EXHIBIT 4.10

EMPLOYMENT AGREEMENT

This
EMPLOYMENT AGREEMENT (the Agreement)
is made as of the 15th day of July, 2002, by and between Daniel Yelin (the Executive) and Arel Communications and
Software Ltd., a corporation incorporated under the laws of the State of Israel
(the Company).

W I T N E S S E T H:

WHEREAS,
the Company desires to employ the Executive to serve as its Chief Financial
Officer and the Executive desires to accept such employment, under the terms
and conditions of this Agreement.

NOW,
THEREFORE, for and in consideration of the premises and the mutual covenants
and agreements herein contained, and for other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:

1.          Employment and Duties.

a.  
The Company hereby employs the Executive, and the Executive hereby accepts
employment, to serve as the Chief Financial Officer of the Company during the
Term (as defined below).

b.  
During the Term, the Executive shall perform such duties and  responsibilities commensurate with the
position of a chief financial officer and shall report to, and comply with the
directives of, the Chief Executive Officer of the Company (the CEO) or such officer of the
Company as may be designated by the CEO from time to time (the Supervising Officer).

c.  
Executive acknowledges and agrees that he may be required to travel within and
outside of Israel to perform his duties hereunder.

d.  
Excluding periods of vacation, sick leave and military reserve service to which
the Executive is entitled or required, the Executive agrees to devote all of his working time and attention to the
business and affairs of the Company and its subsidiaries (the subsidiaries
shall be referred to herein as the Arel
Companies) and shall use his best efforts, skills and abilities in
his diligent and faithful performance of his duties and responsibilities
hereunder. During the Term, as defined below, the Executive shall not engage in
any other business activities, excluding the passive management of his personal
investments, or hold any office or position, regardless of whether any such
activity, office or position is pursued for profit or other pecuniary
advantage, without the prior written consent of the Company.

e.  
The Executives duties are in the nature of management duties
that demand a special level of loyalty and, accordingly, the Law of Work Hours
and Rest 5711-1951 shall not apply to this Agreement. The parties hereto
confirm that this is a personal services contract and that the relationship
between the parties hereto shall not be subject to any general or special
collective employment agreement or any custom or practice of the Company in
respect of any of its other employees or contractors.

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2.          Term.  Executive shall be employed
hereunder commencing as of July 15, 2002 and ending upon the termination of the
Executives employment, by either party, in accordance with Section 5 below
(the Term).

3.          Compensation and Related Matters. As full compensation for the Executives
performance of his duties and responsibilities hereunder, the Company shall pay
the Executive the compensation and provide the benefits set forth below:

a.          Base
Salary.

(i)    The
Company shall pay the Executive a monthly gross salary (the Base Salary) of thirty-six thousand New
Israeli Shekels (NIS 36,000), less required deductions. Base
Salary shall be payable in accordance with the customary payroll practices of
the Company.

(ii)    The
Base Salary as specified in this Section 3a. above includes remuneration for
working overtime and on days of rest, and the Executive shall not be entitled
to any further remuneration or payment whatsoever other than the Base Salary,
unless expressly specified in this Agreement. The Executive acknowledges that
the Base Salary which the Executive is entitled pursuant to this Agreement
constitutes due consideration for the Executive working overtime and on days of
rest.

b.          Bonus.

(i)        Beginning
in the year 2003, the Executive shall be eligible to receive an annual
performance-based bonus in the maximum gross amount of thirty-two thousand U.S.
dollars ($32,000) (the Annual Bonus).
The Annual Bonus shall be payable within thirty (30) days from the date of the
release of the annual consolidated audited financial statements of the Company.
The Annual Bonus shall be payable, provided, however, that the Executive is
still employed by the Company as of December 31 of the relevant year and that
the Arel Companies and the Executive achieve certain performance objectives as
determined by the Company prior to or at the beginning of the relevant year;
said performance objectives shall be based on the annual budget as approved by
the board of directors of the Company. Executive shall not be entitled to
receive the Annual Bonus in the event that the Company does not set such
performance objectives.

(ii)      The
Executive shall be eligible to receive a pro-rated gross portion of the Annual
Bonus for the year 2002 (the 2002 Bonus)
(the Annual Bonus and the 2002 
Bonus shall be referred to together as the Bonuses). The 2002 Bonus shall be payable within thirty (30)
days from the date of the release of the annual consolidated audited financial
statements of the Company for the year ending December 31, 2002. The 2002 Bonus
shall be payable, provided that the Executive is still employed by the Company
as of December 31, 2002, and that the Arel Companies and the Executive achieve
certain performance objectives during the period of July 1, 2002, and December
31, 2002, as determined by the Company and based on the semi-annual budget
approved by the Board of Directors on June 12, 2002. The Company shall make its
best efforts to set such performance objectives by no later than August 15,
2002.

