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# EXHIBIT 4.7

# SETTLEMENT &
RELEASE AGREEMENT

THIS
SETTLEMENT & RELEASE (this Release) is made on this third day of
October, 2003, by and among Arel Communications and Software Ltd. (Arel
Ltd.), Arel Learning Solutions, Inc. (formerly Arel Acquisition, Inc.)
(ALS) (Arel Ltd. and ALS, collectively, the
Company), Izhak Gross (Gross) (the Company and
Gross, collectively, the Arel Parties), M.E. Jones Sub, Ltd. (formerly
W2Com, LLC) (JonesSub), CYMI Ltd. (CYMI), M.E.
Jones Inc. (Jones Inc.), Mitchell E. Jones (Jones)
and Clayton L. Mathile (Mathile) (Jones Sub, CYMI, Jones Inc., Jones
and Mathile, collectively the W2Com Parties).

WHEREAS,
 Arel Ltd.,  the W2Com Parties and W2Com  International  LLC are parties to an Asset
Purchase Agreement, dated August 8, 2000 (the "Asset Purchase Agreement"); and

WHEREAS,
under the terms of Exhibit 5.5(z) to the Asset Purchase Agreement (the Side
Letter), 272,727 shares of Arel Ltd. were placed into escrow with National City
Bank (NCB)(the Side LetterShares) pursuant
to an escrow agreement dated August 8, 2000 between Arel Ltd., Jones Sub, CYMI and NCB
(the Side Letter Escrow Agreement); and

WHEREAS,
under the terms of Section 4.2 of the Asset Purchase Agreement, 777,272 shares of Arel
Ltd. were placed into a second escrow account with NCB (the Indemnity
Shares) pursuant to a second escrow agreement dated August 8, 2000 between Arel
Ltd., Jones Sub, CYMI and NCB (the Indemnity Escrow Agreement); and

WHEREAS,
disputes have arisen between the Arel Parties and the W2Com Parties, as demonstrated,
inter alia, in lawsuits being filed by each against the other as follows:

(i)          Arel
Ltd. filed an action against the W2Com Parties with the Jerusalem District
          Court (civil action 4178/02A) (the Arel Action), (ii) Jones
          Inc., Jones Sub, CYMI and Jones filed an action against Arel Ltd., and Gross
          with the Jerusalem District Court (civil action 4178.1/02A) (the
          Counter Suit), and (iii) Jones Inc., Jones Sub, CYMI and
          Jones filed an action against the Arel Parties and against NCB with the Common
          Pleas Court of Montgomery County, Ohio, Civil Division (the Ohio
          Court) (2002 CV 03764) (the Ohio Suit) (the Arel
          Action, the Counter Suit and the Ohio Suit, collectively, the           Lawsuits);
and

WHEREAS,
during the proceedings in the Ohio Suit, the Side Letter Shares (represented by one share
certificate) and the Indemnity Shares (represented by two share certificates, each
representing 388,636 shares) (the three certificates are hereinafter referred to
collectively as the Certificates) were deposited with the Ohio Court on
August 16, 2002 pursuant to the Courts order dated August 13, 2002, and such shares
are currently held by such Court; and



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WHEREAS,
the Arel Parties, the W2Com Parties and NCB have entered into a settlement agreement
relating to the escrow issues and have settled all such claims between them, including
those set forth in the complaint filed by the W2Com Parties in the Ohio Suit and the
counterclaims and crossclaims filed by NCB in the Ohio Suit (the NCB
Agreement); and

WHEREAS,
the W2Com Parties are, or are affiliated with, major shareholders of Arel Ltd.; and

WHEREAS, the
Arel Parties and the W2Com Parties believe that it is in their interests and in the
interests of Arel Ltd. and its shareholders, to fully and finally settle the disputes
between them, including the Lawsuits, pursuant to the terms hereof.

NOW,
THEREFORE, in consideration of the promises, covenants and releases set forth herein, and
for other good and valuable consideration, the adequacy of which are hereby acknowledged,
the parties hereby agree as follows:

1.    
          Release.

1.1        Subject
to the fulfillment and/or waiver of all the conditions set forth in Section 4 below, each
of the Arel Parties, for itself and for its representatives, successors, and/or assigns
hereby irrevocably, unconditionally covenants not to sue or seek recovery and forever
releases, acquits and discharges each of the W2Com Parties, their past, present and
future directors, officers, affiliates, agents and employees, and their successors,
and/or assigns from any and all Claims (as hereinafter defined).

