THIS AGREEMENT (this "AGREEMENT") made and entered into as of the Second day of
January, 2006, by and between ELBIT VISION SYSTEMS LTD. (the "COMPANY" or "EVS")
and MIVTACH-SHAMIR HOLDINGS LTD. ("MIVTACH").
WHEREAS, the Company engages principally in the manufacturing of nondestructive
and surface inspection systems for a wide range of industrial applications using
machine vision and ultrasonic technologies; and
WHEREAS, the Company desires to borrow from Mivtach and Mivtach desires to loan
to the Company certain funds which may be converted into ordinary shares of the
Company, pursuant to the terms of this Agreement; and
WHEREAS, the Company desires to grant to Mivtach and Mivtach desires to receive
from the Company a warrant to purchase shares of the Company pursuant to the
terms of this Agreement; and
WHEREAS, the parties wish to set forth herein the terms and conditions of their
mutual agreements in connection therewith.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties conditions and covenants contained herein, and intending to be
legally bound hereby, the parties herein hereby agree as follows:
1. INTERPRETATION & DEFINITIONS
The annexes to this agreement are an integral part hereof.
In this Agreement, the following expressions shall bear the meanings set
forth alongside them, insofar as such meaning does not contradict the
contents or context thereof:
1.1. "ORDINARY SHARES" means the ordinary shares of the Company,
nominal value 1.00 New Israeli Shekel per share.
1.2. "DOLLAR(S)" or "$" shall mean United States dollar(s).
1.3. "FULLY DILUTED BASIS" shall mean a theoretical increase of the
Company's issued share capital assuming the exercise of all
outstanding securities, options and warrants exercisable into
shares of the Company, provided however that options reserved
under the Company's share option plans, but not granted shall not
be included for the purpose of such theoretical increase.
1.4. "SUBSIDIARIES" shall mean: Elbit Vision Systems US Inc; Elbit
Vision Systems B.V.; ScanMaster Systems (IRT) Ltd. ("SCANMASTER")
& IRT ScanMaster Systems, Inc.
1.5. "TERM SHEET" shall mean the Term Sheet for the Proposed Issuance
of Convertible Note and Warrant by Elbit Vision Systems Ltd.
entered by the parties, dated November 14, 2005.
1.6. "TRANSACTION DOCUMENTS" shall mean this Agreement and all
Schedules attached hereto.
2. ISSUANCE OF THE CONVERTIBLE NOTE & GRANT OF THE WARRANT
2.1. Subject to the terms and conditions hereof and in reliance upon
the representations, warranties and agreements contained herein,
on the Closing Date (as defined below), the Company shall:
2.1.1. issue to Mivtach a Convertible Note in the agreed form
attached hereto as SCHEDULE 2.1.1 (the "CONVERTIBLE
2.1.2. issue and grant to Mivtach a Warrant in the agreed form
attached as SCHEDULE 2.1.2 hereto (the "WARRANT").
2.2. At the Closing (as defined below) Mivtach shall transfer the
Principal Amount (as defined hereunder) to the Company.
2.3. Concurrently with the issuance of the Convertible Note and
Warrant to Mivtach as aforesaid, at the Closing (as defined
below), the Company shall have delivered to Mivtach the following
documents (the receipt of all of which shall be a condition to
the closing of the transactions hereunder):
(a) an executed management services agreement with the
Chairman of the Board to be appointed as described in
Section 2.3 (e) below.
(b) written confirmation from all parties to the
shareholders agreement dated March 28, 2001 as amended
on September 8, 2004 concerning such parties' holdings
in the Company, that such agreement has been
(c) an executed legally binding registration rights
agreement in the agreed form attached hereto as
SCHEDULE 2.3(C) (the "REGISTRATION RIGHTS AGREEMENT").
(d) a true and correct copy of a resolution of the Board of
Directors of the Company approving this Agreement and
the transactions contemplated herein, issuing the
Convertible Note and the Warrant and appointing a new
Chairman of the Board of Directors, substantially in a
form mutually agreed upon by the parties; and
(e) a true and correct copy of the resolution of the
Company's shareholders substantially in a form mutually
agreed upon by the parties;
(f) a legal opinion duly executed by Xxxxx Xxxxx & Co.,
acting as legal counsel to the Company in substantially
the form attached hereto as SCHEDULE 2.4(F); and
(g) A Compliance Certificate as mentioned in Section 8.3
The performance and consummation of all transactions contemplated by this
Agreement, including the issuance and grant of the Convertible Note and the
Warrant by the Company to Mivtach and the transfer of the Principle Amount
from Mivtach to the Company shall take place at a closing (the "CLOSING" or
the "CLOSING DATE") to be held at the offices of Shnitzer, Xxxxxxx, Xxxxxx
& Co., 7 Xxxxxxxx Xxxxx St. Ramat Gan 52521, at such date and time as
Mivtach and the Company shall agree, but in any event no later than ten
(10) days after fulfillment of all conditions to the Closing as stipulated
in Sections 2.3 & 8.
4. THE LOAN & CONVERTIBLE NOTE
4.1. THE LOAN -
4.1.1. Mivtach shall lend the Company the sum of three million
Dollars (US$3,000,000) (the "PRINCIPAL AMOUNT"),
subject to the terms and conditions of this Agreement
and the Convertible Note.
4.1.2. At the Closing and subject to fulfillment of all
conditions to Closing as set forth in Sections 2.3 & 8
herein Mivtach will transfer to the Company by wire
transfer the Principal Amount.
