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                                                            Exhibit 10.7


                    FREE TRANSLATION OF THE HEBREW ORIGINAL


        AGREEMENT FOR THE ALLOTMENT OF SHARE OPTIONS AND TRUST AGREEMENT


                Made in Tel Aviv, this 31st day of December 1997


BETWEEN:              I.E.T. INTELLIGENT ELECTRONICS LTD.

                      (hereinafter referred to as "the Company")

                                                               of the first part


AND:                  CERTAIN EMPLOYEES OF THE COMPANY WHO SHALL BE INVITED BY
                      THE COMPANY TO PARTICIPATE IN THE AGREEMENT AND SIGN THE
                      PARTICIPATION DOCUMENT

                      (such an employee is hereinafter referred to as "a
                      Participating Employee")

                                                              of the second part


AND:                  B.Y.A.D. TRUSTEES

                      (hereinafter referred to as "the Trustee")

                                                               of the third part


WHEREAS               the Company wishes to grant to certain Participating
                      Employees, not including controlling shareholders, and up
                      to 35 (thirty five) of such Participating Employees,
                      within the context of a trust, options for shares of the
                      Company in the first stage and thereafter to enable the
                      Participating Employees, upon certain terms and
                      conditions, to receive an actual allotment of shares;

AND WHEREAS           the Company wishes to grant the options, such that they
                      shall be held by the Trustee on behalf of the
                      Participating Employees, whether existing employees or
                      employees who shall commence working for the Company;


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AND WHEREAS           the Company wishes to appoint the Trustee, and the
                      provisions of this Agreement shall serve as an
                      instrument of trust and instructions to the Trustee;


AND WHEREAS           the Trustee agrees to accept such position;

AND WHEREAS           the parties intend to implement this arrangement in
                      accordance with section 102 of the Income Tax Ordinance
                      [New Version] (hereinafter: the "Ordinance")

AND WHEREAS           the parties wish to define, determine and detail the
                      method of the allotment, the stages thereof and all
                      matters relating thereto or connected therewith or
                      deriving therefrom, all as detailed below in this
                      Agreement;


ACCORDINGLY, IT IS WARRANTED, PROVIDED AND AGREED BETWEEN THE PARTIES AS
FOLLOWS:


1.      RECITALS

        1.1     The recitals to this Agreement constitute an integral part
                hereof.

        1.2     The clause headings in this Agreement are for convenience and
                orientation purposes only, they do not constitute any part
                hereof and shall not be used for the interpretation hereof.

        1.3     The provisions of this Agreement do not prejudice the rights or
                holdings or shares of any of the holders of any classes of the
                Company's shares at the time of the making hereof or thereafter,
                unless otherwise expressly stated and provided herein.

2.      THE TRUST

        The parties hereby establish and create a trust and shall procure that
        the Company shall allot to the Trustee the options for Ordinary "B"
        shares of the Company and the shares, at the time of the exercise of
        part or all of the options.

        The provisions of this Agreement constitute an instrument of trust and
        instructions to the Trustee.

        It is agreed that Appendix B to the Income Tax Regulations (Tax Relief
        Upon Allotment of Shares to Employees) 1989 (hereinafter the
        "Regulations"), constitute an integral part of this Agreement,
        Instrument of Trust and Instructions to the Trustee, in accordance with
        this


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        Agreement.


3.      THE OBJECT OF THE TRUST

        The object of the trust is for options to shares to be held by the
        Trustee for the benefit of employees of the Company whose names appear
        in List "1" attached to this Agreement, as may be amended from time to
        time by the Company by written notice to the Trustee detailing the names
        of the beneficiaries and next to each beneficiaries' name, the number of
        options which the Trustee holds or shall hold in trust for each
        beneficiary.

        3.1     The Trustee shall maintain and manage List "1" and shall attend
                to updating it from time to time as required, including adding
                new beneficiaries, recording options that have been allotted to
                the Trustee on behalf of the beneficiaries according to the
                ratio of their rights at the determining date, and he shall also
                record the options that shall be added to the beneficiaries from
                such allotment in List "1" to the credit of such beneficiaries.

