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EXHIBIT 4.8

Arel Communications &
Software Ltd.

Effective July 9, 2003

Dear Zvi:

The following summarizes our
agreement with respect to the cessation of your duties, and the termination of your
employment, with Arel Communications & Software Ltd. (the Company):

1.    
          You will continue in the employ of the Company until May 8, 2004 (the
          Termination Date). Provided, however, that at any time until April
          8, 2004, you shall have the right to terminate your employment earlier than the
          Termination Date, upon a 14 day advance written notice. In such a case, your
          Shortened Termination Date shall be 14 days after handing such a notice which
          may not be delivered to the Company before November 8, 2003 (the Shortened
          Termination Date). Until November 8, 2003, you shall be available at all
          times to work for the Company, either from the Companys office or from
          your home, as shall mutually be agreed upon by the Companys Chief
          Executive Officer and you in good faith. Between November 9, 2003 and the
          Termination Date or the Shortened Termination Date (as the case may be) you
          shall remain an employee of the Company exercising your unused days of vacation.

2.    
          Effective as of the Termination Date or the Shortened Termination Date (as the
          case may be), your duties as President of the Company as well as any other
          duties related to positions held by you as an executive in the Company and/or
          any of its associated or subsidiary companies, except for your position as an
          alternate director on the Companys Board of Directors, shall cease and you
          shall cease to be an employee of the Company.

3.    
          You shall receive (subject to Section 7 below) the following:

| | 3.1 | Until
the Termination Date or Shortened Termination Date (as the case may be) you shall
continue to enjoy all wages, social and fringe benefits to which you were entitled during
the term of your employment;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.2 | In
case you shall notify the Company of a Shortened Termination Date, the Company shall pay
you, not later than 30 days after the Shortened Termination Date, an amount equal to
$11,000 for each full month remaining until the Termination Date (and a pro-rata amount
for part of a month);
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.3 | An
aggregate payment of $15,000 which shall be paid no later than August 31, 2003;
| | --- | ----------------------------------------------------------------------------------

| | 3.4 | An
aggregate payment of $25,000 which shall be paid no later than November 1, 2003;
| | --- | -----------------------------------------------------------------------------------

| | 3.5 | An
aggregate payment of $25,000 which shall be paid no later than February 1, 2004;
| | --- | -----------------------------------------------------------------------------------

| | 3.6 | On
May 8, 2004 or earlier if the Company so decides but not earlier than the Shortened
Termination Date, the Company shall provide you with a letter for the release of your
Managers Insurance and Education Fund instructing the transfer of all the amounts
accumulated in your Managers Insurance Policy and Education Fund; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.7 | On
May 8, 2004 or earlier if the Company so decides but not earlier than the Shortened
Termination Date,, the Company will provide you with the difference between $154,515 and
the proceeds from the release of the sum accrued on account of severance pay in your
Managers Insurance, which together constitute the entire severance payment you are
entitled to receive pursuant to applicable law.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | 
|-- | 

| | 4.1 | Payments
quoted in US Dollars shall be paid according to the representative rate of exchange
published by the Bank of Israel which may be known on the date of payment.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4.2 | In
the event that the Company shall not pay you the requisite amount set forth in the
relevant sub section above, within 30 days of the date set forth therein, such requisite
amount which was not paid to you according to this Letter, shall bear interest at a rate
equal to 10% compounded annually.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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5.    
          We hereby confirm that as of the Termination Date or the Shortened Termination
          Date (as the case may be), you will have the following outstanding and vested
          options: (i) 90,000 options to purchase 90,000 Ordinary Shares of the Company,
          nominal value of NIS 0.001 each, at a price per share of $3.16; and (ii) 125,000
          options to purchase 125,000 Ordinary Shares of the Company, nominal value of NIS
          0.001 each, at a price per share of $2.25 (collectively, the
          Options). The Options shall expire on July 9, 2005.

6.    
          On the Termination Date or Shortened Termination Date (as the case may be), you
          shall return to the Company the Company car, cellular-phone, all documents,
          instruments and/or objects of the Company in your possession.

7.    
          The above remuneration and rights including the receiving and the exercise of
          the options, constitutes the full and complete consideration due to you with
          respect to your employment with the Company and/or the termination of your
          employment with the Company and/or your Employment Agreement with the Company
          (the Employment Agreement) and include all compensations, including
          for unused vacation days, and reimbursements for all obligations, expenses and
          costs of whatever nature to be incurred by you. Any and all taxes and levies
          which in accordance with the law are imposed on employees, shall be borne by
          you, and shall be withheld at source by the Company in accordance with
          applicable law.

