Document:

SECURITY AGREEMENT

 

  THIS SECURITY AGREEMENT (the “Agreement”) is entered into and made effective as of August 26, 2004, by and between EVS US, INC.
  
, a Delaware corporation (the “Company”), and the BUYER as defined in the Securities Purchase Agreement dated the date hereof (the “Secured Party”).

 

  WHEREAS, the Company is a wholly owned direct subsidiary of Elbit Vision Systems, Ltd., an entity organized under the laws of the State of Israel (the “Parent”);

 

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

 

  WHEREAS, the Company shall benefit from the sale of the Promissory Note by the Parent to the Secured Party;

 

  WHEREAS, to induce the Secured Party to enter into the transaction contemplated by the Investment Agreement, the Pledge and Escrow Agreement, the Irrevocable Transfer Agent Instructions, the Security Agreement and the Promissory Note, all of which are between the Parent and the Secured Party (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 Parent 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 Parent 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 Parent thereunder (collectively, the “Obligations”).

 

  Section 1.4.    Definitions

 

  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 defined in the Transaction Documents) shall have occurred and be continuing:

 

 

  
	 
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  (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

 

  (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

 

   

  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.

 

 

  
	 
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  Section 3.2.    Secured Party May Perform.

   

  If the Company fails to perform any act contained herein, the Secured Party, at its option, may itself perform, or cause performance of, such act, 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.

 

  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 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) of the Security Agreement between the Secured Party and the Parent (the "Security Agreement"), 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) of the Security Agreement 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.

 

 

  
	 
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  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.

 

  (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.

 

 

  
	 
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  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:

 

  (i)    to file and prove a claim 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 ( 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)  or the Pledged Property.

 

 

  
	 
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  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, 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) any part of the Pledged Collateral; or (iii) any of the transactions contemplated in this Agreement.

 

  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 this Agreement), 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.

 

 

  
	 
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  (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 this Agreement or applicable law and (iv) as may be reasonably requested by Secured Party, all with adequate, financially sound and reputable insurers.

 

  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. 

 

 

  
	 
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  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.

 

  Section 6.10.   
  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 of Incorporation or By-Laws; (b) be a party to any merger, consolidation or corporate reorganization; (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.

 

 

  
	 
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  Section 7.2.    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 7.3.    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 merger with IRT ScanMaster Holdings Inc.

 

  Section 7.4.    Places of Business.

   

  The location of the Company’s chief place of business is 319 Garlington Road, Suite B4 Greenville, SC 29615. 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:

 

  (i)    If to Secured Party: 

 

 

  
	 
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  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)    If to the Company:

  

	

  EVS US Inc.

	

  c/o 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    

  

  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.

 

 

  
	 
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  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. None of the undertakings, agreements and covenants of the Company contained in this Agreement 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.

 

  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.

 

 

  
	 
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  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.

 

  

  

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

 

  

	 	

  COMPANY:

	 	

  EVS US INC.

	 	 
	 	

  By: 
                          

	 	

  Name:    

	 	

  Title:    

	 	 
	 	 
	 	

  SECURED PARTY:

	 	

  CORNELL CAPITAL PARTNERS, LP

	 	 
	 	

  By:    Yorkville Advisors, LLC

	 	

  Its:    General Partner

	 	 
	 	

  By:                        

	 	

  Name:    Mark Angelo

	 	

  Title:    Portfolio Manager

  

  

  

  
	 
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  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.

  
 

  
	 
	 	A-1	 
	

	 

  

 

 

  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-2PLEDGE AND ESCROW AGREEMENT

 

  THIS PLEDGE AND ESCROW AGREEMENT (the “Agreement”) is made and entered into as of August 26, 2004 (the “Effective Date”) by and between
Cornell Capital Partners, LP (the “Pledgee”), Elbit Vision Systems, Ltd. (the “Borrower”) and Butler Gonzalez llp, as escrow agent (“Escrow Agent”). All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Documents (as defined herein). 