        3.2     The share options allotted upon exercise of the options shall be
                allotted to the Trustee or that shall be held by the Trustee
                pursuant to the provisions of this Agreement shall be registered
                in the Trustee's name in the Company's register of shareholders.

        3.3     The Trustee shall act in all matters relating to adding new
                employees to List "1" and to determine the terms and conditions
                of their entitlement pursuant to resolutions of the Company as
                shall be passed from time to time. Nonetheless, the Trustee
                shall not be entitled to detract from the rights and conditions
                prescribed and/or that shall be prescribed for the beneficiaries
                pursuant to this Agreement except with the prior written consent
                of the Company and of the beneficiary or beneficiaries affected
                by such change, as the case may be.

        3.4     The beneficiaries included or that shall be included in List "1"
                at any time whatsoever do not and shall not have any right or
                claim against other beneficiaries being added to List "1" or
                against the adding of rights or shares to those included in List
                "1", in whole or in part.

        3.5     Upon the fulfillment of the terms and conditions or at the
                specified times, all pursuant to the terms and conditions
                hereof, the Trustee shall transfer to the beneficiaries the
                options or the shares allotted to them, as the case may be, all
                subject to the provisions hereof, the provisions of the
                Ordinance and the Regulations.


4.      THE TRUSTEE'S DUTIES AND POWERS


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        The Company and the beneficiaries hereby instruct the Trustee to act
        with the options which it holds and with the rights deriving therefrom
        in the following manner:

        4.1     The Trustee shall apply to the authorities in a request for
                approval of the trust as obligated by the provisions.

        4.2     If the Company shall distribute bonus shares during the term of
                the trust, the bonus shares that shall be distributed to the
                Trustee in respect of the options pursuant to this Agreement
                shall belong to the beneficiaries and they shall be credited to
                them pro rata to their entitlement to the options according to
                List "1", and at the date of the end of the trust and the
                transfer of the shares to the beneficiaries, the Trustee and the
                Company shall act to allot the bonus shares to them
                simultaneously with the allotment of the shares due pursuant to
                the options.

        4.3     If rights in respect of the options are distributed by the
                Company at the end of the trust, the Trustee shall give prior
                written notice thereof to the beneficiaries in sufficient time
                to receive their response and it shall act in accordance with
                the beneficiaries' instructions. If the beneficiaries wish to
                register the rights and they transfer the amount required
                therefor to the Trustee, the Trustee shall purchase the rights
                on their behalf or on behalf of some of them and they shall be
                added to their rights at the end of the trust. If the
                beneficiaries do not give notice or if the beneficiaries do not
                reply to the Trustee at the time prescribed therefor, the
                Trustee shall deem the beneficiaries who did not reply or who
                did not pay the fixed consideration on due date as having
                irrevocably waived the offered rights.

        4.4     The Trustee shall act in its exclusive discretion regarding all
                the other subjects or rights conferred pursuant to the options
                or the shares upon exercise of the options. However, if the
                Trustee receives rights or monies in respect of the options,
                save for bonus shares, it shall transfer them to the
                beneficiaries pursuant to their proportionate share of the
                options pursuant to List "1".


5.      THE BENEFICIARIES' PARTICIPATION

        Each Participating Employee pursuant to this Agreement shall sign a
        trust participation document in the form of wording set forth below:

                           INSTRUMENT OF PARTICIPATION

                Employee's name ______________________________ (hereinafter
                referred to as "the Participating Employee")

                1.      I hereby participate as a beneficiary pursuant to the
                        Option Agreement dated _______________ (hereinafter
                        referred to as "the Agreement") and undertake all the
                        obligations and rights of a beneficiary pursuant to the


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                        Agreement.

                2.      I sign this instrument of participation having read the
                        Agreement and having understood the provisions thereof.

                3.      I confirm my rights in the options held on my behalf by
                        the Trustee both pursuant to the Agreement and also
                        pursuant to the conditions of participating in the trust
                        dated _______________ and pursuant to the Ordinance and
                        Regulations.