8.    
          The Company hereby undertakes not to make any disparaging comments about you or
          your work as the President of the Company.

9.    
          This Letter and the terms and conditions set forth herein, are subject to the
          approval of each of the Companys Audit Committee, Board of Directors and
          shareholders meeting.

10.    
          The Company, subject to the full, complete and timely execution of the
          obligations set forth in this Letter and the attached letter from you to the
          Company, hereby irrevocably, ultimately and unconditionally, waives and
          relinquishes any and all rights, claims, demands and/or actions against you,
          except for any claim arising from (i) a breach of your fiduciary duties towards
          the Company; or (ii) any action pursuant to which the Company would have been
          entitled to terminate your employment without having to pay severance. To the
          Companys actual knowledge as of the date hereof, you have not breached
          your fiduciary duties towards the Company and have not taken an action pursuant
          to which the Company would have been entitled to terminate your employment
          without having to pay severance.

11.    
          The Company hereby clarifies that following November 8, 2003, it will have no
          objection to you being employed with an additional employer, provided that your
          employment with such employer does not breach your non-compete undertaking set
          forth in Section 15 of the Employment Agreement.

___________________________
Arel Communications & Software Ltd. 
By: _________________________ 
Title: _______________________



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I, hereby acknowledge my agreement to
the foregoing, and certify as follows:

1.    
          Subject to the full, complete and timely execution of all of the obligations set
          out in the Letter attached hereto (the Letter), including my receipt
          of the full remuneration and rights including the receiving and the exercise of
          the options, as set forth in the Letter, the Company (as defined in the Letter)
          will have discharged any and all obligations with respect to my employment with
          the Company and/or the termination of my employment with the Company and/or the
          Employment Agreement (as defined in the Letter). Except as specified above, I
          shall not be entitled to obtain any payment and/or performance and/or other
          remedy from either the Company and/or any of its employees, officers, directors,
          representatives and/or consultants with respect to my employment with the
          Company and/or the termination of my employment with the Company and/or the
          Employment Agreement.

2.    
          Subject to the full, complete and timely execution of all of the obligations set
          out in the Letter, including my receipt of the full remuneration and rights
          including the receipt and the exercise of the options, as set forth in the
          Letter, I hereby irrevocably, ultimately and unconditionally, waive and
          relinquish any and all rights, claims, demands and/or actions towards the
          Company, its subsidiaries and/or any of their employees, officers, directors,
          representatives and/or consultants (the Released Parties) with
          respect to my employment with the Company and/or the termination thereof and/or
          the Employment Agreement.

3.    
          [THIS SECTION IS TRANSLATED FROM HEBREW ORIGINAL] I hereby undertake not to make
          any disparaging comments about the Company in any way or manner. Notwithstanding
          the foregoing, in the context of my serving as an alternate director of the
          Company I will act and express myself freely as my fiduciary duties as an
          alternate director of the Company require.

4.    
          This document constitutes, inter alia, a settlement and discharge acknowledgment
          with respect to severance pay (Pitzuai Pitturim) in accordance with Section 29
          of Severance Pay Law. For the avoidance of doubt, it is hereby clarified that
          the Company has allowed me to terminate my employment prior to the Termination
          Date (as defined in the Letter) pursuant to section 1 of the Letter on the basis
          that this in no way impedes the Company from paying me severance pay on May 8,
          2004 and not at such time I terminate my employment prior to the Termination
          Date. I, after reviewing this issue with and receiving legal advice from Adv.
          Ronit Jaffe, hereby waive any claim I may have regarding the timing of payment
          of severance pay in the event that such payment is made no later than May 8,
          2004.

5.    
          On the Termination Date or Shortened Termination Date (as defined in the Letter)
          (as applicable), I shall return to the Company the Company car, cellular-phone,
          all documents, instruments and/or objects belonging to the Company in my
          possession and will comply with the terms of Sections 14 (Confidentiality) and
          15 (Competitive Activity) of the Employment Agreement.

| | __________________
Mr. Zvi Klier 
Dated:_________, 2003
| | -------------------------------------------------------



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