the date the written notice contemplated by Section 1.6(f) hereof is given by the Company to (ii) the date on which the Company delivers to the Investor the supplement or amendment contemplated by Section 1.6(f) hereof; provided, further, that upon receipt of such notice from the Company, sellers of the Registrable Securities covered by such registration statement shall discontinue disposition of such Registrable Securities until the delivery by the Company to the Investor of the supplement or amendment contemplated by Section 1.6(f) hereof;

(c) furnish to each seller of Registrable Securities covered by such registration statement and to any underwriter of Registrable Securities that number of conformed copies of the registration statement and of each amendment and supplement thereto (in each case including all exhibits), that number of copies of the prospectus included in the registration statement (including each preliminary prospectus and any summary prospectus), in conformity with the requirements of the Securities Act, those documents incorporated by reference in such registration statement or prospectus, and any other documents, as such seller or the underwriter may reasonably request;

(d) make every commercially reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the registration statement at the earliest possible moment;

(e) if requested by the Investor in any underwritten offering, (i) furnish to the Investor an opinion of counsel for the Company addressed to the Investor and dated the date of the closing under the underwriting agreement (if any) (or if the offering is not underwritten, dated the effective date of the registration statement), and (ii) use its best efforts to furnish to the Investor a “comfort” or “special procedures” letter addressed to the Investor and signed by the independent public accountants who have audited the Company’s financial statements included in the registration statement, in each case covering substantially the same matters with respect to the registration statement (and the prospectus included therein) as are customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in underwritten public offerings of securities and any other matters as the Investor may reasonably request and, in the case of the accountants’ letter, with respect to events subsequent to the date of such financial statements;

(f) immediately notify the Investor in writing (i) at any time when a prospectus relating to a registration hereunder is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in the registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (ii) of any request by the Commission or any other regulatory body or other body having jurisdiction for any amendment of or supplement to any registration statement or other document relating to the offering, and in either case (i) or (ii), at the request of the Investor, prepare and furnish to the Investor a reasonable number of copies of a supplement to or an amendment of the prospectus as may be necessary so that, as thereafter delivered to the purchasers of the Registrable Securities, that prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading;

(g) use its commercially reasonable efforts to list all Registrable Securities covered by a registration statement on each securities exchange and inter-dealer quotation system on which a class of common equity securities of the Company is then listed, and to pay all fees and expenses in connection therewith;

(h) upon the transfer of shares by the Investor in connection with a registration hereunder, furnish unlegended certificates representing ownership of the Registrable Securities being sought in denominations as shall be requested by the Investor or the underwriters;

(i) use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Investor, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;

(j) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering; and

(k) provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

1.7 Indemnification.

(a) By the Company. The Company will indemnify and hold harmless the Investor, each of its partners, principals, affiliates, officers and directors, and each person controlling the Investor within the meaning of Section 15 of the Securities Act, with respect to whom registration, qualification or compliance has been effected pursuant to this Agreement, and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act, against all fees, expenses, costs, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of the Securities Act or any rule or regulation promulgated under the Securities Act applicable to the Company in connection with a registration, qualification or compliance, and the Company will reimburse the Investor, and each of its partners, principals, affiliates, officers and directors, each person controlling the Investor, and each underwriter and each person who controls any underwriter, for any legal and any other expenses reasonably incurred in connection

with investigating, preparing or defending any claim, loss, damage, liability or action; provided, that the Company will not be liable in any case to the extent that any claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished by the Investor to the Company by an instrument duly executed by the Investor specifically for inclusion in the registration statement, prospectus, offering circular, or other documents, amendment or supplement, as applicable. If the Investor is represented by counsel other than counsel for the Company, the Company will not be obligated under this Section 1.7(a) to reimburse legal fees, costs and expenses of more than one separate counsel for the Investor.

(b) By the Investor. The Investor will indemnify and hold harmless the Company, each of its directors and officers, each underwriter, if any, of the Company’s securities covered by such a registration statement, and each person who controls the Company or an underwriter within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in a registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, directors, officers, underwriters or controlling persons for any legal or any other fees, costs and expenses reasonably incurred in connection with investigating or defending any claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that the untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in the registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished by the Investor by an instrument duly executed by the Investor and stated to be specifically for inclusion therein. Notwithstanding the foregoing, the liability of the Investor under this subsection (b) shall be limited in an amount equal to the net proceeds from the Registrable Securities sold by such Investor, unless such liability arises out of or is based on willful misconduct or gross negligence by the Investor.