4.1.3. The Principal Amount shall bear interest at the rate of
LIBOR plus two percent (2%) per annum, compounded
quarterly ("INTEREST"; and, together with the Principal
Amount, the "LOAN AMOUNT").
4.2. SECURITY FOR THE LOAN -
The Loan Amount, shall be secured by a first-priority fixed
charge on the issued and outstanding shares of Panoptes Ltd.; and
a second-ranking floating charge on the assets of ScanMaster
Systems (IRT) Ltd.; and a third-ranking floating charge on the
Company's assets (the "SECURITY"), in accordance with the
Security Agreements attached hereto as SCHEDULE 4.2 (A) and
Schedule 4.2 (b). Upon repayment of the Loan Amount, or upon
conversion of the Principal Amount in accordance with Section 4.3
or 4.4, such lien shall be automatically canceled and rendered
null and void and Mivtach shall immediately following such
repayment take all appropriate action necessary to release the
Security created by the Security Agreement.
4.3. REPAYMENT OF THE LOAN AMOUNT -
4.3.1. Subject to Section 4.5 below, in the event the
Principal Amount is not converted in accordance with
Section 4.4 within the Conversion Period (as defined
below), the Company shall repay the Principal Amount to
Mivtach in thirty (30) equal monthly payments payable
on the first of each month with the first such
installment due and payable on the first day of the
twenty fifth (25th) month following the Closing Date.
4.3.2. The Loan Amount shall not be prepayable in whole or in
part by the Company without the prior written consent
4.3.3. The Company shall repay the Interest on quarterly basis
with the first payment of Interest to be made on April
1, 2006 for all Interest accrued until such date.
4.3.4. The Company hereby expressly waives demand and
presentment for payment, notice of non-payment, notice
of dishonor, protest, notice of protest, bringing of
suit, and diligence in taking any action to collect
amounts called for hereunder and shall be directly and
primarily liable for payment of all sums owing and to
be owing hereon, regardless of and without any notice,
diligence, act or omission by Mivtach.
4.4. CONVERSION -
4.4.1. The entire Principal Amount, but not the Interest,
shall be convertible into six million (6,000,000)
Ordinary Shares (subject to adjustment, as provided in
Section 4.6 below) (the "EXERCISE NOTE SHARES"), for a
period of twenty four (24) months from the Closing Date
(the "CONVERSION PERIOD"), at the sole discretion of
Mivtach, all as further set forth in the Convertible
Note. The Principal Amount may not be converted in
part. In no event shall the Principal Amount be
automatically converted into Ordinary Shares.
4.4.2. The Convertible Note shall be converted in its entirety
and upon conversion the Principal Amount of the Loan
shall be deemed repaid in full.
4.4.3. The Exercise Note Shares shall be free from and clear
of any liens, claims, charges, attachments,
encumbrances, interests or any other third party rights
or claims of any type or nature whatsoever.
4.4.4. The Exercise Note Shares shall be deemed Registrable
Securities under the Registration Rights Agreement.
4.4.5. Following the Conversion Period and subject to
compliance with applicable securities laws, the
Convertible Note or any part thereof shall be freely
4.5. ACCELERATION -
The entire unpaid Loan Amount shall be due and payable at any
time without any demand, immediately upon any of the following
events (each an "ACCELERATION EVENT"): (i) the adjudicated
insolvency of the Company, (ii) upon the Company becoming unable
to pay debts in an amount greater than five hundred thousand
Dollars (US$500,000) as they come due, and such condition
persisting for at least sixty (60) days; (iii) the execution by
the Company of a general assignment for the benefit of creditors,
(v) the filing by or against the Company of any petition in
bankruptcy or liquidation or any petition for relief under the
provisions of the federal bankruptcy act or any other state or
federal law for the relief of debtors and the continuation of
such petition without dismissal for a period of at least sixty
(60) days, (vi) the appointment of a receiver or trustee to take
possession of a substantial portion of the property or assets of
the Company, which appointment of such receiver or trustee is not
removed within sixty (60) days, or (vii) a material breach by the
Company of this Agreement that remains uncured for a period of 30
days after receipt of notice thereof.
4.6. ADJUSTMENTS -
The Number of the Exercise Note Shares which shall be issued to
Mivtach upon conversion of the Convertible Note shall be subject
to adjustments as provided in the Convertible Note.
5. THE WARRANT
5.1. The Company agrees to grant to Mivtach a right to purchase from
the Company up to an aggregate of 4,000,000 Ordinary Shares
(subject to adjustments, as provided in Section 5.6 below) (the
"EXERCISE WARRANT SHARES"), at an exercise price per share of
fifty cents ($0.50) per Ordinary Share.
5.2. Mivtach shall be entitled to exercise the Warrant, in whole or in
part, during the period beginning on the conversion of the
Convertible Note in its entirety and ending 24 months from the
Closing Date (the "WARRANT TERM"). In the event the Convertible
Note is not converted in accordance with Section 4.4, Mivtach
shall not have the right to exercise the Warrant.
5.3. The exercise of the Warrant shall be at the sole discretion of
Mivtach, which shall not be obliged to exercise its right under
the Warrant under any circumstances.
5.4. The Exercise Warrant Shares, when issued upon exercise of the
Warrant in accordance with its terms, shall be free and clear of
any liens, claims,
charges, attachments, encumbrances, interests or any other third
party rights or claims of any type or nature whatsoever (a
"Lien"), except in any case that such Lien exists due to an
action or inaction of Mivtach.