                ---------------             -----------------------------------
                Date                        Signature of Participating Employee

                Name of Participating Employee _______________

                Identity No. of Participating Employee _______________

                Address of Participating Employee _______________

                Witness' signature: I certify the signature of the Participating
                Employee

                                                ------------------------------
                                                Director of the Company

                We the undersigned hereby confirm your participation as a
                beneficiary pursuant to the Agreement.

                ---------------                     ---------------
                Date                                The Trustee

6.      THE OPTIONS

        The employee participating in this Agreement, the trust and the option
        entitlement arrangement is hereby granted and given options upon the
        terms and conditions and at the times set forth below:

        6.1     A conditional and suspensive right upon the cumulative
                fulfillment of the terms and conditions detailed below to
                receive by way of an actual allotment at the end of the option
                period, _______________ Ordinary "A" Shares of the Company, as a
                right to benefit from the Trust Arrangement upon joining the
                Agreement and until the end of the Trust period, whereby in its
                duration the Participating Employee is granted the right that
                his name be registered in List "1" with a notation of the option
                for the specific number of shares specified above.


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        6.2     The terms and conditions:

                The Participating Employee's right to convert the options held
                in trust on his behalf by the Trustee into shares that shall be
                actually allotted in his name is conditional and suspensive upon
                the fulfillment of all the following terms and conditions:

                6.2.1   Every actual period of employment with the Company of at
                        least 24 months from the participation date shall confer
                        the right to convert 1/3 (a third) of the number of
                        shares specified in the options into shares.

                6.2.2   Every month of continuous and cumulative period of
                        employment exceeding the first 24 months shall confer
                        the right to convert a further 1/36 (one thirty sixth)
                        from the balance of 2/3 (two-thirds) of the total number
                        of shares specified in the option, into shares actually
                        allotted, in an allotment at the end of the cumulative
                        period..

                6.2.3   After a continuous and cumulative actual period of
                        employment with the Company of 48 months, the
                        beneficiary's right shall be exhausted and the validity
                        of the trust in relation to him shall expire.

                6.2.4   The exercise of the right to an actual allotment is
                        further conditional and suspensive upon the payment of
                        US $0.35 (thirty five cents) according to the
                        representative rate known at the time of the allotment
                        in respect of the right to each share.

                6.2.5   In the event that conditions are imposed by the
                        authorities as conditions for approval of the
                        fulfillment of this Agreement, the beneficiaries agree
                        and will agree to these conditions.

                (The periods specified in this clause above are hereinafter
                referred to as "the Vesting Period".)

        6.3     If the employee ceases to be an actual employee of the Company
                at any stage whatsoever prior to the conversion of the options
                or part thereof into shares and prior to the actual allotment of
                shares, regardless of the reason for termination of employment
                in the Company, the employee's rights to the allotment of
                options or the exercise of the balance of the allotment in
                accordance with this Agreement, shall expire, be cancelled and
                be nullified and the Trust for the same employee shall expire.

                In the event that a beneficiary who ceased to be an employee
                within two years from the date of this Option Agreement and the
                tax exemption does not apply to the beneficiary, the same
                employee shall be liable for the tax payment for tax upon
                allotment and for tax pursuant to section 102 of the Ordinance,
                the higher of the two.


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        6.4     If the options are cancelled because the terms and conditions of
                this clause have not been fulfilled, the employee shall not be
                entitled to consideration, refund or compensation or indemnity
                whatsoever in respect of the cancellation.

7.      THE BENEFICIARIES' LIABILITY

        7.1     The Beneficiaries are aware that the Trustee may hold options on
                their behalf which are not fully paid up, whether they are
                options under this Agreement or additional rights as specified
                in section 4 above, and in the event that a demand for payment
                is received for the conversion of the options into shares or
                other rights that are conditioned on payment, the Beneficiaries
                shall pay the required sums immediately upon receipt of a
                request from the Trustee in connection with it. Failure to
                satisfy this requirement may bring to such results as if the
                Beneficiaries ceased to be employed in the Company.

