Document:

Exhibit 10.1 - Purchase Agreement, dated as of February 27, 2007

     

    Exhibit
      10.1

     

    PURCHASE
      AGREEMENT

     

    THIS
      PURCHASE AGREEMENT (“Agreement”) is made as of the 27th day of February, 2007 by
      and among Caprius, Inc., a Delaware corporation (the “Company”), and the
      Investors set forth on the signature pages affixed hereto (each an “Investor”
and collectively the “Investors”).

    

    Recitals

    

    A. The
      Company and the Investors are executing and delivering this Agreement in
      reliance upon the exemption from securities registration afforded by the
      provisions of Regulation D (“Regulation D”), as promulgated by the U.S.
      Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
      as amended; and

    

    B. The
      Investors wish to purchase from the Company, and the Company wishes to sell
      and
      issue to the Investors, upon the terms and conditions stated in this Agreement,
      (i) up to an aggregate of 10,000 shares of the Company’s Series E Convertible
      Preferred Stock, stated value $250 per share (the “Preferred Stock”), such
      Preferred Stock to have the relative rights, preferences and designations set
      forth in the Certificate of Designations set forth in Exhibit A hereto (the
      “Certificate of Designations”), at a purchase price of $250 per share and (ii)
      2007 Warrants to purchase up to an aggregate of 3,125,000 shares of the
      Company’s Common Stock, par value $0.01 per share (together with any securities
      into which such shares may be reclassified the “Common Stock”) (subject to
      adjustment) at an exercise price of $0.50 per share (subject to adjustment)
      in
      the form attached hereto as Exhibit B (the “Warrants”); and

    

    C. Contemporaneous
      with the sale of the Preferred Stock and Warrants, the parties hereto will
      execute and deliver a Registration Rights Agreement, in the form attached hereto
      as Exhibit C (the “Registration Rights Agreement”), pursuant to which the
      Company will agree to provide certain registration rights under the Securities
      Act of 1933, as amended, and the rules and regulations promulgated thereunder,
      and applicable state securities laws.

    

    In
      consideration of the mutual promises made herein and for other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      the
      parties hereto agree as follows:

    

    1. Definitions.
      In
      addition to those terms defined above and elsewhere in this Agreement, for
      the
      purposes of this Agreement, the following terms shall have the meanings set
      forth below:

    

    “Affiliate”
means,
      with respect to any Person, any other Person which directly or indirectly
      through one or more intermediaries Controls, is controlled by, or is under
      common control with, such Person, as such terms are used in and construed under
      Rule 144 under the 1933 Act.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Business
      Day”
means
      a
      day, other than a Saturday or Sunday, on which banks in New York City are open
      for the general transaction of business.

    

    “Company’s
      Knowledge”
means
      the actual knowledge of the executive officers (as defined in Rule 405 under
      the
      1933 Act) of the Company, after due inquiry.

    

    “Confidential
      Information”
means
      trade secrets, confidential information and know-how (including but not limited
      to ideas, formulae, compositions, processes, procedures and techniques, research
      and development information, computer program code, performance specifications,
      support documentation, drawings, specifications, designs, business and marketing
      plans, and customer and supplier lists and related information).

    

    “Control”
      (including the terms “controlling”, “controlled by” or “under common control
      with”) means the possession, direct or indirect, of the power to direct or cause
      the direction of the management and policies of a Person, whether through the
      ownership of voting securities, by contract or otherwise.

    

    “Conversion
      Shares”
means
      the shares of Common Stock issuable upon conversion of the Preferred
      Stock.

    

    “Effective
      Date”
means
      the date on which the initial Registration Statement is declared effective
      by
      the SEC.

    

    “Effectiveness
      Deadline”
means
      the date on which the initial Registration Statement is required to be declared
      effective by the SEC under the terms of the Registration Rights
      Agreement.

    

    “Excluded
      Stock”
means
      (i) capital stock or options issued to employees, officers, directors or
      consultants (provided that in no event shall such issuance to consultants exceed
      100,000 shares (subject to adjustment for stock splits, stock dividends and
      recapitalizations) in any 12 month period) of the Company pursuant to any stock
      or option plan duly adopted by a majority of the non-employee members of the
      Board of Directors of the Company or a majority of the members of a committee
      of
      non-employee directors established for such purpose subsequent to the date
      hereof, (ii) shares of Common Stock issued upon the conversion or exercise
      of
      options or other Common Stock Equivalents issued prior to the date hereof,
      provided that such securities have not been amended since the date hereof to
      increase the number of shares of Common Stock issuable thereunder or to lower
      the exercise or conversion price thereof, (iii) securities issued pursuant
      to
      this Agreement, and securities issued upon the exercise of those securities,
      and
      (iv) securities issued pursuant to acquisitions or strategic transactions
      approved by a majority of the disinterested directors, provided that any such
      issuance shall only be to a Person which is, itself or through its subsidiaries,
      an operating company in a business synergistic with the business of the Company
      and shall provide to the Company additional benefits in addition to the
      investment of funds, but shall not include a transaction in which the Company
      is
      issuing securities primarily for the purpose of raising capital or to an entity
      whose primary business is investing in securities.

    
      
        
        

      

      
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    “Intellectual
      Property”
means
      all of the following: (i) patents, patent applications, patent disclosures
      and
      inventions (whether or not patentable and whether or not reduced to practice);
      (ii) trademarks, service marks, trade dress, trade names, corporate names,
      logos, slogans and Internet domain names, together with all goodwill associated
      with each of the foregoing; (iii) copyrights and copyrightable works; (iv)
      registrations, applications and renewals for any of the foregoing; and (v)
      proprietary computer software (including but not limited to data, data bases
      and
      documentation).

    

    “Material
      Adverse Effect”
means
      a
      material adverse effect on (i) the assets, liabilities, results of operations,
      condition (financial or otherwise), business, or prospects of the Company and
      its Subsidiaries taken as a whole, or (ii) the ability of the Company to perform
      its obligations under the Transaction Documents.

    

    “Maximum
      Amount”
means
      the sale of up to 10,000 shares of Preferred Stock for total gross proceeds
      of
      $2.5 million, together with 3,125,000 Warrants.

     

    

    “Minimum
      Amount“
means
      the sale of a minimum of 5,000 shares of Preferred Stock for gross proceeds
      of
      $1.25 million, together with 1,562,500 Warrants.

     

    

    “Person”
means
      an individual, corporation, partnership, limited liability company, trust,
      business trust, association, joint stock company, joint venture, sole
      proprietorship, unincorporated organization, governmental authority or any
      other
      form of entity not specifically listed herein.

    

    “Purchase
      Price”
means,
      as to each Investor, the aggregate amount to be paid for the Shares and Warrants
      purchased hereunder as specified below such Investor’s name on the signature
      pages of this Agreement.

    

    “Registration
      Statement”
has
      the
      meaning set forth in the Registration Rights Agreement.

    

    “SEC
      Filings”
has
      the
      meaning set forth in Section 4.6.

    

    “Securities”
means
      the Shares, the Conversion Shares, the Warrants and the Warrant
      Shares.

    

    “Series
      B Preferred Stock”
means
      the Company’s Series B Convertible Redeemable Preferred Stock, par value $0.01
      per share.

    

    “Series
      D Preferred Stock”
means
      the Company’s Series D Convertible Redeemable Preferred Stock, par value $0.01
      per share.

    

    “Shares”
means
      the shares of Preferred Stock being purchased by the Investors
      hereunder.

    
      
        
        

      

      
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    “Subsidiary”
of
      any
      Person means another Person, an amount of the voting securities, other voting
      ownership or voting partnership interests of which is sufficient to elect at
      least a majority of its Board of Directors or other governing body (or, if
      there
      are no such voting interests, 50% or more of the equity interests of which)
      is
      owned directly or indirectly by such first Person.

    

    “Transaction
      Documents”
means
      this Agreement, the Certificate of Designations, the Warrants and the
      Registration Rights Agreement.

    

    “Warrant
      Shares”
means
      the shares of Common Stock issuable upon the exercise of the
      Warrants.

    

    “1933
      Act”
means
      the Securities Act of 1933, as amended, or any successor statute, and the rules
      and regulations promulgated thereunder.

    

    “1934
      Act”
means
      the Securities Exchange Act of 1934, as amended, or any successor statute,
      and
      the rules and regulations promulgated thereunder.

    

    2. Purchase
      and Sale of the Shares and Warrants.
      Subject
      to the terms and conditions of this Agreement, on the Closing Date, each of
      the
      Investors shall severally, and not jointly, purchase, and the Company shall
      sell
      and issue to the Investors, the Shares and Warrants in the respective amounts
      set forth opposite the Investors’ names on the signature pages attached hereto
      in exchange for the Purchase Price as specified in Section 3 below.

    

    3. Closing.
      Upon
      confirmation that the other conditions to closing specified herein have been
      satisfied or duly waived by the Investors, the Company shall file the
      Certificate of Designations with the Secretary of State of Delaware. Upon
      confirmation that the Certificate of Designations has been filed and has become
      effective, unless other arrangements have been made between the Company and
      a
      particular Investor, the Company shall deliver to Lowenstein Sandler PC, in
      trust, a certificate or certificates, registered in such name or names as the
      Investors may designate, representing the Shares and Warrants being purchased,
      with instructions that such certificates are to be held for release to the
      Investors only upon payment in full of the applicable portion of the Purchase
      Price to the Company. Upon such receipt by Lowenstein Sandler PC of the
      certificates (or as specified in any alternative arrangement entered into
      between the Company and an Investor), each Investor shall promptly, but no
      more
      than one Business Day thereafter, cause a wire transfer in same day funds to
      be
      sent to the account of the Company as instructed in writing by the Company,
      in
      an amount representing such Investor’s Purchase Price. On the date (the “Initial
      Closing Date”) the Company receives the Purchase Price from the Investors
      purchasing Shares and Warrants on the Initial Closing Date, the certificates
      evidencing the Shares and Warrants shall be released to the Investors (the
      “Initial Closing”). The Initial Closing of the purchase and sale of the Shares
      and Warrants shall take place at the offices of Lowenstein Sandler PC, 1251
      Avenue of the Americas, 18th Floor, New York, New York 10020, or at such other
      location and on such other date as the Company and the Investors shall mutually
      agree. The subsequent closing(s) of the purchase and sale of up to the Maximum
      Amount under this Agreement (the “Subsequent Closings”) shall take place at a
      time agreed upon by the Company and the Investors participating therein
(the
      date(s) of the

    
      
        
        

      

      
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    Subsequent
      Closing(s) is hereinafter referred to as the “Subsequent Closing Date(s)”), all
      of which shall occur in any event no later than fifteen (15) days after the
      Initial Closing. The Investors agree that any additional Persons that acquire
      Shares and Warrants at any “Subsequent Closing” shall become “Investors” under
      this Agreement and the Registration Rights Agreement with all the rights and
      obligations attendant thereto, upon their execution of this Agreement and the
      Registration Rights Agreement without further action by any other Investor.
      For
      purposes of this Agreement, the terms “Closing” and “Closing Date”, unless
      otherwise indicated, refer to the applicable closing and closing date of the
      Initial Closing or the Subsequent Closing(s), as the case may be.

    

    4. Representations
      and Warranties of the Company.
      The
      Company hereby represents and warrants to the Investors that, except as set
      forth in the schedules delivered herewith (collectively, the “Disclosure
      Schedules”):

    

    4.
      1 Organization,
      Good Standing and Qualification.
      Each of
      the Company and its Subsidiaries is a corporation duly organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      incorporation and has all requisite corporate power and authority to carry
      on
      its business as now conducted and to own its properties. Each of the Company
      and
      its Subsidiaries is duly qualified to do business as a foreign corporation
      and
      is in good standing in each jurisdiction in which the conduct of its business
      or
      its ownership or leasing of property makes such qualification or leasing
      necessary unless the failure to so qualify has not had and could not reasonably
      be expected to have a Material Adverse Effect. The Company’s Subsidiaries are
      listed on Schedule
      4.1
      hereto.
      Neither the Company nor any Subsidiary is in violation of any of the provisions
      of its respective certificate or articles of incorporation, by-laws or other
      organizational or charter documents. 

    

    4.2 Authorization.
      The
      Company has full power and authority and has taken all requisite action on
      the
      part of the Company, its officers, directors and stockholders necessary for
      (i)
      the authorization, execution and delivery of the Transaction Documents, (ii)
      the
      authorization of the performance of all obligations of the Company hereunder
      or
      thereunder, and (iii) the authorization, issuance (or reservation for issuance)
      and delivery of the Securities.
      The
      Transaction Documents constitute the legal, valid and binding obligations of
      the
      Company, enforceable against the Company in accordance with their terms, subject
      to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
      and
      similar laws of general applicability, relating to or affecting creditors’
rights generally.

    

    4.3 Capitalization.
      Schedule
      4.3
      sets
      forth (a) the authorized capital stock of the Company on the date hereof; (b)
      the number of shares of capital stock issued and outstanding; (c) the number
      of
      shares of capital stock issuable pursuant to the Company’s outstanding stock
      award; and (d) the number of shares of capital stock issuable pursuant to future
      grants of awards eligible to be made under the Company’s stock plans; (e) the
      number of shares of Common Stock issuable upon conversion of the outstanding
      Series B Preferred Stock and the outstanding Series D Preferred Stock; and
      (f)
      the number of shares of capital stock issuable and reserved for issuance
      pursuant to securities (other than the Series B Preferred Stock, the Series
      D
      Preferred Stock, the Shares and the Warrants) exercisable for, or convertible
      into or exchangeable for any shares of capital stock of the Company. All of
      the
      issued and outstanding

    
      
        
        

      

      
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    shares
      of
      the Company’s capital stock have been duly authorized and validly issued and are
      fully paid, nonassessable and free of pre-emptive rights and were issued in
      full
      compliance with applicable state and federal securities law and any rights
      of
      third parties. Except as described on Schedule
      4.3,
      all of
      the issued and outstanding shares of capital stock of each Subsidiary have
      been
      duly authorized and validly issued and are fully paid, nonassessable and free
      of
      pre-emptive rights, were issued in full compliance with applicable state and
      federal securities law and any rights of third parties and are owned by the
      Company, beneficially and of record, subject to no lien, encumbrance or other
      adverse claim. Except as described on Schedule
      4.3,
      no
      Person is entitled to pre-emptive or similar statutory or contractual rights
      with respect to any securities of the Company. Except as described on
Schedule
      4.3,
      there
      are no outstanding warrants, options, convertible securities or other rights,
      agreements or arrangements of any character under which the Company or any
      of
      its Subsidiaries is or may be obligated to issue any equity securities of any
      kind and except as contemplated by this Agreement, neither the Company nor
      any
      of its Subsidiaries is currently in negotiations for the issuance of any equity
      securities of any kind. Except as described on Schedule
      4.3
      and
      except for the Registration Rights Agreement, there are no voting agreements,
      buy-sell agreements, option or right of first purchase agreements or other
      agreements of any kind among the Company and any of the securityholders of
      the
      Company relating to the securities of the Company held by them. Except as
      described on Schedule
      4.3
      and
      except as provided in the Registration Rights Agreement, no Person has the
      right
      to require the Company to register any securities of the Company under the
      1933
      Act, whether on a demand basis or in connection with the registration of
      securities of the Company for its own account or for the account of any other
      Person.