(c) Procedure for Indemnification. Each party indemnified under paragraph (a) or (b) of this Section 1.7 (the “Indemnified Party”) shall, promptly after receipt of notice of any claim or the commencement of any action against such Indemnified Party in respect of which indemnity may be sought, notify the party required to provide indemnification (the “Indemnifying Party”) in writing of the claim or the commencement thereof; provided, that the failure of the Indemnified Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability it may have to an Indemnified Party on account of the indemnity agreement contained in paragraph (a) or (b) of this Section 1.7, unless the Indemnifying Party was materially prejudiced by that failure, and in no event shall relieve the Indemnifying Party from any other liability it may have to that Indemnified Party. If any claim or action shall be brought against an Indemnified Party, it shall notify the Indemnifying Party thereof and the Indemnifying Party shall be entitled to participate therein, and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of any claim or action, the Indemnifying Party shall not be liable (except to the extent the proviso to this sentence is applicable, in which event it will be so liable) to the Indemnified Party under this

Section 1.7 for any legal or other fees, costs or expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided, that each Indemnified Party shall have the right to employ separate counsel to represent it and assume its defense (in which case, the Indemnifying Party shall not represent it) if (i) upon the advice of counsel, the representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them, or (ii) in the event the Indemnifying Party has not assumed the defense thereof within ten (10) days of receipt of notice of such claim or commencement of action, and in each case the fees and expenses of one such separate counsel shall be paid by the Indemnifying Party. If any Indemnified Party employs such separate counsel, it will not enter into any settlement agreement not approved by the Indemnifying Party, whose approval is not to be unreasonably withheld. If the Indemnifying Party so assumes the defense thereof, it may not agree to any settlement of any claim or action as the result of which any remedy or relief, other than monetary damages for which the Indemnifying Party shall be responsible hereunder, shall be applied to or against the Indemnified Party, without the prior written consent of the Indemnified Party. In any action hereunder as to which the Indemnifying Party has assumed the defense thereof with counsel reasonably satisfactory to the Indemnified Party, the Indemnified Party shall continue to be entitled to participate in the defense thereof, with counsel of its own choice, but, except as set forth above, the Indemnifying Party shall not be obligated hereunder to reimburse the Indemnified Party for the costs thereof.

If the indemnification provided for in this Section 1.7 shall for any reason be unavailable to an Indemnified Party in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each Indemnifying Party shall, in lieu of indemnifying that Indemnified Party, contribute to the amount paid or payable by that Indemnified Party as a result of the loss, claim, damage or liability, or action in respect thereof, in such proportion as shall be appropriate to reflect the relative fault of the Indemnifying Party on the one hand and the Indemnified Party on the other with respect to the statements or omissions that resulted in the loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied specifically for inclusion in any registration statement, prospectus, offering circular or other similar document by the Indemnifying Party on the one hand or the Indemnified Party on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission, but not by reference to any Indemnified Party’s stock ownership in the Company. In no event, however, shall the Investor be required to contribute in excess of the amount of the net proceeds received by the Investor in connection with the sale of Registrable Securities in the offering that is the subject of the loss, claim, damage or liability. The amount paid or payable by an Indemnified Party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this paragraph shall be deemed to include, for purposes of this paragraph, any legal or other expenses reasonably incurred by the Indemnified Party in connection with investigating or defending the action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 12(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of a fraudulent misrepresentation.

(d) Conflict with Underwriting Agreement. Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

1.8 Information by the Investor. The Investor shall furnish to the Company that information regarding the Investor as shall be necessary to enable the Company to comply with the provisions hereof in connection with any registration, qualification or compliance referred to in this Agreement.

1.9 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission that may at any time permit the sale of restricted securities to the public without registration or pursuant to a registration statement on Form S-3, the Company agrees to use its best efforts to, within one hundred twenty (120) days following the date hereof:

(a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date that the Company becomes subject to the reporting requirements of the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”);

(b) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements);

(c) furnish to the Investor forthwith upon request a written statement by the Company that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies) or as to its compliance with the reporting requirements of Rule 144, and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as the Investor may reasonably request in availing itself of any rule or regulation of the Commission allowing the Investor to sell any securities without registration; and

(d) take such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable each Investor to utilize Form S-3 for the sale of its Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective.