1.2        Subject
to the fulfillment and/or waiver of all the conditions set forth in Section 4 below, each
of the W2Com Parties, for itself and for its representatives, successors, and/or assigns
hereby irrevocably, unconditionally covenants not to sue or seek recovery and forever
releases, acquits and discharges each of the Arel Parties, their past, present and future
directors, officers, affiliates, agents and employees, and their successors, and/or
assigns from any and all Claims.

1.3        As
used in this Release, the term Claims means any and all claims,
demands, actions, causes of action, costs, expenses, suits, damages, debts, liabilities,
obligations, liens, security interests, judgments and rights of any kind whatsoever,
direct or indirect, known or unknown, absolute or contingent, determined or speculative,
at law, in equity or otherwise arising from or in connection with the Lawsuits, including
any Claims under the Asset Purchase Agreement and the Side Letter that: (i) the Arel
Parties ever had, now have or hereafter may have or claim to have or succeed to against
the W2Com Parties in connection with the Asset Purchase Agreement and the Side Letter, or
(ii) that the W2Com Parties ever had, now have or hereafter may have or claim to have or
succeed to against the Arel Parties in connection with the Asset Purchase Agreement and
the Side Letter.

1.4        Nothing
in this Release shall be construed as or deemed to be an admission by any of the parties
of any unlawful or actionable conduct or omission and none of the parties makes any
admission of liability of any kind whatsoever.

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2.    
          Reserved.

3.     Requisite
Approvals.

This
Release shall become effective upon the approval of the terms hereof by Arel Ltd.s
audit committee, board of directors and shareholders in accordance with Section 275 of the
Israel Companies Law  1999.

4.    
          Events Upon Effectiveness.

Upon
the effectiveness of this Release, the following acts shall occur, and such acts shall be
deemed to take place simultaneously and no act shall be deemed to have been completed
until all such acts have been completed:

4.1        The
parties to the Ohio Suit shall jointly file an agreed entry (the Agreed Entry)
with the Ohio Court in the form attached hereto as Exhibit 4.1, which shall
provide, inter alia, for the release of the Certificates evidencing the Side
Letter Shares and the Indemnity Shares to the law firm of Chernesky, Heyman & Kress
P.L.L. (CH&K), as escrow agent under an Escrow Agreement dated
July 18, 2003 (a copy of which is attached hereto as Exhibit 4.1(a)) and in
accordance with the terms of the NCB Agreement.

The
parties hereto shall each cooperate with the other and use their respective best efforts
to take or cause to be taken all necessary actions, and do or cause to be done all things,
necessary, proper or advisable as soon as practicable, including, without limitation,
preparing and filing all documentation, notices, petitions, statements, registrations,
submissions of information, applications and other documents to cause the Ohio Court to
release the Side Letter Shares and the Indemnity Shares as set forth in the Agreed Entry.

For
the removal of doubt, the act contemplated by this Section 4.1 shall not be deemed to be
completed until the Ohio Court will have released the Side Letter Shares and the Indemnity
Shares as set forth in the Agreed Entry.

4.2        CYMI
shall direct CH&K to send irrevocable instructions to Arel Ltd.s stock transfer
agent to issue the following new share certificates in exchange for the Certificates:

| | (a)       
a
share certificate evidencing two hundred thousand (200,000) shares in the           name
of Arel Ltd. (or to such other person as Arel Ltd. may designate in           writing);
and
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)       
a
share certificate evidencing eight hundred forty nine thousand nine hundred
          ninety nine (849,999) shares in the name of Clayton L. Mathile, as Trustee
under           an Amended and Restated Agreement of Trust for Clayton L. Mathile, dated
June           18, 2001.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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4.3        The
sum of $500,000 (five hundred thousand US dollars) (the Settlement Funds)
shall be paid by the W2Com Parties to the Arel Parties as follows: CYMI shall direct CH&K
to deposit by wire transfer the Settlement Funds to a bank account designated by Arel
Ltd. This deposit shall be made at the direction of CYMI on behalf of itself and the
other W2Com Parties. The obligations of CYMI under this Section 4.3 are binding upon each
of the W2Com Parties, jointly and severally. If CYMI should fail to fulfill its
obligations under this Section 4.3, the other W2Com Parties shall be liable for such
obligations and shall promptly fulfill such obligations upon written demand, without the
need for the Arel Parties to prove such failure.