    

    Except
      as
      described on Schedule
      4.3,
      the
      issuance and sale of the Securities hereunder will not obligate the Company
      to
      issue shares of Common Stock or other securities to any other Person (other
      than
      the Investors) and will not result in the adjustment of the exercise,
      conversion, exchange or reset price of any outstanding security.

    

    The
      Company does not have outstanding stockholder purchase rights or “poison pill”
or any similar arrangement in effect giving any Person the right to purchase
      any
      equity interest in the Company upon the occurrence of certain
      events.

    

    4.4 Valid
      Issuance.
      The
      Shares have been duly and validly authorized and, when issued and paid for
      pursuant to this Agreement, will be validly issued, fully paid and
      nonassessable, and shall be free and clear of all encumbrances and restrictions
      (other than those created by the Investors), except for restrictions on transfer
      set forth in the Transaction Documents or imposed by applicable securities
      laws
      and will be entitled to the relative rights, powers and preferences set forth
      in
      the Certificate of Designations. Upon the due conversion of the Shares in
      accordance with the Certificate of Designations, the Conversion Shares will
      be
      validly issued, fully paid and nonassessable, and shall be free and clear of
      all
      encumbrances and restrictions (other than those created by the Investors),
      except for restrictions on transfer set forth in the Transaction Documents
      or
      imposed by applicable securities laws. The Warrants have been duly and validly
      authorized. Upon the due exercise of the Warrants, the Warrant Shares will
      be
      validly issued, fully paid and non-assessable free and clear of all encumbrances
      and restrictions, except for restrictions on transfer set forth in the
      Transaction Documents or imposed by applicable securities laws and except for
      those created by the Investors. The Company has

    
      
        
        

      

      
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    reserved
      a sufficient number of shares of Common Stock for issuance upon the conversion
      of the Preferred Stock and the exercise of the Warrants, free and clear of
      all
      encumbrances and restrictions, except for restrictions on transfer set forth
      in
      the Transaction Documents or imposed by applicable securities laws and except
      for those created by the Investors.

    

    4.5 Consents.
      The
      execution, delivery and performance by the Company of the Transaction Documents
      and the offer, issuance and sale of the Securities require no consent of, action
      by or in respect of, or filing with, any Person, governmental body, agency,
      or
      official other than filings that have been made pursuant to applicable state
      securities laws and post-sale filings pursuant to applicable state and federal
      securities laws which the Company undertakes to file within the applicable
      time
      periods. Subject to the accuracy of the representations and warranties of each
      Investor set forth in Section 5 hereof, the Company has taken all action
      necessary to exempt (i) the issuance and sale of the Securities, (ii) the
      issuance of the Conversion Shares upon due exercise of the Shares, (iii) the
      issuance of the Warrant Shares upon due exercise of the Warrants, and (iv)
      the
      other transactions contemplated by the Transaction Documents from the provisions
      of any stockholder rights plan or other “poison pill” arrangement, any
      anti-takeover, business combination or control share law or statute binding
      on
      the Company or to which the Company or any of its assets and properties may
      be
      subject and any provision of the Company’s Certificate of Incorporation or
      Bylaws that is or could reasonably be expected to become applicable to the
      Investors as a result of the transactions contemplated hereby, including without
      limitation, the issuance of the Securities and the ownership, disposition or
      voting of the Securities by the Investors or the exercise of any right granted
      to the Investors pursuant to this Agreement or the other Transaction
      Documents.

    

    4.6 Delivery
      of SEC Filings; Business.
      The
      Company has made available to the Investors through the EDGAR system, true
      and
      complete copies of the Company’s most recent Annual Report on Form 10-KSB for
      the fiscal year ended September 30, 2006 (the “10-KSB”), and all other reports
      filed by the Company pursuant to the 1934 Act since the filing of the 10-KSB
      and
      prior to the date hereof (collectively, the “SEC Filings”). The SEC Filings are
      the only filings required of the Company pursuant to the 1934 Act for such
      period and have been made on a timely basis or the Company has received a valid
      extension of such time of filing and has filed any such SEC Filings prior to
      the
      expiration of such extension. The Company and its Subsidiaries are engaged
      in
      all material respects only in the business described in the SEC Filings and
      the
      SEC Filings contain a complete and accurate description in all material respects
      of the business of the Company and its Subsidiaries, taken as a
      whole.

    

    4.7 Use
      of
      Proceeds.
      The net
      proceeds of the sale of the Shares and the Warrants hereunder shall be used
      by
      the Company to repay principal and interest on the Company’s $100,000 bridge
      note and for working capital and general corporate purposes.

    

    4.8 No
      Material Adverse Change.
      Since
      September 30, 2006, except as identified and described in the SEC Filings or
      as
      described on Schedule
      4.8,
      there
      has not been:

    

    (i) any
      change in the consolidated assets, liabilities, financial condition or operating
      results of the Company from that reflected in the financial statements included
      in the Company’s Quarterly Report on Form 10-QSB for the quarter ended
      December

    
      
        
        

      

      
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    31,
      2006,
      except for changes in the ordinary course of business which have not had and
      could not reasonably be expected to have a Material Adverse Effect, individually
      or in the aggregate;

    

    (ii) any
      declaration or payment of any dividend, or any authorization or payment of
      any
      distribution, on any of the capital stock of the Company, or any redemption
      or
      repurchase of any securities of the Company;

    

    (iii) any
      material damage, destruction or loss, whether or not covered by insurance to
      any
      assets or properties of the Company or its Subsidiaries;

    

    (iv) any
      waiver, not in the ordinary course of business, by the Company or any Subsidiary
      of a material right or of a material debt owed to it;

    

    (v) any
      satisfaction or discharge of any lien, claim or encumbrance or payment of any
      obligation by the Company or a Subsidiary, except in the ordinary course of
      business and which is not material to the assets, properties, financial
      condition, operating results or business of the Company and its Subsidiaries
      taken as a whole (as such business is presently conducted and as it is proposed
      to be conducted);

    

    (vi) any
      change or amendment to the Company's Certificate of Incorporation or Bylaws,
      or
      material change to any material contract or arrangement by which the Company
      or
      any Subsidiary is bound or to which any of their respective assets or properties
      is subject;

    

    (vii) any
      material labor difficulties or labor union organizing activities with respect
      to
      employees of the Company or any Subsidiary;

    

    (viii) any
      material transaction entered into by the Company or a Subsidiary other than
      in
      the ordinary course of business; 

    

    (ix) the
      loss
      of the services of any key employee, or material change in the composition
      or
      duties of the senior management of the Company or any Subsidiary;

    

    (x) the
      loss
      or threatened loss of any customer which has had or could reasonably be expected
      to have a Material Adverse Effect; or

    

    (xi) any
      other
      event or condition of any character that has had or could reasonably be expected
      to have a Material Adverse Effect.

    

    4.9 SEC
      Filings.

    

    (a) At
      the
      time of filing thereof, the SEC Filings complied as to form in all material
      respects with the requirements of the 1934 Act and did not contain any untrue
      statement of a material fact or omit to state any material fact necessary in
      order to make the statements made therein, in the light of the circumstances
      under which they were made, not misleading.

    
      
        
        

      

      
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    (b) Each
      registration statement and any amendment thereto filed by the Company since
      January 1, 2004 pursuant to the 1933 Act and the rules and regulations
      thereunder, as of the date such statement or amendment became effective,
      complied as to form in all material respects with the 1933 Act and did not
      contain any untrue statement of a material fact or omit to state any material
      fact required to be stated therein or necessary in order to make the statements
      made therein not misleading; and each prospectus filed pursuant to Rule 424(b)
      under the 1933 Act, as of its issue date and as of the closing of any sale
      of
      securities pursuant thereto did not contain any untrue statement of a material
      fact or omit to state any material fact required to be stated therein or
      necessary in order to make the statements made therein, in the light of the
      circumstances under which they were made, not misleading.

    

    4.10 No
      Conflict, Breach, Violation or Default.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the issuance and sale of the Securities will not conflict with or result
      in
      a breach or violation of any of the terms and provisions of, or constitute
      a
      default under (i) the Company’s Certificate of Incorporation or the Company’s
      Bylaws, both as in effect on the date hereof (true and complete copies of which
      have been made available to the Investors through the EDGAR system), or (ii)(a)
      any statute, rule, regulation or order of any governmental agency or body or
      any
      court, domestic or foreign, having jurisdiction over the Company, any Subsidiary
      or any of their respective assets or properties, or (b) any agreement or
      instrument to which the Company or any Subsidiary is a party or by which the
      Company or a Subsidiary is bound or to which any of their respective assets
      or
      properties is subject.

    

    4.11 Tax
      Matters.
      The
      Company and each Subsidiary has timely prepared and filed all tax returns
      required to have been filed by the Company or such Subsidiary with all
      appropriate governmental agencies and timely paid all taxes shown thereon or
      otherwise owed by it. The charges, accruals and reserves on the books of the
      Company in respect of taxes for all fiscal periods are adequate in all material
      respects, and there are no material unpaid assessments against the Company
      or
      any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of
      any additional taxes, penalties or interest for any fiscal period or audits
      by
      any federal, state or local taxing authority except for any assessment which
      is
      not material to the Company and its Subsidiaries, taken as a whole. All taxes
      and other assessments and levies that the Company or any Subsidiary is required
      to withhold or to collect for payment have been duly withheld and collected
      and
      paid to the proper governmental entity or third party when due. There are no
      tax
      liens or claims pending or, to the Company’s Knowledge, threatened against the
      Company or any Subsidiary or any of their respective assets or property. Except
      as described on Schedule
      4.11,
      there
      are no outstanding tax payment or tax sharing agreements or other such
      arrangements between the Company and any Subsidiary or other corporation or
      entity.

    

    4.12 Title
      to Properties.
      Except
      as disclosed in the SEC Filings or as described on Schedule
      4.12,
      the
      Company and each Subsidiary has good and marketable title to all real properties
      and all other properties and assets owned by it, in each case free from liens,
      encumbrances and defects that would materially affect the value thereof or
      materially interfere with the use made or currently planned to be made thereof
      by them; and except as disclosed in the SEC Filings, the Company and each
      Subsidiary holds any leased real or personal property

    
      
        
        

      

      
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    under
      valid and enforceable leases with no exceptions that would materially interfere
      with the use made or currently planned to be made thereof by them.

    

    4.13 Certificates,
      Authorities and Permits.
      Except
      as disclosed in the 10-KSB or as described on Schedule
      4.13,
      the
      Company and each Subsidiary possess adequate certificates, authorities or
      permits issued by appropriate governmental agencies or bodies necessary to
      conduct the business now operated by it, and neither the Company nor any
      Subsidiary has received any notice of proceedings relating to the revocation
      or
      modification of any such certificate, authority or permit that, if determined
      adversely to the Company or such Subsidiary, could reasonably be expected to
      have a Material Adverse Effect, individually or in the aggregate.

    

    4.14 Labor
      Matters.

     

    (a) Except
      as
      set forth on Schedule
      4.14,
      the
      Company is not a party to or bound by any collective bargaining agreements
      or
      other agreements with labor organizations. The Company has not violated in
      any
      material respect any laws, regulations, orders or contract terms, affecting
      the
      collective bargaining rights of employees, labor organizations or any laws,
      regulations or orders affecting employment discrimination, equal opportunity
      employment, or employees’ health, safety, welfare, wages and hours.

     

    (b) (i)
      There
      are no labor disputes existing, or to the Company's Knowledge, threatened,
      involving strikes, slow-downs, work stoppages, job actions, disputes, lockouts
      or any other disruptions of or by the Company's employees, (ii) there are no
      unfair labor practices or petitions for election pending or, to the Company's
      Knowledge, threatened before the National Labor Relations Board or any other
      federal, state or local labor commission relating to the Company's employees,
      (iii) no demand for recognition or certification heretofore made by any labor
      organization or group of employees is pending with respect to the Company and
      (iv) to the Company's Knowledge, the Company enjoys good labor and employee
      relations with its employees and labor organizations.

     

    (c) The
      Company is, and at all times has been, in compliance in all material respects
      with all applicable laws respecting employment (including laws relating to
      classification of employees and independent contractors) and employment
      practices, terms and conditions of employment, wages and hours, and immigration
      and naturalization. There are no claims pending against the Company before
      the
      Equal Employment Opportunity Commission or any other administrative body or
      in
      any court asserting any violation of Title VII of the Civil Rights Act of 1964,
      the Age Discrimination Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other
      federal, state or local Law, statute or ordinance barring discrimination in
      employment.

     

    (d) The
      Company is not a party to, or bound by, any employment or other contract or
      agreement that contains any severance, termination pay or change of control
      liability or obligation, including, without limitation, any “excess parachute
      payment,” as defined in Section 2806(b) of the Internal Revenue
      Code.

    
      
        
        

      

      
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    (e) Except
      as
      specified in Schedule
      4.14,
      each of
      the Company's employees who works in the United States is a Person who is either
      a United States citizen or a permanent resident entitled to work in the United
      States. To the Company's Knowledge, the Company has no liability for the
      improper classification by the Company of such employees as independent
      contractors or leased employees prior to the Closing.

    

    4.15 Intellectual
      Property.

    

    (a) All
      Intellectual Property of the Company and its Subsidiaries is currently in
      compliance with all legal requirements (including timely filings, proofs and
      payments of fees) and, to the Company’s Knowledge, is valid and enforceable. No
      Intellectual Property of the Company or its Subsidiaries which is necessary
      for
      the conduct of Company’s and each of its Subsidiaries’ respective businesses as
      currently conducted or as currently proposed to be conducted has been or is
      now
      involved in any cancellation, dispute or litigation, and, to the Company’s
      Knowledge, no such action is threatened. No patent of the Company or its
      Subsidiaries has been or is now involved in any interference, reissue,
      re-examination or opposition proceeding.