1.10 Transfer of Registration Rights. The rights to cause the Company to register securities granted to the Investor under Section 1.2, Section 1.3 and Section 1.4 may be assigned in connection with any transfer or assignment of Registrable Securities (and only with respect to the transferred Registrable Securities) by the Investor provided that: (a) the transfer may otherwise be effected in accordance with applicable securities laws; (b) the transfer is effected in compliance with the restrictions on transfer contained in this Agreement and in any other agreement between the Company and the Investor; and (c) the assignee or transferee receives at least five percent (5%) of the outstanding Common Stock and agrees in writing to be bound by

the terms of this Agreement and assumes all of the obligations of the Investor hereunder. For purposes of determining the percentage of shares transferred, the shares owned by the Investor shall be aggregated with the shares owned by the Affiliates of the Investor. Subject to the terms of Section 1.12 below, no transfer or assignment will divest the Investor or any subsequent owner of those rights and powers with respect to the shares of Registrable Securities still held, unless all Registrable Securities are transferred or assigned and at such time the transferring Investor has no claims for indemnification or contribution pending and no factual basis for such claims exist (whether or not know to the Investor). Notwithstanding the foregoing, the Investor may transfer its rights hereunder to an affiliate without regard to the minimum number of shares specified in clause (c) above. Any permitted transferee shall be an “Investor” for purposes of this Agreement.

1.11 No Registration Rights to Third Parties. Without the prior written consent of the Investor, the Company covenants and agrees that it shall not grant, or cause or permit to be created, for the benefit of any person or entity any registration rights of any kind (whether similar to the demand, “piggyback” or Form S-3 registration rights described in this Section 1, or otherwise) relating to shares of the Company’s Common Stock or any other securities of the Company, other than rights that are subordinate to the Investor’s rights to include all of the Registrable Securities owned by the Investor in any registration statement prior to any such person having the right to include any securities of the Company owned by them in such registration statement.

1.12 Termination of Registration Rights. The registration rights granted in Sections 1.2, Section 1.3 and Section 1.4 shall terminate, with respect to the Investor, at such time as (a) all Registrable Securities held by the Investor can be sold pursuant to Rule 144 without compliance with the registration requirements of the Securities Act, or (b) all Registrable Securities held by the Investor constitute less than five percent (5%) of the voting securities of the Company (on an as-converted basis) and can be sold pursuant to Rule 144 within a consecutive three month period without compliance with the registration requirements of the Securities Act. The respective indemnities, representations and warranties of the Investor and the Company shall survive a termination of registration rights by reason of this Section 1.12, with respect to any registration of Registrable Securities effected under this Agreement prior to such termination.

2.	Miscellaneous.

2.1 “Market Stand-Off” Agreement; Agreement to Furnish Information. The Investor agrees not to sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale of, any Common Stock (or other securities) of the Company held by the Investor (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed one hundred eighty (180) days following the effective date of a registration statement of the Company filed under the Securities Act; provided, that all executive officers and directors of the Company and all other holders of at least three percent (3%) of the outstanding equity securities of the Company enter into similar agreements.

The Investor shall not be subject to this Section 2.1 in the event that the Company or any underwriter has released any executive officer, director or holder of three percent (3%) or more of the equity securities of the Company from the provisions of this Section 2.1. The Investor agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, the Investor shall provide, within twenty (20) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 2.1 shall not apply to a registration pursuant to a Special Registration Statement. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said one hundred eighty (180) day period. The Investor agrees that any transferee of any shares of Registrable Securities shall be bound by this Section 2.1.

2.2 Waivers and Amendments. With the written consent of the Company and the Investor, the obligations of the Company and the rights of the Investor under this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely), and with the same consent, the Company, when authorized by resolution of the Board, may amend this Agreement or enter into a supplementary agreement for the purpose of adding any provisions to this Agreement. Neither this Agreement nor any provisions hereof may be changed, waived, discharged or terminated orally, but only by a signed statement in writing. Any amendment, waiver or supplementary agreement effected in accordance with this paragraph shall be binding upon the Investor and each future holder of Registrable Securities. Notwithstanding the foregoing, it shall not be deemed an amendment to make subsequent purchasers of Common Stock who purchased such Common Stock directly from the Company parties to this Agreement only for purposes of Section 1.3.

2.3 Notices. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given at the earliest of (i) the date received, or (ii) one (1) Business Day after being sent by a nationally recognized overnight courier for next Business Day delivery, with receipt acknowledged, or (iii) five (5) Business Days after being mailed, postage prepaid, by certified mail, return receipt requested, addressed to the parties hereto as specified in the Annex 1 or to such other address or addresses as the Investor or the Company, as the case may be, may specify by written notice given in accordance with this Section 2.3.

2.4 Descriptive Headings. The descriptive headings herein have been inserted for convenience only and shall not be deemed to limit or otherwise affect the construction of any provisions hereof.