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(iii)
The Executive will not be entitled to any bonus under this Section 3b. should
this Agreement and the Executives employment be terminated for cause (as
defined in Section 5a.
below) prior to the payment of any such bonus.

(iv)  The Company shall be entitled, in its sole
discretion, to pay, in accordance with the terms of this Section 3b., the
Bonuses in New Israeli Shekels or in U.S. dollars. Any payment made in New
Israeli Shekels shall be calculated according to the
representative rate of exchange published by the Bank of Israel on the date
immediately prior to the date on which the Bonus is paid.

c.          Company
Car. The Company shall make available to the Executive an automobile for
his business and personal use.  The
automobile shall be owned or leased by the Company, at its sole discretion, and
shall be registered in the Companys name during the term of this Agreement.  The automobile shall be returned by the
Executive to the Company upon the termination, for any reason, of the
Executives employment with the Company. The Company shall bear all expenses of
maintaining and operating the automobile, including, without limitation,
insurance, gasoline, maintenance and repairs, up to a maximum monthly amount of
$900. For the sake of clarity, Executive shall only be entitied to the benefits
under this Section 3c. (including any economic value therefrom) if he makes use
of the automobile.

d.          Sick
Leave Under the Sick Pay Law 5736-1976.          The
Executive shall be entitled to the maximum number of days of sick leave as set
forth in the Sick Pay Law 5736-1976, payment for which shall be made in
accordance with the Companys standard practices for its senior employees.

e.          Vacation.  The Executive shall be
entitled to twenty (20) working days annual paid vacation, which will be
accrued in accordance with the Companys vacation policy in effect from time to
time. The Executive may schedule the vacation as he elects, subject to the
Companys business needs.

f.          
Reserve Duty.  The Executive
shall continue to receive the Base Salary, along with all its related benefits,
provided for hereunder during periods of military reserve duty.  The Executive hereby assigns and undertakes
to pay to the Company any amounts received from the National Insurance Institute
as compensation for such reserve duty service.

g.          Managers
Insurance.  The Company shall effect
a Managers Insurance Policy (the Policy)
in the name of the Executive, and shall pay a sum up to 15.83% of the Base
Salary towards such Policy, of which 8.33% will be on account of severance pay
and 5% on account of pension fund payments and up to a further 2.5% of the Base
Salary on account of disability pension payments.  The Company shall deduct 5% from the Base Salary to be paid on
behalf of the Executive towards the Policy.

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h.          Further
Education Fund Contributions.  The
Company shall pay a sum equal to 7.5% of the Base Salary and shall deduct 2.5%
from the Base Salary to be paid on behalf of the Executive towards a further
education fund (the Further Education Fund).
Use of these funds shall be in accordance with the by-laws of such fund.

i.          Convalesence
Pay. Executive shall be entitled to receive convalesence pay (Demei Havraa) according to applicable
law.

j.
         Notwithstanding
anything to the contrary herein, all payments and contributions of the Company
under this Agreement shall be limited to the highest deductible amount
recognized by the tax authorities.

4.          Expenses.

a.          
The Executive shall be reimbursed for reasonable and necessary out-of-pocket
expenses incurred on the Companys behalf provided, however,that (i) such expenses have been
previously approved in writing by the CEO or the Supervising Officer and
incurred in accordance with the Companys expense policy in effect at such time
(the Expense Policy), (ii) the
Executive has submitted, in writing, in the proper format, an expense report
for the same, together with written receipts, in accordance with the Expense
Policy (each, an Expense Report),
(iii) the Expense Report has been submitted within thirty (30) days of the date
on which the expense was incurred, and (iv) where expenses have been incurred
by means of installment payments or on credit, Executive shall not be
reimbursed for such expenses until the Executive has actually paid them, i.e.,
the Executives account has been debited for each installment.  Executive hereby acknowledges that once
reimbursement has been received for goods purchased by him on behalf of the
Company, such goods shall become the sole property of the Company.

b.          The
Employee shall be entitled to receive from the Company a one-time reimbursement
for reasonable expenses of the door-to-door moving, incurred in connection with
his relocation, including shipping, of his familys personal effects to Israel
from the United States, against written receipts for such expenses and up to a
maximum of $10,000 (ten thousand U.S. dollars) less required deductions.  In the event that the Executive terminates
his employment with the Company at any time prior to the first anniversary of
the commencement of the Term, the Executive shall return to the Company all
amounts received under this Section 4b. and the Executive agrees that such
amounts may be offset from any salary or severance pay owing to him at such
time.

c.          The
Company shall be entitled, in its sole discretion, to reimburse the Executive
for such relocation expenses, as provided for in this Section 4, in New Israeli
Shekels or in U.S. dollars. Any payment made in New Israeli Shekels shall be calculated
according to the representative rate of exchange published by the Bank of
Israel on the date immediately prior to the date on which such reimbursement is
paid.