    

    (b) All
      of
      the licenses and sublicenses and consent, royalty or other agreements concerning
      Intellectual Property which are necessary for the conduct of the Company’s and
      each of its Subsidiaries’ respective businesses as currently conducted or as
      currently proposed to be conducted to which the Company or any Subsidiary is
      a
      party or by which any of their assets are bound (other than  generally
      commercially available, non-custom, off-the-shelf software application programs
      having a retail acquisition price of less than $10,000 per license)
      (collectively, “License Agreements”) are valid and binding obligations of the
      Company or its Subsidiaries that are parties thereto and, to the Company’s
      Knowledge, the other parties thereto, enforceable in accordance with their
      terms, except to the extent that enforcement thereof may be limited by
      bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
      other similar laws affecting the enforcement of creditors’ rights generally, and
      there exists no event or condition which will result in a material violation
      or
      breach of or constitute (with or without due notice or lapse of time or both)
      a
      default by the Company or any of its Subsidiaries under any such License
      Agreement.

    

    (c) The
      Company and its Subsidiaries own or have the valid right to use all of the
      Intellectual Property that is necessary for the conduct of the Company’s and
      each of its Subsidiaries’ respective businesses as currently conducted or as
      currently proposed to be conducted and for the ownership, maintenance and
      operation of the Company’s and its Subsidiaries’ properties and assets, free and
      clear of all liens, encumbrances, adverse claims or obligations to license
      all
      such owned Intellectual Property and Confidential Information, other than
      licenses entered into in the ordinary course of the Company’s and its
      Subsidiaries’ businesses. The Company and its Subsidiaries have a valid and
      enforceable right to use all third party Intellectual Property and Confidential
      Information used or held for use in the respective businesses of the Company
      and
      its Subsidiaries.

    

    (d) To
      the
      Company’s Knowledge, the conduct of the Company’s and its Subsidiaries’
businesses as currently conducted does not infringe or otherwise impair
      or

    
      
        
        

      

      
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    conflict
      with (collectively, “Infringe”) any Intellectual Property rights of any third
      party or any confidentiality obligation owed to a third party, and, to the
      Company’s Knowledge, the Intellectual Property and Confidential Information of
      the Company and its Subsidiaries which are necessary for the conduct of
      Company’s and each of its Subsidiaries’ respective businesses as currently
      conducted or as currently proposed to be conducted are not being Infringed
      by
      any third party. There is no litigation or order pending or outstanding or,
      to
      the Company’s Knowledge, threatened or imminent, that seeks to limit or
      challenge or that concerns the ownership, use, validity or enforceability of
      any
      Intellectual Property or Confidential Information of the Company and its
      Subsidiaries and the Company’s and its Subsidiaries’ use of any Intellectual
      Property or Confidential Information owned by a third party, and, to the
      Company’s Knowledge, there is no valid basis for the same.

    

    (e) The
      consummation of the transactions contemplated hereby and by the other
      Transaction Documents will not result in the alteration, loss, impairment of
      or
      restriction on the Company’s or any of its Subsidiaries’ ownership or right to
      use any of the Intellectual Property or Confidential Information which is
      necessary for the conduct of Company’s and each of its Subsidiaries’ respective
      businesses as currently conducted or as currently proposed to be
      conducted.

    

    (f) The
      Company and its Subsidiaries have taken reasonable steps to protect the
      Company’s and its Subsidiaries’ rights in their Intellectual Property and
      Confidential Information. Each employee, consultant and contractor who has
      had
      access to Confidential Information which is necessary for the conduct of
      Company’s and each of its Subsidiaries’ respective businesses as currently
      conducted or as currently proposed to be conducted has executed an agreement
      to
      maintain the confidentiality of such Confidential Information and has executed
      appropriate agreements that are substantially consistent with the Company’s
      standard forms thereof. Except under confidentiality obligations, there has
      been
      no material disclosure of any of the Company’s or its Subsidiaries’ Confidential
      Information to any third party.

    

    4.16 Environmental
      Matters.
      Neither
      the Company nor any Subsidiary is in violation of any statute, rule, regulation,
      decision or order of any governmental agency or body or any court, domestic
      or
      foreign, relating to the use, disposal or release of hazardous or toxic
      substances or relating to the protection or restoration of the environment
      or
      human exposure to hazardous or toxic substances (collectively, “Environmental
      Laws”), owns or operates any real property contaminated with any substance that
      is subject to any Environmental Laws, is liable for any off-site disposal or
      contamination pursuant to any Environmental Laws, or is subject to any claim
      relating to any Environmental Laws, which violation, contamination, liability
      or
      claim has had or could reasonably be expected to have a Material Adverse Effect,
      individually or in the aggregate; and there is no pending or, to the Company’s
      Knowledge, threatened investigation that might lead to such a
      claim.

    

    4.17 Litigation.
      Except
      as described on Schedule
      4.17,
      there
      are no pending actions, suits or proceedings against or affecting the Company,
      its Subsidiaries or any of its or their properties; and to the Company’s
      Knowledge, no such actions, suits or proceedings are threatened or contemplated.
      Except as described on Schedule
      4.17,
      neither
      the Company nor any Subsidiary, nor any director or officer thereof, is or
      since
      January 1, 2004 has been the subject of

    
      
        
        

      

      
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    any
      action involving a claim of violation of or liability under federal or state
      securities laws or a claim of breach of fiduciary duty with respect to the
      Company. There has not been, and to the Company’s Knowledge, there is not
      pending or contemplated, any investigation by the SEC involving the Company
      or
      any current or former director or officer of the Company. The SEC has not issued
      any stop order or other order suspending the effectiveness of any registration
      statement filed by the Company or any Subsidiary under the 1933 Act or the
      1934
      Act.

    

    4.18 Financial
      Statements.
      The
      financial statements included in each SEC Filing present fairly, in all material
      respects, the consolidated financial position of the Company as of the dates
      shown and its consolidated results of operations and cash flows for the periods
      shown, and such financial statements have been prepared in conformity with
      United States generally accepted accounting principles applied on a consistent
      basis (“GAAP”) (except as may be disclosed therein or in the notes thereto, and,
      in the case of quarterly financial statements, as permitted by Form 10-QSB
      under
      the 1934 Act). Except as set forth in the financial statements of the Company
      included in the SEC Filings filed prior to the date hereof or as described
      on
Schedule
      4.18,
      neither
      the Company nor any of its Subsidiaries has incurred any liabilities, contingent
      or otherwise, except those incurred in the ordinary course of business,
      consistent (as to amount and nature) with past practices since the date of
      such
      financial statements, none of which, individually or in the aggregate, have
      had
      or could reasonably be expected to have a Material Adverse Effect.

    

    4.19 Insurance
      Coverage.
      The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary in the businesses in which the Company and the Subsidiaries are
      engaged, including, but not limited to, directors and officers insurance
      coverage at least equal to the aggregate Purchase Price. To the Company’s
      Knowledge, its current insurance carriers have not notified the Company that
      any
      of them will not be able or willing to renew its existing insurance coverage
      as
      and when such coverage expires.

    

    4.20 Brokers
      and Finders.
      No
      Person will have, as a result of the transactions contemplated by the
      Transaction Documents, any valid right, interest or claim against or upon the
      Company, any Subsidiary or an Investor for any commission, fee or other
      compensation pursuant to any agreement, arrangement or understanding entered
      into by or on behalf of the Company, other than as described in Schedule
      4.20.

    

    4.21 No
      Directed Selling Efforts or General Solicitation.
      Neither
      the Company nor any Person acting on its behalf has conducted any general
      solicitation or general advertising (as those terms are used in Regulation
      D) in
      connection with the offer or sale of any of the Securities.

    

    4.22 No
      Integrated Offering.
      Neither
      the Company nor any of its Affiliates, nor any Person acting on its or their
      behalf has, directly or indirectly, made any offers or sales of any Company
      security or solicited any offers to buy any security, under circumstances that
      would adversely affect reliance by the Company on Section 4(2) for the exemption
      from registration for the transactions contemplated hereby or would require
      registration of the Securities under the 1933 Act.

    
      
        
        

      

      
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    4.23 Private
      Placement.
      Subject
      to the accuracy of the Investors’ representations in Section 5 of this
      Agreement, the offer and sale of the Securities to the Investors as contemplated
      hereby is exempt from the registration requirements of the 1933
      Act.

    

    4.24 Questionable
      Payments.
      Neither
      the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of
      their respective current or former stockholders, directors, officers, employees,
      agents or other Persons acting on behalf of the Company or any Subsidiary,
      has
      on behalf of the Company or any Subsidiary or in connection with their
      respective businesses: (a) used any corporate funds for unlawful contributions,
      gifts, entertainment or other unlawful expenses relating to political activity;
      (b) made any direct or indirect unlawful payments to any governmental officials
      or employees from corporate funds; (c) established or maintained any unlawful
      or
      unrecorded fund of corporate monies or other assets; (d) made any false or
      fictitious entries on the books and records of the Company or any Subsidiary;
      or
      (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or
      other unlawful payment of any nature.

    

    4.25 Transactions
      with Affiliates.
      Except
      as disclosed on Schedule
      4.25,
      none of
      the officers or directors of the Company and, to the Company’s Knowledge, none
      of the employees of the Company is presently a party to any transaction with
      the
      Company or any Subsidiary (other than as holders of stock options and/or
      warrants, and for services as employees, officers and directors), including
      any
      contract, agreement or other arrangement providing for the furnishing of
      services to or by, providing for rental of real or personal property to or
      from,
      or otherwise requiring payments to or from any officer, director or such
      employee or, to the Company’s Knowledge, any entity in which any officer,
      director, or any such employee has a substantial interest or is an officer,
      director, trustee or partner.

    

    4.26 Internal
      Controls.
      The
      Company is
      in
      material compliance with the provisions of the Sarbanes-Oxley Act of 2002
      currently applicable to the Company. The Company and
      the
      Subsidiaries maintain a system of internal accounting controls sufficient to
      provide reasonable assurance that (i) transactions are executed in accordance
      with management's general or specific authorizations, (ii) transactions are
      recorded as necessary to permit preparation of financial statements in
      conformity with GAAP and to maintain asset accountability, (iii) access to
      assets is permitted only in accordance with management's general or specific
      authorization, and (iv) the recorded accountability for assets is compared
      with
      the existing assets at reasonable intervals and appropriate action is taken
      with
      respect to any differences. The Company has established disclosure controls
      and
      procedures (as defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the
      Company and designed such disclosure controls and procedures to ensure that
      material information relating to the Company, including the Subsidiaries, is
      made known to the certifying officers by others within those entities,
      particularly during the period in which the Company’s most recently filed
      periodic report under the 1934 Act, as the case may be, is being prepared.
      The
      Company's certifying officers have evaluated the effectiveness of the Company's
      controls and procedures as of the end of the period covered by the most recently
      filed periodic report under the 1934 Act (such date, the "Evaluation Date").
      The
      Company presented in its most recently filed periodic report under the 1934
      Act
      the conclusions of the certifying officers about the effectiveness of the
      disclosure controls and

    
      
        
        

      

      
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    procedures
      based on their evaluations as of the Evaluation Date. Since the Evaluation
      Date,
      there have been no significant changes in the Company's internal controls (as
      such term is defined in Item 308 of Regulation S-K) or, to the Company's
      Knowledge, in other factors that could significantly affect the Company's
      internal controls. The Company maintains and will continue to maintain a
      standard system of accounting established and administered in accordance with
      GAAP and the applicable requirements of the 1934 Act.

    

    4.27 Listing
      and Maintenance Requirements.
      The
      Company’s Common Stock is registered pursuant to Section 12(g) of the 1934 Act,
      and the Company has taken no action designed to, or which to its knowledge
      is
      likely to have the effect of, terminating the registration of the Common Stock
      under the 1934 Act nor has the Company received any notification that the SEC
      is
      contemplating terminating such registration. The Company has not, in the 12
      months preceding the date hereof, received notice from any Trading Market on
      which the Common Stock is or has been listed or quoted to the effect that the
      Company is not in compliance with the listing or maintenance requirements of
      such Trading Market. The Company is, and has no reason to believe that it will
      not in the foreseeable future continue to be, in compliance with all such
      listing and maintenance requirements.

    

    4.28 Compliance.
      Neither
      the Company nor any Subsidiary (i) is in default under or in violation of (and
      no event has occurred that has not been waived that, with notice or lapse of
      time or both, would result in a default by the Company or any Subsidiary under),
      nor has the Company or any Subsidiary received notice of a claim that it is
      in
      default under or that it is in violation of, any indenture, loan or credit
      agreement or any other agreement or instrument to which it is a party or by
      which it or any of its properties is bound (whether or not such default or
      violation has been waived), (ii) is in violation of any order of any court,
      arbitrator or governmental body, or (iii) is or has been in violation of any
      statute, rule or regulation of any governmental authority, including without
      limitation all foreign, federal, state and local laws relating to taxes,
      environmental protection, occupational health and safety, product quality and
      safety and employment and labor matters, except in each case as does not,
      individually or in the aggregate, have or reasonably be expected to result
      in a
      Material Adverse Effect.

    

    4.29 Accountants.
      To the
      Knowledge of the Company, the accountants, who the Company expects will express
      their opinion with respect to the financial statements to be included in the
      Company’s Annual Report on Form 10-KSB for the year ending September 30, 2007
      are a registered public accounting firm as required by the 1933
      Act.

    

    4.30 Seniority.
      Except
      as described on Schedule
      4.30,
      as of
      the Closing Date, no indebtedness for borrowed money or equity of the Company
      is
      senior to the Preferred Stock in right of payment, whether with respect to
      interest or upon liquidation or dissolution, or otherwise, other than
      indebtedness secured by purchase money security interests (which is senior
      only
      as to underlying assets covered thereby) and capital lease obligations (which
      is
      senior only as to the property covered thereby), other than Series B Preferred
      Stock.

    

    4.31 No
      Disagreements with Accountants and Lawyers.
      There
      are no disagreements of any kind presently existing, or reasonably anticipated
      by the Company to arise, between the Company and the accountants and lawyers
      formerly or presently employed by the

    
      
        
        

      

      
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    Company
      and the Company is current with respect to any fees billed within the past
      ninety (90) days from its accountants and lawyers.

    

    4.32 Manipulation
      of Price.
      The
      Company has not, and to its knowledge no one acting on its behalf has, (i)
      taken, directly or indirectly, any action designed to cause or to result in
      the
      stabilization or manipulation of the price of any security of the Company to
      facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
      purchased, or paid any compensation for soliciting purchases of, any of the
      Securities, or (iii) paid or agreed to pay to any person any compensation for
      soliciting another to purchase any other securities of the Company, other than,
      in the case of each of clauses (ii) and (iii), compensation paid to the
      Company’s placement agent in connection with the placement of the
      Securities.