        7.2     Every liability and every amount that a holder of the options is
                under a duty to pay and all the obligations applicable pursuant
                to the Companies Ordinance and the Company's documents of
                incorporation to a holder of options or shares or a member of
                the Company, shall be passed on from the Trustee to the
                beneficiaries pursuant to the proportion of the options or the
                shares held by the Trustee for the benefit of the beneficiaries.

        7.3     The beneficiaries hereby confirm that they acknowledge that if
                payment demands of them are not complied with, the Company may
                forfeit the options held on their behalf by the Trustee pursuant
                to the Company's Articles of Association and the results of the
                forfeiture shall apply to each beneficiary in accordance with
                the option for shares held on trust on his behalf by the
                Trustee.

        7.4     If the Trustee receives demands, requests, notices and claims,
                including payment calls, demands for payments at the time of the
                Company's winding up, notices in respect of forfeiting the
                shares or any other demand, the Trustee shall, immediately upon
                the receipt thereof, send them to each of the beneficiaries in
                respect of whose shares held on his behalf by the Trustee the
                said demands were received, to the beneficiary's address as
                appearing in his participation notice or to another address
                which the beneficiary sent the Trustee, provided that they shall
                be sent in writing and the liability deriving from the said
                demands shall apply to the beneficiary alone.

        7.5     The beneficiaries' liability pursuant to this clause shall apply
                in accordance with the shares held on their behalf. If any
                charge or payment demand whatsoever shall relate to shares held
                for a number of beneficiaries, each beneficiary shall be liable
                for the charge or the payment demand pro rata to the options
                held on his behalf.

8.      TERMINATION OF THE TRUST


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        8.1     If the Trustee holds options or shares for any beneficiary,
                during the Vesting Period that shall not be less than two years,
                the shares or options shall be transferred to the beneficiary's
                possession either on its own initiative or on the beneficiary's
                initiative, on the following terms and conditions:

                8.1.1   The Company notified the Trustee that the employee is
                        continuously employed by the Company for the whole
                        vesting period, and continues to be employed by the
                        Company and he has requested to exercise an option and
                        has paid the Company the exercise price.

                8.1.2   In the event that the Notification of Deduction at
                        Source Form has been completed and sent, as specified in
                        the Income Tax Regulations (Tax Relief Upon Allotment of
                        Shares to Employees) 1989, and tax is actually paid, at
                        the rate specified in the Regulations at that time.


        8.2     If a Participating Employee ceases to be employed by the Company
                at any time whatsoever and for any reason whatsoever, the trust
                for him shall expire at the time of the termination of
                employee-employer relations. Expiration of the Trust upon
                termination of the employee-employer relationship will be
                relative to the balance of the right of the Beneficiary at such
                time.

        8.3     If a Participating Employee exercises a right as a beneficiary
                by way of exercising the conversion of an option into a share
                that shall be actually allotted, subject to all the terms and
                conditions of this Agreement, the trust shall expire in respect
                of the part of the option converted and actually allotted at
                such time.

9.      ISSUE TO THE PUBLIC

        9.1     If the Company notifies the Trustee that for the purposes of an
                issue of shares to the public an undertaking by the beneficiary
                option holders is required, pursuant whereto they undertake a
                restriction on the transfer of the shares of which they are
                beneficiaries or to which they are entitled pursuant to the
                options or the trading of such shares, the Trustee shall be
                entitled to assume the undertaking as aforesaid, provided that
                such an undertaking shall not prevent it transferring options to
                the beneficiaries, subject to the beneficiaries assuming the
                said undertaking.

        9.2     If as a condition for the issue of shares to the public the
                option holders shall be required to undertake not to sell them
                during a specific period (hereinafter referred to as "the
                restriction period"), the Company is entitled to make demand of
                the Trustee to join in giving an undertaking as aforesaid, and
                in the event of a demand as aforesaid the Trustee shall accede
                thereto, even if the Vesting Period, or part


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                thereof,mentioned in clause 6 above, has not yet terminated, and
                in such case the trust period shall be extended by the
                restriction period and the beneficiaries shall have no complaint
                in consequence thereof.