4.4        The
parties to each of the Lawsuits shall jointly file petitions with the relevant courts in
the forms attached hereto as Exhibit 4.4 for (i) the dismissal of the Ohio Suit,
(ii) the dismissal of the Arel Action and the Counter Suit, (iii) the return of all fees
paid to the court at the time the relevant Lawsuit was first filed, and (iv) that no
party shall be liable for the expenses of any other party.

The
parties hereto shall each cooperate with the other and use their respective best efforts
to take or cause to be taken all necessary actions, and do or cause to be done all
things, necessary, proper or advisable including, without limitation, preparing and
filing all documentation, notices, petitions, statements, registrations, submissions of
information, applications and other documents to give full effect to the provisions of
this Section 4.4.

4.5        Jones
hereby waives any rights, claims, demands, actions, causes of action, costs, expenses,
suits, damages, and obligations, of any kind with respect to options to purchase shares
or securities of Arel Ltd.

4.6        The
letter dated April 2001, from Arel Ltd. addressed to Jones, providing Jones with certain
rights to be included as a nominee to Arel Ltd.s board of directors shall be deemed
terminated and no longer of any force or effect.

5.     Further
Assurances.

Each
of the parties hereto shall perform such further acts and execute such further documents
as may reasonably be necessary to carry out and give full effect to, and shall refrain
from taking any acts which may impede, hinder or prevent the effectiveness of, the
provisions of this Release and the intentions of the parties as reflected thereby.

6.    
          Governing Law.

This
Release shall be construed in accordance with, and governed in all respects by the
internal laws of the State of Israel (without giving effect to the principles of conflicts
of laws). The competent courts of Jerusalem shall have exclusive jurisdiction upon any
dispute arising hereunder and each of the parties hereby consents to the jurisdiction of
such courts (and of the appropriate appellate courts therefrom) in any such suit, action
or proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or proceeding which
is brought in any such court has been brought in an inconvenient forum.

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7.    
          Severability.

If
any provision of this Release is held by a court of competent jurisdiction to be
unenforceable under applicable law, then such provision shall be excluded from this
Release and the remainder of this Release shall be interpreted as if such provision were
so excluded and shall be enforceable in accordance with its terms; provided, however, that
in such event this Release shall be interpreted so as to give effect, to the greatest
extent consistent with and permitted by applicable law, to the meaning and intention of
the excluded provision as determined by such court of competent jurisdiction. The parties
further agree to replace any such invalid or unenforceable provisions with valid and
enforceable provisions designed to achieve, to the extent possible, the purposes and
intent of such invalid and enforceable provisions.

8.    
          Counterparts.

This
Release may be executed in any number of counterparts (including facsimile counterparts),
each of which shall be deemed an original, but all of which together shall constitute one
and the same instrument.

9.    
          Notices.

All
notices and other communications required or permitted hereunder to be given to a party to
this Release shall be in writing and shall be faxed or mailed by registered or certified
mail, postage prepaid, or otherwise delivered by hand or by messenger, addressed to such
partys address as set forth below or at such other address as the party shall have
furnished to each other party in writing in accordance with this provision:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                         
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|if to any of the Arel Parties:        
                                                   
                                                   
                                                   
                                                   
                                                   
             with a copy to                        
             (which shall not constitute notice):  
                                                   
                                                   
                                                   
                                                   
                                                   
             if to Jones Sub, Jones Inc., or Jones: | Arel Communications and Software Ltd
3 HaYarden Street
Yavne, Israel
70600
Fax: +972-8-943-8106
Attention: Chief Executive Officer
Yigal Arnon & Co.
One Azrieli Center
46th Floor - Round Tower
Tel-Aviv, Israel
67021
Fax: +972-3-608-7714
Attention: David H. Schapiro, Adv.
Mitchell E. Jones
2242 Peters Pike
Troy, Ohio  45373
Fax: (937) 890-2256