2.5 Governing Law. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS

MADE AND PERFORMED IN THAT STATE (WITHOUT REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

2.6 Counterparts. This Agreement may be executed in two or more counterparts and by facsimile or PDF signature, each of which shall be deemed to be an original, and all of which together shall constitute one instrument.

2.7 Expenses. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney’s fees, costs, expenses and necessary disbursements in addition to any other relief to which such party may be entitled.

2.8 Successors and Assigns. Except as otherwise expressly provided in this Agreement, this Agreement shall benefit and bind the successors, assigns, heirs, executors and administrators of the parties to this Agreement.

2.9 Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter of this Agreement.

2.10 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall be severable and, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provisions in any other jurisdiction.

2.11 Stock Splits. All references to numbers of shares in this Agreement shall be appropriately adjusted to reflect any stock dividend, split, combination or other recapitalization of shares by the Company occurring after the date of this Agreement.

2.12 Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY AND ENFORCEABLE UNDER APPLICABLE LAW, EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR OTHER PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS OF THE COMPANY OR THE INVESTOR IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS.

2.13 Interpretation. No provision of this Agreement shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or dictated such provision.

2.14 Consent to Forum. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF THE COMPANY OR ANY OTHER PARTY HERETO, EACH PARTY HERETO HEREBY CONSENTS AND AGREES THAT THE

SUPERIOR COURT OF LOS ANGELES COUNTY, CALIFORNIA, OR, AT THE INVESTOR’S OPTION, THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES PERTAINING TO THIS AGREEMENT OR ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. EACH PARTY HERETO EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH PARTY HERETO HEREBY WAIVES ANY OBJECTION WHICH EACH PARTY HERETO MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH PARTY HERETO HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH PARTY’S ACTUAL RECEIPT THEREOF OR FIVE DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF ANY INVESTOR TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY THE INVESTOR OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

[signature pages follow]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


COMPANY: CAPRIUS, INC., a Delaware corporation

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

PAGE 1


INVESTOR: VINTAGE CAPITAL GROUP, LLC, a Delaware limited liability company

By:	/s/ Fred C. Sands
	Name:	Fred C. Sands
	Title:	Chairman

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

PAGE 2

ANNEX 1

Notice Addresses

If to the Investor, to:

Vintage Capital Group, LLC

11611 San Vicente Boulevard, 10th Floor

Los Angeles, CA 90049


Attention:		Thomas Webster
Telephone:		(310) 979-9090
Facsimile:		(310) 207-0035
E-Mail:		twebster@vintage-vfm.com

With a copy to:

Klee, Tuchin, Bogdanoff & Stern LLP

1999 Avenue of the Stars, 39th Floor

Los Angeles, CA 90067


Attention:		Ronn S. Davids
Telephone:		(310) 407-4095
Facsimile:		(310) 407-9090
E-Mail:		RDavids@ktbslaw.com

If to the Company, to:

Caprius, Inc.

10 Forest Avenue, Suite 220

Paramus, NJ 07652


Attention:		Dwight Morgan
Telephone:		(201) 342-0900
Facsimile:		(866) 405-4918
E-Mail:		dmorgan@mcmetech.com

With a copy to:

Carter Ledyard & Milburn LLP

2 Wall Street

New York, NY 10005


Attention:		Bruce A. Rich
Telephone:		(212) 238-8895
Facsimile:		(212) 732-3232
E-Mail:		rich@clm.com

EX-99.11 12 dex9911.htm EQUITY RIGHTS AGREEMENT Equity Rights Agreement

Exhibit 11

EQUITY RIGHTS AGREEMENT

THIS EQUITY RIGHTS AGREEMENT (this “Agreement”) is entered into as of January 22, 2010, by and among Vintage Capital Group, LLC, a Delaware limited liability company (together with its successors and assigns, the “Investor”), and Caprius, Inc., a Delaware corporation (the “Company”), with reference to the following facts:

R E C I T A L S

A. The Company and the Investor are parties to that certain Securities Purchase and Sale Agreement, dated as of September 16, 2009 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Securities Purchase Agreement”) providing for, among other things, (i) the issuance by the Company and the purchase by the Investor of that certain Note, and (ii) the issuance by the Company and the purchase by the Investor of a warrant (the “Warrant”) to purchase 40% (in the aggregate) of the Company’s common stock, par value $0.01 per share (the “Common Stock”) on a Fully Diluted Basis (as defined in the Warrant).