        9.3     The beneficiaries are aware that the Company is considering an
                issue to the public with the intention of listing the Company's
                shares for trading on a stock exchange either in Israel or
                abroad. The beneficiaries empower the Trustee to sign any
                document which, in the opinion of the Company's board of
                directors, is required to enable an issue as aforesaid,
                including changes to the Company's documents of incorporation
                and including changes in its capital structure, provided that
                the changes shall not result in the shares the subject of the
                options held in trust by the Trustee having inferior rights
                (save for voting rights) compared with the rights which other
                shares of the Company confer.

                In the event that the shares are registered for trading, as
                aforesaid, the employee shall be permitted to apply to the
                Commissioner in a request that his shares will be seen as sold
                pursuant to the average stock exchange price-list in the first
                three days of trading.

10.     NON-TRANSFERABILITY

        The rights to the options pursuant to this Agreement and the shares that
        shall be allotted to the Participating Employee pursuant thereto and
        upon the terms and conditions thereof are granted to the Participating
        Employee as a beneficiary and to him alone.

        The beneficiaries' rights may not be transferred or assigned in any
        manner whatsoever, including by way of pledge, charge, attachment,
        assignment and the like.

        Without derogating from the foregoing, rights to options may only be
        transferred by way of implementing a will of an employee or his
        inheritance if the employee dies on a date when he was an actual
        employee of the Company.

11.     REPLACEMENT TRUSTEE

        If the Trustee is unable to perform its duties or does not wish to
        perform its duties, the Company is entitled to appoint another trustee
        and in such event the Trustee shall transfer the options it is holding
        to the other trustee and the replacement trustee shall replace the
        Trustee for all intents and purposes.

12.     THE COMPANY'S OTHER SHARES

        12.1    The provisions of this Agreement do not prejudice the rights of
                other holders of options or shares of the Company to which the
                trust arrangement does not apply.

        12.2    The parties are aware that additional employees of the Company
                own rights in


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                shares or to receive shares in other arrangements, and it is
                hereby expressly agreed that this Agreement does not apply to
                and does not affect or howsoever impair rights of other
                shareholders of the Company or persons entitled to shares of the
                Company, including employees entitled as aforesaid.

13.     PAYMENT AND INDEMNITY

        13.1    An action by the Trustee and any outcome of an action by the
                Trustee, directly or indirectly, shall not render the Trustee
                liable for any payment whatsoever. In any event in which the
                Trustee is directly or indirectly ordered to make any payment in
                connection with its actions as trustee, the Company undertakes
                to directly effect and make the payment which shall be required,
                for so long as it is a payment relating to the trust, or to
                indemnify the Trustee for a payment as aforesaid upon demand
                received from it.

        13.2    Save in regard to the subjects detailed in clause 7 above, if
                the Trustee is ordered to make any payment by a court or
                tribunal or arbitrator in consequence of its operations as
                trustee, whether directly or indirectly, the Company shall bear
                the payment in its stead and shall effect the payment on the
                required date, and the Trustee shall not be liable to indemnify
                the Company for such payment.

        13.3    The beneficiaries and the Company release the Trustee from any
                liability for a negligent act or omission, and the Company shall
                indemnify the Trustee for any payment which it is required to
                pay in order to compensate any person or corporation for such an
                act or omission.

14.     GENERAL PROVISIONS

        14.1    If the law so obliges or if the Company or any of its
                shareholders so requests, the Company shall procure that the
                Trustee shall be registered in the Company's register of
                shareholders as the owner of the options for shares held by it
                on trust.

        14.2    The Company shall pay the Trustee's remuneration.

        14.3    If the Company resolves to issue any of its shares in
                consequence of additional investors joining the Company or for
                any other reason, the Trustee's part of the options convertible
                into shares of the Company shall be diluted accordingly and the
                beneficiaries' right shall also be diluted in accordance
                therewith, and the beneficiaries shall not have any complaint or
                claim in such regard.