5.5. The Warrant shall be exercisable in whole or in part on one or
more occasions during its Term, by the surrender of the Warrant
to the Company with a notice of exercise duly completed and
executed by the holder of the Warrant.
5.6. The Number and the price of the Ordinary Shares which shall be
issued to Mivtach upon exercise of the Warrant shall be subject
to adjustments as provided in the Warrant.
5.7. The Warrant or any part thereof shall only upon conversion of the
Note, if so converted and subject to compliance with applicable
securities laws, be freely transferable.
5.8. The Exercise Warrant Shares shall be deemed Registrable
Securities under the Registration Rights Agreement.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
For the purposes of this Section 6, except for Section 6.1, 6.2, 6.3, 6.4,
6.5, 6.6, 6.16, 6.18, 6.19 and 6.20 the term "Company" shall mean the
Company and/or the Subsidiaries. Accordingly the representations and
warranties in this Section 6 (except for the above-mentioned subsections of
Section 6) shall apply mutatis mutandis to the Subsidiaries as well as to
The Company hereby represents and warrants to Mivtach, and acknowledges
that Mivtach is entering into this Agreement in reliance thereon, as
follows, that at the date hereof:
6.1. Corporate Power: The Company has all requisite corporate power to
enter into and to perform this Agreement and all other agreements
contemplated hereby or which are ancillary hereto and to carry
out the transactions contemplated hereunder.
6.2. Subsidiaries: Except for the Subsidiaries, Micro Components Ltd.
(0eeaei aeoe0ei ao"i), Yuravision Co. Ltd. and Panoptes Ltd., the
Company has no subsidiaries, and does not own, of record or
beneficially, directly or indirectly, any interest or share
capital or equity interest in any other corporation, association,
partnership, joint venture or other business entity.
The Subsidiaries are wholly owned (100%) by the Company and
except as set forth in SCHEDULE 6.2, the shares of the
Subsidiaries held by the Company are free and clear of any liens
or encumbrances or any rights of any third party, fully paid and
The Company has entered into a sale and purchase agreement dated
December 6, 2005 (the "Yura Agreement") with Atek Ltd. ("ATEK")
whereby it has undertaken to sell all of its shares in Yuravision
consideration for one million forty thousand Dollars
(US$1,040,000) and assign to Atek the debt owed by Yuravision to
the Company in consideration for the payment by Atek to the
Company of an amount equal to such debt and interest, within
three (3) years of the consummation of the Yura Agreement, all as
further set forth in the Yura Agreement and the ancillary
documentation attached thereto, a copy of which has been provided
6.3. Organization and Standing:
The Company is a corporation duly organized and validly existing
under the laws of the State of Israel. The Company has all
requisite corporate power to own and operate its properties and
assets, and to carry on its business as presently conducted. The
Company is in good standing in each jurisdiction in which the
nature of its business and its ownership or leasing of property
require that the Company become so qualified, except to the
extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries taken as a whole. The Company has not taken any
action or failed to take any action, which action or failure
would preclude or prevent the Company from conducting its
business after the execution of this Agreement in substantially
the manner heretofore conducted. The Company has all permits,
licenses and any similar authority necessary for the conduct of
its business as now being conducted by it, the lack of which
could adversely affect the business, properties, prospects or
financial condition of the Company. The Company is not in default
under any of such permits, licenses, or other similar authority,
which default would have a material adverse effect on the Company
and its subsidiaries taken as a whole.
6.4. Incorporation Documents: The Company's Articles of Association
(the "ARTICLES") and its Memorandum of Association (the
"MEMORANDUM") as in effect to date are attached hereto as
SCHEDULE 6.4. No act has been effected by the Company and/or its
shareholders and/or to the Company's knowledge, others to wind up
the Company and/or to have it struck out from the Israeli
Registrar of Companies' records.
6.5. Capitalization: The Company's authorized share capital,
immediately prior to the Closing, shall be 60,000,000 shares,
divided into sixty million (60,000,000) Ordinary Shares. The
Company's issued and outstanding share capital immediately prior
to the Closing (without giving effect to the exercise of options
by employees, directors and consultants of the Company or the
exercise of currently exercisable warrants to purchase shares of
the Company) shall consist of twenty six million, seven hundred
sixty two thousand and two hundred and seventeen (26,762,217)
Ordinary Shares, all of which are duly authorized and validly
issued, are fully paid and non-assessable. SCHEDULE 6.5 attached
hereto describes the share capital of the Company, on a Fully
6.6. Authorization: All corporate actions on the part of the Company,
required for the authorization, execution, delivery and
performance by the Company of this Agreement and the consummation
of the transactions contemplated herein have been, or will be,
taken prior to the Closing, including but not limited to the
issuance, sale and delivery of the Convertible Note and the grant
of the Warrant. This Agreement, when executed and delivered by or
on behalf of the Company, shall constitute the valid and binding
obligation of the Company, enforceable in accordance with its
terms. The execution, delivery and performance of the Agreement
and the agreements referred to herein by the Company and the
consummation by the Company of the transactions contemplated
hereby and thereby will not (i) result in a violation of the
Articles, or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material
agreement, indenture or instrument to which the Company is a
party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and
state securities laws) applicable to the Company or by which any
property or asset of the Company is bound or affected. The
Exercise Note Shares, when and if issued, will have been validly
issued and outstanding, fully paid and non-assessable, and will
be free and clear of any Liens, except in any case that such Lien
exists due to an action or inaction of Mivtach.