    

    4.33 Disclosures.
      Neither
      the Company nor any Person acting on its behalf has provided the Investors
      or
      their agents or counsel with any information that constitutes or might
      constitute material, non-public information, other than the terms of the
      transactions contemplated hereby. The written materials delivered to the
      Investors in connection with the transactions contemplated by the Transaction
      Documents do not contain any untrue statement of a material fact or omit to
      state a material fact necessary in order to make the statements contained
      therein, in light of the circumstances under which they were made, not
      misleading.

    

    5. Representations
      and Warranties of the Investors.
      Each of
      the Investors hereby severally, and not jointly, represents and warrants to
      the
      Company that:

    

    5.1 Organization
      and Existence.
      Such
      Investor is a validly existing corporation, limited partnership or limited
      liability company and has all requisite corporate, partnership or limited
      liability company power and authority to invest in the Securities pursuant
      to
      this Agreement, and was not formed solely for the purpose of investing in the
      Securities.

    

    5.2 Authorization.
      The
      execution, delivery and performance by such Investor of the Transaction
      Documents to which such Investor is a party have been duly authorized and will
      each constitute the valid and legally binding obligation of such Investor,
      enforceable against such Investor in accordance with their respective terms,
      subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
      moratorium and similar laws of general applicability, relating to or affecting
      creditors’ rights generally.

    

    5.3 Purchase
      Entirely for Own Account.
      The
      Securities to be received by such Investor hereunder will be acquired for such
      Investor’s own account, not as nominee or agent, and not with a view to the
      resale or distribution of any part thereof in violation of the 1933 Act, and
      such Investor has no present intention of selling, granting any participation
      in, or otherwise distributing the same in violation of the 1933 Act
      without
      prejudice, however, to such Investor’s right at all times to sell or otherwise
      dispose of all or any part of such Securities in compliance with applicable
      federal and state securities laws.
      Nothing
      contained herein shall be deemed a representation or warranty by such Investor
      to hold the Securities for any period of time. Neither such
      Investor
      nor any Affiliate of such Investor is a broker-dealer registered with the SEC
      under the 1934 Act or an entity engaged in a business that would require it
      to
      be so registered.

    
      
        
        

      

      
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    5.4 Investment
      Experience.
      Such
      Investor acknowledges that it can bear the economic risk and complete loss
      of
      its investment in the Securities and has such knowledge and experience in
      financial or business matters that it is capable of evaluating the merits and
      risks of the investment contemplated hereby.

    

    5.5 Disclosure
      of Information.
      Such
      Investor has had an opportunity to receive all information related to the
      Company requested by it and to ask questions of and receive answers from the
      Company regarding the Company, its business, the terms and conditions of the
      offering of the Securities and the risk factors included in the Company’s SEC
      Filings. Such Investor acknowledges receipt of copies of the SEC Filings.
      Neither such inquiries nor any other due diligence investigation conducted
      by
      such Investor shall modify, limit or otherwise affect such Investor’s right to
      rely on the Company’s representations and warranties contained in this
      Agreement.

    

    5.6 Restricted
      Securities.
      Such
      Investor understands that the Securities are characterized as “restricted
      securities” under the U.S. 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
      or
      otherwise transferred without registration under the 1933 Act only in certain
      limited circumstances.

    

    5.7 Legends.
      It is
      understood that, except as provided below, certificates evidencing the
      Securities may bear the following or any similar legend:

    

    (a) “The
      securities represented hereby may not be transferred unless (i) such securities
      have been registered for sale pursuant to the Securities Act of 1933, as
      amended, (ii) such securities may be sold pursuant to Rule 144(k), or (iii)
      the
      Company has received an opinion of counsel reasonably satisfactory to it that
      such transfer may lawfully be made without registration under the Securities
      Act
      of 1933 or qualification under applicable state securities laws.”

    

    (b) If
      required by the authorities of any state in connection with the issuance of
      sale
      of the Securities, the legend required by such state authority.

    

    5.8 Accredited
      Investor.
      Such
      Investor is an accredited investor as defined in Rule 501(a) of Regulation
      D, as
      amended, under the 1933 Act.

    

    5.9 No
      General Solicitation.
      Such
      Investor did not learn of the investment in the Securities as a result of any
      general solicitation or general advertising.

    

    5.10 Brokers
      and Finders.
      No
      Person will have, as a result of the transactions contemplated by the
      Transaction Documents, any valid right, interest or claim against or upon the
      Company, any Subsidiary or an Investor for any commission, fee or other
      compensation pursuant to any agreement, arrangement or understanding entered
      into by or on behalf of such Investor.

    
      
        
        

      

      
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    5.11 Prohibited
      Transactions.
      During
      the last thirty (30) days prior to the date hereof, neither such Investor nor
      any Affiliate of such Investor which (x) had knowledge of the transactions
      contemplated hereby, (y) has or shares discretion relating to such Investor’s
      investments or trading or information concerning such Investor’s investments,
      including in respect of the Securities, or (z) is subject to such Investor’s
      review or input concerning such Affiliate’s investments or trading
      (collectively, “Trading Affiliates”) has, directly or indirectly, effected or
      agreed to effect any short sale, whether or not against the box, established
      any
“put equivalent position” (as defined in Rule 16a-1(h) under the 1934 Act) with
      respect to the Common Stock, granted any other right (including, without
      limitation, any put or call option) with respect to the Common Stock or with
      respect to any security that includes, relates to or derived any significant
      part of its value from the Common Stock or otherwise sought to hedge its
      position in the Securities (each, a “Prohibited Transaction”). Prior to the
      earliest to occur of (i) the termination of this Agreement, (ii) the Effective
      Date or (iii) the Effectiveness Deadline, such Investor shall not, and shall
      cause its Trading Affiliates not to, engage, directly or indirectly, in a
      Prohibited Transaction. Such Investor acknowledges that the representations,
      warranties and covenants contained in this Section 5.11 are being made for
      the
      benefit of the Investors as well as the Company and that each of the other
      Investors shall have an independent right to assert any claims against such
      Investor arising out of any breach or violation of the provisions of this
      Section 5.11.

    

    6.
      Conditions
      to Closing.

    

    6.1 Conditions
      to the Investors’ Obligations.
      The
      obligation of each Investor to purchase the Shares and the Warrants at the
      Closing is subject to the fulfillment to such Investor’s satisfaction, on or
      prior to the Closing Date, of the following conditions, any of which may be
      waived by such Investor (as to itself only):

    

    (a) The
      representations and warranties made by the Company in Section 4 hereof qualified
      as to materiality shall be true and correct at all times prior to and on the
      Closing Date, except to the extent any such representation or warranty expressly
      speaks as of an earlier date, in which case such representation or warranty
      shall be true and correct as of such earlier date, and, the representations
      and
      warranties made by the Company in Section 4 hereof not qualified as to
      materiality shall be true and correct in all material respects at all times
      prior to and on the Closing Date, except to the extent any such representation
      or warranty expressly speaks as of an earlier date, in which case such
      representation or warranty shall be true and correct in all material respects
      as
      of such earlier date. The Company shall have performed in all material respects
      all obligations and covenants herein required to be performed by it on or prior
      to the Closing Date.

    

    (b) The
      Company shall have obtained any and all consents, permits, approvals,
      registrations and waivers necessary or appropriate for consummation of the
      purchase and sale of the Securities and the consummation of the other
      transactions contemplated by the Transaction Documents, all of which shall
      be in
      full force and effect.

    

    (c) The
      Company shall have executed and delivered the Registration Rights
      Agreement.

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    

    (d) The
      Certificate of Designations shall have been filed with the Secretary of State
      of
      Delaware and shall have become effective.

    

    (e) The
      Company shall receive gross proceeds at least equal to the Minimum
      Amount.

    

    (f) No
      judgment, writ, order, injunction, award or decree of or by any court, or judge,
      justice or magistrate, including any bankruptcy court or judge, or any order
      of
      or by any governmental authority, shall have been issued, and no action or
      proceeding shall have been instituted by any governmental authority, enjoining
      or preventing the consummation of the transactions contemplated hereby or in
      the
      other Transaction Documents.

    

    (g) The
      Company shall have delivered a Certificate, executed on behalf of the Company
      by
      its Chief Executive Officer or its Chief Financial Officer, dated as of the
      Closing Date, certifying to the fulfillment of the conditions specified in
      subsections (a), (b), (d), (e), (f) and (j) of this Section 6.1.

    

    (h) The
      Company shall have delivered a Certificate, executed on behalf of the Company
      by
      its Secretary, dated as of the Closing Date, certifying the resolutions adopted
      by the Board of Directors of the Company approving the transactions contemplated
      by this Agreement and the other Transaction Documents and the issuance of the
      Securities, certifying the current versions of the Certificate of Incorporation
      and Bylaws of the Company and certifying as to the signatures and authority
      of
      persons signing the Transaction Documents and related documents on behalf of
      the
      Company.

    

    (i) The
      Investors purchasing Shares and Warrants at the Initial Closing shall have
      received an opinion from Thelen Reid Brown Raysman & Steiner LLP, the
      Company's counsel, dated as of the Closing Date, in form and substance
      reasonably acceptable to the Investors and addressing such legal matters as
      the
      Investors may reasonably request.

    

    (j) No
      stop
      order or suspension of trading shall have been imposed by the SEC or any other
      governmental or regulatory body with respect to public trading in the Common
      Stock.

    

    6.2 Conditions
      to Obligations of the Company.
      The
      Company's obligation to sell and issue the Shares and the Warrants at the
      Closing is subject to the fulfillment to the satisfaction of the Company on
      or
      prior to the Closing Date of the following conditions, any of which may be
      waived by the Company:

    

    (a) The
      representations and warranties made by the Investors in Section 5 hereof, other
      than the representations and warranties contained in Sections 5.3, 5.4, 5.5,
      5.6, 5.7, 5.8 and 5.9 (the “Investment Representations”), shall be true and
      correct in all material respects when made, and shall be true and correct in
      all
      material respects on the Closing Date with the same force and effect as if
      they
      had been made on and as of said date. The Investment Representations shall
      be
      true and correct in all respects when made, and shall be true

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    and
      correct in all respects on the Closing Date with the same force and effect
      as if
      they had been made on and as of said date. The Investors shall have performed
      in
      all material respects all obligations and covenants herein required to be
      performed by them on or prior to the Closing Date.

    

    (b) The
      Investors shall have executed and delivered the Registration Rights
      Agreement.

    

    (c) The
      Company shall have received at least the Minimum Amount from the
      Investors.

    

    6.3 Termination
      of Obligations to Effect Closing; Effects.

    

    (a) The
      obligations of the Company, on the one hand, and the Investors, on the other
      hand, to effect the Closing shall terminate as follows:

    

    (i) Upon
      the
      mutual written consent of the Company and the Investors;

    

    (ii) By
      the
      Company if any of the conditions set forth in Section 6.2 shall have become
      incapable of fulfillment, and shall not have been waived by the
      Company;

    

    (iii) By
      an
      Investor (with respect to itself only) if any of the conditions set forth in
      Section 6.1 shall have become incapable of fulfillment, and shall not have
      been
      waived by the Investor; or

    

    (iv) By
      either
      the Company or any Investor (with respect to itself only) if the Closing has
      not
      occurred on or prior to March 31, 2007;

    

    provided,
      however, that, except in the case of clause (i) above, the party seeking to
      terminate its obligation to effect the Closing shall not then be in breach
      of
      any of its representations, warranties, covenants or agreements contained in
      this Agreement or the other Transaction Documents if such breach has resulted
      in
      the circumstances giving rise to such party’s seeking to terminate its
      obligation to effect the Closing.

    

    (b) In
      the
      event of termination by the Company or any Investor of its obligations to effect
      the Closing pursuant to this Section 6.3, written notice thereof shall forthwith
      be given to the other Investors and the other Investors shall have the right
      to
      terminate their obligations to effect the Closing upon written notice to the
      Company and the other Investors. Nothing in this Section 6.3 shall be deemed
      to
      release any party from any liability for any breach by such party of the terms
      and provisions of this Agreement or the other Transaction Documents or to impair
      the right of any party to compel specific performance by any other party of
      its
      obligations under this Agreement or the other Transaction
      Documents.

    

    7. Covenants
      and Agreements of the Company.

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    

    7.1 Reservation
      of Common Stock.
      The
      Company shall at all times reserve and keep available out of its authorized
      but
      unissued shares of Common Stock, solely for the purpose of providing for the
      conversion of the Preferred Stock and the exercise of the Warrants, such number
      of shares of Common Stock as shall from time to time equal the Conversion Shares
      and the Warrant Shares.

    

    7.2 Reports.
      The
      Company will furnish to the Investors and/or their assignees such information
      relating to the Company and its Subsidiaries as from time to time may reasonably
      be requested by the Investors and/or their assignees; provided, however, that
      the Company shall not disclose material nonpublic information to the Investors,
      or to advisors to or representatives of the Investors, unless prior to
      disclosure of such information the Company identifies such information as being
      material nonpublic information and provides the Investors, such advisors and
      representatives with the opportunity to accept or refuse to accept such material
      nonpublic information for review and any Investor wishing to obtain such
      information enters into an appropriate confidentiality agreement with the
      Company with respect thereto.

    

    7.3 No
      Conflicting Agreements.
      The
      Company will not take any action, enter into any agreement or make any
      commitment that would conflict or interfere in any material respect with the
      Company’s obligations to the Investors under the Transaction
      Documents.

    

    7.4 Insurance.
      The
      Company shall not materially reduce the insurance coverages described in Section
      4.19.

    

    7.5 Compliance
      with Laws.
      The
      Company will comply in all material respects with all applicable laws, rules,
      regulations, orders and decrees of all governmental authorities.

    

    7.6 Listing
      of Underlying Shares and Related Matters.
      If the
      Company applies to have its Common Stock or other securities traded on a stock
      exchange or market, it shall include in such application the Conversion Shares
      and the Warrant Shares and will take such other action as is necessary to cause
      such Common Stock to be so listed. The Company will use commercially reasonable
      efforts to continue the listing and trading of its Common Stock on such stock
      exchange or market and, in accordance, therewith, will use commercially
      reasonable efforts to comply in all respects with the Company’s reporting,
      filing and other obligations under the bylaws or rules of such exchange or
      market, as applicable.

