Document:

PROMISSORY NOTE

August 26, 2004

 

Jersey City, New Jersey
$4,000,000

FOR VALUE RECEIVED, the undersigned, ELBIT VISION SYSTEMS LTD., a corporation organized and existing under the laws of the State of Israel (the “Company”), promises to pay CORNELL CAPITAL PARTNERS, LP (the “Holder”) at 101 Hudson Street, Suite 3700, Jersey City, New Jersey 07302 or other address as the Holder shall specify in writing, the principal sum of Four Million (U.S.) Dollars ($4,000,000) and will be payable pursuant to the following terms: 

1.  Amount of Note. This Promissory Note (this “Note”) shall be funded by the Holder to the Company as follows: (i) $3,500,000 shall be funded on the date hereof; and (ii) $500,000 (the “Second Installment ”) shall be funded no later than five business days following the filing by the Company of a new registration statement (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) by the deadline set forth in the next sentence to register 14,444,445 Ordinary
Shares pursuant to that certain Standby Equity Distribution Agreement (the “Standby Equity Distribution Agreement ”) dated as of March 30, 2004 between the Buyer and the Company. Such registration statement shall be filed with the SEC on or before October 1, 2004. 

2.  Principal and Interest. 

	a.  	Interest. The principal amount of this Promissory Note (the “Note”) shall not accrue interest during the initial 120 days after the date hereof. Interest shall accrue at a rate of 1% per 30 days for the subsequent 90 days thereafter. Interest shall accrue at a rate of 2% per 30 days thereafter. In the Event of Default (as defined herein), the principal amount outstanding hereunder shall accrue interest at a rate of 24% per year or the highest permitted by applicable law, if lower, until all amounts due hereunder are paid and any judgment is collected. 

 

	b.  	Payment Schedule. The Company shall pay all amounts due hereunder (including principal and accrued interest) (the “Full Amount”) as set forth below:

 

	i.  	The Company shall pay at least $42,000 to the Holder per calendar week with the initial payment due on or before September 13, 2004. Each subsequent payment shall be due on or before each Monday thereafter or the next business day if such date is not a business day; provided that upon repayment of $714,000, no further payments shall be required pursuant to this sub-section.

 

 

	 
	 	 	 
	

	 

 

	ii.  	Commencing on January 10, 2005, the Company shall pay at least $80,000 to the Holder per calendar week. Each subsequent payment shall be due on or before each Monday thereafter or the next business day if such date is not a business day; provided that upon repayment of lesser of (i) the remaining Full Amount; and (ii) $1,040,000, no further payments shall be required pursuant to this sub-section.

 

	iii.  	Provided that the Company has not repaid the Full Amount, then on or before April 4, 2005, the Company shall pay to the Holder the lesser of (i) $2,000,000 and (ii) the remaining Full Amount in immediately available funds.

 

	iv.  	Provided that the Company has not repaid the Full Amount, then commencing on April 11, 2005, the Company shall pay at least $100,000 to the Holder per calendar week. Each subsequent payment shall be due on or before each Monday thereafter or the next business day if such date is not a business day; provided that upon repayment of the Full Amount no further payments shall be required pursuant to this sub-section. All amounts due hereunder shall be due and payable on or before the earlier of (i) May 9, 2005 or (ii) an Event of Default (as defined herein). 

 

	c.  	Form of Payment. All amounts due hereunder shall be paid by the Company to the Holder in immediately available funds. As set forth in the Pledge and Escrow Agreement of even date herewith a portion of the proceeds shall be derived from the proceeds of the sale of Ordinary Shares pursuant to the terms of the Standby Equity Distribution Agreement. 

 

	d.  	Escrow. Pursuant to the Investment Agreement, the Company deposited in escrow 42 Advance Notices under the Standby Equity Distribution Agreement for an aggregate amount of $4,200,000, as well as 5,555,555 Ordinary Shares (the “Escrowed Shares”) that are registered on an effective registration statement on Form F-2 (SEC File No. 333-11509) filed with the Securities and Exchange Commission on May 3, 2004. The Escrowed Shares are only an estimate of the number of Ordinary Shares that the Company is obligated to issue to the Holder upon delivery of the Advances Notices by the Escrow Agent to the Holder. If, during the term of this Note, the number of Escrowed Shares are insufficient to honor the Company’s obligations under the Advance Notices, the Company shall immediately deposit in escrow,
pursuant to the irrevocable transfer agent instructions of even date herewith (the “Irrevocable Transfer Agent Instructions”), such number of Ordinary Shares as shall be sufficient to honor all Advance Notices. The Advance Notices and the Escrowed Shares will be held in escrow by the law firm of Butler Gonzalez LLP (the “Escrow Agent”), which shall deliver one Advance Notice every five (5) Trading Days commencing on the first Monday following the SEC filings required to be made by the Company pursuant to Section 2.3 of the Investment Agreement in an amount corresponding to the payments set forth in Section 2(b) hereof. In the Event of Default, the Escrow Agent shall accelerate and/or aggregate the delivery of such number of the Advance Notices and shall deliver one or more Advance Notices every five (5) Trading Days that equals the Maximum Advance Amount (as defined in the
Standby Equity Distribution Agreement) as is required in order to repay the Full Amount. The net proceeds under the Standby Equity Distribution Agreement shall be disbursed by the
Escrow Agent to the Holder and shall be applied by the Holder to the amounts due under this Note. Upon repayment of all amounts due hereunder, the Escrow Agent shall promptly disburse to the Company any unused Advances Notices.

 

 

	 
	 	2 	 
	

	 

 

	e.  	No Prepayment Penalty. The Company may prepay all or any portion of this Note without penalty.

 

3.  Secured Nature of Note. This Note is secured by the following agreements:

 

	a.  	That certain Security Agreement of even date herewith between the Company and the Holder.

 

	b.  	That certain Pledge and Escrow Agreement of even date herewith between the Company and the Holder.

 

	c.  	The 14,444,445 Ordinary Shares that may be issued in the Event of Default pursuant to the Irrevocable Transfer Agent Instructions of even date herewith.