 

 

  RECITALS:

 

  WHEREAS, on even date herewith, the Pledgee and the Borrower executed that certain Investment Agreement (a copy of which is attached as Exhibit “A”, hereafter referred to as the “Investment Agreement”) and that certain Security Agreement (a copy of which is attached as
Exhibit “B”, hereafter referred to as the “Security Agreement”); and

 

  WHEREAS, on even date herewith, the Borrower executed that certain Secured Promissory Note (the “Note”), attached hereto as Exhibit “C”, in favor of the Pledgee in the initial principal amount of Four Million Dollars (US$4,000,000) (the Security Agreement, Investment Agreement, and
 the Note are hereinafter collectively referred to as the “Documents”); and

 

  WHEREAS, in order to secure the Borrower’s obligations under the Documents, the Borrower has agreed to (i) pledge and escrow 2,500,000 newly issued restricted Ordinary Shares (the “Shares”) to the Pledgee and (ii) escrow 5,555,555 Ordinary Shares (the “Registered Shares”)
 that are registered on an effective registration statement on Form F-2 filed with the Securities and Exchange Commission on May 3, 2004, in each case simultaneously with the execution of the Documents and pursuant to the terms of this Agreement; and

 

  WHEREAS, Borrower and Pledgee have agreed upon the identity of the Escrow Agent and upon the form of this Agreement; and

 

  WHEREAS, the Escrow Agent has consented to act under this Agreement for the purposes herein provided.

 

  NOW, THEREFORE, in consideration of the mutual covenants, agreements, warranties, and representations herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

 

  
	 
	 	 1	 
	

	 

  

  TERMS AND CONDITIONS

 

  1.  Pledge and Transfer of Pledge Shares. 

 

  1.1.  Borrower hereby grants to Pledgee a security interest in the 2,500,000 Shares as security for Borrower’s obligations under the Documents. Simultaneously with the execution of this Agreement and the closing of the transactions contemplated under the Documents, Borrower shall deliver to the Escrow Agent stock certificates representing the Shares, together with duly executed stock powers or other appropriate transfer documents executed in blank by Borrower (the “Transfer Documents
  
”), and such stock certificates and Transfer Documents shall be held by the Escrow Agent until the Company files with the Securities and Exchange Commission the New Registration Statement in accordance with Section 2.1 of the Investment Agreement. 

 

  1.2.  Borrower hereby grants Pledgee a further security interest in any stock rights, rights to subscribe, stock dividends, new securities, or other property (excluding cash dividends) to which said Borrower is or may hereafter become entitled to receive on account of the Shares originally pledged hereunder. In the event Borrower receives additional property of such nature (“Additional Pledged Property”), Borrower shall immediately deliver such Additional Pledged Property to the Escrow
Agent to be held by the Escrow Agent in the same manner and on the same terms as the Shares originally pledged hereunder.

 

  2.  Title to Pledge Shares. From the Effective Date, subject only to the security interest of Pledgee created hereunder, the Escrow Agent shall be the legal and record owner of the Shares. However, the Escrow Agent shall not be entitled to vote the Shares. Upon the occurrence of an Event of Default (as defined herein), the Pledgee shall be entitled to vote the Shares, to receive dividends and other distributions thereon,
and to enjoy all other rights and privileges incident to the ownership of the Shares.

 

  3.  Release of Shares from Pledge. Promptly upon the filing of a registration statement with the SEC to register 14,444,445 Ordinary Shares pursuant to a certain Standby Equity Distribution Agreement dated as of March 30, 2004 by and between the Pledgee and the Borrower, the parties hereto shall notify the Escrow Agent to such effect in writing. Upon receipt of such written notice, the Escrow Agent shall return
to the Borrower or a designee appointed by the Borrower, the Transfer Documents, the certificates representing the Pledge Shares, and any Additional Pledged Property (collectively, the “Pledged Materials”), whereupon any and all rights of Pledgee in the Shares and any Additional Pledged Property shall be terminated. Notwithstanding anything to the contrary contained herein, the Escrow Agent shall have no obligation pursuant to the preceding sentence if there is an Event of Default. Notwithstanding anything to the contrary contained herein, upon full payment of all amounts due to the Pledgee under the Documents, this Agreement and Pledgees’ security interest and rights in and to the Shares, shall terminate.

 

  4.  Escrow of Registered Shares. 

 

 

  
	 
	 	2 	 
	

	 

  

 