B. All capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Securities Purchase Agreement.

A G R E E M E N T

NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual promises herein contained, the parties hereby agree as follows:

1. Preemptive Rights.

(a) The Company hereby grants to the Investor, from and after the initial exercise of the Warrant, the right to purchase up to its pro rata share of any New Company Securities (as such term is defined below) which the Company may from time to time propose to sell and issue, and the Company shall not issue or sell any New Company Securities without first complying with the provisions of this Section 1. For purposes of this Section 1(a), the Investor’s pro rata share shall be equal to a percentage based on a fraction, (i) the numerator of which is equal to the number of issued and outstanding shares of Common Stock beneficially owned by the Investor immediately prior to the issuance of the New Company Securities, and (ii) the denominator of which is equal to the total number of shares of Common Stock outstanding or deemed outstanding on a Fully Diluted Basis (as defined in the Warrant) immediately prior to the issuance of the New Company Securities.

(b) The term “New Company Securities” shall mean any capital stock of the Company (including Common Stock or preferred stock of the Company), whether now authorized or not, and any equity rights of the Company (collectively, “Stock”); provided, however, that the term New Company Securities does not include any stock issued pursuant to: (i) any stock options, warrants or equity convertible into Common Stock as of the Closing Date, (ii) any stock option or similar plan approved by the Investor, (iii) any Common Stock issued in a bona fide public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), so long as the Company receives proceeds in

such public offering (net of selling commissions and underwriting discounts) of at least $1,000,000 and so long as the shares of Common Stock sold in such public offering are listed on Nasdaq or any other national securities exchange, or (iv) any Stock issued in order to acquire another company, business or assets, in a transaction approved by the Board of Directors of the Company (the “Board”) and consented to by the Investor.

(c) If the Company proposes to undertake an issuance of New Company Securities, it shall give the Investor written notice (an “Issuance Notice”) of its intention, describing the number and type of New Company Securities, and their proposed offer price and the general terms upon which the Company proposes to issue the same. The Investor shall have ten (10) Business Days (the “Acceptance Period”) after the receipt of the Issuance Notice to agree to purchase up to its pro rata share of such New Company Securities for the price and upon the terms specified in the Issuance Notice by giving written notice to the Company (the “Acceptance Notice”) and indicating therein the number of New Company Securities to be purchased. The Company shall, at the closing of the issuance of the New Company Securities, sell to the Investor such number of New Company Securities as it shall have agreed to purchase in the Acceptance Notice; provided, that the Investor shall not be obligated to purchase such securities until ten (10) Business Days after delivery of the Acceptance Notice.

(d) The Company may, during the sixty (60) day period following the expiration of the Acceptance Period, offer the remaining unsubscribed portion of the New Company Securities, if any, to any person or persons at a price not less than, and upon terms no more favorable to the offeree, than those specified in the Issuance Notice. If the Company does not enter into an agreement for the sale of the New Company Securities within such period, or if the terms of such offer change from those described in the Issuance Notice, the preemptive rights provided hereunder shall be deemed to be revived and such New Company Securities shall not be offered unless first reoffered to the Investor in accordance herewith.

2. Observation Rights.

(a) Observation Rights. The Investor shall at all times have the right to designate a representative to be a Board observer (the “Investor Observer”), whom the Company shall invite to attend, in a non-voting observer capacity, all meetings of the Board and the committees thereof and all meetings of the stockholders of the Company. Notice of such meetings shall be given to the Investor Observer in the same manner and at the same time as to the members of the Board or such committees or such stockholders, as the case may be (which in any event shall not be less then forty-eight (48) hours prior to such meeting unless otherwise agreed to by the Investors in advance and in writing). The Investor Observer shall be provided with copies of (i) a meeting agenda, if any is prepared, (ii) all information that is provided to the members of the Board or such committees or such stockholders (whether prior to, at, or subsequent to any such meetings), as the case may be, at the same time as such materials are provided to the members of the Board or such committee or such stockholders, as the case may be, and (iii) copies of the minutes of all meetings of the Board and such committees or such stockholders concurrently with the distribution of such minutes to one or more members of the Board or such committees or such stockholders, as the case may be, but in no event later than forty-five (45) days after each such meeting, and copies of any action proposed to be taken by written consent shall be provided to the Investor Observer reasonably prior to and promptly after

execution thereof. The Investor Observer may be excluded from any meeting or portion thereof if the Board reasonably believes that there is a legitimate business or legal reason to maintain the confidential nature of the meeting or portion thereof; provided, that prior to being excluded, the Investor Observer and the Investor shall be offered the opportunity to enter into a joint defense agreement in a form reasonably determined by Company counsel, unless the matter involves a dispute or transaction with the Investor.