 

	d.  	The Holder shall receive a second position security interest in all assets of the Company as described in the Investment Agreement. The Company and its counsel shall make all necessary filings in Israel to perfect the Holder’s security interests in Israel and shall deliver a legal opinion to the Holder on the date hereof stating the priority of the Holder’s security interest and that all filings necessary to perfect the Holder’s security have been made in accordance with Israeli laws.

3.    Security Interests.  So long as any amounts are outstanding hereunder, the Company shall not enter into any security instrument granting the holder a security interest in any of the assets of the Company. The Company shall not guarantee nor be liable in any manner, whether directly or indirectly, or become contingently liable after the date of this Note in connection with the obligations or indebtedness of any person or
persons. The Company shall not make any loan, advance or extension of credit to any person other than in the normal course of its business.

 

 

	 
	 	 3	 
	

	 

4.    Debt. The Company shall not create, incur, assume or suffer to exist any additional indebtedness outside the ordinary course of business in an aggregate amount in excess of $100,000.

5.    Waiver and Consent. To the fullest extent permitted by law and except as otherwise provided herein, the Company waives demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Company liable with respect to this Note.

6.    Costs, Indemnities and Expenses. In the event of default as described herein, the Company agrees to pay all reasonable fees and costs incurred by the Holder in collecting or securing or attempting to collect or secure this Note, including reasonable attorneys’ fees and expenses, whether or not involving litigation, collecting upon any judgments and/or appellate or bankruptcy proceedings. The Company agrees to pay any documentary stamp taxes, intangible taxes or other taxes which may now or hereafter apply to this Note or any payment made in respect of this Note, and the Company
agrees to indemnify and hold the Holder harmless from and against any liability, costs, attorneys’ fees, penalties, interest or expenses relating to any such taxes, as and when the same may be incurred.

7.    Event of Default. Upon an Event of Default (as defined below), the entire principal balance and accrued interest outstanding under this Note, and all other obligations of the Company under this Note, shall be become due and payable without any action on the part of the Holder. Upon an Event of Default, the Holder shall be entitled to seek and institute any and all remedies available to it (including, without limitation, the acceleration of Advance Notices as described in Section 2(d) hereof. No remedy conferred under this Note upon the Holder is intended to be exclusive of any other
remedy available to the Holder, pursuant to the terms of this Note or otherwise. No single or partial exercise by the Holder of any right, power or remedy hereunder shall preclude any other or further exercise thereof. The failure of the Holder to exercise any right or remedy under this Note or otherwise, or delay in exercising such right or remedy, shall not operate as a waiver thereof. Each of the following events shall constitute a default under this Note (each an “Event of Default”):

 

	            (i)         	Failure to pay when due any payment of principal or interest due on the Note or any fee, expense, other sum due hereunder; provided that the Holder has delivered to the Company a notice of Event of Default (a “Notice of Default”) and such event has not been remedied within seven days of the date of such Notice of Default; 

 

 

	 
	 	4 	 
	

	 

 

	           (ii)  	Any default, whether in whole or in part, shall occur in the due observance or performance of any obligations or other covenants, terms or provisions to be performed under this Note, the Investment Agreement, Security Agreement, Pledge and Escrow Agreement, Irrevocable Transfer Agent Instructions or any other document, note, agreement, mortgage, security agreement, instrument or understanding with, held by, or executed in favor of the Holder by the Company, ScanMaster, or EVS US Inc.; provided that the Holder has delivered to the Company a Notice of Default and such event has not been remedied within seven days of the date of such Notice of Default; or

 

	          (iii)  	Upon delivery of a notice of default and failure by the Company to remedy such default within any time specified therein or the filing of a complaint, action or lawsuit by any lender having a security interest of higher priority than the Buyer regarding the due observance or performance of any obligations or other covenants, terms or provisions to be performed by the Company, ScanMaster or EVS US Inc. to such lender, whether in whole or in part,; or

 

	          (iv)  	The Company shall: (1) make a general assignment for the benefit of its creditors; (2) apply for or consent to the appointment of a receiver, trustee, assignee, custodian, sequestrator, liquidator or similar official for itself or all or substantially all of its assets and properties; (3) commence a voluntary case for relief as a debtor under the United States Bankruptcy Code; (4) file with or otherwise submit to any governmental authority any petition, answer or other document seeking: (A) reorganization, (B) an arrangement with creditors or (C) to take advantage of any other present or future applicable law respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief of debtors, dissolution or liquidation; (5) file or otherwise submit any answer or other document admitting or failing to contest the material allegations of a petition or other document
filed or otherwise submitted against it in any proceeding under any such applicable law, or (6) be adjudicated a bankrupt or insolvent by a court of competent jurisdiction; or

	          (v)  	Any case, proceeding or other action shall be commenced against the Company for the purpose of effecting, or an order, judgment or decree shall be entered by any court of competent jurisdiction approving (in whole or in part) anything specified in Section 7(iv) hereof, or any receiver, trustee, assignee, custodian, sequestrator, liquidator or other official shall be appointed with respect to the Company, or shall be appointed to take or shall otherwise acquire possession or control of all or a substantial part of the assets and properties of the Company, and any of the foregoing shall continue unstayed and in effect for any period of sixty (60) days.

 

 

	 
	 	 5	 
	

	 

  8.    Maximum Interest Rate. In no event shall any agreed to or actual interest charged, reserved or taken by the Holder as consideration for this Note exceed the limits imposed by New Jersey law. In the event that the interest provisions of this Note shall result at any time or for any reason in an effective rate of interest that exceeds the maximum interest rate permitted by applicable law, then without further agreement or notice the obligation to be fulfilled shall
be automatically reduced to such limit and all sums received by the Holder in excess of those lawfully collectible as interest shall be applied against the principal of this Note immediately upon the Holder’s receipt thereof, with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Holder had agreed to accept such extra payment(s) as a premium-free prepayment or prepayments.

9.    Cancellation of Note. Upon the repayment by the Company of all of its obligations hereunder to the Holder, including, without limitation, the face amount of this Note, plus accrued but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled and paid in full. Except as otherwise required by law or by the provisions of this Note, payments received by the Holder hereunder shall be applied first against expenses and indemnities, next against interest accrued on this Note, and next in reduction of the outstanding principal balance of this Note.