  4.1.  On the date hereof, the Borrower shall deliver in escrow to the Escrow Agent (i) the Registered Shares and (ii) 42 Advance Notices for aggregate Advances of $4,200,000. The Registered Shares shall be delivered by DWAC to a brokerage account maintained by the Escrow Agent. Six Trading Days prior to the due date of each installment due to the Pledgee under the Note, the Escrow Agent shall deliver to the Pledgee one Advance Notice in an amount equal to the weekly installment due by the Borrower to the Pledgee under Section 2(b) of the Note. On the due date of each installment, the Escrow Agent shall deliver to the Pledgee the number of Ordinary Shares that
 relates to such Advance as set forth in
 the Note, which shall be calculated pursuant to the terms of the Standby Equity Distribution Agreement. For example, on the first Monday following the SEC filings required to be made by the Company pursuant to Section 2.3 of the Investment Agreement, the Escrow Agent shall deliver to the Pledgee an Advance for $42,000 (i.e., the amount of the installment due on the settlement date which is 7 calendar days later). On the settlement date, the Escrow Agent shall calculate the number of Ordinary Shares to be issued to the Pledgee under the terms of the Standby Equity Distribution Agreement and shall issue such Ordinary Shares to the Pledgee on such date. The Escrow Agent shall repeat this process on a weekly basis until the Full Amount (as defined in the Promissory Note) is repaid. Notwithstanding the forgoing, the Escrow Agent shall only deliver the seven Advance Notices in the amount of $285,714.29 in an Event of Default, and only then in accordance with the provisions of Section 4.2 herein.

 

  4.2.  Upon an Event of Default, the Escrow Agent shall accelerate the delivery of the Advance Notices and shall deliver such number of Advance Notices every five (5) Trading Days that equals the Maximum Advance Amount under the Standby Equity Distribution Agreement, as is required in order to repay the Full Amount.

 

  4.3.  Upon the repayment of the Full Amount, the Escrow Agent shall promptly return any unused Advances and Ordinary Shares to the Borrower. 

 

  4.4.  The instructions to the Escrow Agent pursuant to this Section 4 are irrevocable and the Borrower covenants and agrees that it shall revoke or attempt to revoke such instructions. The Escrow Agent is expressly authorized to disregard any such revocation or attempt to revoke and shall have no liability whatsoever in carrying out these instructions, other than in the event of gross negligence or willful misconduct.

 

  5.  Event of Default. Each of the following events shall constitute a default under this Pledge and Escrow Agreement (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 Pledgee has delivered to the Borrower 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 Pledge and Escrow Agreement, the Investment Agreement, Security Agreement, Note, 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 Pledgee by the Borrower, ScanMaster, or, EVS US Inc.; provided that the Pledgee has delivered to the Borrower a Notice of Default and such event has not been remedied within seven days of the date of such Notice of Default; or

 

 

  
	 
	 	3 	 
	

	 

  

 

	
(iii)  	The Borrower 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

 

	
(iv)  	Any case, proceeding or other action shall be commenced against the Borrower 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 5(iii) hereof, or any receiver, trustee, assignee, custodian, sequestrator, liquidator or other official shall be appointed with respect to the Borrower, 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 Borrower, and any of the foregoing shall continue unstayed and in effect for any period of sixty (60) days.

 

  6.  Remedies. Upon the occurrence of the Event of Default, Pledgee shall provide written notice of such Default (the “Default Notice”) to the Escrow Agent, with a copy to the Borrower. Within five (5) days of receipt
 of the Default Notice, the Escrow Agent shall deliver to Pledgee the Pledged Materials held by the Escrow Agent hereunder, whereupon Pledgee may exercise all rights and remedies of a secured party with respect to such property as may be available under the Uniform Commercial Code as in effect in the State of New Jersey.

 

  7.  Registered Shares. On the date hereof, Borrower shall deliver in escrow to the Escrow Agent (i) the Registered Shares pursuant to the terms of the Investment Agreement and (ii) 42 Advance Notices under the Standby Equity Distribution Agreement for an aggregate amount of $4,200,000. The Escrow Agent shall disburse one Advance Notice every seven (7) calendar 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. Further, the net proceeds under the Standby Equity Distribution Agreement shall be disbursed by the Escrow Agent to the Pledgee and shall be applied by the Pledgee to the amounts due under this Note. Upon repayment of all amounts due hereunder, the Escrow Agent shall promptly disburse to the Borrower any unused Advances Notices.

 

  8.  Concerning the Escrow Agent.

 

  8.1.  The Escrow Agent undertakes to perform only such duties as are expressly set forth herein and no implied duties or obligations shall be read into this Agreement against the Escrow Agent.