6.7. Outstanding Debt: Except as set forth in SCHEDULE 6.7 the Company
has no outstanding loans, and is not a guarantor of any debt or
6.8. Taxes: The Company has timely filed all tax returns and tax
reports required by applicable laws. All tax returns and reports
of the Company were true and correct in all material respects
when filed, and the Company has paid all taxes and other
assessments due. The Company made the proper allowance in its
financial statements with respect to any taxes that are due
(other than stamp duty tax) but not yet paid by the Company.
6.9. Contracts and Contractual Arrangements: To the Company's
knowledge, the Company is not in default under any note,
indenture, mortgage, lease, agreement, contract, purchase order
or other instrument, document or agreement to which the Company
is a party or by which it or any of its property is bound or
affected. To the Company's knowledge, no third party is in
material default under any agreement, contract or other
instrument, document or agreement to which the Company is a party
or by which it or any of its property is affected. A list of all
material agreements, executed by the Company from January 1, 2003
to date, are attached hereto as SCHEDULE 6.9(A). Except as
detailed in SCHEDULE 6.9(B), there is no contract, license,
commitment or undertaking to which the Company is a party that
will be in effect after the Closing Date (i) that prohibits or
substantially restricts the Company from freely engaging in any
business in any part
of the world, or (ii) obligating the Company to share, license or
develop any product or technology.
6.10. Indebtedness of or to Major Shareholders; Conflicts of Interest:
6.10.1. Except as detailed in SCHEDULE 6.10.1, none of the
Company's affiliates, holders of ten percent (10%) or
more of the Company's share capital on a Fully Diluted
Basis (a "MAJOR SHAREHOLDER"), directors, officers or
employees is indebted to the Company, and the Company
has no debt or obligation to any of them.
6.10.2. To the best of the Company's knowledge, except for
Panoptes Ltd. ("PANOPTES") and the directors, officers,
employees and consultants of Panoptes, none of the
Company's affiliates, directors, officers or employees,
engages in any activity which competes with the
Company, or directly or indirectly, owns any material
interest in any entity which is a competitor of the
6.10.3. To the Company's knowledge, none of the Company's
affiliates, Major Shareholders, directors, officers or
employees (i) has any interest in the assets,
technology or know-how used or held by the Company or
which is required for the Company to operate its
business; (ii) is a party to any contract or business
arrangement with the Company or any contract affecting
the assets, technology or know-how used or held by the
Company or which is required for the Company to operate
its business; or (iii) has any interest in any other
transaction related to the assets, technology or
know-how used or held by the Company or which is
required for the Company to operate its business.
6.11. Litigation: Except as detailed in SCHEDULE 6.11 there is no
civil, criminal or arbitration proceedings involving the Company.
To the Company's knowledge, no such proceedings and no claims of
any nature are pending or threatened in writing against the
Company or the officers or directors of the Company, in their
capacity as such, and to the Company's knowledge, there are no
facts likely to give rise to any such proceedings.
6.12. Title to Properties; Liens and Encumbrances: The Company owns, or
holds under lease, all real and personal property used by it in
6.13. Leases: The SEC Document (as defined below) contains a correct
and complete list of all leases under which the Company leases
property, real or personal. SCHEDULE 6.13 sets forth the rent
payments of each such lease as of December 1, 2005.
6.14. Business of the Company: Except as detailed in SCHEDULE 6.14 the
Company has no actual knowledge of: (i) pending or planned
patent, invention, device, application or principle, or any
statute, rule, law,
regulation, standard or code which would materially adversely
affect the condition, financial condition, or the business
operations, of the Company; or (ii) other factor (excluding such
factors which are of general applications such as political,
economic, general market conditions, etc.) which could reasonably
be expected to materially adversely affect the financial
condition, or the operations, of the Company.
6.15. Compliance with Other Instruments: The Company is not in
violation of the terms of its Articles and/or the Memorandum as
amended and in effect on and as of the date hereof, and it is not
to its knowledge, in any violation of the terms of any judgment,
decree, order, statute, rule or regulation to which it is
6.16. Employees; Directors and Major Shareholders:
6.16.1. SCHEDULE 6.16(A) contains a complete and accurate list
of all employees of the Company with a correct summary
of their material terms of employment. SCHEDULE 6.16(B)
lists the non disclosure, confidentiality,
non-competition and proprietary information agreements
between the Company and its key employees.
6.16.2. To the Company's knowledge, no key employee, officer,
or director(each, a "REPRESENTATIVE" and collectively,
the "REPRESENTATIVES") is a party to, or otherwise
bound by, any agreement or arrangement (including any
confidentiality, non-competition, proprietary rights
agreement, licenses, covenants or commitments of any
nature), between such Representative and any other
person, or subject to any order or any other
restriction that in any way adversely affects the
performance of such Representative's duties as an
employee, officer or director Company. With the
exception of Xxxxxx Xxxxxx, none of the Company's
directors, officers, or key employees has informed the
Company that he intends to terminate his employment
6.17. Labor Relations; Compliance.
6.17.1. The Company is not bound by or subject to any
non-standard contracts, commitments or arrangements
with any labor union.
6.17.2. The Company has complied in all material respects with
all material legal requirements relating to employment,
wages, hours, benefits, collective bargaining, the
payment of social security and similar taxes,
occupational safety and health.
6.17.3. The Company does not have any material labor relations
problem pending, or to the knowledge of the Company,
threatened and its labor relations are satisfactory.
