Elron Electronic Industries Ltd. Makes Announcement.

Business & Technology Editors

HAIFA, Israel--(BUSINESS WIRE)--March 3, 2000

Elron Electronic Industries Ltd. (Nasdaq:ELRNF) a leading multinational high technology holding company, further to its announcement of February 29, 2000, announced that Elbit Ltd. (Nasdaq:ELBTF), in which Elron holds approximately 42% interest, signed today a detailed agreement for the sale of the entire share capital of Peach Networks Ltd. ("Peach") to Microsoft Corporation ("Microsoft"). Elbit Ltd. holds approximately 57% of Peach, on a fully diluted basis, for which it will receive a cash payment of approximately $43 million. Subject to the completion of the transaction, Elbit Ltd.'s net income after tax from the transaction is estimated at approximately $35 million and Elbit will record a net capital gain of approximately $30 million. Elron will record a gain of approximately $12.5 million from the transaction, if completed.

The closing of the transaction is expected to take place within thirty days of the date of signature of the agreement, subject to various conditions, including: receipt of the approval of the Israel Supervisor of Restricted Trades Practices; the consent of at least 65% of Peach's key employees, and at least 65% of Peach's other employees, to employment by Microsoft; an agreed solution with the tax authorities concerning the exchange of employee options with options in the company by whom they will be employed following the closing.

Under the agreement, $7 million from the overall consideration paid for the shares will be deposited in an escrow account, to secure representations and performance of contractual obligations, for an eighteen-month period (Elbit's share is in proportion to its relative share in the transaction). The agreement contains a non-competition undertaking and also establishes arrangements (supported by a pre-ruling) concerning the tax consequences of the transaction.

Peach is an Israeli company engaged in the development and marketing of systems enabling digital cable TV subscribers to operate interactive services, such as internet and computer games, on their TV screens.

Elron Electronic Industries Ltd. is a multinational high technology holding company based in Israel. Through affiliates, Elron is engaged with a group of high technology operating companies in the fields of advanced defense electronics, communication, semiconductors, networking, software and information technology. For further information, visit http://www.elron.com

Any statements in this press release that may be considered forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Actual results may differ from such forward-looking statements due to the risk factors discussed in periodic reports filed by the Company with the Securities and Exchange Commission which the Company urges investors to consider.