 

  8.2.  The Escrow Agent may act in reliance upon any writing or instrument or signature which it, in good faith, believes to be genuine, may assume the validity and accuracy of any statement or assertion contained in such a writing or instrument, and may assume that any person purporting to give any writing, notice, advice or instructions in connection with the provisions hereof has been duly authorized to do so. The Escrow Agent shall not be liable in any manner for the sufficiency or correctness as to form, manner, and execution, or validity of any instrument deposited in this escrow, nor as to the identity, authority, or right of any person
executing the same; and its duties hereunder shall be limited to the safekeeping of such certificates, monies, instruments, or other documents received by it as such escrow Pledgee, and for the disposition of the same in accordance with the written instruments accepted by it in the escrow.

 

  8.3.  Pledgee and Borrower hereby agree, jointly and severally, to defend and indemnify the Escrow Agent and hold it harmless from any and all claims, liabilities, losses, actions, suits, or proceedings at law or in equity, or any other expenses, fees, or charges of any character or nature which it may incur or with which it may be threatened by reason of its acting as Escrow Agent under this Agreement, except where arising out of willful misconduct or gross negligence; and in connection therewith, to indemnify the Escrow Agent against any and all expenses, including attorneys’ fees and costs of defending any action, suit, or proceeding or
resisting any claim (and any costs incurred by the Escrow Agent pursuant to Sections 6.4 or 6.5 hereof). The Escrow Agent shall be vested with a lien on all property deposited hereunder, for indemnification of attorneys’ fees and court costs regarding any suit, proceeding or otherwise, or any other expenses, fees, or charges of any character or nature, which may be incurred by the Escrow Agent by reason of disputes arising between the makers of this escrow as to the correct interpretation of this Agreement and instructions given to the Escrow Agent hereunder, or otherwise, with the right of the Escrow Agent, regardless of the instructions aforesaid, to hold said property until and unless said additional expenses, fees, and charges shall be fully paid. Any fees and costs charged by the Escrow Agent for serving hereunder shall be paid by the Borrower, which fees and costs are specified in the Standby Equity Distribution Agreement.

 

  8.4.  If any two parties shall be in disagreement about the interpretation of this Agreement, or about the rights and obligations, or the propriety of any action contemplated by the Escrow Agent hereunder, the Escrow Agent may, at its sole discretion deposit the Pledged Materials with the Clerk of the Circuit Court of Hudson County, New Jersey, and, upon notifying all parties concerned of such action, all liability on the part of the Escrow Agent shall fully cease and terminate. The Escrow Agent shall be indemnified by the Borrower and Pledgee for all costs, including reasonable attorneys’ fees in connection
with the aforesaid proceeding,
and shall be fully protected in suspending all or a part of its activities under this Agreement until a final decision or other settlement in the proceeding is received.

 

 

  
	 
	 	 5	 
	

	 

  

 

  8.5.  The Escrow Agent may consult with counsel of its own choice (and the costs of such counsel shall be paid by Borrower and Pledgee) and shall have full and complete authorization and protection for any action taken or suffered by it hereunder in good faith and in accordance with the opinion of such counsel. The Escrow Agent shall otherwise not be liable for any mistakes of fact or error of judgment, or for any actions or omissions of any kind, unless caused by its willful misconduct or gross negligence.

 

  8.6.  The Escrow Agent may resign upon thirty (30) days’ written notice to the parties in this Agreement. If a successor Escrow Agent is not appointed within this thirty (30) day period, the Escrow Agent may petition a court of competent jurisdiction to name a successor.

 

  9.  Conflict Waiver. Borrower acknowledges and agrees that the Escrow Agent is solely representing the Pledgee in connection with this Agreement and all of the other Documents and Borrower waives any objection it might have with respect to the Escrow Agent acting as the Escrow Agent pursuant to this Agreement.

 

  10.  Notices. Unless otherwise provided herein, all demands, notices, consents, service of process, requests and other communications hereunder shall be in writing and shall be delivered in person or by overnight courier service, or mailed by certified mail, return receipt requested, addressed:

 

 

 

	 	  

  Cornell Capital Partners, LP

	  
If to the Pledgee:	
101 Hudson Street -Suite 3700
	 	
Jersey City, NJ 07302
	
 
	
Attention:   Mark Angelo
	 	
                                                      Portfolio Manager
	 	
Telephone:   

(201) 985-8300 
	 	
Facsimile:    

(201) 985-8266 

 

 

 

  
	 
	 	 6	 
	

	 

 

 

	 	  

  Cornell Capital Partners, LP

	
With a copy to:	
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  

 

 

	 	  

  Elbit Vision Systems Ltd.