            10.     Severability. If any provision of this Note is, for any reason, invalid or unenforceable, the remaining provisions of this Note will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Note that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect.

              11.     Amendment and Waiver. This Note may be amended, or any provision of this Note may be waived, provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by the parties hereto. The waiver by any such party hereto of a breach of any provision of this Note shall not operate or be construed as a waiver of any other breach.

              12.     Successors. Except as otherwise provided herein, this Note shall bind and inure to the benefit of and be enforceable by the parties hereto and their permitted successors and assigns.

              13.     Assignment. This Note shall not be directly or indirectly assignable or delegable by the Company. The Holder may assign this Note as long as such assignment complies with the Securities Act of 1933, as amended.

 

 

	 
	 	 6	 
	

	 

            14.     No Strict Construction. The language used in this Note will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party.

            15.    Further Assurances. Each party hereto will execute all documents and take such other actions as the other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Note.

            16.    Notices, Consents, etc.  Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) upon the expiration of three (3) trading days after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

	
If to Company:
	
Elbit Vision Systems Ltd.

	 	
New Industrial Park

	 	
Post Office Box 140

	 	
Yokneam

	 	
Israel 

	 	
Attention:    Yaky Yanay CFO

	 	
Telephone:    +972-4-993-6414

	 	
Facsimile:    +972-4-993-6450

	 	 
	
With Copy to:
	
Yigal Arnon & Co

	 	
Azrieli Center

	 	
Tel Aviv

	 	
Israel

	 	
Attention:                         Adrian Daniels, Adv    

	 	
Telephone:                      +972-3-608-7864    

	 	
Facsimile:                        +972-3-608-7714    

	 	 
	
If to the Company:
	
Cornell Capital Partners, L.P.

	 	
101 Hudson Street, Suite 3700

	 	
Jersey City, NJ 07302

	 	
Attention: Mark A. Angelo

	 	
Telephone: (201) 324-1619

	 	
Facsimile: (201) 324-1447

	 	 

or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) trading days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.

 

 

	 
	 	7 	 
	

	 

17.     Remedies, Other Obligations, Breaches and Injunctive Relief. The Holder’s remedies provided in this Note shall be cumulative and in addition to all other remedies available to the Holder under this Note, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy of the Holder contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder’s right to pursue actual damages for any failure by the Company to comply with the terms of this Note. Every
right and remedy of the Holder under any document executed in connection with this transaction may be exercised from time to time and as often as may be deemed expedient by the Holder. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, and specific performance without the necessity of showing economic loss and without any bond or other security being required.

            18.    Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction of the
Superior Court of the State of New Jersey sitting in Hudson County, New Jersey and the United States Federal District Court for the District of New Jersey sitting in Newark, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 

            19.    No Inconsistent Agreements. None of the parties hereto will hereafter enter into any agreement, which is inconsistent with the rights granted to the parties in this Note.

 

 

	 
	 	8 	 
	

	 

            20.    Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties to this Note and their respective permitted successor and assigns, any rights or remedies under or by reason of this Note.

            21.    Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE HOLDER TO LOAN TO THE COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.

            22.    Entire Agreement.  This Note (including the recitals hereto) and the Irrevocable Transfer Agent Instructions set forth the entire understanding of the parties with respect to the subject matter hereof, and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party in connection with the negotiation of the terms hereof, and may be modified only by instruments signed by all of the parties hereto.

	
 

	 	9 	 
	

	 

IN WITNESS WHEREOF, this Note is executed by the undersigned as of the date hereof.

	 	
CORNELL CAPITAL PARTNERS, LP

	 	 
	 	
By: Yorkville Advisors, LLC

	 	
Its: General Partner

	 	 
	 	
By:                     

	 	
Name: Mark Angelo

	 	
Its: Portfolio Manager

	 	 
	 	 
	 	
ELBIT VISION SYSTEMS, LTD.

	 	 
	 	
By:                    

	 	
Name:    

	 	
Title:    

	 
	 	10SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (the “Agreement”) is entered into and made effective as of August 26, 2004, by and between ELBIT VISION SYSTEMS, LTD.
, an entity organized under
 the laws of the State of Israel (the “Company”), and the BUYER as defined in the Securities Purchase Agreement of even date hereof (the “Secured Party”).

 

WHEREAS, the Company shall issue and sell to the Secured Party, as provided in the Investment Agreement of even date herewith, and the Secured Party shall loan $4,000,000 to the Company pursuant to a Promissory Note of even date herewith;

 

WHEREAS, to induce the Secured Party to enter into the transaction contemplated by the Investment Agreement, the Pledge and Escrow Agreement and the Promissory Note (collectively referred to as the “Transaction Documents”), the Company hereby grants to the Secured Party a second priority security interest in and to the pledged property identified on Exhibit “A”
 hereto (collectively referred to as the “Pledged Property”) until the satisfaction of the Obligations, as defined herein below. 

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and for other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE 1.

 

DEFINITIONS AND INTERPRETATIONS

 

Section 1.1.    Recitals. 

 

The above recitals are true and correct and are incorporated herein, in their entirety, by this reference.

 

Section 1.2.    Interpretations. 

 

Nothing herein expressed or implied is intended or shall be construed to confer upon any person other than the Secured Party any right, remedy or claim under or by reason hereof.

 

Section 1.3.    Obligations Secured.

 

The obligations secured hereby are any and all obligations of the Company now existing or hereinafter incurred to the Secured Party, whether oral or written and whether arising before, on or after the date hereof including, without limitation, those obligations of the Company to the Secured Party under the Investment Agreement, the Pledge Agreement, the Promissory Note and Irrevocable Transfer Agent Instructions, and any other amounts now or hereafter owed to the Secured Party by the Company thereunder or hereunder (collectively, the “Obligations”).

 

Section 1.4.    Definitions

	 
	 	1 	 
	

	 

Capitalized terms not defined herein shall have the meanings ascribed to them in the Standby Equity Distribution Agreement entered into by and between the parties hereof and dated as of March 30, 2004.

 

ARTICLE 2.

 

PLEDGED COLLATERAL, ADMINISTRATION OF COLLATERAL AND TERMINATION OF SECURITY INTEREST

 

Section 2.1.    Pledged Property.