    

    7.7 Integration.
      The
      Company shall not sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the 1933 Act)
      that would be integrated with the offer or sale of the Securities in a manner
      that would require the registration under the 1933 Act of the sale of the
      Securities to the Investors or that would be integrated with the offer or sale
      of the Securities for purposes of the rules and regulations of any applicable
      exchange or market on which the Common Stock is listed or quoted.

    

    7.8 Termination
      of Covenants.
      The
      provisions of Sections 7.2 through 7.7 shall terminate and be of no further
      force and effect on the date on which the Company’s

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    obligations
      under the Registration Rights Agreement to register or maintain the
      effectiveness of any registration covering the Registrable Securities (as such
      term is defined in the Registration Rights Agreement) shall
      terminate.

    

    7.9 Removal
      of Legends.
      Upon
      the earlier of (i) registration for resale pursuant to the Registration Rights
      Agreement or (ii) Rule 144(k) becoming available the Company shall (A) deliver
      to the transfer agent for the Common Stock (the “Transfer Agent”) irrevocable
      instructions that the Transfer Agent shall reissue a certificate representing
      shares of Common Stock without legends upon receipt by such Transfer Agent
      of
      the legended certificates for such shares, together with either (1) a customary
      representation by the Investor that Rule 144(k) applies to the shares of Common
      Stock represented thereby or (2) a statement by the Investor that such Investor
      has sold the shares of Common Stock represented thereby in accordance with
      the
      Plan of Distribution contained in the Registration Statement, and (B) cause
      its
      counsel to deliver to the Transfer Agent one or more blanket opinions to the
      effect that the removal of such legends in such circumstances may be effected
      under the 1933 Act. From and after the earlier of such dates, upon an Investor’s
      written request, the Company shall promptly cause certificates evidencing the
      Investor’s Securities to be replaced with certificates which do not bear such
      restrictive legends, and Conversion Shares subsequently issued upon due exercise
      of the Preferred Stock and Warrant Shares subsequently issued upon due exercise
      of the Warrants shall not bear such restrictive legends provided the provisions
      of either clause (i) or clause (ii) above, as applicable, are satisfied with
      respect to such Conversion Shares or Warrant Shares, as applicable. When the
      Company is required to cause unlegended certificates to replace previously
      issued legended certificates, if unlegended certificates are not delivered
      to an
      Investor within three (3) Business Days of submission by that Investor of
      legended certificate(s) to the Transfer Agent as provided above (or to the
      Company, in the case of the Warrants), the Company shall be liable to the
      Investor for liquidated damages in an amount equal to 1.5% of the aggregate
      purchase price of the Securities evidenced by such certificate(s) for each
      thirty (30) day period (or portion thereof) beyond such three (3) Business
      Day
      that the unlegended certificates have not been so delivered.

    

    7.10 Subsequent
      Equity Sales.

    

    (a) From
      the
      date hereof until ninety (90) days after the Effective Date, without the consent
      of the Investors acquiring a majority of the Shares pursuant to this Agreement,
      neither the Company nor any Subsidiary shall issue shares of Common Stock or
      Common Stock Equivalents; provided, however, the ninety (90) day period set
      forth in this Section shall be extended for the number of days during such
      period in which (i) trading in the Common Stock is suspended by any exchange
      or
      market on which the Common Stock is listed or quoted, or (ii) following the
      Effective Date, the Registration Statement is not effective or the prospectus
      included in the Registration Statement may not be used by the Investors for
      the
      resale of the Conversion Shares or Warrant Shares.

    

    (b) From
      the
      date hereof until such time as the Investors no longer hold a majority of the
      Shares purchased hereunder, the Company shall be prohibited from effecting
      or
      entering into an agreement to effect any Subsequent Financing involving a
“Variable Rate Transaction”. The term “Variable Rate Transaction” shall mean a
      transaction in which the

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    Company
      issues or sells (i) any debt or equity securities that are convertible into,
      exchangeable or exercisable for, or include the right to receive additional
      shares of Common Stock either (A) at a conversion, exercise or exchange rate
      or
      other price that is based upon and/or varies with the trading prices of or
      quotations for the shares of Common Stock at any time after the initial issuance
      of such debt or equity securities, or (B) with a conversion, exercise or
      exchange price that is subject to being reset at some future date after the
      initial issuance of such debt or equity security or upon the occurrence of
      specified or contingent events directly or indirectly related to the business
      of
      the Company or the market for the Common Stock or (ii) enters into any
      agreement, including, but not limited to, an equity line of credit, whereby
      the
      Company may sell securities at a future determined price.

    

    (c) Notwithstanding
      the foregoing, this Section shall not apply in respect of an Excluded Stock,
      except that no Variable Rate Transaction shall be an Excluded
      Stock.

    

    7.11 Equal
      Treatment of Investors.
      No
      consideration shall be offered or paid to any Person to amend or consent to
      a
      waiver or modification of any provision of any of the Transaction Documents
      unless the same consideration is also offered to all of the parties to the
      Transaction Documents. For clarification purposes, this provision constitutes
      a
      separate right granted to each Investor by the Company and negotiated separately
      by each Investor, and is intended for the Company to treat the Investors as
      a
      class and shall not in any way be construed as the Investors acting in concert
      or as a group with respect to the purchase, disposition or voting of Securities
      or otherwise.

    

    8. Survival
      and Indemnification.

    

    8.1 Survival.
      The
      representations, warranties, covenants and agreements contained in this
      Agreement shall survive the Closing of the transactions contemplated by this
      Agreement; provided, however, that the representations and warranties contained
      in this Agreement shall expire twelve (12) months after the
      Closing.

    

    8.2 Indemnification.
      Subject
      to the provisions of Section 8.1, the Company agrees to indemnify and hold
      harmless each Investor and its Affiliates and their respective directors,
      officers, employees and agents from and against any and all losses, claims,
      damages, liabilities and expenses (including without limitation reasonable
      attorney fees and disbursements and other expenses incurred in connection with
      investigating, preparing or defending any action, claim or proceeding, pending
      or threatened and the costs of enforcement thereof) (collectively, “Losses”) to
      which such Person may become subject as a result of any breach of
      representation, warranty, covenant or agreement made by or to be performed
      on
      the part of the Company under the Transaction Documents, and will reimburse
      any
      such Person for all such amounts as they are incurred by such
      Person.

    

    8.3 Conduct
      of Indemnification Proceedings.
      Promptly
      after receipt by any Person (the “Indemnified
      Person”) of notice of any demand, claim or circumstances which would or might
      give rise to a claim or the commencement of any action, proceeding or
      investigation in respect of which indemnity may be sought pursuant to Section
      8.2, such Indemnified Person shall promptly notify the Company in writing and
      the Company shall assume

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    the
      defense thereof, including the employment of counsel reasonably satisfactory
      to
      such Indemnified Person, and shall assume the payment of all fees and expenses;
      provided,
      however, that
      the
      failure of any Indemnified Person so to notify the Company shall not relieve
      the
      Company of its obligations hereunder except to the extent that the Company
      is
      materially prejudiced by such failure to notify. In any such proceeding, any
      Indemnified Person shall have the right to retain its own counsel, but the
      fees
      and expenses of such counsel shall be at the expense of such Indemnified Person
      unless: (i) the Company and the Indemnified Person shall have mutually agreed
      to
      the retention of such counsel; or (ii) in the reasonable judgment of counsel
      to
      such Indemnified Person representation of both parties by the same counsel
      would
      be inappropriate due to actual or potential differing interests between them.
      The Company shall not be liable for any settlement of any proceeding effected
      without its written consent, which consent shall not be unreasonably withheld,
      but if settled with such consent, or if there be a final judgment for the
      plaintiff, the Company shall indemnify and hold harmless such Indemnified Person
      from and against any loss or liability (to the extent stated above) by reason
      of
      such settlement or judgment. Without the prior written consent of the
      Indemnified Person, which consent shall not be unreasonably withheld, the
      Company shall not effect any settlement of any pending or threatened proceeding
      in respect of which any Indemnified Person is or could have been a party and
      indemnity could have been sought hereunder by such Indemnified Party, unless
      such settlement includes an unconditional release of such Indemnified Person
      from all liability arising out of such proceeding.

    

    9. Miscellaneous.

    

    9.1 Successors
      and Assigns.
      This
      Agreement may not be assigned by a party hereto without the prior written
      consent of the Company or the Investors, as applicable, provided, however,
      that
      an Investor may assign its rights and delegate its duties hereunder in whole
      or
      in part to an Affiliate or to a third party acquiring some or all of its
      Securities in a private transaction without the prior written consent of the
      Company or the other Investors, after notice duly given by such Investor to
      the
      Company provided, that no such assignment or obligation shall affect the
      obligations of such Investor hereunder. The provisions of this Agreement shall
      inure to the benefit of and be binding upon the respective permitted successors
      and assigns of the parties. Nothing in this Agreement, express or implied,
      is
      intended to confer upon any party other than the parties hereto or their
      respective successors and assigns any rights, remedies, obligations, or
      liabilities under or by reason of this Agreement, except as expressly provided
      in this Agreement.

    

    9.2 Counterparts;
      Faxes.
      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. This Agreement may also be executed via facsimile, which shall
      be
      deemed an original.

    

    9.3 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.

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    9.4 Notices.
      Unless
      otherwise provided, any notice required or permitted under this Agreement shall
      be given in writing and shall be deemed effectively given as hereinafter
      described (i) if given by personal delivery, then such notice shall be deemed
      given upon such delivery, (ii) if given by telex or telecopier, then such notice
      shall be deemed given upon receipt of confirmation of complete transmittal,
      (iii) if given by mail, then such notice shall be deemed given upon the earlier
      of (A) receipt of such notice by the recipient or (B) three days after such
      notice is deposited in first class mail, postage prepaid, and (iv) if given
      by
      an internationally recognized overnight air courier, then such notice shall
      be
      deemed given one Business Day after delivery to such carrier. All notices shall
      be addressed to the party to be notified at the address as follows, or at such
      other address as such party may designate by ten days’ advance written notice to
      the other party:

    

    If
      to the
      Company:

    

    Caprius,
      Inc.

    One
      University Plaza

    Hackensack,
      NJ 07601

    Attention:
      Dwight Morgan, President

    Fax:
      (201) 342-0991

    

    With
      a
      copy to:

    

    Thelen
      Reid Brown Raysman & Steiner LLP

    875
      Third
      Avenue

    New
      York,
      NY 10022

    Attention:
      Bruce A. Rich, Esq.

    Fax:
      (212) 603-2001 

    

    If
      to the
      Investors:

    

    to
      the
      addresses set forth on the signature pages hereto.

    

    9.5 Expenses.
      The
      parties hereto shall pay their own costs and expenses in connection herewith,
      except that the Company shall pay the reasonable fees and expenses of Lowenstein
      Sandler PC not to exceed $35,000; it being understood that Lowenstein Sandler
      PC
      has only rendered legal advice to the Special Situations Funds participating
      in
      this transaction and not to the Company or any other Investor in connection
      with
      the transactions contemplated hereby, and that each of the Company and each
      Investor has relied for such matters on the advice of its own respective
      counsel. Such expenses shall be paid not later than the Closing. The Company
      shall reimburse the Investors upon demand for all reasonable out-of-pocket
      expenses incurred by the Investors, including without limitation reimbursement
      of attorneys’ fees and disbursements, in connection with any amendment,
      modification or waiver of this Agreement or the other Transaction Documents.
      In
      the event that legal proceedings are commenced by any party to this Agreement
      against another party to this Agreement in connection with this Agreement or
      the
      other Transaction Documents, the party or parties which do not prevail in such
      proceedings shall severally, but not jointly, pay their pro rata share of the
      reasonable attorneys’

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    fees
      and
      other reasonable out-of-pocket costs and expenses incurred by the prevailing
      party in such proceedings.

    

    9.6 Amendments
      and Waivers.
      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), only with the written consent of the Company
      and the Investors. Any amendment or waiver effected in accordance with this
      paragraph shall be binding upon each holder of any Securities purchased under
      this Agreement at the time outstanding, each future holder of all such
      Securities, and the Company.

    

    9.7 Publicity.
      Except
      as set forth below, no public release or announcement concerning the
      transactions contemplated hereby shall be issued by the Company or the Investors
      without the prior consent of the Company (in the case of a release or
      announcement by the Investors) or the Investors (in the case of a release or
      announcement by the Company) (which consents shall not be unreasonably
      withheld), except as such release or announcement may be required by law or
      the
      applicable rules or regulations of any securities exchange or securities market,
      in which case the Company or the Investors, as the case may be, shall allow
      the
      Investors or the Company, as applicable, to the extent reasonably practicable
      in
      the circumstances, reasonable time to comment on such release or announcement
      in
      advance of such issuance. By 8:30 a.m. (New York City time) on the trading
      day
      immediately following the Closing Date, the Company shall issue a press release
      disclosing the consummation of the transactions contemplated by this Agreement.
      No later than the third trading day following the Closing Date, the Company
      will
      file a Current Report on Form 8-K attaching the press release described in
      the
      foregoing sentence as well as copies of the Transaction Documents. In addition,
      the Company will make such other filings and notices in the manner and time
      required by the SEC.

    

    9.8 Severability.
      Any
      provision of this Agreement that 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 but shall be interpreted as if it were written so as to be
      enforceable to the maximum extent permitted by applicable law, and any such
      prohibition or unenforceability in any jurisdiction shall not invalidate or
      render unenforceable such provision in any other jurisdiction. To the extent
      permitted by applicable law, the parties hereby waive any provision of law
      which
      renders any provision hereof prohibited or unenforceable in any
      respect.

    

    9.9 Entire
      Agreement.
      This
      Agreement, including the Exhibits and the Disclosure Schedules, and the other
      Transaction Documents constitute the entire agreement among the parties hereof
      with respect to the subject matter hereof and thereof and supersede all prior
      agreements and understandings, both oral and written, between the parties with
      respect to the subject matter hereof and thereof.

    

    9.10 Further
      Assurances.
      The
      parties shall execute and deliver all such further instruments and documents
      and
      take all such other actions as may reasonably be required to carry out the
      transactions contemplated hereby and to evidence the fulfillment of the
      agreements herein contained.

