Elbit Vision Systems Limited Announces Agreement with Investor for the Purchase of EVS shares for $3,000,000.

Business Editors

YOQNEAM, Israel--(BUSINESS WIRE)--Feb. 8, 2001

Elbit Vision Systems Ltd. (OTCBB:EVSN.OB) announced today that it had entered into an agreement with an investor for the purchase of 3,000,000 EVS shares for $3,000,000 (the "EVS Investment Agreement") as part of a series of interdependent transactions.

Nir Alon ("Alon"), the CEO of Altro Warenhandels GmbH ("Altro"), a company owned by Alon's family, with an annual turnover of approximately $80,000,000 and which has developed an established network for the trade and production of cotton and cotton fabrics throughout the world, will be investing an aggregate sum of $3,000,000 in EVS.

Commenting on the transaction, Ofer Yuval, President and CEO of EVS, stated: "This is a strategic investment by an investor that has a deep understanding of our industry and is demonstrating a long-term commitment to the success of EVS. This major investment is a significant achievement in the light of current conditions in the financial markets and represents a clear vote of confidence in the future of EVS.

"We are confident that we can continue to develop and strengthen our business and maintain the quarterly positive trend achieved since Q2 2000. We are market leaders with the technology to support this leadership. Our strategy is to strengthen our presence in the market whilst improving our financial performance.

"Automatic inspection of fabrics is vital for fabric manufacturers who are committed to maintaining a competitive edge and EVS is in the best position to answer this need."

Nir Alon stated that EVS has significant growth potential in the global textile market, which will be enhanced by the combination of Altro's worldwide distribution network and EVS' technological capabilities and advanced products. He added, "I intend to take an active part in expanding EVS' customer base, using my considerable experience in the textile field."

According to the terms of the EVS Investment Agreement, Alon's investment will be made in two tranches, each at a price of $1.00 per share: $1,500,000 upon consummation of the transaction and in the event that EVS achieves certain specified milestones with respect to its financial results for 2001, a further $1,500,000, by no later than March 15, 2002.

This investment is dependent upon the consummation of two related transactions: the sale of EVS shares by Elbit Ltd. (Nasdaq: ELBTF) to Alon (the "Purchase Agreement"), and the investment by Elbit Ltd. in Cell Data Ltd. ("Cell Data"), an Israeli company in which Altro is a majority shareholder (the "Cell Data Transaction"). Pursuant to the Purchase Agreement, Elbit Ltd., which is currently EVS' major shareholder, has undertaken to sell to Alon approximately 3.5 million shares in EVS at a price of $1.00 per share in two tranches. In the first tranche, Alon will purchase 2,000,000 EVS shares from Elbit Ltd., at a price of $2 million, and in the second tranche, in the event that EVS achieves the above-referenced milestones, approximately 1,500,000 EVS shares will additionally be purchased by Alon from Elbit Ltd. by no later than March 15, 2002.

Following the first tranche of both the EVS Investment Agreement and the Purchase Agreement, Alon will hold approximately 34% of EVS' issued and outstanding share capital, and Elbit will hold approximately 26%, of EVS' issued and outstanding share capital. Upon completion of the first tranche of the Purchase Agreement, Elbit will grant Alon a proxy to vote 10% of EVS shares held by Elbit Ltd., which proxy will be revoked if the second tranche of the purchase transaction is not completed.

Following the second tranche of both the EVS Investment Agreement and the Purchase Agreement, Alon will hold approximately 56% of EVS' issued and outstanding share capital at such time, and Elbit, subject to the terms of the proxy arrangement, will hold 10%, of EVS' issued and outstanding share capital at such time.

Upon consummation of the EVS Investment Agreement, EVS' Board of Directors will be increased to nine, Alon will be appointed Chairman of the Board of Directors and he will be entitled to three additional members on Board of Directors.

Pursuant to the Cell Data Transaction, Elbit Ltd. will invest in Cell Data $4.5 million in two tranches (representing a total of 21.43% of Cell Data's issued and outstanding share capital, at a pre-money valuation of $16.5 million). Initially, Elbit Ltd. will invest $3 million and, upon the achievement of certain commercial milestones, a further $1.5 million. Cell Data operates in the field of cellular modems utilizing N-AMPS and CDMA technology.

All of the aforementioned transactions are interdependent and are subject, therefore, to receipt of the EVS shareholders approval of the EVS Investment Agreement and to the approvals of certain authorities and other third parties.

Alon has entered into an agreement with a director of EVS, Mr. Joseph Barath ("Mr. Barath"), granting him an option to purchase 75,000 EVS shares held by Alon at an exercise price of $1.00 per share with a 10-year exercise period. Six months thereafter, an option to acquire an additional 75,000 EVS shares held by Alon will be granted to Mr. Barath on the same terms; such grant being at Alon's sole discretion.

About the Company

Elbit Vision Systems Limited designs, develops, manufactures, markets and supports automatic optical inspection and quality monitoring systems for the textile and the non-woven industries. The Company's systems, marketed under the brands ITEX (TM) and PRINTEX (TM) are designed to increase the accuracy, consistency and speed of detecting and identifying defects in the manufacturing process in order to improve product quality and increase production efficiency.

Forward looking statements in this release with respect to the Company's business, financial condition and results of operations are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward looking statements, including, but not limited to, product demand, pricing, market acceptance, changing economic conditions, risks in product and technology development, the effect of the Company's accounting policies as well as certain other risk factors which are detailed from time to time in the Company's SEC filings