 

(a)    The Company hereby pledges to the Secured Party, and creates in the Secured Party for its benefit, a security interest for such time until the Obligations are paid in full, in and to all of the property of the Company as set forth in Exhibit “A” attached hereto (collectively, the “Pledged Property”):

 

The Pledged Property, as set forth in Exhibit “A” attached hereto, and the products thereof and the proceeds of all such items are hereinafter collectively referred to as the “Pledged Collateral.”

 

(b)    Simultaneously with the execution and delivery of this Agreement, the Company shall make, execute, acknowledge, file, record and deliver to the Secured Party any documents reasonably requested by the Secured Party to perfect its security interest in the Pledged Property. Simultaneously with the execution and delivery of this Agreement, the Company shall make, execute, acknowledge and deliver to the Secured Party such documents and instruments, including, without limitation, financing statements, certificates, affidavits and forms as may, in the Secured Party’s reasonable judgment, be necessary to effectuate, complete or perfect, or to continue and preserve, the security
interest of the Secured Party in the Pledged Property, and the Secured Party shall hold such documents and instruments as secured party, subject to the terms and conditions contained herein.

 

Section 2.2.    Rights; Interests; Etc.

 

(a)    So long as no Event of Default (as hereinafter defined) shall have occurred and be continuing:

 

(i)    the Company shall be entitled to exercise any and all rights pertaining to the Pledged Property or any part thereof for any purpose not inconsistent with the terms hereof; and

 

(ii)    the Company shall be entitled to receive and retain any and all payments paid or made in respect of the Pledged Property.

 

(b)    Upon the occurrence and during the continuance of an Event of Default:

 

(i)    All rights of the Company to exercise the rights which it would otherwise be entitled to exercise pursuant to Section 2.2(a)(i) hereof and to receive payments which it would otherwise be authorized to receive and retain pursuant to Section 2.2(a)(ii) hereof shall be suspended, and all such rights shall thereupon become vested in the Secured Party who shall thereupon have the sole right to exercise such rights and to receive and hold as Pledged Collateral such payments; provided, however, that
 if the Secured Party shall become entitled and shall elect to exercise its right to realize on the Pledged Collateral pursuant to Article 5 hereof, then all cash sums received by the Secured Party, or held by Company for the benefit of the Secured Party and paid over pursuant to Section 2.2(b)(ii) hereof, shall be applied against any outstanding Obligations; and

	 
	 	2 	 
	

	 

(ii)    All interest, dividends, income and other payments and distributions which are received by the Company contrary to the provisions of Section 2.2(b)(i) hereof shall be received in trust for the benefit of the Secured Party, shall be segregated from other property of the Company and shall be forthwith paid over to the Secured Party; or 

 

(iii)    The Secured Party in its sole discretion shall be authorized to sell any or all of the Pledged Property at public or private sale in order to recoup all of the outstanding principal plus accrued interest owed pursuant to the Promissory Note as described herein

 

(c)    Each of the following events shall constitute a default under this Security Agreement (each an “Event of Default”):

 

	(i)  	Failure to pay when due any payment of principal or interest due on the Promissory Note of even date herewith or any fee, expense, other sum due hereunder; provided that the Secured Party has delivered to the Company a notice of Event of Default (a “Notice of Default”) and such event has not been remedied within seven days of the date of such Notice of Default; or

 

	(ii)  	Any default, whether in whole or in part, shall occur in the due observance or performance of any obligations or other covenants, terms or provisions to be performed under this Security Agreement, the Investment Agreement, Promissory Note (except as otherwise described in sub-section 2.2(c)(i)), Pledge and Escrow Agreement, Irrevocable Transfer Agent Instructions or any other document, note, agreement, mortgage, security agreement, instrument or understanding with, held by, or executed in favor of the Secured Party by the Company, ScanMaster, or, EVS US Inc.; provided that the Secured Party has delivered to the Company a Notice of Default and such event has not been remedied within seven days of the date of
 such Notice of Default; or

 

	(iii)  	The Company shall: (1) make a general assignment for the benefit of its creditors; (2) apply for or consent to the appointment of a receiver, trustee, assignee, custodian, sequestrator, liquidator or similar official for itself or all or substantially all of its assets and properties; (3) commence a voluntary case for relief as a debtor under the United States Bankruptcy Code; (4) file with or otherwise submit to any governmental authority any petition, answer or other document seeking: (A) reorganization, (B) an arrangement with creditors or (C) to take advantage of any other present or future applicable law respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief of debtors, dissolution or liquidation; (5) file or otherwise submit any answer or other document admitting or failing to contest the material allegations of a petition or
 other document filed or otherwise submitted against it in any proceeding under any such applicable law, or (6) be adjudicated a bankrupt or insolvent by a court of competent jurisdiction; or

	 
	 	3 	 
	

	 

(iv)    Any case, proceeding or other action shall be commenced against the Company for the purpose of effecting, or an order, judgment or decree shall be entered by any court of competent jurisdiction approving (in whole or in part) anything specified in Section 2.2(c)(iii) hereof, or any receiver, trustee, assignee, custodian, sequestrator, liquidator or other official shall be appointed with respect to the Company, or shall be appointed to take or shall otherwise acquire possession or control of all or a substantial part of the assets and properties of the Company, and any
of the foregoing shall continue unstayed and in effect for any period of sixty (60) days.

ARTICLE 3.

 

ATTORNEY-IN-FACT; PERFORMANCE

 

Section 3.1.   Secured Party Appointed Attorney-In-Fact.  

 

Upon the occurrence of an Event of Default, the Company hereby appoints the Secured Party as its attorney-in-fact, with full authority in the place and stead of the Company and in the name of the Company or otherwise, from time to time in the Secured Party’s discretion to take any action and to execute any instrument which the Secured Party may reasonably deem necessary to accomplish the purposes of this Agreement, including, without limitation, to receive and collect all instruments made payable to the Company representing any payments in respect of the Pledged Collateral or any part thereof and to give full discharge for the same. The Secured Party may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose, or realize on the Pledged Property
as and when the Secured Party may determine. To facilitate collection, the Secured Party may notify account debtors and obligors on any Pledged Property or Pledged Collateral to make payments directly to the Secured Party.