(b) Indemnification and Insurance.

(i) The Company shall, to the maximum extent permitted by law, indemnify, defend and hold harmless each Investor Observer, the Investor and each of their respective employees, partners, principals, agents, attorneys, accountants, representatives and other Affiliates (collectively, the “Investor Parties”), from and against all costs, expenses, liabilities, claims, judgments, damages and losses, including, without limitation, all reasonable attorneys’ fees, costs and expenses and the cost of any investigation and preparation incurred in connection therewith, incurred in connection with any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative (collectively, “Liabilities and Costs”), arising out of or in any way related to the fact that any Investor Party is or was a director, officer, employee, advisor or other agent of the Company or any subsidiary of the Company, is or was serving as an observer of the Board, or is or was serving at the request of the Company as a director, officer, employee, trustee, agent, observer or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise and, in connection with any Investor Party serving as such director, officer, employee, trustee, agent, observer or fiduciary, provided that such Investor Party acted in good faith and in a manner he or she reasonably believed to be in the best interests of the Company and not in violation of law.

(ii) Upon request by any Investor Party, and upon receipt of an undertaking by the applicable Investor Party to reimburse the Company if the Investor Party is found by a court of competent jurisdiction in a final, non-appealable judgment to not have been entitled to indemnification (except for amounts paid under the next sentence), the Company shall advance (within five (5) Business Days of such request) any and all expenses, including, without limitation, any and all reasonable attorneys’ fees, costs and expenses and the fees, costs and expenses of any investigation and preparation incurred in connection with any matter for which such Investor Party is or may be entitled to indemnification hereunder. The Company shall also indemnify each Investor Party from and against any and all Liabilities and Costs incurred in connection with any claim or action brought to enforce such Investor Party’s rights under this Section 2(b), or under Applicable Law or the Company’s articles of incorporation or bylaws now or hereafter in effect relating to indemnification, or for recovery under directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether such Investor Party is ultimately determined to be entitled to such indemnification or insurance recovery, as the case may be. If, for any reason, the foregoing indemnification is not available for any reason or is not sufficient to indemnify and hold the Investor Parties harmless from all such Liabilities and Costs, then the Company shall promptly contribute to the amount of all such Liabilities and Costs paid or payable by any Investor Party in such proportion as is appropriate to reflect not only the relative benefits received by the Company, on the one hand, and the Investor, on the other hand, but also the relative fault of each, as well as any other equitable considerations. The Company’s reimbursement, indemnity and contribution obligations shall be in addition to any

liability or other obligation the Company may otherwise have at law or under any other agreement or its organizational or governing documents, and such obligations shall, to the extent permitted by law, extend, upon the same terms, to all Investor Parties. This Section 2(b) shall survive indefinitely after the termination of this Agreement.

(iii) At any time that the Obligations are outstanding and continuing for as long as any claim may be made against any Investor Party during any applicable statute of limitations periods, the Company shall have in place and shall maintain in force and effect one or more directors’ and officers’ liability insurance policies providing at least $5,000,000 (or such other amount as is acceptable to the Investor) in insurance coverage for the Investor and for any Investor Party serving as a director, observer or officer of the Company, for claims under federal and state securities laws and other claims for which such coverage might extend, under terms and conditions generally included in such policies and so long as the Company can obtain such a policy under terms reasonably acceptable to the Investor (including the premium amount).

3. Nondisclosure.

(a) The Investor recognizes and acknowledges that the Investor has had access to certain confidential information of the Company and that such information constitutes valuable, special, and unique property of the Company. The Investor agrees, therefore, that the Investor shall not use or disclose to any party for any reason or purpose whatsoever, any of such confidential information unless authorized by the Company’s management for use in furtherance of the Company’s business or required by law (whether orally or in writing, by interrogatory, subpoena, civil investigatory demand or any similar process relating to any legal proceeding, investigation, hearing or otherwise) to make such disclosure.

(b) The 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 or any other agreement between the Investor and the Company may constitute the possession of material non-public information and the possession of that information or the use restriction set forth herein may preclude s the Investor from buying or selling such publicly traded securities.

(c) Notwithstanding anything in this Section 3 to the contrary, any use and trading restrictions set forth herein shall in no event apply to the purchase or sale by the 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 the Investor or its Affiliates for all or substantially all of the Common Stock of the Company, or a merger of the Company with or into Investor or any Affiliate of Investor, except as may be required by law.