6.17.4. All former employees, if any, and directors of the
Company that contributed to the development of the
business of the Company have entered into a written
agreement with the Company, under
which all copyrights on any invention or patents
invented by one of the above in the framework of his or
her service with the Company and during the term of his
engagement with the Company, belong solely to the
6.18. Licenses, Patents, Trademarks
6.18.1. For purposes of this Agreement, "INTELLECTUAL PROPERTY"
means the following items of intangible and tangible
18.104.22.168. Patents, whether in the form of utility
patents or design patents and all pending
applications for such patents;
22.214.171.124. Trademarks, trade names, service marks,
designs, logos, trade dress, and trade
styles, whether or not registered, and all
pending applications for registration of the
126.96.36.199. Copyrights, whether or not registered, and
all pending applications for registration of
188.8.131.52. Inventions, research records, trade secrets,
confidential information, product designs,
engineering specifications and drawings,
technical information, formulae, customer
lists, supplier lists and market analysis;
184.108.40.206. Computer programs and related flow-charts,
programmer notes, updates and data, whether
in object or source code form.
6.18.2. The Company has good title to and/or ownership of,
and/or valid and enforceable licenses to use all of its
Intellectual Property that is used in the conduct of
the Company's business. A list of all such licenses,
other than licenses for off-the-shelf products, is
attached hereto as SCHEDULE 6.18.2.
6.18.3. The Company has taken reasonable security measures,
including measures against unauthorized disclosure, to
protect the secrecy, confidentiality and value of its
trade secrets and other technical information.
6.18.4. To the Company's knowledge, the use of the Company's
Intellectual Property in the business of the Company,
as contemplated does not constitute an infringement,
misappropriation or misuse of any intellectual property
rights of any third party. There are no claims pending
and, to the Company's knowledge, no claims threatened
in writing against the Company or its directors
regarding the use of, or challenging or questioning the
Company's right or title in the Company's Intellectual
Property or the use of it.
6.18.5. Except as set forth in SCHEDULE 6.18.5 the Company has
no registered patents, trademarks and copyrights,
pending patent, trademarks and copyright applications.
6.18.6. Except as set forth in SCHEDULE 6.18.6 the Company's
Intellectual Property rights are sufficient to enable
the Company to carry on their business as presently
6.19. Financial Reports:
6.19.1. A true and complete copy of the audited, consolidated
financial statements of the Company for the year ended
December 31, 2004 is attached hereto in SCHEDULE
6.19.1(A) (the "YEARLY FINANCIAL STATEMENTS"); a true
and complete copy of the unaudited financial reports
for the period ended September 30, 2005 (including
balance sheet, statement of income, changes in
shareholders' equity and cash flow), is attached hereto
as SCHEDULE 6.19.1(B) (the "QUARTERLY FINANCIAL
STATEMENTS"). The Yearly Financial Statements and the
Quarterly Financial Statements (the "FINANCIAL
STATEMENTS") were prepared in conformity with generally
accepted accounting principles in the U.S. (except (i)
as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may
not include footnotes or may be condensed or summary
statements). The Financial Statements present fairly in
all material respects the financial condition, the
results of operations, changes in shareholders' equity
and cash flow of the Company as of such date and for
the periods referred to in such Financial Statements
(subject, in the case of unaudited statements, to
normal year-end audit adjustments).
6.19.2. Other than as disclosed in the Financial Statements,
the Company has no liabilities, debts or obligations,
whether accrued, absolute or contingent.
6.19.3. Except as set forth on SCHEDULE 6.19.3, since September
30, 2005 and until the date of this Agreement the
Company has not consummated any of the following: (i)
merger or acquisition, (ii) transaction which on its
face represents ten percent (10%) of the Company's
activities during the fourth fiscal quarter of 2005,
(iii) created or extended any credit facility, and (iv)
event which is out of the ordinary course of business
of the Company. Since September 30, 2005, there has not
been any event or condition of any character which has
materially adversely affected the Company's business,
prospects or plans.
6.19.4. The books of account, minute books, share record books,
and other records of the Company are complete and
correct in all material respects.
6.20. Plan: The Company's principals for the 2006 budget are set forth
in SCHEDULE 6.20 (the "PLAN"). The assumptions set forth in the
Plan are reasonable and have been prepared in good faith, and the
financial projections therein, if any, have been prepared with
care and consideration, and there are no other facts or matters
of which the Company is aware which could render any such
assumptions or projections, if any, misleading, provided,
however, that no assurance can be or is given that the
assumptions are correct or any of the forecast projections
expectations or transactions contemplated therein, if any, will
6.21. Title to Property and Assets: Except as set forth in SCHEDULE
6.21, the Company owns its property and assets which is material
to the business of the Company free and clear of all mortgages,
liens, loans and other encumbrances, except such encumbrances
which arise in the ordinary course of business and do not
materially impair the Company's ownership or use of such property
or assets. With respect to the property and assets it leases or
licenses, the Company is in compliance with all applicable lease
or license agreements, except where failure to be in compliance
would not result in a material adverse effect on the Company,
taken as a whole.
To the Company's knowledge, all of the material property and
assets used by the Company in the operation of its business are
in good operating condition and are in the state of good repair
and maintenance, subject to normal wear and tear.
6.22. Governmental Consents: No consent, approval, order or
authorization of, or registration, qualification, designation,
declaration or filing with, any Israeli governmental authority on
the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or
issuance of securities of the Company hereunder that will not be
obtained prior to Closing.