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5.        Termination. 
Unless otherwise mutually agreed to by the parties, this Agreement and
the Executives employment shall terminate:

a.  Upon
written notice of the Company of the existence of cause.  For purposes of this Agreement, the term
cause will be defined to include matters such as: (i) a determination by the
Company, in the reasonable judgement of the board of directors of the Company,
that the Executive has engaged in gross misconduct; (ii) the prosecution of the
Executive for any felony whatsoever, or any other criminal act involving moral
turpitude or affecting the Company or the Arel Companies; (iii) any failure to
carry out a directive of the CEO or the Supervising Officer which involves the
business of the Company or any of the Arel Companies which failure
continues after seven (7) days written notice of such failure; (iv) embezzlement or intentional misuse of
funds of the Company or any of the Arel Companies; (v) falsification of
records or reports; (vi) ownership,
directly or indirectly, of an interest in a person or entity in competition
with the products or services of the Company or any of the Arel Companies,
including those products or services contemplated in a plan adopted by the
board of directors of the Company or of any of the Arel Companies; provided,
however, that the Executive may
own, directly or indirectly, solely as an investment, securities of any entity
which are traded on any national securities exchange if Executive owns in the aggregate, directly or indirectly, less
than three percent (3%) of all classes of securities of such entities at any
time; (vii) any breach of the
Executives fiduciary duties or duties of care to the Company or any of the
Arel Companies; (viii) any material breach of this Agreement by the Executive;
(ix) any breach of Sections 7, 8 and/or 9 hereof; (x) any conduct materially
detrimental to the Company or any of the Arel Companies; and (xi) any other act
or omission that constitutes cause under the laws of any jurisdiction in
which the Company or any of the Arel Companies 
conducts its business at the time of such act.

b.  If the employment of the Executive is
terminated under Section 5a., then, unless the parties otherwise mutually agree
in writing, in full satisfaction of the Companys obligations under this
Agreement, the Executive shall only be entitled to: (w) earned but unpaid Base Salary provided for herein up to and
including the effective date of termination, prorated on a daily basis;
(x) severance pay in the amount required by law; (y) the portion of the Policy
that was contributed by the Executive; and (z) the portion of the Further Education
Fund that was contributed by the Executive. The Executive shall cooperate with the Company to assist the integration into the Companys organization of the person
or persons who will assume the Executives
responsibilities.

c.  Upon three (3) months written notice (the Notice Period) by the Company, it being
understood that the Company may provide such notice at any time without cause
and without the need to state the reason therefor. During the
Notice Period, Executive shall,
at the option of the Company, continue to perform his duties as set forth
herein or remain absent from the premises of the Company and the Arel
Companies. In addition, Executive shall
cooperate with the Company to
assist the integration into the Companys
organization of the person or persons who will assume the Executives responsibilities. During
the Notice Period, Executive shall continue to receive his compensation
pursuant to Section 3 above. Upon termination without cause, the Executive
shall be entitled to receive severance pay required by law, subject to the
provisions of Section 5e. below.

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d.     Upon three (3) months written notice (the
Company
Notice Period) by the
Executive (it being understood that the Executive may provide such notice at
any time). During the Company Notice
Period,  Executive shall, at the option of the Company continue to perform
his duties as set forth herein or remain absent from the premises of the
Company and the Arel Companies. In addition, Executive shall cooperate with the Company to assist the integration into the Companys organization of the person
or persons who will assume the Executives
responsibilities. During the Company
Notice Period, the Executive shall continue to receive his compensation
pursuant to Section 3 above.

e.  Upon the termination of the Executives
employment with the Company under Sections 5c. or 5d. only, the right to
receive the Policy and the Further Eduction Fund shall be automatically
assigned to the Executive. The Company and Executive agree and acknowledge
that, in the event that the Company transfers ownership of the Policy and/or
any Executive insurance policy, or the right to receive such policies to the
Executive, then, in accordance with Section 14 of the Severance Pay Law
5723-1963, such transfer shall be credited against any obligation that the
Company may have to pay severance pay to the Executive pursuant to the
Severance Pay Law, 5727-1963, and that such transfer shall be made instead of
any statutory obligation to pay severance pay, and not in addition thereto. For
the avoidance of any doubt, in such case, the Company hereby further
acknowledges that it waives its right to a refund of the funds accumulated in
the Policy, in accordance with the provisions of, but subject to the
limitations set forth in, the General Approval of the Minister of Labor and
Welfare, a translation of which is attached hereto as Appendix A.

