Exhibit 10.1
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 |
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The
annexes to this agreement are an integral part hereof. |
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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: |
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1.1. |
“Ordinary
Shares” means the ordinary shares of the Company, nominal value
1.00 New Israeli Shekel per share. |
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1.2. |
“Dollar(s)” or
“$” shall mean United States dollar(s). |
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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. |
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1.4. |
“Subsidiaries” shall
mean: Elbit Vision Systems US Inc; Elbit Vision Systems B.V.; ScanMaster
Systems (IRT) Ltd. (“ScanMaster”) & IRT ScanMaster
Systems, Inc. |
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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. |
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1.6. |
“Transaction
Documents” shall mean this Agreement and all Schedules attached
hereto. |
| 2. |
ISSUANCE
OF THE CONVERTIBLE NOTE & GRANT OF THE WARRANT |
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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: |
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2.1.1. |
issue
to Mivtach a Convertible Note in the agreed form attached hereto as Schedule 2.1.1 (the “Convertible Note”). |
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2.1.2. |
issue
and grant to Mivtach a Warrant in the agreed form attached as Schedule 2.1.2 hereto (the “Warrant”). |
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2.2. |
At
the Closing (as defined below) Mivtach shall transfer the Principal Amount
(as defined hereunder) to the Company. |
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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): |
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(a) |
an
executed management services agreement with the Chairman of the Board to be
appointed as described in Section 2.3 (e) below. |
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(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 terminated. |
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(c) |
an
executed legally binding registration rights agreement in the agreed form
attached hereto as Schedule 2.3(c) (the
“Registration Rights Agreement”). |
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(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 |
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(e) |
a
true and correct copy of the resolution of the Company’s shareholders
substantially in a form mutually agreed upon by the parties; |
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(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 |
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(g) |
A
Compliance Certificate as mentioned in Section 8.3 below. |
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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 |
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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. |
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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. |
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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”). |
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4.2. |
SECURITY
FOR THE LOAN – |
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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. |
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4.3. |
REPAYMENT
OF THE LOAN AMOUNT – |
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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. |
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4.3.2. |
The
Loan Amount shall not be prepayable in whole or in part by the Company
without the prior written consent of Mivtach. |
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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. |
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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. |
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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. |
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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. |
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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. |
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4.4.4. |
The
Exercise Note Shares shall be deemed Registrable Securities under the
Registration Rights Agreement. |
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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
transferable. |
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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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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5.8. |
The
Exercise Warrant Shares shall be deemed Registrable Securities under the
Registration Rights Agreement. |
| 6. |
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY |
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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. |
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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: |
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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. |
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6.2. |
Subsidiaries: Except
for the Subsidiaries, Micro Components Ltd., 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. |
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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
non-assessable. |
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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 in 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 to Mivtach. |
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6.3. |
Organization
and Standing: |
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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. |
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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. |
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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 Diluted Basis. |
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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. |
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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
obligation. |
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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. |
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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. |
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6.10. |
Indebtedness
of or to Major Shareholders; Conflicts of Interest: |
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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. |
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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 Company. |
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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. |
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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. |
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6.12. |
Title
to Properties; Liens and Encumbrances: The Company owns, or holds
under lease, all real and personal property used by it in its business. |
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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. |
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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. |
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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 subject. |
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6.16. |
Employees;
Directors and Major Shareholders: |
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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. |
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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 with it. |
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6.17. |
Labor
Relations; Compliance. |
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6.17.1. |
The
Company is not bound by or subject to any non-standard contracts,
commitments or arrangements with any labor union. |
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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. |
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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. |
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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 Company. |
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6.18. |
Licenses,
Patents, Trademarks |
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6.18.1. |
For
purposes of this Agreement, “Intellectual Property”means the
following items of intangible and tangible property: |
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6.18.1.1. |
Patents,
whether in the form of utility patents or design patents and all pending
applications for such patents; |
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6.18.1.2. |
Trademarks,
trade names, service marks, designs, logos, trade dress, and trade styles,
whether or not registered, and all pending applications for registration
of the same; |
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6.18.1.3. |
Copyrights,
whether or not registered, and all pending applications for registration
of the same; |
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6.18.1.4. |
Inventions,
research records, trade secrets, confidential information, product
designs, engineering specifications and drawings, technical information,
formulae, customer lists, supplier lists and market analysis; and |
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6.18.1.5. |
Computer
programs and related flow-charts, programmer notes, updates and data,
whether in object or source code form. |
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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. |
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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. |
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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. |
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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. |
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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 conducted. |
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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 theQuarterly
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). |
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6.19.2. |
Other
than as disclosed in the Financial Statements, the Company has no
liabilities, debts or obligations, whether accrued, absolute or
contingent. |
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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. |
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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. |
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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 due diligence, 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 be
attained. |
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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. |
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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. |
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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. |
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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
engaged. |
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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. |
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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 |
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Mivtach
represents and warrants to the Company as follows, that as of the date hereof: |
| |
7.1. |
Organization:
The Mivtach is a corporation duly registered and validly existing under
the law of the state of Israel. |
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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. |
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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. |
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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 their contents. Mivtach understands that the federal securities
laws impose restrictions on trading based on information regarding this
offering. |
| |
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 |
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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. |
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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 Schedule 8.3. |
| |
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 Subsidiary. |
| |
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 Yura Agreement 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 business. |
| |
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. |
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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 Closing Date. |
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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”). |
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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
thereto; provided 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 made. |
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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: |
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To Mivtach: |
Mivtach-Shamir Holdings Ltd. |
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|
00 Xxxxxxxx Xxxxxx |
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|
Xxxxxx, Xxx-Xxxx 00000, Xxxxxx |
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Tel: 00-0000000 |
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|
Fax: 00-0000000 |
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|
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With a copy to: |
Xxxxxx Xxxxxxx Schnitzer, Adv. |
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|
Shnitzer, Xxxxxxx, Xxxxxx & Co. |
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|
Gibor Sport Xxxx 00xx xxxxx |
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0 Xxxxxxxx Xxxxx Xxxxxx, |
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|
Xxxxx Xxx 00000, Israel |
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|
Tel: 00-0000000 |
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|
Fax: 00-0000000 |
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To the Company: |
Elbit Vision Systems Ltd. |
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|
Xxx Xxxxxxxxxx Xxxx |
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|
X.X.X. 000 |
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|
Xxxxxxx 00000 |
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|
Xxxxxx |
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Fax: 00-0000000 |
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|
Attention: Chief Executive Officer |
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With a copy to: |
Xxxxx Xxxxxxxx, Adv. |
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Xxxxx Xxxxx & Co. |
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One Azrieli Xxxxxx (Xxxxx Xxxxx) |
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00xx Xxxxx |
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Xxx Xxxx 00000 |
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|
Xxxxxx |
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Fax: 00-0000000 |
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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 actual receipt. |
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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. |
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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. |
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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. |
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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.
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| Mivtach-Shamir Holdings Ltd. |
Elbit Vision Systems Ltd. |
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|
| By:____________________ |
By: ________________________ |
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|
| Signature:______________ |
Signature: __________________ |