6.23. Insurance: SCHEDULE 6.23 hereto lists all policies of insurance
to which the Company is a party. Such policies are valid,
outstanding, and enforceable, and, (i) are issued by insurers of
recognized financial responsibility; (ii) taken together, they
provide adequate insurance coverage against such losses and risks
and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company is
6.24. Directors, Officers: A list of the directors and officers of the
Company as at the date of the execution of this Agreement is
attached as SCHEDULE 6.24 hereto.
6.25. Disclosure: This Agreement does not contain any untrue statement
of a material fact and does not omit to state any material fact
necessary in order to make the statements contained herein in
light of the circumstances under which they were made not
misleading in view of the circumstances in which they were made
and said statements including and all other documentation
provided by the Company to Mivtach or to Mivtach's advisors,
represent full disclosure by the Company as of the date of this
Agreement of all matters which the Company's deems are reasonably
required to be disclosed to Mivtach in order for Mivtach to make
and informed investment decision. The
Company is not aware of any facts which are reasonably likely to
have an adverse material effect on the Company's business as
presently conducted or on it current financial condition, which
have not been previously disclosed to the Mivtach. For purposes
of this Section 6.25, material shall be deemed as any amount/s,
action/s or transaction/s equal to or greater than, individually
or in the aggregate, five hundred thousand Dollars (US$500,000).
7. REPRESENTATIONS AND WARRANTIES OF MIVTACH
Mivtach represents and warrants to the Company as follows, that as of the
7.1. Organization: The Mivtach is a corporation duly registered and
validly existing under the law of the state of Israel.
7.2. Authorization: By the Closing, all corporate actions on the part
of Mivtach, its directors, and/or shareholders necessary for the
authorization, execution, delivery, payment and performance by
Mivtach of this Agreement and the consummation of the
transactions contemplated herein, shall have been taken. Mivtach
acknowledges and agrees that the Company does not make or has
made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically
set forth in Section 6 above.
7.3. No Conflicts: The execution, delivery and performance of the
Agreement and the agreements referred to herein by Mivtach and
the consummation by Mivtach of the transactions contemplated
hereby and thereby will not (i) result in a violation of the
Articles of Association of Mivtach, or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation
of, any material agreement, indenture or instrument to which
Mivtach is a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal
and state securities laws) applicable to Mivtach or by which any
property or asset of Mivtach is bound or affected.
7.4. Confidentiality: Mivtach understands that the information
provided or presented to it is strictly confidential and
proprietary to the Company and has been prepared from the
Company's publicly available documents and other information and
is being submitted to Mivtach solely for Mivtach's confidential
use. Mivtach agrees to use the information for the sole purpose
of evaluating a possible investment in the Convertible Note and
Securities pursuant to this Agreement and Mivtach hereby
acknowledges that it is prohibited from reproducing or
distributing the offering materials or other information provided
by the Company in connection with Mivtach's consideration of
entering into this Agreement, or divulging or discussing any of
Mivtach understands that the federal securities laws impose
restrictions on trading based on information regarding this
7.5. SEC Document: Mivtach confirms that it has received and reviewed
a copy of the Company's Annual Report on Form 20-F for the year
ended December 31, 2004 (the "SEC DOCUMENT").
8. CONDITIONS OF MIVTACH TO CLOSING
The obligation of Mivtach at the Closing to transfer the Principal Amount
to the Company, as referred to in Section 2.2 hereof, is subject to the
fulfillment of each of the following conditions:
8.1. Representations and Warranties: The representations and
warranties made by the Company in Section 6 hereof shall be true
and correct in all material respects upon the Closing, with the
same force and effect as if they had been made immediately prior
to the Closing, and as of such time except for such changes which
result from the obligations of the parties to this Agreement.
8.2. Performance: All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Company
on or prior to Closing shall have been performed or complied with
in all respects.
8.3. Compliance Certificate: The Company shall have delivered to the
Mivtach a certificate of its Chief Financial Officer on behalf of
the Company, dated as of the date of Closing, certifying to the
fulfillment of the conditions specified in Sections 8.1 and 8.2
of this Agreement in substantially the form attached hereto as
8.4. Share Purchase Transaction : An agreement for the purchase by
Mivtach of an aggregate of 2,939,192 Ordinary Shares of the
Company from S.R. Master Investments (2002) Ltd., R.D. Master
Investments (2002) Ltd. and Xxxxx Xxxxxxx shall be consummated
prior to or concurrently with this Agreement.
8.5. Due Diligence and Disclosure: Mivtach shall be satisfied in its
sole discretion with the results of its business, financial and
legal due diligence investigations concerning the Company and the
8.6. New Shareholders Agreement: A new Shareholder Agreement in the
form attached as SCHEDULE 8.6 shall be executed by the parties
thereto (the "NEW SHAREHOLDER AGREEMENT").
8.7. New Articles of Association: The Company shall adopt new Articles
of Association in the form attached as SCHEDULE 8.7, which shall
replace the current Articles.
8.8. 2005 Financial Results: The Company's shall present reviewed,
consolidated financial statements of the Company for the year
ended December 31, 2005 reflecting net profit of one point one
million Dollars (US$ 1,100,000), before the purchase price
allocation which is due to the acquisition of ScanMaster.
8.9. Yuravision Transaction: the YuraAgreement shall have been
consummated and performed in accordance with its terms.
8.10. Qualifications: The consent of the following entities to the
transactions contemplated hereunder shall have been obtained by
the Company and shall be effective on and as of the Closing: (i)
Investment Center; (ii) Office of the Chief Scientist; (iii)
Cornell Capital Partners LP; (iv) Bank Hapoalim.