6.        Return
of Proprietary Information and Company Property.

a.
In the event of any termination of this Agreement, whether by the Company or
the Executive, and whatever the reason, the Executive will promptly deliver to
the Company all documents, data, records and other information pertaining to
his employment by the Company  and other
responsibilities hereunder, including any Proprietary Information (as defined
below) or Company Intellectual Property (as defined below), and the Executive
will not intentionally take with him any documents or data, or any reproduction
or excerpt of any documents or data, containing or pertaining to his employment
by the Company or other responsibilities hereunder or any Proprietary
Information or Company Intellectual Property.

b.          Return
of Company Property.The Executive acknowledges that
the Company, in its sole discretion, may provide him with a computer and other
equipment in connection with the performance of his duties hereunder.  The Executive will use the equipment solely
for work done on behalf of the Company. Upon termination of this Agreement for
whatever reason, or sooner if requested by the Company, the Executive shall
return to the Company all equipment of the Company in the condition received
from the Company, fair wear and tear excepted.

7.        Confidentiality;
Proprietary Information.

a.
The Executive recognizes and acknowledges that the designs, inventions,
improvements, trade secrets, software systems (including specifications, programs
and documentation), hardware, methods, data, developments, and works of
authorship, which the Company or any of the Arel Companies use, own, plan or
develop (whether for their own use or for use by their clients), and the
Companys or any of the Arel Companies business plans, marketing plans and
customer lists, are confidential and are the property of the Company or
the  Arel Companies (hereinafter Proprietary Information). Proprietary
Information does not include information that is now, or hereafter becomes,
through no act or failure to act on the part of Executive, generally known to
the public.

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b.  The Executive agrees that, except as
directed by the Company and in the ordinary course of the business of the
Company, he will not,
during or after the term of this Agreement or of his employment with the
Company, disclose to any person or entity or use, directly or indirectly for
his own benefit or the benefit of others, any Proprietary Information, or
permit any person to examine or make copies of any documents which may contain
or be derived from Proprietary Information.

c.  The Executive agrees that the provisions of
this paragraph shall survive the termination of this Agreement and Executives
employment with the Company.

8.        Intellectual
Property Rights.

a.          For
purposes of this Agreement, Intellectual Property means the following items
of intangible and tangible property:

(i)     Patents,
whether in the form of utility patents or design patents and all pending
applications for such patents;

(ii)    Trademarks,
trade names, service marks, designs, logos, trade dress, and trade styles,
whether or not registered, and all pending applications for registration of the
same;

(iii)  Copyrights
or copyrightable material, including but not limited to books, articles and
publications, whether or not registered, and all pending applications for
registration of the same;

(iv)  Inventions,
research records, trade secrets, confidential information, product designs,
engineering specifications and drawings, technical information, formulae,
customer lists, supplier lists and market analyses;

(v)  Computer
programs, including, without limitation, computer programs embodied in
semiconductor chips or otherwise embodied, and related flow-charts, programmer
notes, updates and data, whether in object or source code form; and

(vi)  Semiconductor
chip designs, whether or not registered as mask works or topographies.

b.          The
Executive hereby assigns to the Company by way of future assignment all
Intellectual Property, originated, conceived, written or made by the Executive
during the term of this Agreement, related to his employment with the Company,
or which is in any way connected to the products or services of the Company or
any of the Arel Companies, including those products or services contemplated in
a plan adopted by the board of directors of the Company or of any of the Arel
Companies.

