Elron and Elbit Announces Agreement On an Exchange Ratio of One Elbit Share for 0.45 Elron Share in the Proposed Merger Between the Companies.

Business Editors

TEL AVIV, Israel--(BUSINESS WIRE)--Sept. 4, 2001

Elron Electronic Industries Ltd. (NASDAQ; ELRN) a leading multinational high technology holding company, announced that, further its announcement of July 15, 2001, the Company and its 44.1% held affiliate, Elbit Ltd. (NASDAQ; ELBT), have agreed on an exchange ratio of 0.45 Elron ordinary shares, for each ordinary share of Elbit Ltd., in the proposed merger of the Company with Elbit Ltd.

The exchange ratio was negotiated by the companies in consultation with the respective financial advisors and was approved by each companies' Audit Committee and the Board of Directors. The parties will continue to negotiate the terms of the merger which will be set forth in a definitive merger agreement. The merger agreement is expected to contain customary representations, warranties and conditions to closing which will include among others, the completion of due diligence and the receipt of the final opinion from the companies' respective financial advisors regarding the fairness from a financial point of view of the exchange ratio to their respective shareholders.

The proposed merger will be subject to (i) court approval in accordance with sections 350 and 351 of the Israel Companies Law 1999, (ii) the approval of a definitive agreement by the respective Audit Committees and Boards of Directors, (iii) the approval of shareholders and creditors of both companies, and (iv) the receipt of any other approvals required by law.

There is no assurance that the Company and Elbit Ltd. will reach agreement on the other terms of a merger or that, if agreed, the merger will be consummated in a timely manner.

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, software, information technology and medical devices. For further information, visit http://www.elron.com.

Forward looking statement 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.