    
      
        
        

      

      
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    9.11 Governing
      Law; Consent to Jurisdiction; Waiver of Jury Trial.
      This
      Agreement shall be governed by, and construed in accordance with, the internal
      laws of the State of New York without regard to the choice of law principles
      thereof. Each of the parties hereto irrevocably submits to the exclusive
      jurisdiction of the courts of the State of New York located in New York County
      and the United States District Court for the Southern District of New York
      for
      the purpose of any suit, action, proceeding or judgment relating to or arising
      out of this Agreement and the transactions contemplated hereby. Service of
      process in connection with any such suit, action or proceeding may be served
      on
      each party hereto anywhere in the world by the same methods as are specified
      for
      the giving of notices under this Agreement. Each of the parties hereto
      irrevocably consents to the jurisdiction of any such court in any such suit,
      action or proceeding and to the laying of venue in such court. Each party hereto
      irrevocably waives any objection to the laying of venue of any such suit, action
      or proceeding brought in such courts and irrevocably waives any claim that
      any
      such suit, action or proceeding brought in any such court has been brought
      in an
      inconvenient forum. EACH
      OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
      LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
      CONSULTED SPECIFICALLY AS TO THIS WAIVER.

    

    9.12 Independent
      Nature of Investors' Obligations and Rights.
      The
      obligations of each Investor under any Transaction Document are several and
      not
      joint with the obligations of any other Investor, and no Investor shall be
      responsible in any way for the performance of the obligations of any other
      Investor under any Transaction Document. The decision of each Investor to
      purchase Securities pursuant to the Transaction Documents has been made by
      such
      Investor independently of any other Investor. Nothing contained herein or in
      any
      Transaction Document, and no action taken by any Investor pursuant thereto,
      shall be deemed to constitute the Investors as a partnership, an association,
      a
      joint venture or any other kind of entity, or create a presumption that the
      Investors are in any way acting in concert or as a group with respect to such
      obligations or the transactions contemplated by the Transaction Documents.
      Each
      Investor acknowledges that no other Investor has acted as agent for such
      Investor in connection with making its investment hereunder and that no Investor
      will be acting as agent of such Investor in connection with monitoring its
      investment in the Securities or enforcing its rights under the Transaction
      Documents. Each Investor shall be entitled to independently protect and enforce
      its rights, including, without limitation, the rights arising out of this
      Agreement or out of the other Transaction Documents, and it shall not be
      necessary for any other Investor to be joined as an additional party in any
      proceeding for such purpose. The Company acknowledges that each of the Investors
      has been provided with the same Transaction Documents for the purpose of closing
      a transaction with multiple Investors and not because it was required or
      requested to do so by any Investor.

     

    [signature
      page follows]

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
      authorized officers to execute this Agreement as of the date first above
      written.

    

    The
      Company:        CAPRIUS,
      INC.

    

    

    

    By:
      /s/ Jonathan Joels            

    Name:
      Jonathan Joels 

    Title:
      Chief Financial Officer

     

    
      
        
        

      

      
        28Exhibit 10.2 - Registration Rights Agreement, dated as of March 1, 2007

     

    Exhibit
      10.2

    
      

      REGISTRATION
        RIGHTS AGREEMENT

      

      This
        Registration Rights Agreement (the “Agreement”) is made and entered into as of
        this 1st day of March, 2007 by and among Caprius, Inc., a Delaware
        corporation (the “Company”), and the “Investors” named in that certain Purchase
        Agreement by and among the Company and the Investors (the “Purchase
        Agreement”).

       

      The
        parties hereby agree as follows:

       

      1. Certain
        Definitions.

       

      As
        used
        in this Agreement, the following terms shall have the following
        meanings:

       

      “Affiliate”
means,
        with respect to any person, any other person which directly or indirectly
        controls, is controlled by, or is under common control with, such
        person.

       

      “Business
        Day”
means
        a
        day, other than a Saturday or Sunday, on which banks in New York City are
        open
        for the general transaction of business.

       

      “Common
        Stock”
shall
        mean the Company’s common stock, par value $0.01 per share, and any securities
        into which such shares may hereinafter be reclassified.

       

      “Conversion
        Shares”
means
        the shares of Common Stock issuable upon conversion of the Shares.

       

      “Investors”
shall
        mean the Investors identified in the Purchase Agreement and any Affiliate
        or
        permitted transferee of any Investor who is a subsequent holder of any Warrants
        or Registrable Securities.

       

      “Preferred
        Stock”
means
        the Company’s Series E Convertible Preferred Stock, par value $0.01 per
        share.

       

      “Prospectus”
shall
        mean (i) the prospectus included in any Registration Statement, as amended
        or
        supplemented by any prospectus supplement, with respect to the terms of the
        offering of any portion of the Registrable Securities covered by such
        Registration Statement and by all other amendments and supplements to the
        prospectus, including post-effective amendments and all material incorporated
        by
        reference in such prospectus, and (ii) any “free writing prospectus” as defined
        in Rule 405 under the 1933 Act.

       

      “Register,”
        “registered”
and
        “registration”
refer
        to a registration made by preparing and filing a Registration Statement or
        similar document in compliance with the 1933 Act (as defined below), and
        the
        declaration or ordering of effectiveness of such Registration Statement or
        document.

       

      “Registrable
        Securities”
shall
        mean (i) the Conversion Shares, (ii) the Warrant Shares and (iii) any other
        securities issued or issuable with respect to or in exchange for Registrable
        Securities; provided, that, a security shall cease to be a Registrable Security
        upon (A) sale pursuant to a Registration Statement or Rule 144 under the
        1933
        Act, or (B) such security becoming eligible for sale by the Investors pursuant
        to Rule 144(k).

       

      “Registration
        Statement”
shall
        mean any registration statement of the Company filed under the 1933 Act that
        covers the resale of any of the Registrable Securities pursuant to
        the

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      provisions
        of this Agreement, amendments and supplements to such Registration Statement,
        including post-effective amendments, all exhibits and all material incorporated
        by reference in such Registration Statement.

       

      “Required
        Investors”
means
        the Investors holding at least 66% of the Registrable Securities at the time
        of
        the action taken by the Required Investors.

       

      “SEC”
means
        the U.S. Securities and Exchange Commission.

       

      “Shares”
means
        the shares of Preferred Stock issued pursuant to the Purchase
        Agreement.

       

      “1933
        Act”
means
        the Securities Act of 1933, as amended, and the rules and regulations
        promulgated thereunder.

       

      “1934
        Act”
means
        the Securities Exchange Act of 1934, as amended, and the rules and regulations
        promulgated thereunder.

       

      “Warrants”
means,
        the warrants to purchase shares of Common Stock issued to the Investors pursuant
        to the Purchase Agreement, the form of which is attached to the Purchase
        Agreement as Exhibit B.

       

      “Warrant
        Shares”
means
        the shares of Common Stock issuable upon the exercise of the
        Warrants.

       

      2. Registration.

       

      (a)  Registration
        Statements.

       

      (i) Promptly
        following the Initial Closing Date (as defined in the Purchase Agreement),
        but
        no later than thirty (30) days after the Initial Closing Date (the “Filing
        Deadline”), the Company shall prepare and file with the SEC one Registration
        Statement on Form SB-2 (or, if Form SB-2 is not then available to the Company,
        on such form of registration statement as is then available to effect a
        registration for resale of the Registrable Securities), covering the resale
        of
        the Registrable Securities in an amount at least equal to the Conversion
        Shares
        and the Warrant Shares. Subject to any SEC comments, such Registration Statement
        shall include the plan of distribution attached hereto as Exhibit
        A.
        Such
        Registration Statement also shall cover, to the extent allowable under the
        1933
        Act and the rules promulgated thereunder (including Rule 416), such
        indeterminate number of additional shares of Common Stock resulting from
        stock
        splits, stock dividends or similar transactions with respect to the Registrable
        Securities. Such Registration Statement shall not include any shares of Common
        Stock or other securities for the account of any other holder without the
        prior
        written consent of the Required Investors. The Registration Statement (and
        each
        amendment or supplement thereto, and each request for acceleration of
        effectiveness thereof) shall be provided in accordance with Section 3(c)
        to the
        Investors and their counsel prior to its filing or other submission. If a
        Registration Statement covering the Registrable Securities is not filed with
        the
        SEC on or prior to the Filing Deadline, the Company will make pro rata payments
        to each Investor, as liquidated damages and not as a penalty, in an amount
        equal
        to 1.5% of the aggregate amount invested by such Investor for each 30-day
        period
        or pro rata for any portion thereof following the Filing Deadline for which
        no
        Registration Statement is filed with respect to the Registrable Securities.
        Such
        payments shall constitute the Investors’ exclusive monetary remedy for such
        events, but shall not

       

      
        
          
          

        

        
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      affect
        the right of the Investors to seek injunctive relief. Such payments shall
        be
        made to each Investor in cash. 

       

      (ii) Additional
        Registrable Securities.
        Upon
        the written demand of any Investor and upon any change in the Conversion
        Price
        (as defined in the Preferred Stock) or the Warrant Price (as defined in the
        Warrant) such that additional shares of Common Stock become issuable upon
        the
        conversion of the Shares or the exercise of the Warrants (the “Additional
        Shares”), the Company shall prepare and file with the SEC one or more
        Registration Statements on Form SB-2 or amend the Registration Statement
        filed
        pursuant to clause (i) above, if such Registration Statement has not previously
        been declared effective (or, if Form SB-2 is not then available to the Company,
        on such form of registration statement as is then available to effect a
        registration for resale of the Additional Shares, subject to the Required
        Investors’ consent) covering the resale of the Additional Shares, but only to
        the extent the Additional Shares are not at the time covered by an effective
        Registration Statement. Subject to any SEC comments, such Registration Statement
        shall include the plan of distribution attached hereto as Exhibit
        A.
        Such
        Registration Statement also shall cover, to the extent allowable under the
        1933
        Act and the rules promulgated thereunder (including Rule 416), such
        indeterminate number of additional shares of Common Stock resulting from
        stock
        splits, stock dividends or similar transactions with respect to the Additional
        Shares. Such Registration Statement shall not include any shares of Common
        Stock
        or other securities for the account of any other holder without the prior
        written consent of the Required Investors. The Registration Statement (and
        each
        amendment or supplement thereto, and each request for acceleration of
        effectiveness thereof) shall be provided in accordance with Section 3(c)
        to the
        Investors and their counsel prior to its filing or other submission. If a
        Registration Statement covering the Additional Shares is required to be filed
        under this Section 2(a)(ii) and is not filed with the SEC within five Business
        Days of the request of any Investor or upon the occurrence of any of the
        events
        specified in this Section 2(a)(ii), the Company will make pro rata payments
        to
        each Investor, as liquidated damages and not as a penalty, in an amount equal
        to
        1.5% of the aggregate amount invested by such Investor for each 30-day period
        or
        pro rata for any portion thereof following the date by which such Registration
        Statement should have been filed for which no Registration Statement is filed
        with respect to the Additional Shares. Such payments shall constitute the
        Investors’ exclusive monetary remedy for such events, but shall not affect the
        right of the Investors to seek injunctive relief. Such payments shall be
        made to
        each Investor in cash.

       

      (iii) S-3
        Qualification.
        Promptly following the date (the “Qualification Date”) upon which the Company
        becomes eligible to use a registration statement on Form S-3 to register
        the
        Registrable Securities or Additional Shares, as applicable, for resale, but
        in
        no event more than thirty (30) days after the Qualification Date (the
“Qualification Deadline”), the Company shall file a registration statement on
        Form S-3 covering the Registrable Securities or Additional Shares, as applicable
        (or a post-effective amendment on Form S-3 to the registration statement
        on Form
        SB-2) (a “Shelf Registration Statement”) and shall use commercially reasonable
        efforts to cause such Shelf Registration Statement to be declared effective
        as
        promptly as practicable thereafter. If a Shelf Registration Statement covering
        the Registrable Securities is not filed with the SEC on or prior to the
        Qualification Deadline, the Company will make pro rata payments to each
        Investor, as liquidated damages and not as a penalty, in an amount equal
        to 1.5%
        of the aggregate purchase price paid by such Investor pursuant to the Purchase
        Agreement attributable to those Registrable Securities that remain unsold
        at
        that time

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      for
        each
        30-day period or pro rata for any portion thereof following the date by which
        such Shelf Registration Statement should have been filed for which no such
        Shelf
        Registration Statement is filed with respect to the Registrable Securities
        or
        Additional Shares, as applicable. Such payments shall constitute the Investors’
exclusive monetary remedy for such events, but shall not affect the right
        of the
        Investors to seek injunctive relief. Such payments shall be made to each
        Investor in cash.

       

      (b)  Expenses.
        The
        Company will pay all expenses associated with each registration, including
        filing and printing fees, the Company’s counsel and accounting fees and
        expenses, costs associated with clearing the Registrable Securities for sale
        under applicable state securities laws, listing fees, fees and expenses of
        one
        counsel to the Investors and the Investors’ reasonable expenses in connection
        with the registration, but excluding discounts, commissions, fees of
        underwriters, selling brokers, dealer managers or similar securities industry
        professionals with respect to the Registrable Securities being
        sold.

       

      (c)  Effectiveness.

       

      (i) The
        Company shall use commercially reasonable efforts to have the Registration
        Statement declared effective as soon as practicable. The Company shall notify
        the Investors by facsimile or e-mail as promptly as practicable, and in any
        event, within twenty-four (24) hours, after any Registration Statement is
        declared effective and shall simultaneously provide the Investors with copies
        of
        any related Prospectus to be used in connection with the sale or other
        disposition of the securities covered thereby. If (A)(x) a Registration
        Statement covering the Registrable Securities is not declared effective by
        the
        SEC prior to the earlier of (i) five (5) Business Days after the SEC shall
        have
        informed the Company that no review of the Registration Statement will be
        made
        or that the SEC has no further comments on the Registration Statement or
        (ii)
        the 90th
        day
        after the Closing Date (the 120th
        day if
        the SEC reviews the Registration Statement), (y) a Registration Statement
        covering Additional Shares is not declared effective by the SEC within ninety
        (90) days following the time such Registration Statement was required to
        be
        filed pursuant to Section 2(a)(ii) (120 days if the SEC reviews the Registration
        Statement) or (z) a Shelf Registration Statement is not declared effective
        by
        the SEC within ninety (90) days after the Qualification Deadline (120 days
        if
        the SEC reviews the Registration Statement), or
        (B)
        after a Registration Statement has been declared effective by the SEC, sales
        cannot be made pursuant to such Registration Statement for any reason (including
        without limitation by reason of a stop order, or the Company’s failure to update
        the Registration Statement), but excluding the inability of any Investor
        to sell
        the Registrable Securities covered thereby due to market conditions and except
        as excused pursuant to subparagraph (ii) below, then
        the
        Company will make pro rata payments to each Investor, as liquidated damages
        and
        not as a penalty, in an amount equal to 1.5% of the aggregate amount invested
        by
        such Investor for each 30-day period or pro rata for any portion thereof
        following the date by which such Registration Statement should have been
        effective (the “Blackout Period”). Such payments shall constitute the Investors’
exclusive monetary remedy for such events, but shall not affect the right
        of the
        Investors to seek injunctive relief. The amounts payable as liquidated damages
        pursuant to this paragraph shall be paid monthly within three (3) Business
        Days
        of the last day of each month following the commencement of the Blackout
        Period
        until the termination of the Blackout Period. Such payments shall be made
        to
        each Investor in cash.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      (ii) For
        not
        more than twenty (20) consecutive days or for a total of not more than
        forty-five (45) days in any twelve (12) month period, the Company may delay
        the
        disclosure of material non-public information concerning the Company, by
        suspending the use of any Prospectus included in any registration contemplated
        by this Section containing such information, the disclosure of which at the
        time
        is not, in the good faith opinion of the Company, in the best interests of
        the
        Company (an “Allowed Delay”); provided, that the Company shall promptly (a)
        notify the Investors in writing of the existence of (but in no event, without
        the prior written consent of an Investor, shall the Company disclose to such
        Investor any of the facts or circumstances regarding) material non-public
        information giving rise to an Allowed Delay, (b) advise the Investors in
        writing
        to cease all sales under the Registration Statement until the end of the
        Allowed
        Delay and (c) use commercially reasonable efforts to terminate an Allowed
        Delay
        as promptly as practicable.