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c.          In
furtherance of the foregoing Sections 8a and 8b, the Executive agrees that all
fruits of the Executives work in connection with the business of the
Company or any of the Arel Companies, including all Intellectual Property and
future products (hereinafter referred to as an Invention) which are invented or developed by the Executive
during the term of his employment with the Company shall be wholly-owned by the
Company, and the Company shall be entitled to deal therewith as it desires and
register the Invention in its name or in the name of an Arel Company. The duty
of confidentiality in Section 7 above shall also apply to all Company
Intellectual Property and to any Inventions.

d.          Upon
request, the Executive will execute any instrument required to vest in the
Company or an Arel Company complete title and ownership to any Company
Intellectual Property or Invention.  The
Executive will, at the request of the Company, execute any necessary instrument
to obtain legal protection in the United States, Israel, and other foreign
countries for Company Intellectual Property or Inventions and for the purposes
of vesting title thereto in the Company or an Arel Company, all at the
Companys expense and without any additional compensation of any kind to the
Executive.  The Executive irrevocably
appoints the Company as his attorney in his name and on his behalf to execute
all documents and do all things required in order to give full effect to the
provisions of this Section 8.

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9.          Competitive
Activity. During the Term and for a period of twelve (12)
months from the date of termination of this Agreement by the Executive or by
the Company (the
Termination Date), the Executive
will not directly or indirectly:

a.  carry on or hold, directly or indirectly, an
interest in any company, venture, entity or other business which competes with the products or services of
the Company or any of the Arel Companies, including those products or services
contemplated in a plan adopted by the 
board of directors of the Company or of any of Arel Companies (a competing business) (including, without
limitation, as a shareholder); provided, however, that the Executive may own, directly or
indirectly, solely as an investment, securities of any entity which are traded
on any national securities exchange if he
owns in the aggregate, directly or indirectly, less than three percent
(3%) of all classes of securities of such entities at any time;

b.  solicit, canvass or approach or endeavor to
solicit, canvass or approach any person who, to his knowledge, was provided
with services by the Company or an Arel Company at any time during the
twenty-four (24) months immediately prior to the Termination Date, for the
purpose of offering services or products which compete with the services or products
supplied by the Company or an Arel Company at the Termination Date (restricted services) or request
or advise any such person to withdraw, curtail or cancel its business dealings
with the Company or an Arel
Company;

c.  act as a consultant or employee or officer
or in any managerial capacity in a competing business or supply in competition
with the Company or an Arel Company restricted services to any person who, to
his knowledge, was provided with services by the Company or an Arel Company any
time during the twenty-four (24) months immediately prior to the Termination
Date; or

d.  employ any person employed by the Company or
an Arel Company at any time during the twenty-four (24) months immediately
prior the Termination Date or solicit or entice away or endeavor to solicit or
entice away any such person from the Company or an Arel Company with a view to
inducing that person to leave such employment and to act for another employer in
the same or a similar capacity or to provide similar services to another
person.

e. 
If the scope of any restriction contained in this Section 9 is
too broad to permit enforcement of such restriction to its full extent, then
such restriction shall be enforced to the maximum extent permitted by law, and
the Executive hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such restriction.

10.       Injunction.
The Executive agrees that it would be difficult to measure damage to the
Company or an Arel Company from any breach by the of the Executive of the
promises set forth in Sections 7, 8 and/or 9 hereof, and that injury to the
Companyor an Arel Company from any such breach would be extrememly difficult to
calculate, and that money damages would therefore be an inadequate remedy for
any such breach.  Accordingly, the
Executive agrees that if he breaches any provision of Sections 7, 8 and/or 9
hereof, the Company, or an Arel Company will be entitled, in addition to all
other remedies it may have at law or in equity, to an injunction or other appropriate
orders to restrain any such breach by Executive without showing or proving any
actual damage sustained by the Company or an Arel Company, as the case may be.

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11.       Representations of the Executive. The Executive represents to the Company as
follows:

a.          Neither
the execution and delivery of this
Agreement nor the performance by the Executive of his duties and obligations
hereunder violates or will require him to violate or breach any obligation to
or agreement or confidence with any previous employer or third party.

b.         The
Executive has the full right, power and legal capacity to enter into and
deliver this Agreement and to perform his duties and other obligations
hereunder. This Agreement constitutes the valid and binding obligation of the
Executive and no approvals or consents of any persons or entities are required
for the Executive to execute and deliver this Agreement or perform his duties
and other obligations hereunder.

c.          The
Executive does not have in his possession any Intellectual Property,
confidential information or documents belonging to others, and will not use,
disclose to the Company or to any Arel Company or induce the Company or any
Arel Company to use any such Intellectual Property, confidential information or
documents during the term of this Agreement.

12.       Successors. This Agreement and the Executives performance hereunder are personal
to the Executive and shall not be assignable by the Executive. This Agreement
shall inure to the benefit of and be binding upon the Company and its
successors and assigns.