 

Section 3.2.    Secured Party May Perform.

 

If the Company fails to perform any agreement contained herein, the Secured Party, at its option, may itself perform, or cause performance of, such agreement, and the expenses of the Secured Party incurred in connection therewith shall be included in the Obligations secured hereby and payable by the Company under Section 8.3.

	 
	 	4 	 
	

	 

ARTICLE 4.

 

REPRESENTATIONS AND WARRANTIES

 

Section 4.1.    Authorization; Enforceability.

 

Each of the parties hereto represents and warrants that it has taken all action necessary to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby; and upon execution and delivery, this Agreement shall constitute a valid and binding obligation of the respective party, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights or by the principles governing the availability of equitable remedies.

 

Section 4.2.    Ownership of Pledged Property.

 

The Company warrants and represents that, except as set forth in Schedule 4.2 hereof, it is the legal and beneficial owner of the Pledged Property free and clear of any lien, security interest, option or other charge or encumbrance except for the security interest created by this Agreement.

 

ARTICLE 5.

 

DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL

 

Section 5.1.    Default and Remedies.

 

(a)    If an Event of Default described in Section 2.2(c)(i) and (ii) occurs, then in each such case the Secured Party may declare the Obligations to be due and payable immediately, by a notice in writing to the Company, and upon any such declaration, the Obligations shall become immediately due and payable. If an Event of Default described in Sections 2.2(c)(iii) or (iv) occurs and is continuing for the period set forth therein, then the Obligations shall automatically become immediately due and payable without declaration or other act on the part of the Secured Party.

 

(b)    Upon the occurrence of an Event of Default, the Secured Party shall,: (i) be entitled to receive all distributions with respect to the Pledged Collateral, (ii) to cause the Pledged Property to be transferred into the name of the Secured Party or its nominee, (iii) to dispose of the Pledged Property, and (iv) to realize upon any and all rights in the Pledged Property then held by the Secured Party.

 

Section 5.2.    Method of Realizing Upon the Pledged Property : Other Remedies.

 

Upon the occurrence of an Event of Default, in addition to any rights and remedies available at law or in equity, the following provisions shall govern the Secured Party’s right to realize upon the Pledged Property:

 

(a)    Any item of the Pledged Property may be sold for cash or other value in any number of lots at brokers board, public auction or private sale and may be sold without demand, advertisement or notice (except that the Secured Party shall give the Company ten (10) days’ prior written notice of the time and place or of the time after which a private sale may be made (the “Sale Notice”)), which notice period shall in any event is hereby agreed to be commercially reasonable. At any sale
 or sales of the Pledged Property, the Company may bid for and purchase the whole or any part of the Pledged Property and, upon compliance with the terms of such sale, may hold, exploit and dispose of the same without further accountability to the Secured Party. The Company will execute and deliver, or cause to be executed and delivered, such instruments, documents, assignments, waivers, certificates, and affidavits and supply or cause to be supplied such further information and take such further action as the Secured Party reasonably shall require in connection with any such sale.

	 
	 	5 	 
	

	 

(b)    Any cash being held by the Secured Party as Pledged Collateral and all cash proceeds received by the Secured Party in respect of, sale of, collection from, or other realization upon all or any part of the Pledged Collateral shall be applied as follows:

 

(i)    to the payment of all amounts due the Secured Party for the expenses reimbursable to it hereunder or owed to it pursuant to Section 8.3 hereof;

 

(ii)    to the payment of the Obligations then due and unpaid.

 

(iii)    the balance, if any, to the person or persons entitled thereto, including, without limitation, the Company.

 

(c)    In addition to all of the rights and remedies which the Secured Party may have pursuant to this Agreement, the Secured Party shall have all of the rights and remedies provided by law, including, without limitation, those under the Uniform Commercial Code.

 

(i)    If the Company fails to pay such amounts due upon the occurrence of an Event of Default which is continuing, then the Secured Party may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company and collect the monies adjudged or decreed to be payable in the manner provided by law out of the property of Company, wherever situated.

 

(ii)    The Company agrees that it shall be liable for any reasonable fees, expenses and costs incurred by the Secured Party in connection with enforcement, collection and preservation of the Transaction Documents, including, without limitation, reasonable legal fees and expenses, and such amounts shall be deemed included as Obligations secured hereby and payable as set forth in Section 8.3 hereof.

 

Section 5.3.    Proofs of Claim.

 

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relating to the Company or the property of the Company or of such other obligor or its creditors, the Secured Party (irrespective of whether the Obligations shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Secured Party shall have made any demand on the Company for the payment of the Obligations), subject to the rights of Previous Security Holders, shall be entitled and empowered, by intervention in such proceeding or otherwise:

	 
	 	6 	 
	

	 

(i)    to file and prove a claim for the whole amount of the Obligations and to file such other papers or documents as may be necessary or advisable in order to preserve the claims of the Secured Party (including any claim for the reasonable legal fees and expenses and other expenses paid or incurred by the Secured Party permitted hereunder and of the Secured Party allowed in such judicial proceeding), and

 

(ii)    to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by the Secured Party to make such payments to the Secured Party and, in the event that the Secured Party shall consent to the making of such payments directed to the Secured Party, to pay to the Secured Party any amounts for expenses due it hereunder.

 

Section 5.4.    Duties Regarding Pledged Collateral.

 

The Secured Party shall have no duty as to the collection or protection of the Pledged Property or any income thereon or as to the preservation of any rights pertaining thereto, beyond the safe custody and reasonable care of any of the Pledged Property actually in the Secured Party’s possession.

 

ARTICLE 6.

 

AFFIRMATIVE COVENANTS

 

The Company covenants and agrees that, from the date hereof and until the Obligations have been fully paid and satisfied, unless the Secured Party shall consent otherwise in writing (as provided in Section 8.4 hereof):

 

Section 6.1.    Existence, Properties, Etc.