       

      (d) Rule
        415; Cutbacks.
        Notwithstanding the other provisions of this Section 2, if at any time the
        SEC
        takes the position that the offering of some or all of the Registrable
        Securities in a Registration Statement is not eligible to be made on a delayed
        or continuous basis under the provisions of Rule 415 under the 1933 Act,
        the
        Company shall (i) remove from the Registration Statement such portion of
        the
        Registrable Securities (the “Cut Back Shares”) and/or (ii) agree to such
        restrictions and limitations on the registration and resale of the Registrable
        Securities as the SEC may require to assure the Company’s compliance with the
        requirements of Rule 415 (collectively, the “SEC Restrictions”). Any cut-back
        imposed pursuant to this Section 2(d) shall be allocated among the Investors
        on
        a pro rata basis and shall be allocated first to any Warrant Shares, unless
        the
        SEC Restrictions otherwise require. No liquidated damages shall accrue on
        or as
        to any Cut Back Shares until such time as the Company is able to effect the
        registration of the Cut Back Shares in accordance with any SEC Restrictions
        (such date, the “Restriction Termination Date”). From and after the Restriction
        Termination Date, all of the provisions of this Section 2 (including the
        liquidated damages provisions) shall again be applicable to the Cut Back
        Shares;
        provided, however, that for such purposes the Closing Date shall be deemed
        to be
        the Restriction Termination Date.

      

      3. Company
        Obligations.
        The
        Company will use commercially reasonable efforts to effect the registration
        of
        the Registrable Securities in accordance with the terms hereof, and pursuant
        thereto the Company will, as expeditiously as possible:

       

      (a)  use
        commercially reasonable efforts to cause such Registration Statement to become
        effective and to remain continuously effective for a period that will terminate
        upon the earlier of (i) the date on which all Registrable Securities covered
        by
        such Registration Statement as amended from time to time, have been sold,
        and
        (ii) the date on which all Registrable Securities covered by such Registration
        Statement may be sold pursuant to Rule 144(k) (the “Effectiveness Period”) and
        advise the Investors in writing when the Effectiveness Period has
        expired;

       

      (b)  prepare
        and file with the SEC such amendments and post-effective amendments to the
        Registration Statement and the Prospectus as may be necessary to keep the
        Registration Statement effective for the Effectiveness Period and to comply
        with
        the provisions

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      of
        the
        1933 Act and the 1934 Act with respect to the distribution of all of the
        Registrable Securities covered thereby;

       

      (c)  provide
        copies to and permit counsel designated by the Investors to review each
        Registration Statement and all amendments and supplements thereto no fewer
        than
        three (3) Business Days prior to their filing with the SEC and not file any
        document to which such counsel reasonably objects;

       

      (d)  furnish
        to the Investors and their legal counsel (i) promptly after the same is prepared
        and publicly distributed, filed with the SEC, or received by the Company
        (but
        not later than two (2) Business Days after the filing date, receipt date
        or
        sending date, as the case may be) one (1) copy of any Registration Statement
        and
        any amendment thereto, each preliminary prospectus and Prospectus and each
        amendment or supplement thereto, and each letter written by or on behalf
        of the
        Company to the SEC or the staff of the SEC, and each item of correspondence
        from
        the SEC or the staff of the SEC, in each case relating to such Registration
        Statement (other than any portion of any thereof which contains information
        for
        which the Company has sought confidential treatment), and (ii) such number
        of
        copies of a Prospectus, including a preliminary prospectus, and all amendments
        and supplements thereto and such other documents as each Investor may reasonably
        request in order to facilitate the disposition of the Registrable Securities
        owned by such Investor that are covered by the related Registration
        Statement;

       

      (e)  use
        commercially reasonable efforts to (i) prevent the issuance of any stop order
        or
        other suspension of effectiveness and, (ii) if such order is issued, obtain
        the
        withdrawal of any such order at the earliest possible moment;

       

      (f)  prior
        to
        any public offering of Registrable Securities, use commercially reasonable
        efforts to register or qualify or cooperate with the Investors and their
        counsel
        in connection with the registration or qualification of such Registrable
        Securities for offer and sale under the securities or blue sky laws of such
        jurisdictions requested by the Investors and do any and all other commercially
        reasonable acts or things necessary or advisable to enable the distribution
        in
        such jurisdictions of the Registrable Securities covered by the Registration
        Statement;
        provided, however, that the Company shall not be required in connection
        therewith or as a condition thereto to (i) qualify to do business in any
        jurisdiction where it would not otherwise be required to qualify but for
        this
        Section 3(f), (ii) subject itself to general taxation in any jurisdiction
        where
        it would not otherwise be so subject but for this Section 3(f), or (iii)
        file a
        general consent to service of process in any such jurisdiction;

       

      (g)  use
        commercially reasonable efforts to cause all Registrable Securities covered
        by a
        Registration Statement to be listed on each securities exchange, interdealer
        quotation system or other market on which similar securities issued by the
        Company are then listed;

       

      (h)  immediately
        notify the Investors, at any time prior to the end of the Effectiveness Period,
        upon discovery that, or upon the happening of any event as a result of which,
        the Prospectus 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 not

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      misleading
        in light of the circumstances then existing, and promptly prepare, file with
        the
        SEC and furnish to such holder a supplement to or an amendment of such
        Prospectus as may be necessary so that such 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 not misleading
        in
        light of the circumstances then existing; and

       

      (i)  otherwise
        use commercially reasonable efforts to comply with all applicable rules and
        regulations of the SEC under the 1933 Act and the 1934 Act, including, without
        limitation, Rule 172 under the 1933 Act, file any final Prospectus, including
        any supplement or amendment thereof, with the SEC pursuant to Rule 424 under
        the
        1933 Act, promptly inform the Investors in writing if, at any time during
        the
        Effectiveness Period, the Company does not satisfy the conditions specified
        in
        Rule 172 and, as a result thereof, the Investors are required to deliver
        a
        Prospectus in connection with any disposition of Registrable Securities and
        take
        such other actions as may be reasonably necessary to facilitate the registration
        of the Registrable Securities hereunder; and make available to its security
        holders, as soon as reasonably practicable, but not later than the Availability
        Date (as defined below), an earnings statement covering a period of at least
        twelve (12) months, beginning after the effective date of each Registration
        Statement, which earnings statement shall satisfy the provisions of Section
        11(a) of the 1933 Act, including Rule 158 promulgated thereunder (for the
        purpose of this subsection 3(i), “Availability Date” means the 45th day
        following the end of the fourth fiscal quarter that includes the effective
        date
        of such Registration Statement, except that, if such fourth fiscal quarter
        is
        the last quarter of the Company’s fiscal year, “Availability Date” means the
        90th day after the end of such fourth fiscal quarter).

       

      (j)  With
        a
        view to making available to the Investors the benefits of Rule 144 (or its
        successor rule) and any other rule or regulation of the SEC that may at any
        time
        permit the Investors to sell shares of Common Stock to the public without
        registration, the Company covenants and agrees to: (i) make and keep public
        information available, as those terms are understood and defined in Rule
        144,
        until the earlier of (A) three months after such date as all of the Registrable
        Securities may be resold pursuant to Rule 144(k) or any other rule of similar
        effect or (B) such date as all of the Registrable Securities shall have been
        resold; (ii) file with the SEC in a timely manner all reports and other
        documents required of the Company under the 1934 Act; and (iii) furnish to
        each
        Investor upon request, as long as such Investor owns any Registrable Securities,
        (A) a written statement by the Company that it has complied with the reporting
        requirements of the 1934 Act, (B) a copy of the Company’s most recent Annual
        Report on Form 10-KSB or Quarterly Report on Form 10-QSB, and (C) such other
        information as may be reasonably requested in order to avail such Investor
        of
        any rule or regulation of the SEC that permits the selling of any such
        Registrable Securities without registration.

      

      4. Due
        Diligence Review; Information.
        The
        Company shall make available, during normal business hours, for inspection
        and
        review by the Investors, advisors to and representatives of the Investors
        (who
        may or may not be affiliated with the Investors and who are reasonably
        acceptable to the Company), all financial and other records, all SEC Filings
        (as
        defined in the Purchase Agreement) and other filings with the SEC, and all
        other
        corporate documents and properties of the Company as may be reasonably necessary
        for the purpose of such review, and cause the Company’s officers, directors and
        employees, within a reasonable time period, to supply all such information
        reasonably requested by the Investors or any such

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      representative,
        advisor or underwriter in connection with such Registration Statement
        (including, without limitation, in response to all questions and other inquiries
        reasonably made or submitted by any of them), prior to and from time to time
        after the filing and effectiveness of the Registration Statement for the
        sole
        purpose of enabling the Investors and such representatives, advisors and
        underwriters and their respective accountants and attorneys to conduct initial
        and ongoing due diligence with respect to the Company and the accuracy of
        such
        Registration Statement.

       

      The
        Company shall not disclose material nonpublic information to the Investors,
        or
        to advisors to or representatives of the Investors, unless prior to disclosure
        of such information the Company identifies such information as being material
        nonpublic information and provides the Investors, such advisors and
        representatives with the opportunity to accept or refuse to accept such material
        nonpublic information for review and any Investor wishing to obtain such
        information enters into an appropriate confidentiality agreement with the
        Company with respect thereto.

       

      5. Obligations
        of the Investors.

       

      (a)  Each
        Investor shall furnish in writing to the Company such information regarding
        itself, the Registrable Securities held by it and the intended method of
        disposition of the Registrable Securities held by it, as shall be reasonably
        required to effect the registration of such Registrable Securities and shall
        execute such documents in connection with such registration as the Company
        may
        reasonably request. At least five (5) Business Days prior to the first
        anticipated filing date of any Registration Statement, the Company shall
        notify
        each Investor of the information the Company requires from such Investor
        if such
        Investor elects to have any of the Registrable Securities included in the
        Registration Statement. An Investor shall provide such information to the
        Company at least two (2) Business Days prior to the first anticipated filing
        date of such Registration Statement if such Investor elects to have any of
        the
        Registrable Securities included in the Registration Statement.

       

      (b)  Each
        Investor, by its acceptance of the Registrable Securities agrees to cooperate
        with the Company as reasonably requested by the Company in connection with
        the
        preparation and filing of a Registration Statement hereunder, unless such
        Investor has notified the Company in writing of its election to exclude all
        of
        its Registrable Securities from such Registration Statement.

       

      (c)  Each
        Investor agrees that, upon receipt of any notice from the Company of either
        (i)
        the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii)
        the
        happening of an event pursuant to Section 3(h) hereof, such Investor will
        immediately discontinue disposition of Registrable Securities pursuant to
        the
        Registration Statement covering such Registrable Securities, until the Investor
        is advised by the Company that such dispositions may again be made.

       

      6. Indemnification.

       

      (a)  Indemnification
        by the Company.
        The
        Company will indemnify and hold harmless each Investor and its officers,
        directors, members, employees and agents, successors and assigns, and each
        other
        person, if any, who controls such Investor within the

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      meaning
        of the 1933 Act, against any losses, claims, damages or liabilities, joint
        or
        several, to which they may become subject under the 1933 Act or otherwise,
        insofar as such losses, claims, damages or liabilities (or actions in respect
        thereof) arise out of or are based upon: (i) any untrue statement or alleged
        untrue statement of any material fact contained in any Registration Statement,
        any preliminary Prospectus or final Prospectus, or any amendment or supplement
        thereof; (ii) any blue sky application or other document executed by the
        Company
        specifically for that purpose or based upon written information furnished
        by the
        Company filed in any state or other jurisdiction in order to qualify any
        or all
        of the Registrable Securities under the securities laws thereof (any such
        application, document or information herein called a “Blue
        Sky
        Application”);
        (iii)
        the omission or alleged omission to state therein a material fact required
        to be
        stated therein or necessary to make the statements therein not misleading;
        (iv)
        any violation by the Company or its agents of any rule or regulation promulgated
        under the 1933 Act applicable to the Company or its agents and relating to
        action or inaction required of the Company in connection with such registration;
        or (v) any failure to register or qualify the Registrable Securities included
        in
        any such Registration in any state where the Company or its agents has
        affirmatively undertaken or agreed in writing that the Company will undertake
        such registration or qualification on an Investor’s behalf and will reimburse
        such Investor, and each such officer, director or member and each such
        controlling person for any legal or other expenses reasonably incurred by
        them
        in connection with investigating or defending any such loss, claim, damage,
        liability or action; provided,
        however,
        that
        the Company will not be liable in any such case if and to the extent that
        any
        such loss, claim, damage or liability arises out of or is based upon an untrue
        statement or alleged untrue statement or omission or alleged omission so
        made in
        conformity with information furnished by such Investor or any such controlling
        person in writing specifically for use in such Registration Statement or
        Prospectus.

       

      (b)  Indemnification
        by the Investors.
        Each
        Investor agrees, severally but not jointly, to indemnify and hold harmless,
        to
        the fullest extent permitted by law, the Company, its directors, officers,
        employees, stockholders and each person who controls the Company (within
        the
        meaning of the 1933 Act) against any losses, claims, damages, liabilities
        and
        expense (including reasonable attorney fees) resulting from any untrue statement
        of a material fact or any omission of a material fact required to be stated
        in
        the Registration Statement or Prospectus or preliminary Prospectus or amendment
        or supplement thereto or necessary to make the statements therein not
        misleading, to the extent, but only to the extent that such untrue statement
        or
        omission is contained in any information furnished in writing by such Investor
        to the Company specifically for inclusion in such Registration Statement
        or
        Prospectus or amendment or supplement thereto. In no event shall the liability
        of an Investor be greater in amount than the dollar amount of the proceeds
        (net
        of all expense paid by such Investor in connection with any claim relating
        to
        this Section 6 and the amount of any damages such Investor has otherwise
        been
        required to pay by reason of such untrue statement or omission) received
        by such
        Investor upon the sale of the Registrable Securities included in the
        Registration Statement giving rise to such indemnification
        obligation.