13.       Miscellaneous.

a.          Waiver;
Amendment.  The failure of a party
to enforce any term, provision, or condition of this Agreement at any time or
times shall not be deemed a waiver of that term, provision, or condition for
the future, nor shall any specific waiver of a term, provision, or condition at
one time be deemed a waiver of such term, provision, or condition for any
future time or times.  This Agreement
may be amended or modified only by a writing signed by both parties hereto.

b.
          Governing
Law; Jurisdiction. This Agreement shall be governed and construed in
accordance with the laws of the State of Israel without giving effect to the
rules of conflicts of law.   The
competent courts of Tel Aviv-Jaffa shall have exclusive jurisdiction upon any
dispute arising hereunder.

c.
          Tax
Withholding.  The Company may
withhold from any amounts payable under this Agreement such taxes (including
federal, state, or local) as shall be required to be withheld pursuant to any
applicable law or regulation. All amounts payble hereunder by the Company refer
to gross amounts, unless specifically stated otherwise.

d.
          Paragraph
Captions.  Paragraph and other
captions contained in this Agreement are for reference purposes only and are in
no way intended to describe, interpret, define or limit the scope, extent or
intent of this Agreement or any provision hereof.

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e.
          Severability. Without derogating from Section 9e., if
any provision of this Agreement is held by a court of competent jurisdiction to
be unenforceable under applicable law, then such provision shall be excluded
from this Agreement and the remainder of this Agreement 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 Agreement 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.

f.
          Integrated
Agreement.  This Agreement
constitutes the entire under-standing and agreement between the parties hereto
with respect to the subject matter hereof, and supersedes all prior agreements,
understandings, memoranda, term sheets, conversations and negotiations.  There are no agreements, understandings,
restrictions, representations or warranties between the parties, express or
implied, other than those set forth herein or herein provided for.

g.
          Interpretation;
Counterparts.  No provision of this
Agreement is to be interpreted for or against any party because that party
drafted such provision.  For purposes of
this Agreement: herein, hereby, hereinafter, herewith, hereafter and
hereinafter refer to this Agreement in its entirety, and not to any
particular subsection or paragraph. 
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, and all of which shall constitute one and
the same instrument.

h.
          Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand delivery, or by facsimile (with confirmation of transmission),
or by overnight courier, or within five (5) days after posting if sent by
registered or certified mail, return receipt requested, postage prepaid, in
each case addressed as follows:

| | If to the Executive:                 
| | -------------------------------------
| |                                      
| | Keren Hayakemet LeIsrael 12         
| | Givataim 53237                       
| | Tel:
  03-731-1629                   
| |                                      
| |                                      
| | If to the Company:                   
| |                                      
| | Arel Communications and Software Ltd.
| |                                      
| | 3 Ha-Yarden St.                      
| | Yavne, Israel                        
| | 70600                                
| | Attention:  Chief Executive
  Officer
| | Facsimile: 972-8-943-8106            

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| | with a copy to:
| | ---------------
| |                

| | Yigal Arnon & Co.                 
| | ----------------------------------
| | 1 Azrieli Centre                  
| | Tel Aviv 67021, Israel            
| | Attention: David H. Schapiro, Adv.
| |                                   
| | Facsimile:  972-3-608-7714        

or to such other address as either party
shall have furnished to the other in writing in accordance herewith.

i.          Confidentiality
of Agreement.  Subject to applicable
law, the Executive undertakes to keep the contents of this Agreement
confidential and not to disclose the contents of this Agreement to any third
party without the prior written consent of the Company.

IN
WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of
the date first above written.

|AREL COMMUNICATIONS AND             |                                    | /S/DANIEL YELIN
|----------------------------------- | ---------------------------------- | ---------------
|SOFTWARE LTD.                       |                                    | DANIEL YELIN   
|By:                                 | /S/IZHAK GROSS                     | Date: 7/20/2002
|Name:                               | Izhak Gross_________               |                
|Title:                              | Chairman of the Board of Directors |                
|Date: _7/20/2002___________________ |                                   



July 15, 2002

Mr. Daniel Yelin.

Dear Mr. Yelin,

We are pleased to inform you that further to a meeting of the board of
directors of Arel Communications and Software Ltd. (the Company) held on July
1, 2002, the board of directors, has decided to grant you options (Options)
to purchase up to one hundred and twenty five thousand (125,000) ordinary
shares (Shares) of the Company at an exercise price of US $0.60 (sixty cents)
per share (the Exercise Price).