	
If to the Borrower:	
New Industrial Park
	 	

  Post Office Box 140 

	 	

  Yokneam 

	 	Israel
	 	
Attention:   Yaky Yanay CFO
	 	
Telephone:  +972-4-993-6414
	 	
Facsimile:   +972-4-993-6450

 

 

	 	Yigal Arnon & Co 
	With a copy to:	

  Azrieli Center 

	 	

  Tel Aviv 

	 	
Israel
	 	Attention:                         Adrian Daniels, Adv
	 	Telephone:                       +972-3-608-7864
	 	Facsimile:                         +972-3-608-7714 

 

                

  

 

  Any such notice shall be effective (a) when delivered, if delivered by hand delivery or overnight courier 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 following the date sent if sent by Federal Express (or similar overnight courier service).

 

  11.  Binding Effect. All of the covenants and obligations contained herein shall be binding upon and shall inure to the benefit of the respective parties, their successors and assigns.

 

  12.  Governing Law; Venue; Service of Process. The validity, interpretation and performance of this Agreement shall be determined in accordance with the laws of the State of New Jersey applicable to contracts made and to be performed wholly within that state except to the extent that Federal law applies. The parties hereto agree that any disputes, claims, disagreements, lawsuits, actions or controversies of any type
or nature whatsoever that, directly or indirectly, arise from or relate to this Agreement, including, without limitation, claims relating to the inducement, construction, performance or termination of this Agreement, shall be brought in the state or Federal courts located in Hudson County, New Jersey, and the parties hereto agree not to challenge the selection of that venue in any such proceeding for any reason, including, without limitation, on the grounds that such venue is an inconvenient forum. The parties hereto specifically agree that service of process may be made, and such service of process shall be effective if made, pursuant to Section 8 hereto.

 

 

  
	 
	 	7 	 
	

	 

  

 

  13.  Enforcement Costs. If any legal action or other pro-ceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresenta-tion in connection with any provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys’ fees, court costs and all expenses even if not taxable as court
costs (including, without limita-tion, all such fees, costs and expenses incident to appeals), incurred in that action or proceeding, in addition to any other relief to which such party or parties may be entitled.

 

  14.  Remedies Cumulative. No remedy herein conferred upon any party is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or here-after existing at law, in equity, by statute, or otherwise. No single or partial exercise by any party of any right, power or remedy hereunder shall preclude any other or further exercise thereof. 

 

  15.  Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute the same instrument.

 

  16.  No Penalties. No provision of this Agreement is to be interpreted as a penalty upon any party to this Agreement.

 

  17.  JURY TRIAL. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT WHICH IT MAY HAVE TO A TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED HEREON, OR ARISING OUT OF, UNDER OR IN ANY WAY CONNECTED WITH THE DEALINGS BETWEEN PLEDGEE AND BORROWER, THIS PLEDGE AND ESCROW AGREEMENT OR ANY DOCUMENTS EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PLEDGEE ENTERING INTO THIS PLEDGE AND ESCROW AGREEMENT EXTENDING THE LOAN EVIDENCED BY THIS NOTE AND IN ENTERING INTO THE SECURITY DOCUMENTS. 

 

 

 

  
	 
	 	8 	 
	

	 

  

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

 

	 	

  Pledgee:

	 	 
	 	

  CORNELL CAPITAL PARTNERS, LP

	 	 
	 	

  By:    Yorkville Advisors, LLC

	 	

  Its:    General Partner

	 	 
	 	

  By:                        

	 	

  Name:    Mark Angelo

	 	

  Title:    Portfolio Manager

	 	 
	 	

  Borrower:

	 	 
	 	

  ELBIT VISION SYSTEMS, LTD.

	 	
 

  By:                        

	 	

  Name: 
                          

	 	

  Title:                        

	 	 
	 	

  Escrow Agent:

	 	 
	 	

  BUTLER GONZALEZ LLP

	 	 
	 	

  By:                        

	 	

  Name:  
  
  David Gonzalez, Esq.

	 	

  Title:     Partner

  

  

  

 

 

  
	 
	 	9 	 
	

	 

  

 

 

  EXHIBIT “A”

 

 

  

 

 

  INVESTMENT AGREEMENT

 

  

  

  

  

  

  

  

  

  

	

   

	 	10 	 
	

	 

  

 

  EXHIBIT “B”

 

 

  

 

 

  SECURITY AGREEMENT

 

  

  

  

  

  

  

  

	

   

	 	B-1 	 
	

	 

  

 

  EXHIBIT “C”

 

 

  

 

 

  NOTE

 

  

  

 

  
	 
	 	D-1

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