        14.4    In a case where the beneficiaries have been actually allotted
                part of the shares at the time of a dilution as aforesaid or at
                any other time thereafter, their shares shall be diluted in
                respect of the joining of investors or other shareholders, and
                the beneficiaries shall not, even as shareholders, have any
                complaint or demand in such regard.


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        14.5    The Trustee is empowered to determine the terms and conditions
                for beneficiaries participating in the trust, in its discretion.

        14.6    The parties undertake to sign all the documents required to give
                validity and effect to this Agreement.

        14.7    If income tax or capital gains tax or any other tax applies in
                respect of the options or in respect of the allotment of the
                shares or in respect of the holding of the shares or the
                transfer thereof, or for another reason, the tax shall be borne
                by the beneficiary in respect of the options or the shares held
                for his benefit by the Trustee. If tax as aforesaid is imposed,
                the Trustee shall be entitled to make demand of the beneficiary
                to pay the tax upon demand pursuant to this Agreement or to
                deduct the imposed tax from the amounts due or that shall be due
                to the beneficiary, and such being in addition to any other
                remedy available to the Trustee at law. If the tax as aforesaid
                is imposed upon the Company, the Trustee shall be under a duty,
                upon the Company's demand, to deduct the said tax and to remit
                the amount collected to the Company, as the case may be.

                The beneficiary authorizes and empowers the Company and the
                Trustee to deduct or collect tax as aforesaid.

        14.8    In the event of the death of a beneficiary at a time when he is
                not an actual employee of the Company, his rights shall
                automatically expire and any prima facie transfer to his heirs
                or to beneficiaries pursuant to his will, as the case may be,
                shall not be valid, unless the Company confirms that as at the
                date of the death the was an actual employee.


AS WITNESS THE HANDS OF THE PARTIES:


------------------------------              ------------------------------
I.E.T. INTELLIGENT ELECTRONICS LTD          B.Y.A.D. TRUSTEES LTD.
"THE COMPANY"                               "THE TRUSTEE"


<PAGE>   12
                          APPENDIX TO TRUST AGREEMENT -
                    CONDITIONS FOR PARTICIPATING IN THE TRUST

                Made in Tel-Aviv this __ day of _______________.


BETWEEN:              IET Intelligent Electronics Ltd.


AND:                  The Participating Employee, Mr./Ms. _____________________


WHEREAS               IET Intelligent Electronics Ltd. (hereinafter referred to
                      as "the Company") shall allot options convertible into
                      shares in favor of the Participating Employee;


AND WHEREAS           the employee wishes to participate in an Agreement dated
                      ________________ 1996 (hereinafter referred to as "the
                      Agreement"), including the Trustee's trust and its holding
                      of the options until they mature;


ACCORDINGLY, IT IS WARRANTED AND AGREED AS FOLLOWS:

1.      The recitals to this appendix constitute an integral part hereof.

2.      The Participating Employee is entitled to be a beneficiary pursuant to
        the Agreement from the date of the signing of this Conditions for
        Participation Appendix.

3.      The Participating Employee's entitlement shall confer upon him the
        following rights:

        3.1     The right to be registered as a beneficiary of options to
                receive ____________ ordinary "B" shares of NIS 0. 01 each of
                the Company from which one third (1/3) the determining date for
                the first third being after 24 months have elapsed of continuous
                work for the Company. After this, each month of continuous
                employment past the first 24 months , shall confer on the
                employee the right to convert 1/36 (one thirty-sixth) of the
                balance of 2/3 (two thirds) of the share options, into shares
                actually allotted in an allotment at the end of the continuous
                period. The entire cumulative period shall be entitled the
                "Vesting Period". The right to shares as aforesaid shall be
                subject to payment of the sum of $0.35 (thirty five cents), for
                the right to each share, at the representative rate known at
                such time.

        3.2     The said right is conditional and suspensive upon the
                fulfillment of all the terms and conditions specified in the
                Agreement.

        3.3     If the employee ceases to be an actual employee of the Company
                at any stage whatsoever until the conversion of the options or
                part thereof into shares and prior to the actual allotment of
                the shares, regardless of the reason for the termination of the
                employment with the Company, his rights to an allotment or to
                exercise the balance of the allotment shall expire, be cancelled
                and nullified except to the extent specified in the Agreement.