This grant is subject to the terms and conditions set out below:

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1.          Issuance
and Vesting of Options

1.1        The
Options are hereby granted to you as of the date hereof and shall vest
according to the vesting schedule below, provided that your employment under
your employment agreement with Arel Communications and Software Ltd., dated as
of July 15, 2002 (the Employment Agreement) has not been terminated as at the
relevant vesting date:

|Tranche            |  | Number of Options |  | Vesting Date   
|------------------ |  | ----------------- |  | ---------------
|                   |  |                   |  |                
|First
  Tranche  |  | 25,000
  Options  |  | July 15,
  2003
|Second
  Tranche |  | 30,000
  Options  |  | July 15,
  2004
|Third
  Tranche  |  | 35,000
  Options  |  | July 15,
  2005
|Fourth
  Tranche |  | 35,000
  Options  |  | July 15,
  2006

1.2        Accelerated
Vesting. Notwithstanding the foregoing, the vesting date of the Options
will be accelerated as follows:

| | (a) | In the event of a Change in
  Control (as defined below) prior to January 1, 2003, the First Tranche will
  become immediately vested and exercisable in full.  
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | In the event of a Change in
  Control (as defined below) on or following January 1, 2003, all Options shall
  become immediately vested and exercisable in full.

Change
in Control means: (1) the acquisition by any person or group, other than by
any affiliates
of the Company, of 50% or more of the voting stock of the Company (other than in
the event of a registered public offering of the securities of the Company); or
(2) a sale or other disposition (in one transaction or a series of related
transactions) of all or substantially all of the consolidated assets of the Company and
of its subsidiaries other than to any affiliates of the Company.

2.          Transfer
of Options

The Options are not transferable other than by will or the applicable
laws of descent and distribution. No transfer of the Options by you, whether by
will or by the laws of descent and distribution, shall be effective to bind the
Company unless the Company shall have been furnished with written notice
thereof and a copy of the will and/or such other evidence as the Companys
board of directors may deem necessary to establish the validity of the transfer
and the acceptance by the transferee or transferees of the terms and conditions
of the Options.

3.          Exercise
Price

Each Option may be exercised in consideration of the payment of the
Exercise Price indicated above.

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4.          Period
of Exercise; Vesting

4.1        The
above Options will vest only if at the time of vesting your employment has not been
terminated under your Employment Agreement. Options which are unvested
at the time of termination of your employment under your Employment Agreement will become void and
unexercisable at the time of such termination. 
For the purposes of this Agreement, your employment under your
Employment Agreement shall be deemed to have been terminated upon notification
to you of your discharge in accordance with the terms and conditions as set
forth therein or the delivery by you of your letter of resignation, as the case
may be, irrespective of the effective date of such resignation or discharge.

4.2        Vested
Options may be exercised in whole or in part at any time for a period of five
(5) years from the date of vesting.  Any
Option not exercised within the aforesaid five (5) year period shall lapse and
become void and unexercisable.

4.3        Notwithstanding
Section
4.2 above, in the event that your Employment Agreement has been terminated for
any reason whatsoever, you must exercise Options which have vested within sixty
(60) days from the date of termination of your employment under your Employment
Agreement, provided, however, should your employment under your Employment
Agreement be terminated following your death or disability, vested Options must
be exercised by your estate or legal representative, as the case may be,
within one (1) year after the date of termination; any unexercised Options after such dates, as applicable,
shall lapse and become void and unexercisable. For purposes of this Section
4.3, the term disability shall mean your inability to perform the duties and
responsibilities required of you under the Employment Agreement due to a
physical and/or mental disability for a period of sixty (60) consecutive days
or ninety (90) non-consecutive days during any twelve (12) month period.

5.          Exercise
of Options

5.1        The
Options, or any part thereof, shall be exercisable by your signing and
returning to the Company at its principal office a Notice of Exercise in such
form as may be prescribed by the Company from time to time, together with full
payment in cash, or in such other form that may be acceptable to the Company,
of the exercise price therefor.

5.2        In order
to issue Shares upon the exercise of any of the Options, you hereby agree to
sign any and all documents and to take such further actions as required by any
applicable law and/or the Companys Articles of Association.

5.3        After a
Notice of Exercise has been delivered to the Company, it may not be rescinded
or revised by you.

5.4        The
Company shall not be required to issue or deliver any certificate or
certificates for Shares purchased upon any exercise of the Options prior to
fulfillment of all the following conditions:

a)          The
completion of any applicable registration or other qualifications of such
Shares under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory
body.

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b)          The
payment to the Company or the making of arrangements satisfactory to the board
of directors of the Company regarding the payment of any taxes of any kind
required by law to be withheld with respect to the Options.