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|with copies to                      
             (which shall not constitute notice):
                                                 
                                                 
                                                 
                                                 
                                                 
                                                 
                                                 
                                                 
                                                 
                                                 
             if to CYMI or Mathile:              
                                                 
                                                 
                                                 
                                                 
                                                 
             with a copy to                      
             (which shall not constitute notice): | Coolidge, Wall, Womsley & Lombard
33 West First St.
Suite 600
Dayton, OH  45402
Fax: (937) 223-6705
Attention: Richard Schwartz, Esq.
Chernesky, Heyman & Kress P.L.L.
10 Courthouse Plaza, S.W.
Suite 1100
Dayton, Ohio 45401-3808
Fax:  (937) 449-2823
Attention: Richard J. Chernesky, Esq.
CYMI, Ltd.
6450 Sand Lake Road
Suite 200
Dayton, Ohio 45414
Fax:  (937) 264-4639
Attention: Leslie Banwart, President
Chernesky, Heyman & Kress P.L.L.
10 Courthouse Plaza, S.W.
Suite 1100
Dayton, Ohio 45401-3808
Fax:  (937) 449-2823
Attention: Richard J. Chernesky, Esq.

Any
notice sent in accordance with this Section 9 shall be effective (i) if mailed, five (5)
business days after mailing, (ii) if sent by messenger, upon delivery, and (iii) if sent
via facsimile, one (1) business day following transmission and electronic confirmation of
receipt.

10.    
          Amendments and Waivers.

Any
term of this Release may be amended only with the written consent of all of the parties
hereto. The observance of any term of this Release may be waived (either generally or in a
particular instance and either retroactively or prospectively), only if it is in writing
and signed by the waiving party. No delay or failure by a party to exercise or enforce at
any time any right or provision of this Release will be considered a waiver thereof or of
such partys right thereafter to exercise or enforce each and every right and
provision of this Release.  No single waiver will constitute a continuing or
subsequent waiver.

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11.    
          Successors; No Assignment.

Except
as otherwise expressly limited herein, the provisions hereof shall inure to the benefit
of, and be binding upon, the successors, assigns, heirs, executors, and administrators of
the parties hereto. Unless explicitly permitted by this Release, no party shall assign or
delegate its rights, liabilities and obligations under this Release, whether in whole or
in part without the written consent of the other parties.

12.    
          Expenses.

Each
party shall bear its own expenses and costs to the transactions contemplated hereby
(including in connection with the preparation, negotiation and execution of this Release
and all documents ancillary thereto), including, but not limited to, attorneys fees.

13.    
          Publicity.

The
parties hereto acknowledge that Arel Ltd. is a publicly traded company and as such is
entitled to disclose the existence, execution or the terms and conditions of this Release
without any further consent of any other party. No publicity release or announcement
concerning this Release may be made without the advance written approval as to its form
and substance by Arel Ltd.

[REMAINDER OF THIS PAGE
LEFT INTENTIONALLY BLANK]

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14.     Entire
Agreement.

This
Release and the documents referred to herein constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior and
contemporaneous understandings and agreements, whether written or oral, with respect to
such subject matter.

IN WITNESS WHEREOF, the parties have
caused this Release to be executed on October 3, 2003.

|Arel Communications and Software Ltd.
By:      _______________________     
Name:    _______________________     
Title:   _______________________     Izhak Gross                          
By:      _______________________        
Name: _______________________        
Clayton L. Mathile                   
By:      _______________________    
Name: _______________________         
Mitchell E. Jones                    
By:      _______________________    
Name: _______________________ |  | Arel Learning Solutions, Inc.
By:      _______________________
Name:    _______________________
Title:   _______________________
M.E. Jones Sub, Ltd.
By:      _______________________
Name: _______________________
Title:   _______________________
M.E. Jones Inc.
By:      _______________________
Name: _______________________
Title:   _______________________
CYMI, Ltd.
By:      _______________________
Name: _______________________
Title:   _______________________
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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