8.11. Mivtach's Option: In the case of any condition referred to in
Sections 8.1 through 8.8 and 8.10 to be performed or complied
with at or prior to the Closing Date shall not have been so
performed or complied with, Mivtach may without limiting any
other right that Mivtach may have, at their sole option either:
8.11.1. rescind this Agreement by notice to the Company, and in
such event the Mivtach shall be released from all
obligations hereunder and Mivtach shall have no
recourse against the Company, provided however that in
the event the shareholders of the Company have not
approved the transactions contemplated hereunder, the
Company shall be obliged to reimburse Mivtach 50% of
its transaction costs; or
8.11.2. waive compliance with any such term, covenant or
condition in whole or in part; provided however that
Mivtach shall receive the Company's approval in writing
to waiving compliance with the conditions set forth in
Sections 2.3(e), 2.3(f) or 8.8.
8A FAILURE TO COMPLETE YURA AGREEMENT
Notwithstanding anything else to the contrary in the Transaction Documents,
in the event that the Yura Agreement is not consummated prior to the
Closing, US$1,500,000 of the Principal Amount (the "Escrow Sum") shall be
paid into an escrow account (the "Escrow Account"). Prior to the Closing
the parties shall agree upon the identity of the escrow agent and the terms
of the Escrow Account. The Escrow Sum shall be considered part of the
Principal Amount for the purposes of repayment or conversion in accordance
with the terms of the Transaction Documents. In the event of conversion,
the remaining amount of the Escrow Sum shall be released from the Escrow
Account to the Company. Upon receipt by the Company of any or all of the
US$1,040,000 due to the Company for the sale of the shares of Yuravision
under the Yura Agreement, a relative portion of the Escrow Sum equal to the
relative portion paid under the Yura Agreement, will be released from the
Escrow Account to the Company. In the event that the Yura Agreement is not
consummated prior to the completion of the Conversion Period, the sum
remaining in the Escrow Account shall be made available for repayment of
the Principle Amount in accordance with the terms of Section 4.3 herein,
unless previously converted by Mivtach, in accordance with the terms of the
Transaction Documents. If necessary, the Transaction Documents shall be
revised in accordance with this Section mutatis mutandis.
9. COVENANTS OF THE PARTIES
9.1. The Company hereby undertakes to produce a budget for the Company
for 2006 in accordance with the principles set forth in the Plan
and present such budget to the Board of Directors of the Company
for its approval no later than March 31, 2006 (the: "2006
BUDGET"). The Plan as well as the 2006 Budget shall provide that
the Principal Amount shall not be used by the Company for
discharging any debt to shareholders and/or directors and/or
employees which has not been created in the ordinary course of
9.2. Notwithstanding Section 9.1, the Company hereby undertakes to
make its best efforts in order to repay the whole debt owed to
Cornell Capital Partners LP, including by the use of up to two
hundred fifty thousand Dollars ($250,000) of the Principal
Amount, by no later than June 30, 2006, in a manner which shall
terminate the Pledge and Escrow Agreement and the Promissory Note
as between the Company and Cornell.
9.3.1. Mivtach has the right to rely fully upon all
representations and warranties of the Company (the
"INDEMNITOR") contained in this Agreement and the
Schedules referenced in Section 6 (the "DISCLOSURE
SCHEDULE"). All such representations and warranties
shall survive the execution and delivery of this
Agreement and until the second anniversary of the
9.3.2. The Indemnitor agrees to indemnify, defend
and hold harmless Mivtach and its successors
and assigns from and against all proven
claims, actions, suits, losses, liabilities,
damages, judgments, settlements, and other
reasonable expenses including reasonable
attorneys' fees and disbursements incurred in
connection with enforcing this
indemnification (collectively, "LOSSES")
based upon, arising out of in respect of any
material breach of any representation or
warranty made by the Indemnitor contained in
this Agreement or the Disclosure Schedules
(the "INDEMNIFICATION EVENT").
9.3.3. In the event that Mivtach shall sustain any
Losses in respect of which indemnification
may be sought by it pursuant hereto, Mivtach
shall assert a claim for indemnification by
giving prompt written notice thereof (a
"CLAIMS NOTICE"), which shall describe in
reasonable detail the facts and circumstances
upon which the asserted claim for
indemnification is based, to the Indemnitor,
and shall thereafter keep the Indemnitor
reasonably fully informed with respect
that failure of Mivtach to give the
Indemnitor prompt notice as provided herein
shall not relieve the Indemnitor of any of
its obligations hereunder, except to the
extent that the Indemnitor is prejudiced in
its ability to defend such action. Upon
receipt of the Claims Notice, the Indemnitor
shall have the right to participate in.
Mivtach shall cooperate fully with Indemnitor
in connection with any negotiation or defense
of any such action by the Indemnitor and
shall furnish to the Indemnitor all
information available to Mivtach, as
applicable, which relates to such action. No
indemnifying party shall be liable for any
settlement of any action, claim or proceeding
effected without its prior written consent,
provided, however, that the indemnifying
party shall not unreasonably withhold, delay
or condition its consent. Following
indemnification as provided for hereunder,
the Indemnitor shall be subrogated to all
rights of Mivtach, with respect to all third
parties, firms or corporations relating to
the matter for which indemnification has been
9.3.4. The indemnification required by this Section
9 shall be made, within ten (10) business
days of a judicial determination or a final
settlement relating to the Losses.