       

      (c)  Conduct
        of Indemnification Proceedings.
        Any
        person entitled to indemnification hereunder shall (i) give prompt notice
        to the
        indemnifying party of any claim with respect to which it seeks indemnification
        and (ii) permit such indemnifying party to assume the defense of such claim
        with
        counsel reasonably satisfactory to the indemnified party; provided
        that any
        person entitled to indemnification hereunder shall have the right to
        employ

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      separate
        counsel and to participate in the defense of such claim, but the fees and
        expenses of such counsel shall be at the expense of such person unless (a)
        the
        indemnifying party has agreed to pay such fees or expenses, or (b) the
        indemnifying party shall have failed to assume the defense of such claim
        and
        employ counsel reasonably satisfactory to such person or (c) in the reasonable
        judgment of any such person, based upon written advice of its counsel, a
        conflict of interest exists between such person and the indemnifying party
        with
        respect to such claims (in which case, if the person notifies the indemnifying
        party in writing that such person elects to employ separate counsel at the
        expense of the indemnifying party, the indemnifying party shall not have
        the
        right to assume the defense of such claim on behalf of such person); and
        provided,
        further,
        that
        the failure of any indemnified party to give notice as provided herein shall
        not
        relieve the indemnifying party of its obligations hereunder, except to the
        extent that such failure to give notice shall materially adversely affect
        the
        indemnifying party in the defense of any such claim or litigation. It is
        understood that the indemnifying party shall not, in connection with any
        proceeding in the same jurisdiction, be liable for fees or expenses of more
        than
        one separate firm of attorneys at any time for all such indemnified parties.
        No
        indemnifying party will, except with the consent of the indemnified party,
        consent to entry of any judgment or enter into any settlement that does not
        include as an unconditional term thereof the giving by the claimant or plaintiff
        to such indemnified party of a release from all liability in respect of such
        claim or litigation.

       

      (d)  Contribution.
        If for
        any reason the indemnification provided for in the preceding paragraphs (a)
        and
        (b) is unavailable to an indemnified party or insufficient to hold it harmless,
        other than as expressly specified therein, then the indemnifying party shall
        contribute to the amount paid or payable by the indemnified party as a result
        of
        such loss, claim, damage or liability in such proportion as is appropriate
        to
        reflect the relative fault of the indemnified party and the indemnifying
        party,
        as well as any other relevant equitable considerations. No person guilty
        of
        fraudulent misrepresentation within the meaning of Section 11(f) of the 1933
        Act
        shall be entitled to contribution from any person not guilty of such fraudulent
        misrepresentation. In no event shall the contribution obligation of a holder
        of
        Registrable Securities be greater in amount than the dollar amount of the
        proceeds (net of all expenses paid by such holder in connection with any
        claim
        relating to this Section 6 and the amount of any damages such holder has
        otherwise been required to pay by reason of such untrue or alleged untrue
        statement or omission or alleged omission) received by it upon the sale of
        the
        Registrable Securities giving rise to such contribution obligation.

       

      7. Miscellaneous.

       

      (a)  Amendments
        and Waivers.
        This
        Agreement may be amended only by a writing signed by the Company and the
        Required Investors, which shall be binding on all of the Investors. The Company
        may take any action herein prohibited, or omit to perform any act herein
        required to be performed by it, only if the Company shall have obtained the
        written consent to such amendment, action or omission to act, of the Required
        Investors.

       

      (b)  Notices.
        All
        notices and other communications provided for or permitted hereunder shall
        be
        made as set forth in Section 9.4 of the Purchase Agreement.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      (c)  Assignments
        and Transfers by Investors.
        The
        provisions of this Agreement shall be binding upon and inure to the benefit
        of
        the Investors and their respective successors and assigns. An Investor may
        transfer or assign, in whole or from time to time in part, to one or more
        persons its rights hereunder in connection with the transfer of Registrable
        Securities by such Investor to such person, provided that such Investor complies
        with all laws applicable thereto and provides written notice of assignment
        to
        the Company promptly after such assignment is effected.

       

      (d)  Assignments
        and Transfers by the Company.
        This
        Agreement may not be assigned by the Company (whether by operation of law
        or
        otherwise) without the prior written consent of the Required Investors,
        provided, however, that the Company may assign its rights and delegate its
        duties hereunder to any surviving or successor corporation in connection
        with a
        merger or consolidation of the Company with another corporation, or a sale,
        transfer or other disposition of all or substantially all of the Company’s
        assets to another corporation, without the prior written consent of the Required
        Investors, after notice duly given by the Company to each Investor.

       

      (e)  Benefits
        of the Agreement.
        The
        terms and conditions of this Agreement shall inure to the benefit of and
        be
        binding upon the respective permitted successors and assigns of the parties.
        Nothing in this Agreement, express or implied, is intended to confer upon
        any
        party other than the parties hereto or their respective successors and assigns
        any rights, remedies, obligations, or liabilities under or by reason of this
        Agreement, except as expressly provided in this Agreement.

       

      (f)  Counterparts;
        Faxes.
        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. This Agreement may also be executed via facsimile, which shall
        be
        deemed an original.

       

      (g)  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.

       

      (h)  Severability.
        Any
        provision of this Agreement that 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 but shall be interpreted as if it were written so as to
        be
        enforceable to the maximum extent permitted by applicable law, and any such
        prohibition or unenforceability in any jurisdiction shall not invalidate
        or
        render unenforceable such provision in any other jurisdiction. To the extent
        permitted by applicable law, the parties hereby waive any provision of law
        which
        renders any provisions hereof prohibited or unenforceable in any
        respect.

       

      (i)  Further
        Assurances.
        The
        parties shall execute and deliver all such further instruments and documents
        and
        take all such other actions as may reasonably be required to carry out the
        transactions contemplated hereby and to evidence the fulfillment of the
        agreements herein contained.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      (j)  Entire
        Agreement.
        This
        Agreement is intended by the parties as a final expression of their agreement
        and intended to be a complete and exclusive statement of the agreement and
        understanding of the parties hereto in respect of the subject matter contained
        herein. This Agreement supersedes all prior agreements and understandings
        between the parties with respect to such subject matter.

       

      (k)  Governing
        Law; Consent to Jurisdiction; Waiver of Jury Trial.
        This
        Agreement shall be governed by, and construed in accordance with, the internal
        laws of the State of New York without regard to the choice of law principles
        thereof. Each of the parties hereto irrevocably submits to the exclusive
        jurisdiction of the courts of the State of New York located in New York County
        and the United States District Court for the Southern District of New York
        for
        the purpose of any suit, action, proceeding or judgment relating to or arising
        out of this Agreement and the transactions contemplated hereby. Service of
        process in connection with any such suit, action or proceeding may be served
        on
        each party hereto anywhere in the world by the same methods as are specified
        for
        the giving of notices under this Agreement. Each of the parties hereto
        irrevocably consents to the jurisdiction of any such court in any such suit,
        action or proceeding and to the laying of venue in such court. Each party
        hereto
        irrevocably waives any objection to the laying of venue of any such suit,
        action
        or proceeding brought in such courts and irrevocably waives any claim that
        any
        such suit, action or proceeding brought in any such court has been brought
        in an
        inconvenient forum. EACH
        OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
        LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS
        BEEN
        CONSULTED SPECIFICALLY AS TO THIS WAIVER.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the parties have executed this Agreement or caused their
        duly
        authorized officers to execute this Agreement as of the date first above
        written.

       

      The
        Company:        CAPRIUS,
        INC.

      

      

      

      By: /s/
        Jonathan Joels        

      Name:
        Jonathan Joels

      Title:
        Chief Financial Officer

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      Exhibit
        A

      

      Plan
        of Distribution

      

      The
        selling stockholders, which as used herein includes donees, pledgees,
        transferees or other successors-in-interest selling shares of common stock
        or
        interests in shares of common stock received after the date of this prospectus
        from a selling stockholder as a gift, pledge, partnership distribution or
        other
        transfer, may, from time to time, sell, transfer or otherwise dispose of
        any or
        all of their shares of common stock or interests in shares of common stock
        on
        any stock exchange, market or trading facility on which the shares are traded
        or
        in private transactions. These dispositions may be at fixed prices, at
        prevailing market prices at the time of sale, at prices related to the
        prevailing market price, at varying prices determined at the time of sale,
        or at
        negotiated prices.

      

      The
        selling stockholders may use any one or more of the following methods when
        disposing of shares or interests therein:

      

      -
        ordinary brokerage transactions and transactions in which the broker-dealer
        solicits purchasers;

      

      -
        block
        trades in which the broker-dealer will attempt to sell the shares as agent,
        but
        may position and resell a portion of the block as principal to facilitate
        the
        transaction;

      

      -
        purchases by a broker-dealer as principal and resale by the broker-dealer
        for
        its account;

      

      -
        an
        exchange distribution in accordance with the rules of the applicable
        exchange;

      

      -
        privately negotiated transactions;

      

      -
        settlement of short sales effected after the date the registration statement
        of
        which this Prospectus is a part is declared effective by the SEC;

      

      -
        through
        the writing or settlement of options or other hedging transactions, whether
        through an options exchange or otherwise;

      

      -
        broker-dealers may agree with the selling stockholders to sell a specified
        number of such shares at a stipulated price per share; and

      

      -
        a
        combination of any such methods of sale.

      

      The
        selling stockholders may, from time to time, pledge or grant a security interest
        in some or all of the shares of common stock owned by them and, if they default
        in the performance of their secured obligations, the pledgees or secured
        parties
        may offer and sell the shares of common stock, from time to time, under this
        prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
        or
        other applicable provision of the Securities Act amending the list of selling
        stockholders to include the pledgee, transferee or other successors in interest
        as

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      selling
        stockholders under this prospectus. The selling stockholders also may transfer
        the shares of common stock in other circumstances, in which case the
        transferees, pledgees or other successors in interest will be the selling
        beneficial owners for purposes of this prospectus.

      

      Broker-dealers
        engaged by the selling stockholders may arrange for other brokers-dealers
        to
        participate in sales. Broker-dealers may receive commissions or discounts
        from
        the selling stockholders (or, if any broker-dealer acts as agent for the
        purchaser of shares, from the purchaser) in amounts to be negotiated. The
        selling stockholders do not expect these commissions and discounts to exceed
        what is customary in the types of transactions involved. 

      

      In
        connection with the sale of our common stock or interests therein, the selling
        stockholders may enter into hedging transactions with broker-dealers or other
        financial institutions, which may in turn engage in short sales of the common
        stock in the course of hedging the positions they assume. The selling
        stockholders may also sell shares of our common stock short and deliver these
        securities to close out their short positions, or loan or pledge the common
        stock to broker-dealers that in turn may sell these securities. The selling
        stockholders may also enter into option or other transactions with
        broker-dealers or other financial institutions or the creation of one or
        more
        derivative securities which require the delivery to such broker-dealer or
        other
        financial institution of shares offered by this prospectus, which shares
        such
        broker-dealer or other financial institution may resell pursuant to this
        prospectus (as supplemented or amended to reflect such
        transaction).

      

      The
        aggregate proceeds to the selling stockholders from the sale of the common
        stock
        offered by them will be the purchase price of the common stock less discounts
        or
        commissions, if any. Each of the selling stockholders reserves the right
        to
        accept and, together with their agents from time to time, to reject, in whole
        or
        in part, any proposed purchase of common stock to be made directly or through
        agents. We will not receive any of the proceeds from this offering. Upon
        any
        exercise of the warrants by payment of cash, however, we will receive the
        exercise price of the warrants.

      

      The
        selling stockholders also may resell all or a portion of the shares in open
        market transactions in reliance upon Rule 144 under the Securities Act of
        1933,
        provided that they meet the criteria and conform to the requirements of that
        rule.

      

      The
        selling stockholders and any underwriters, broker-dealers or agents that
        participate in the sale of the common stock or interests therein may be
        "underwriters" within the meaning of Section 2(11) of the Securities Act.
        Any
        discounts, commissions, concessions or profit they earn on any resale of
        the
        shares may be underwriting discounts and commissions under the Securities
        Act.
        Selling stockholders who are "underwriters" within the meaning of Section
        2(11)
        of the Securities Act will be subject to the prospectus delivery requirements
        of
        the Securities Act.

      

      To
        the
        extent required, the shares of our common stock to be sold, the names of
        the
        selling stockholders, the respective purchase prices and public offering
        prices,
        the names of any agents, dealer or underwriter, any applicable commissions
        or
        discounts with respect to a particular offer will be set forth in an
        accompanying prospectus supplement or, if appropriate, a post-effective
        amendment to the registration statement that includes this
        prospectus.

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      

      In
        order
        to comply with the securities laws of some states, if applicable, the common
        stock may be sold in these jurisdictions only through registered or licensed
        brokers or dealers. In addition, in some states the common stock may not
        be sold
        unless it has been registered or qualified for sale or an exemption from
        registration or qualification requirements is available and is complied
        with.

      

      We
        have
        advised the selling stockholders that the anti-manipulation rules of Regulation
        M under the Exchange Act may apply to sales of shares in the market and to
        the
        activities of the selling stockholders and their affiliates. In addition,
        to the
        extent applicable we will make copies of this prospectus (as it may be
        supplemented or amended from time to time) available to the selling stockholders
        for the purpose of satisfying the prospectus delivery requirements of the
        Securities Act. The selling stockholders may indemnify any broker-dealer
        that
        participates in transactions involving the sale of the shares against certain
        liabilities, including liabilities arising under the Securities
        Act.

      

      We
        have
        agreed to indemnify the selling stockholders against liabilities, including
        liabilities under the Securities Act and state securities laws, relating
        to the
        registration of the shares offered by this prospectus.

      

      We
        have
        agreed with the selling stockholders to keep the registration statement of
        which
        this prospectus constitutes a part effective until the earlier of (1) such
        time
        as all of the shares covered by this prospectus have been disposed of pursuant
        to and in accordance with the registration statement or (2) the date on which
        the shares may be sold pursuant to Rule 144(k) of the Securities
        Act.

       

      
        
          
          

        

        
          3

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