Elron and Arel concluded the establishment of a joint company to exploit transmission of fax and other messages over Internet.

HAIFA, Israel--(BUSINESS WIRE)--July 15, 1996--Elron Electronic Industries Ltd. (NASDAQ/NMS/ELRNF), a leading multinational high technology holding company, today announced that the Company has concluded a previously reported transaction with Arel Communications and Software Ltd. (NASDAQ/NMS/ARLCF) for the formation of a joint company, ArelNet Ltd., elroNet Associate, to exploit Elron's i-FAX product line and technology for transmission of faxes and other messages over the Internet and Arel's "ARCOM" wide area network systems technology.

Elron's i-FAX system is a "client/server" line of products which uses the Internet to send international and long-distance faxes, achieving substantial savings on fax cost. The "client" can be a standard fax machine or a PC/Windows.

Arel's ARCOM store-and-forward based, value-added network message handling, switching and management system can receive a wide variety of telecommunication messages, including facsimile, telex, telegram, E-mail, telephone and X.400, and retransmit them in the same or a transformed protocol.

In addition, customers of the ARCOM system can utilize high speed telecommunication networks (e.g. satellite or dedicated leased line) in order to interconnect between the various distributed nodes, whether these nodes are part of their own network or whether an interconnecting agreement with other message handling VAN service providers is created.

The combined ARCOM, i-FAX technology will enable corporations to distribute single and multiple messages such as faxes over the Internet network, as well as through traditional telecommunication transmission networks at low cost and higher reliability.

Pursuant to the concluded transaction announced today, effective July 1, 1996, Arel has transferred its assets and technology relating to its ARCOM systems to ArelNet, and Elron has transferred its i-FAX product line and underlying technology to ArelNet. Arel owns 80 percent of ArelNet, of which 5 percent has been reserved for options to employees and Elron holds 20 percent. Elron has also received warrants to purchase up to 500,000 Arel shares at $6.125 per share. Arel has invested $2 million and Elron approximately $0.5 million in the new company. -0-

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 medical diagnostic imaging, advanced defense electronics, communication, semiconductors, networking services and Internet software.

CONTACT: Elron Technologies, Inc.

Yung Jin Kim, 212/935-3110

or

Elron Electronic Industries Ltd.

Doron Birger, 972-4-8545000