        3.4     The provisions set forth in this clause are in addition to the
                provisions set forth in the


<PAGE>   13
                Agreement.

        3.5     The ancillary right upon the terms and conditions of the
                Agreement distribution of additional rights or benefits, and
                also those shall be granted in the future to holders of shares
                or at the time of winding up, all pro rata to his entitlement to
                options.

4.      The option convertible into shares upon the terms and conditions of the
        Agreement and the terms and conditions of this instrument of
        participation shall be recorded in List "1" by the Trustee together with
        the Participating Employee's name and his proportionate share of the
        number of the shares as specified above.

5.      The options that shall be recorded for the Participating Employee are in
        addition to his other employment terms and conditions, and are not in
        lieu thereof, but the Company's management may consider them a benefit
        or other right conferred upon the employee in respect of and in
        consequence of his employment.

6.      The Participating Employee hereby agrees and confirms that if there
        shall be a dilution of the Company's shares at any stage or in any
        manner, whether during the course of the Vesting Period, or upon the
        exercise of the conversion of the shares into an actual allotment of
        shares, whether in stages or at the end of the entire Vesting Period,
        his part shall also be diluted respectively.

        In an event in which a waiver of a symbolic part of additional pay would
        be required by the relevant authorities for the approval to implement
        this Agreement, the beneficiaries shall and they do agree to such
        conditions.

7.      The Participating Employee accepts and agrees to all the terms and
        conditions of the Agreement and confirms his express consent that in any
        event of a contradiction between the provisions of this appendix and the
        provisions of the Agreement, the provisions of the Agreement shall
        prevail.

8.      The Participating Employee hereby warrants and confirms his consent that
        all the payment of taxes, official fees, levies and the like of
        whatsoever description applicable now or that shall be applicable in the
        future in respect of the Agreement, in respect of this instrument of
        participation and in respect of the realization thereof shall be borne
        by him alone.

9.      The employee explicitly approves and agrees that he has been notified,
        and it is within his knowledge, that the Arrangement for the Allotment
        of Share Options for conversion is in accordance with section102 Income
        Tax Ordinance, and that he agrees that and undertakes not to request a
        tax exemption under sections 95 or 97 (A) Income Tax Ordinance, or under
        Chapter 7 of the Encouragement of Industry (Taxes) Law 1969.


10.     This appendix constitutes an integral part of the instrument of
        participation in the Agreement and the signing of the instrument of
        participation constitutes the signing of this appendix.

The instrument of participation is annexed hereto.



----------------------------------------
Signature of the Participating Employee


<PAGE>   14
We agree to the foregoing:



----------------------------------------
IET Intelligent Electronics Ltd.


<PAGE>   15
                           INSTRUMENT OF PARTICIPATION


Employee's name _______________________________________________________________
(hereinafter referred to as "the Participating Employee")

1.      I hereby participate as a beneficiary pursuant to the Option Agreement
        dated ______________ (hereinafter referred to as "the Agreement") and
        undertake all the obligations and rights of a beneficiary pursuant to
        the Agreement.

2.      I sign this instrument of participation having read the Agreement and
        having understood the provisions hereof.

3.      I confirm my rights in the options held on my behalf by the Trustee both
        pursuant to the Agreement and also pursuant to the conditions of
        participating in the trust dated ________________, and in accordance
        with the Ordinance and the Regulations.



---------------------                       ------------------------------------
        Date                                 Signature of Participating Employee



Name of Participating Employee ________________________________________________


Identity No. of Participating Employee _________________________________________


Address of Participating Employee ______________________________________________


Witness' signature: I certify the signature of the Participating Employee



                                                    ----------------------------
                                                      Director of the Company


We the undersigned hereby confirm your participation as a beneficiary pursuant
to the Agreement.