9.3.5. The maximum amount of indemnification made by
the Company to all Indemnitor under this
Section 9 shall not exceed, in the aggregate,
the Principal Amount.
9.3.6. Except in the case of fraud, the
indemnification accorded to an Indemnified
Party under this Section 9 shall be the
exclusive remedy of Mivtach.
10.1. Arbitration: All disputes arising under this Agreement or in
connection with the transactions hereunder shall be resolved
between the parties in good faith, however, if these efforts fail
the dispute shall be resolved by arbitration by a sole
arbitrator. The arbitrator shall be chosen by agreement of the
parties hereto. If they fail so to agree within twenty (20) days
after a party shall have requested such arbitration, the
arbitrator shall be appointed by the Chairman of the Israel Bar.
The arbitration proceedings will take place in Tel-Aviv, Israel.
The arbitrator shall not be bound by any judicial rules of
evidence or procedure but he shall be bound by the substantive
law of Israel and he will have to elaborate the grounds of his
decision. The arbitral award shall be final and binding upon the
parties, and judgment upon the award may be entered in any court
having jurisdiction, or application may be made to such court for
a judicial acceptance of the award or for an order of
enforcement, as the case may be.
Subject to the above-mentioned arbitration provisions, the sole
jurisdiction for disputes arising under this Agreement shall be
vested with the courts of Tel-Aviv, Israel.
10.2. Successors and Assigns: Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and
be binding upon, the successors, assignees, heirs, executors and
administrators of the parties hereto.
10.3. Entire Agreement; No Rights in Favor of Third Party; Amendments:
This Agreement (including the Schedules attached hereto) and the
other documents delivered pursuant hereto constitute the full and
entire understanding and agreement between the parties with
regard to the subject matters hereof and thereof shall supersede
all prior agreements and understandings relating thereto, the
Term Sheet included. This Agreement shall not be construed as
conferring any rights to any person not a party hereto. Neither
this Agreement nor any term hereof may be amended, waived,
discharged or terminated except by an instrument in writing
signed by the parties hereto.
10.4. Notices: All notices and other communications required or
permitted to be given or sent hereunder shall be in writing and
shall be deemed to have been sufficiently given or delivered for
all purposes if mailed by registered mail, sent by fax or
delivered by hand to the following respective addresses until
otherwise directed by notice as aforesaid:
To Mivtach: Mivtach-Shamir Holdings Ltd.
00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxx-Xxxx 00000, Xxxxxx
With a copy to: Xxxxxx Xxxxxxx Schnitzer, Adv.
Shnitzer, Xxxxxxx, Xxxxxx & Co.
Gibor Sport Xxxx 00xx xxxxx
0 Xxxxxxxx Xxxxx Xxxxxx,
Xxxxx Xxx 00000, Israel
To the Company: Elbit Vision Systems Ltd.
Xxx Xxxxxxxxxx Xxxx
Fax: 04 -9894733
Attention: Chief Executive Officer
With a copy to: Xxxxx Xxxxxxxx, Adv.
Xxxxx Xxxxx & Co.
One Azrieli Xxxxxx (Xxxxx Xxxxx)
Xxx Xxxx 00000
provided, however, that notice of change of address shall be effective only
upon actual receipt.
All notices sent by registered mail shall be deemed to have been
received: (i) within three (3) business days following the date
on which it was deposited postage prepaid in the mail; (ii)
within one (1) business day after it was transmitted by fax and
confirmation of receipt has been obtained; and (iii) if delivered
by hand shall be deemed to have been received at the time of
10.5. Delays or Omissions: No delay or omission to exercise any right,
power or remedy, upon any breach or default under this Agreement,
shall impair any such right, power or remedy of such holder nor
shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of any similar breach or
default thereafter occurring.
10.6. Waiver of Default: No waiver with respect to any breach or
default in the performance of any obligation under the terms of
this Agreement shall be deemed to be a waiver with respect to any
subsequent breach or default, whether of similar or different
nature. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default
under this Agreement, or any waiver on the part of any holder of
any provisions or conditions of this Agreement shall be effective
only if made in writing and only to the extent specifically set
forth in such writing. All remedies, either under this Agreement
or by virtue of law or otherwise afforded to any holder, shall be
cumulative and not alternative.
10.7. Rights; Severability: In case any provision of the Agreement
shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby. The parties hereto
shall be obliged to draw up an arrangement in accordance with the
meaning and the object of the invalid provision.
10.8. Expenses: Each party to this Agreement shall bear and pay all of
its costs, fees and expenses (including legal, investment
banking, accounting and other professional fees) incurred in
connection with the transaction.
10.9. Announcements: Any public announcement made by either Mivtach or
the Company concerning this proposed transaction shall be made in
a form mutually agreed between the two. Notwithstanding the
foregoing, each party shall be permitted to issue any press
release or make any public statement as such party is advised by
counsel is legally required to be issued or made under any
applicable laws; provided, however, that in such event the party
issuing such press release or making such public
statement will provide the other party with prompt written notice
of such requirement and a copy of the press release to be issued
or public statement to be made, and the parties shall use
reasonable commercial efforts to coordinate the content of such
press release or public statement.
10.10. Titles and Subtitles: The titles of the sections and subsections
of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
10.11. Governing Law: This Agreement shall be governed exclusively by,
and construed solely in accordance with, the laws of the State of
Israel, excluding the choice of law rules thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement one or more
counterparts, as of the date first above-mentioned.
MIVTACH-SHAMIR HOLDINGS LTD. ELBIT VISION SYSTEMS LTD.