4. Termination of Agreement. This Agreement shall terminate upon the earliest to occur of the following: (a) the written agreement of the parties hereto, (b) the consummation of a merger transaction pursuant to which the stockholders of the Company receive cash, securities or other consideration in exchange for their shares of Stock, and (c) the Investor (together with its successors and assignees) holding in the aggregate less than five percent (5%) of the Stock on a Fully Diluted Basis (as defined in the Warrant).

5. General Provisions, Assignments. The Investor may assign its rights hereunder to any of its Affiliates or any person to whom the Investor may transfer or assign securities of the Company.

(a) Notices. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given at the earliest of (i) the date received, (ii) one (1) Business Day, after being sent by a nationally recognized overnight courier for next Business Day delivery, with receipt acknowledged or (iii) five (5) Business Days after being mailed, postage prepaid, by certified mail, return receipt requested, addressed, in the case of each party hereto, at its address specified on the signature page hereto, or to such other address as may be designated by any party in a notice to the other parties as herein provided.

(b) Governing Law. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THAT STATE (WITHOUT REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

(c) Severability. Should any one or more of the provisions of this Agreement or of any agreement entered into pursuant to this Agreement be determined to be illegal or unenforceable, all other provisions of this Agreement and of each other agreement entered into pursuant to this Agreement, shall be given effect separately from the provision or provisions determined to be illegal or unenforceable and shall not be affected thereby.

(d) Equitable Relief. The parties hereto agree that, in the event of a breach by the Company of any of the provisions of this Agreement, damages alone will be an inadequate remedy and that such breach will cause the parties great, immediate and irreparable injury; accordingly, the Company agrees that the Investor shall be entitled to injunctive and other equitable relief, and that such relief shall be in addition to, and not in lieu of, any other remedies it may have at law or under this Agreement.

(e) Waiver to Trial by Jury. TO THE EXTENT PERMITTED AND ENFORCEABLE UNDER APPLICABLE LAW, EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR OTHER PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS OF THE INVESTOR IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS.

(f) Consent to Forum. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF THE COMPANY OR THE INVESTOR, EACH

PARTY HERETO HEREBY CONSENTS AND AGREES THAT THE SUPERIOR COURT OF LOS ANGELES COUNTY, CALIFORNIA, OR, AT THE INVESTOR’S OPTION, THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. EACH PARTY HERETO EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY AND THE INVESTOR HEREBY WAIVE ANY OBJECTION WHICH THE COMPANY OR THE INVESTOR MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. THE COMPANY AND THE INVESTOR HEREBY WAIVE PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREE THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY CERTIFIED MAIL ADDRESSED TO THE COMPANY AND THE INVESTOR AT THE ADDRESSES SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S OR THE INVESTOR’S, AS APPLICABLE, ACTUAL RECEIPT THEREOF OR FIVE (5) BUSINESS DAYS AFTER DEPOSIT IN THE U.S. MAIL, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF THE INVESTOR TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY THE INVESTOR OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

(g) Judicial Reference. IN THE EVENT THE WAIVER PROVIDED IN SECTION 5(e) IS DEEMED INEFFECTIVE, IN ORDER TO GIVE EFFECT TO THE PARTIES’ DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE OR RETIRED JUDGE APPLYING THE APPLICABLE LAW, THE PARTIES AGREE TO REFER, FOR A COMPLETE AND FINAL ADJUDICATION, ANY AND ALL ISSUES OF FACT OR LAW INVOLVED IN ANY LITIGATION OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, ALL DISCOVERY AND LAW AND MOTION MATTERS, PRETRIAL MOTIONS, TRIAL MATTERS AND POST-TRIAL MOTIONS (E.G., MOTIONS FOR RECONSIDERATION, NEW TRIAL AND TO TAX COSTS, ATTORNEY FEES, COSTS AND EXPENSES AND PREJUDGMENT INTEREST)) UP TO AND INCLUDING FINAL JUDGMENT, BROUGHT TO RESOLVE ANY DISPUTE (WHETHER SOUNDING IN CONTRACT, TORT, UNDER ANY STATUTE OR OTHERWISE) BETWEEN AND AMONG ANY OF THE PARTIES HERETO, TO A JUDICIAL REFEREE WHO SHALL BE APPOINTED UNDER A GENERAL REFERENCE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638. THE REFEREE’S DECISION WOULD STAND AS THE DECISION OF THE COURT, WITH JUDGMENT TO BE ENTERED ON HIS/HER STATEMENT OF DECISION IN THE SAME MANNER AS IF THE ACTION HAD BEEN TRIED BY THE COURT. THE PARTIES HERETO SHALL SELECT A SINGLE NEUTRAL REFEREE, WHO SHALL BE A RETIRED STATE OR FEDERAL JUDGE WITH AT LEAST