---------------------                       ------------------------------------
        Date                                             The Trustee


<PAGE>   16
Appendix to the Arrangement of Allotment of Options to Employees

To
Income Tax Assessor
Tax Commissioner's Office


   RE: NOTICE REGARDING ENTITLING ALLOTMENT IN ACCORDANCE WITH THE INCOME TAX
      REGULATIONS (TAX RELIEF UPON ALLOTMENT OF SHARES TO EMPLOYEES) 1989
                              (THE "REGULATIONS")

1.      In accordance with section 3 of the Regulations, we hereby inform you
        that IET Intelligent Electronics Ltd. (hereinafter the "Company") has
        decided to adopt a share option plan, in accordance with section 102 of
        the Income Tax Ordinance and in accordance with the Regulations, whereby
        within its framework, employees of the Company will be allotted options
        in an entitling allotment, as specified in the Regulations.

2.      The date of the allotment of options within the framework of this plan
        shall not be prior to 1.1.97 and not later than 31.12.2001.

3.      B. A. Trustees shall become the Trustee for the fulfillment of this plan
        (hereinafter the "Trustee"). The appointment of the Trustee has been
        approved on August 25, 1996 by the Tax Commissioner's Office in
        accordance with his authority under section 102 of the Ordinance.

4.      A. In accordance with section 4(B) of the Regulations, the Company
        hereby undertakes towards the Income Tax Assessor that if bonus shares
        are allotted to an employee under the options allotted for him in the
        framework of the entitling allotment, they shall be forwarded to the
        Trustee as long as the Trustee holds for him options allotted for the
        employee within the framework of the entitling allotment. The Trustee is
        obligated to the Income Tax Assessor to apply the provisions of section
        102 to the said bonus shares, as if the bonus shares were options
        allotted to the employee in the framework of the entitling offer.

                2nd.    In accordance with section 4(B) of the Regulations, we
                        confirm that we hold a confirmation letter from the
                        employee that he agrees that the arrangement shall apply
                        to him and that he undertakes not to request a tax
                        exemption under sections 95 or 97(A) of the Ordinance or
                        under Chapter 7 Encouragement of Industry (Taxes) Law
                        1969 for any transfer of shares prior to the termination
                        of the holding period.

5.      Attached is an Instrument of Trust as required by section 3 of the
        Regulations.

6.      The Trustee undertakes towards the Income Tax Assessor that he shall not
        forward the options nor option certificates until after tax is paid
        under section 102 of the Ordinance and in accordance with the
        Regulations, or after the Trustee has forwarded to the Tax Assessor 30%
        of the consideration for the account upon which tax applies.

7.      Upon an approval by the Income Tax Assessor regarding the rate of tax
        required to be paid as a condition for the transfer of options (or
        shares) for the employee submitted by the Company or the employee to the
        Trustee, the Trustee shall transfer the options into shares for the
        employee but only after the sum of tax determined in the Income Tax
        Assessor's approval has been paid.


Yours sincerely,


<PAGE>   17
B.Y.A.D. Trustees Ltd.                          IET Intelligent Electronics Ltd.


CC:     Tax Commissioner's Office
        Tax Deduction Assessor


        APPENDIX TO THE ARRANGEMENT FOR ALLOTMENT OF OPTIONS TO EMPLOYEES

                      NOTICE REGARDING DEDUCTION AT SOURCE

                                         Name of Trustee: B.Y.A.D. Trustees Ltd.

                                         Name of Company: IET Intelligent
                                         Electronics Ltd.

                                         Name of Employee: _______________

                                         Date:  __________________________

To
Tax Assessor
Income Tax Commissioner
___________________Street
_________________________


Dear Sir / Madam,

                             RE: DEDUCTION AT SOURCE

 We hereby inform you that:

Options to ____________, in the name of the Trustee B.Y.A.D. Trustees Ltd. for
the employee ___________________, which were bought/granted/purchased on
________________, in an allotment which received approval on
____________________, sold on _________________ , to __________________________
in consideration for NIS _________________.

The tax deducted at source is __________________ (attached is authorization for
the reduced deduction).

The tax was paid on ___________________ at _________________.

Yours sincerely,

B.Y.A.D. Trustees Ltd.

CC:  Tax Commissioner's Office.