 

(a)    The Company shall do, or cause to be done, all things, or proceed with due diligence with any actions or courses of action, that may be reasonably necessary (i) to maintain Company’s due organization, valid existence and good standing under the laws of its state of incorporation, and (ii) to preserve and keep in full force and effect all qualifications, licenses and registrations in those jurisdictions in which the failure to do so could have a Material Adverse Effect (as defined below); and (b) the Company shall not do, or cause to be done, any act impairing the Company’s corporate power or authority (i) to carry on the Company’s business
 as now conducted, and (ii) to execute or deliver this Agreement or any other document delivered in connection herewith, including, without limitation, any UCC-1 Financing Statements required by the Secured Party (which other loan instruments collectively shall be referred to as the “Loan Instruments”) to which it is or will be a party, or perform any of its obligations hereunder or thereunder. For purpose of this Agreement, the term “Material Adverse Effect” shall mean any material and adverse affect as determined by Secured Party in its reasonable discretion, whether individually
or in the aggregate, upon (a) the Company’s assets, business, operations, properties or condition, financial or otherwise; (b) the Company’s to make payment as and when due of all or any part of the Obligations; or (c) the Pledged Property.

	 
	 	7 	 
	

	 

Section 6.2.    Accounts and Reports.

 

The Company shall maintain a standard system of accounting in accordance with generally accepted accounting principles consistently applied and provide, at its sole expense, to the Secured Party the following:

 

(a)    as soon as available, a copy of any notice or other communication alleging any nonpayment or other material breach or default, or any foreclosure or other action respecting any material portion of its assets and properties, received respecting any of the indebtedness of the Company in excess of $100,000 (other than the Obligations), or any demand or other request for payment under any guaranty, assumption, purchase agreement or similar agreement or arrangement respecting the indebtedness or obligations of others in excess of $100,000, including any received from any person acting on behalf of the Secured Party or beneficiary thereof; and

 

(b)    within fifteen (15) days after the making of each submission or filing, a copy of any report, financial statement, notice or other document, whether periodic or otherwise, submitted to the shareholders of the Company, or submitted to or filed by the Company with any governmental authority involving or affecting (i) the Company that could have a Material Adverse Effect; (ii) the Obligations; (iii) any part of the Pledged Collateral; or (iv) any of the transactions contemplated in this Agreement or the Loan Instruments.

 

Section 6.3.    Maintenance of Books and Records; Inspection.

 

The Company shall maintain its books, accounts and records in accordance with generally accepted accounting principles consistently applied, and, subject to the Secured Party and any of its officers and employees and any professionals designated by the Secured Party entering into the Company’s standard Confidentiality and Non-Disclosure Agreement, permit the Secured Party, its officers and employees and any professionals designated by the Secured Party in writing, at any time to visit and inspect any of its properties (including but not limited to the collateral security described in the Transaction Documents and/or the Loan Instruments), corporate books and financial records, and to discuss its accounts, affairs and finances with any employee, officer or director thereof.

 

Section 6.4.    Maintenance and Insurance.

 

(a)    The Company shall maintain or cause to be maintained, at its own expense, all of its assets and properties in good working order and condition, subject to ordinary wear and tear, making all necessary repairs thereto and renewals and replacements thereof.

 

(b)    The Company shall maintain or cause to be maintained, at its own expense, insurance in form, substance and amounts (including deductibles), which the Company deems reasonably necessary to the Company’s business, (i) adequate to insure all assets and properties of the Company, which assets and properties are of a character usually insured by persons engaged in the same or similar business against loss or damage resulting from fire or other risks included in an extended coverage policy; (ii) against public liability and other tort claims that may be incurred by the Company; (iii) as may be required by the Transaction Documents and/or the Loan Instruments
or applicable law and (iv) as may be reasonably requested by Secured Party, all with adequate, financially sound and reputable insurers.

	 
	 	8 	 
	

	 

Section 6.5.    Contracts and Other Collateral.

 

The Company shall perform all of its obligations under or with respect to each instrument, receivable, contract and other intangible included in the Pledged Property to which the Company is now or hereafter will be party on a timely basis and in the manner therein required, including, without limitation, this Agreement.

 

Section 6.6.    Defense of Collateral, Etc.

 

The Company shall defend and enforce its right, title and interest in and to any part of: (a) the Pledged Property; and (b) if not included within the Pledged Property, those assets and properties whose loss could have a Material Adverse Effect, the Company shall defend the Secured Party’s right, title and interest in and to each and every part of the Pledged Property, each against all manner of claims and demands on a timely basis to the full extent permitted by applicable law.

 

Section 6.7.    Payment of Debts, Taxes, Etc.

 

The Company shall pay, or cause to be paid, all of its indebtedness and other liabilities and perform, or cause to be performed, all of its obligations in accordance with the respective terms thereof, and pay and discharge, or cause to be paid or discharged, all taxes, assessments and other governmental charges and levies imposed upon it, upon any of its assets and properties on or before the last day on which the same may be paid without penalty, as well as pay all other lawful claims (whether for services, labor, materials, supplies or otherwise) as and when due

 

Section 6.8.    Taxes and Assessments; Tax Indemnity.

 

The Company shall (a) file all tax returns and appropriate schedules thereto that are required to be filed under applicable law, prior to the date of delinquency, (b) pay and discharge all taxes, assessments and governmental charges or levies imposed upon the Company, upon its income and profits or upon any properties belonging to it, prior to the date on which penalties attach thereto, and (c) pay all taxes, assessments and governmental charges or levies that, if unpaid, might become a lien or charge upon any of its properties; provided, however, that the Company in good faith may contest any
such tax, assessment, governmental charge or levy described in the foregoing clauses (b) and (c) so long as appropriate reserves are maintained with respect thereto. 

 

Section 6.9.    Compliance with Law and Other Agreements. 

 

The Company shall maintain its business operations and property owned or used in connection therewith in compliance with (a) all applicable federal, state and local laws, regulations and ordinances governing such business operations and the use and ownership of such property, and (b) all agreements, licenses, franchises, indentures and mortgages to which the Company is a party or by which the Company or any of its properties is bound. Without limiting the foregoing, the Company shall pay all of its indebtedness promptly in accordance with the terms thereof.

	 
	 	9 	 
	

	 

Section 6.10.    Notice of Default. 