FIVE YEARS OF JUDICIAL EXPERIENCE IN CIVIL MATTERS. IN THE EVENT THAT THE PARTIES HERETO CANNOT AGREE UPON A REFEREE, THE REFEREE SHALL BE APPOINTED BY THE COURT. WITHOUT LIMITING OR AFFECTING ANY INDEMNITIES AVAILABLE TO THE INVESTOR PARTIES, THE INVESTOR PARTIES, ON THE ONE HAND, AND THE COMPANY, ON THE OTHER HAND, SHALL EQUALLY BEAR THE FEES AND EXPENSES OF THE REFEREE (50% BY THE INVESTOR AND 50% BY THE COMPANY) UNLESS THE REFEREE OTHERWISE PROVIDES IN THE STATEMENT OF DECISION.

(h) Attorneys’ Fees. In the event that any party seeks to enforce his, her or its rights under this Agreement, the prevailing party shall be entitled to recover reasonable fees (including attorneys’ fees), costs and all other reasonable expenses incurred in connection therewith, including the fees, costs and expenses of appeals.

(i) Successors. Except as otherwise provided herein, all the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto, their respective successors and permitted assigns.

(j) No Third-Party Benefits. Except as expressly provided in this Agreement, none of the provisions of this Agreement shall be for the benefit of, or enforceable by, any third-party beneficiary.

(k) Counterparts. This Agreement may be executed in any number of counterparts and by different parties in separate 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, and as effective as, originals.

(l) Modification, Amendment and Waiver. This Agreement shall not be amended, waived, discharged or terminated orally or by course of dealing, but only by a statement in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. With regard to any power, remedy or right provided herein or otherwise available to any party hereunder (i) no waiver or extension of time shall be effective unless expressly contained in a writing signed by the waiving party; and (ii) no alteration, modification or impairment shall be implied by reason of any previous waiver, extension of time, delay or omission in exercise, or other indulgence.

(m) Further Assurances. The parties agree to execute such further documents and instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

(n) Integration. This Agreement (including the Exhibits hereto), and any documents referred to herein or executed contemporaneously herewith, constitute the entire agreement of the parties with respect to the collective subject matter hereof and thereof, and supersede any prior or contemporaneous oral or written agreements or understandings with respect to such collective subject matter.

(o) Headings. The headings of the Sections and paragraphs of this Agreement have been inserted for convenience of reference only and do not constitute a part of this Agreement.

(p) Gender and Number; Defined Terms. As used in this Agreement, the masculine, feminine or neuter gender, and the singular or plural, shall be deemed to include the others whenever and whenever the context so requires. Additionally, unless the context requires otherwise, “or” is not exclusive.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, or caused this Agreement to be duly executed by their respective officers, partners or other representatives, thereunto duly authorized, all as of the date first above written.



COMPANY: CAPRIUS, INC. a Delaware corporation

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer
	Address:	10 Forest Avenue,
		Suite 220, Paramus,
		New Jersey 07652

[SIGNATURE PAGE TO EQUITY RIGHTS AGREEMENT]

PAGE 1



INVESTOR: VINTAGE CAPITAL GROUP, LLC, a Delaware limited liability company

By:	/s/ Fred C. Sands
	Name:	Fred C. Sands
	Title:	Chairman
	Address:	11611 San Vicente Blvd. 10th Floor Los Angeles, CA 90049

[SIGNATURE PAGE TO EQUITY RIGHTS AGREEMENT]

PAGE 2

EX-99.12 13 dex9912.htm INVESTMENT MONITORING AGREEMENT Investment Monitoring Agreement

Exhibit 12

Execution Version

INVESTMENT MONITORING AGREEMENT

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

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, Dwight Morgan and Jonathan Joels, and two representatives selected by Investor, initially, Mark Sampson and Tom Webster. 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;

(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.

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;

(b) upon the order of any court or administrative agency or as otherwise required by law;

(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.

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.

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.



COMPANY: CAPRIUS, INC., a Delaware corporation

By:	/s/ Dwight Morgan
	Name:	Dwight Morgan
	Title:	Chief Executive Officer

INVESTOR: VINTAGE CAPITAL GROUP, LLC, a Delaware limited liability company

By:	/s/ Fred C. Sands
	Name:	Fred C. Sands
	Title:	Chairman

[SIGNATURE PAGE TO INVESTMENT MONITORING AGREEMENT]

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