6.          Taxes

Any and all taxes, fees and other liabilities (as may apply from time
to time) in connection with the grant and/or exercise of the Options and/or the
sale of Shares issued upon the exercise of the Options, will be borne by you
and you will be solely liable for all such taxes, fees and other liabilities.
You are advised to consult with your tax advisor with respect to the
consequences of receiving or exercising the Options.

7.          Adjustments

In the event that the Board of Directors of the Company shall
determine, in its sole discretion, that any extraordinary stock dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares or other similar corporate event affects the
Shares such that an adjustment is required in order to preserve the intent of
this Agreement, then the board of directors of the Company shall adjust any or
all of a) the number and kind of shares subject to outstanding Options, and b)
the exercise price with respect to any outstanding Option and/or, if deemed
appropriate, make provision for a cash payment to you. (For example, in the
event of a stock split in which the number of outstanding Shares is increased,
the number of Shares subject to Options and/or the exercise price therefore
shall be adjusted to maintain the approximate difference (i.e., spread)
between the exercise price and the fair market value of the Shares immediately
prior to such stock split. The foregoing adjustment shall also be made in the
event of a reverse stock split, to preserve the approximate spread
immediately prior to such reverse stock split).

8.          Rights
as a Stockholder

You shall not be, nor have any of the rights or privileges of, a
stockholder of the Company in respect of any Shares purchasable upon the
exercise of an Option unless and until certificates representing such Shares
shall have been issued by the Company to you.

9.          No
Right to Continued Employment

Nothing in the Agreement shall confer upon you any right to be employed
by the Company or any of its subsidiaries or affiliates (the Arel Companies),
to continue in the employ of the Company or any of the Arel Companies, or shall
interfere with or restrict in any way the rights of the Company or any Arel
Company to discharge you at any time for any reason whatsoever, with or without
cause (subject to applicable provisions of your Employment Agreement).

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10.          Notices

All notices
and other communications hereunder shall be in writing and shall be deemed to
have been duly given if delivered by hand delivery, or by facsimile (with
confirmation of transmission), or by overnight courier, or within five (5) days
after posting if sent by registered or certified mail, return receipt
requested, postage prepaid, in each case addressed as follows (or to such other
address as either party shall have furnished to the other in writing in
accordance herewith):

|(a) | if to you:                                                          
|--- | --------------------------------------------------------------------
|    |                                                                     
|    | Keren
  Hayakemet LeIsrael 12                                      
|    | Givataim 53237                                                      
|    | Tel: 03-731-1629                                                    
|    |                                                                     
|    |                                                                     
|(b) | if to the
  Company:                                                
|    | Arel
  Communications & Software Ltd.                               
|    | 3 HaYarden
  St.                                                    
|    | Yavne,
  Israel 70600                                               
|    | Fax:
  972-8-943-8106                                               
|    | Attention:
  Chief Executive Officer                                
|    |                                                                     
|    | with a copy
  to:                                                   
|    | Yigal Arnon
  & Co.                                                 
|    | 1 Azrieli
  Center                                                  
|    | Tel-Aviv,
  Israel 67021                                            
|    | Fax: 972-3-608-7714                                                 
|    | Attention:  David H. Schapiro, Adv.                  Ari Fried, Adv.
|    |                                                                     

11.          Amendment

All amendments and other modifications hereof shall be in writing and
signed by the Company and you. The delay or failure on the part of any party hereto
to insist, in any one instance or more, upon strict performance of any of the
terms or conditions of this Agreement, or to exercise any right or privilege
herein conferred shall not be construed as a waiver of any such terms,
conditions, rights or privileges but the same shall continue and remain in full
force and effect.

12.          Governing
Law

The laws of the State of Israel shall govern the interpretation,
validity and performance of the terms of this Agreement, without regard to the
principles of conflicts of laws. Any disputes arising hereunder shall be
adjudicated exclusively in the courts of Tel Aviv-Jaffa.

Please indicate your consent to the above terms by signing this letter
and returning it to the Company.

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Sincerely,

Arel Communications and Software Ltd.

|By: | /S/PHILIPPE SZWARC |  | Date: | 7/15/2002
|--- | ------------------ |  | ----- | ---------
|    |                    |  |       |          

I, the undersigned, confirm that the contents of this letter are
acceptable and agreed to by me.

|By: | /S/DANIEL YELIN |  | Date: | 7/15/2002
|--- | --------------- |  | ----- | ---------
|    |                 |  |       |          
|    | Daniel Yelin    |  |       |          

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