 

The Company shall give written notice to the Secured Party of the occurrence of any default or Event of Default under this Agreement, the Transaction Documents or any other Loan Instrument or any other agreement of Company for the payment of money, promptly upon the occurrence thereof.

 

Section 6.11.    Notice of Litigation.

 

The Company shall give notice, in writing, to the Secured Party of (a) any actions, suits or proceedings wherein the amount at issue is in excess of $25,000, instituted by any persons against the Company, or affecting any of the assets of the Company, and (b) any dispute, not resolved within fifteen (15) days of the commencement thereof, between the Company on the one hand and any governmental or regulatory body on the other hand, which might reasonably be expected to have a Material Adverse Effect on the business operations or financial condition of the Company.

 

ARTICLE 7.

 

NEGATIVE COVENANTS

 

The Company covenants and agrees that, from the date hereof until the Obligations have been fully paid and satisfied, the Company shall not, unless the Secured Party shall consent otherwise in writing:

 

Section 7.1.    Liens and Encumbrances.

 

The Company shall not directly or indirectly make, create, incur, assume or permit to exist any assignment, transfer, pledge, mortgage, security interest or other lien or encumbrance of any nature in, to or against any part of the Pledged Property or of the Company’s capital stock, or offer or agree to do so, or own or acquire or agree to acquire any asset or property of any character subject to any of the foregoing encumbrances (including any conditional sale contract or other title retention agreement), or assign, pledge or in any way transfer or encumber its right to receive any income or other distribution or proceeds from any part of the Pledged Property or the Company’s capital stock; or enter into any sale-leaseback financing respecting any part of the Pledged
Property as lessee, or cause or assist the inception or continuation of any of the foregoing.

 

Section 7.1.    Articles, Mergers, Consolidations, Acquisitions and Sales.

 

Without the prior express written consent of the Secured Party, which consent shall not be unreasonably withheld, the Company shall not: (a) Amend its Articles (except with respect to an increase in the number of authorized ordinary share capital); (b) be a party to any merger, consolidation or corporate reorganization (except with respect to the acquisition of ScanMater, IRT and Yuravision); (c) purchase or otherwise acquire all or substantially all of the assets or stock of, or any partnership or joint venture interest in, any other person, firm or entity; (d) sell, transfer, convey, grant a security interest in or lease all or any substantial part of its assets; nor (e) create any subsidiaries nor convey any of its assets to any subsidiary in excess of $200,000 in the aggregate.

	 
	 	10 	 
	

	 

Section 7.2.    Management, Ownership.

 

To the extent that it is in the interests of the Company and subject to their employment contracts with the Company, Yaky Yanay and Zami Aberman shall remain employed by the Company in their current capacity. 

 

Section 7.3.    Dividends, Etc.

 

The Company shall not declare or pay any dividend of any kind, in cash, on any class of its capital stock, nor purchase, redeem, retire or otherwise acquire for value any shares of such stock, nor make any distribution of any kind in respect thereof, nor make any return of capital to shareholders, nor make any payments in respect of any profit sharing, retirement, stock option, stock bonus, incentive compensation or similar plan (except where required by currently existing contract or as required or permitted hereunder), without the prior written consent of the Secured Party, which consent shall not be unreasonably withheld.

 

Section 7.4.    Conduct of Business.

 

The Company will continue to engage, in an efficient and economical manner, in a business of the same general type as conducted by it on the date of this Agreement, subject to any changes arising out of the acquisition of IRT ScanMaster Holdings Ltd.

 

Section 7.5.    Places of Business.

 

The location of the Company’s chief place of business is New Industrial Park, Post Office Box 140, Yokneam, Israel. The Company shall not change the location of its chief place of business, chief executive office or any place of business disclosed to the Secured Party or move any of the Pledged Property from its current location without thirty (30) days prior written notice to the Secured Party in each instance. 

 

ARTICLE 8.

 

MISCELLANEOUS

 

Section 8.1.    Notices.

 

All notices or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be considered as duly given on: (a) the date of delivery, if delivered in person, by nationally recognized overnight delivery service, (b) upon receipt, when sent via facsimile (provided conformation of transmission is mechanically or electronically generated and kept on file by the sending party); or (c) upon expiration of three (3) days after the date sent, if sent by Federal Express (or similar overnight courier service) to the parties at the following addresses:

	 
	 	11 	 
	

	 

(i)          If to Secured Party: 

	
Cornell Capital Partners, LP

	
101 Hudson Street -Suite 3700

	
Jersey City, NJ 07302

	
Attention: Mark Angelo

	
Portfolio Manager

	
Telephone: (201) 985-8300 

	
Facsimile:  (201) 985-8266 

with a copy to:

	
Cornell Capital Partners, LP

	
101 Hudson Street -Suite 3700

	
Jersey City, NJ 07302

	
Attention: Troy J. Rillo, Esq.

	
Senior Vice President

	
Telephone:  (201) 985-8300 

	
Facsimile:   (201) 985-8266 

(ii)         to the Company:

	
Elbit Vision Systems Ltd.

	
New Industrial Park

	
Post Office Box 140

	
Yokneam

	
Israel 

	
Attention:     Yaky Yanay CFO

	
Telephone:   +972-4-993-6414

	
Facsimile:    +972-4-993-6450

With a copy to:

	
Yigal Arnon & Co

	
Azrieli Center

	
Tel Aviv

	
Israel

	
Attention: Adrian Daniels, Adv    

	
Telephone: +972-3-608-7864    

	
Facsimile: +972-3-608-7714    

	 
	 	12 	 
	

	 

Any party may change its address by giving notice to the other party stating its new address. Commencing on the tenth (10th) day after the giving of such notice, such newly designated address shall be such party’s address for the purpose of all notices or other communications required or permitted to be given pursuant to this Agreement.

 

Section 8.2.     Severability.

 

If any provision of this Agreement shall be held invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render invalid or unenforceable any other severable provision of this Agreement, and this Agreement shall be carried out as if any such invalid or unenforceable provision were not contained herein.

 

Section 8.3.    Expenses.

 

In the event of an Event of Default, the Company will pay to the Secured Party the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel, which the Secured Party may incur in connection with: (i) the custody or preservation of, or the sale, collection from, or other realization upon, any of the Pledged Property; (ii) the exercise or enforcement of any of the rights of the Secured Party hereunder or (iii) the failure by the Company to perform or observe any of the provisions hereof.

 

Section 8.4.    Waivers, Amendments, Etc.

 

The Secured Party’s delay or failure at any time or times hereafter to require strict performance by Company of any undertakings, agreements or covenants shall not waiver, affect, or diminish any right of the Secured Party under this Agreement to demand strict compliance and performance herewith. Any waiver by the Secured Party of any Event of Default shall not waive or affect any other Event of Default, whether such Event of Default is prior or subsequent thereto and whether of the same or a different type. None of the undertakings, agreements and covenants of the Company contained in this Agreement, and no Event of Default, shall be deemed to have been waived by the Secured Party, nor may this Agreement be amended, changed or modified, unless such waiver, amendment, change
or modification is evidenced by an instrument in writing specifying such waiver, amendment, change or modification and signed by the Secured Party.

 

Section 8.5.    Continuing Security Interest.

 

This Agreement shall create a continuing security interest in the Pledged Property and shall remain in full force and effect until payment in full of the Obligations following which this Agreement will terminate and the Security Interest cease to exist; and (i) be binding upon the Company and its successors and heirs and (ii) inure to the benefit of the Secured Party and its successors and assigns, until its termination in accordance with the terms of this Agreement. Upon the payment or satisfaction in full of the Obligations, the Company shall be entitled to the return, at its expense, of such of the Pledged Property as shall not have been sold in accordance with Section 5.2 hereof or otherwise applied pursuant to the terms hereof.

	 
	 	13 	 
	

	 

Section 8.6.    Independent Representation.

 

Each party hereto acknowledges and agrees that it has received or has had the opportunity to receive independent legal counsel of its own choice and that it has been sufficiently apprised of its rights and responsibilities with regard to the substance of this Agreement.

 

Section 8.7.    Applicable Law: Jurisdiction.

 

This Agreement shall be governed by and interpreted in accordance with the laws of the State of New Jersey without regard to the principles of conflict of laws. The parties further agree that any action between them shall be heard in Hudson County, New Jersey, and expressly consent to the jurisdiction and venue of the Superior Court of New Jersey, sitting in Hudson County and the United States District Court for the District of New Jersey sitting in Newark, New Jersey for the adjudication of any civil action asserted pursuant to this Paragraph.

 

Section 8.8.    Waiver of Jury Trial.

 

AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION. 

 

Section 8.9.    Entire Agreement.

 

This Agreement constitutes the entire agreement among the parties and supersedes any prior agreement or understanding among them with respect to the subject matter hereof.

 

Section 8.10    Prior Agreement of Bank Hapoalim B.M

 

Notwithstanding anything to the contrary herein, the Secured Party agrees that as long as any amounts are owed by the Company to Bank Hapoalim B.M. it will not take any action to foreclose on the Pledged Property without receipt of the prior written consent of Bank Hapoalim B.M.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

	
	 	 14	 
	

	 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

	 	
COMPANY:

	 	
ELBIT VISION SYSTEMS, LTD.

	 	 
	 	
By:_____________________

	 	
Name:    

	 	
Title:    

	 	 
	 	 
	 	
SECURED PARTY:

	 	
CORNELL CAPITAL PARTNERS, LP

	 	 
	 	
By: Yorkville Advisors, LLC

	 	
Its: General Partner

	 	 
	 	
By:_______________________   

	 	
Name: Mark Angelo

	 	
Title:  Portfolio Manager

 

	
 

	 	 15	 
	

	 

EXHIBIT A

 

DEFINITION OF PLEDGED PROPERTY

 

For the purpose of securing prompt and complete payment and performance by the Company of all of the Obligations and subject to the terms of the Security Agreement to which this Exhibit A is attached, the Company irrevocably hereby grants to the Secured Party a second ranking continuing security interest in and to, and lien upon, the following Pledged Property of the Company:

 

(a)    all goods of the Company, including, without limitation, machinery, equipment, furniture, furnishings, fixtures, signs, lights, tools, parts, supplies and motor vehicles of every kind and description, now or hereafter owned by the Company or in which the Company may have or may hereafter acquire any interest, and all replacements, additions, accessions, substitutions and proceeds thereof, arising from the sale or disposition thereof, and where applicable, the proceeds of insurance and of any tort claims involving any of the foregoing;

 

(b)    all inventory of the Company, including, but not limited to, all goods, wares, merchandise, parts, supplies, finished products, other tangible personal property, including such inventory as is temporarily out of Company’s custody or possession and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing;

 

(c)    all contract rights and general intangibles of the Company, including, without limitation, goodwill, trademarks, trade styles, trade names, leasehold interests, partnership or joint venture interests, patents and patent applications, copyrights, deposit accounts whether now owned or hereafter created, subject to the provisions of Israeli law and the requirements of the Office of the Chief Scientist of Israel;

 

(d)    all documents, warehouse receipts, instruments and chattel paper of the Company whether now owned or hereafter created;

 

(e)    all accounts and other receivables, instruments or other forms of obligations and rights to payment of the Company (herein collectively referred to as “Accounts”), together with the proceeds thereof, all goods represented by such Accounts and all such goods that may be returned by the Company’s customers, and all proceeds of any insurance thereon, and all guarantees, securities and liens which the Company may hold for the payment of any such Accounts including, without limitation,
 all rights of stoppage in transit, replevin and reclamation and as an unpaid vendor and/or lienor, all of which the Company represents and warrants will be bona fide and existing obligations of its respective customers, arising out of the sale of goods by the Company in the ordinary course of business;

 

(f)    to the extent assignable, all of the Company’s rights under all present and future authorizations, permits, licenses and franchises issued or granted in connection with the operations of any of its facilities;

 

(g)    all products and proceeds (including, without limitation, insurance proceeds) from the above-described Pledged Property.

 

Notwithstanding anything to the contrary herein, the Pledged Property shall not include any property pursuant to which the Company may not grant a security interest in violation of the rules, regulation and laws pertaining to the property funded by the Office of the Chief Scientist of Israel.

	 
	 	A-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00073-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00073-of-00352.parquet"}]]