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                                                                  EXHIBIT 10.18

PHASECOM - HAR HOTZVIM

                           UNPROTECTED LEASE AGREEMENT

              ENTERED INTO AND SIGNED IN TEL AVIV ON MARCH 7, 1999

                                     BETWEEN

            Ayalot Investments in Properties (Har Hotzvim) 1994 Ltd.
                               P.C. # 51-197739-9
                      of 8, Shaul Hamelech Blvd., Tel Aviv
                           (hereinafter: the "Lessor")

                                                              OF THE FIRST PART;

                                       AND

                             Phasecom (Israel) Ltd.
                               P.C. # 51-086689-0
                  whose address shall be at the Leased Premises
          from the date of entry of the Lessee into the Leased Premises
                           (hereinafter: the "Lessee")

                                                              OF THE SECOND PART

Whereas           the Lessor owns the leasing rights to the property located on
                  Har Hotzvim in Jerusalem and known as parcel 116 of block
                  30241 (hereinafter: the "Building"); the extract of
                  registration for the plot is attached to this agreement as
                  APPENDIX A and forms an integral part hereof; and

Whereas           the Lessee is interested in leasing from the Lessor, and the
                  Lessor agrees to lease to the Lessee, part of the Building on
                  a gross area of 2,415 m2 (including an agreed portion of the
                  public areas) on the third and fourth office floors and a
                  warehouse on a gross area of 100 m2 on level -3.35 and parking
                  spaces as set forth in clause 11 (hereinafter: the "Leased
                  Premises"); the (net) Leased Premises are marked in red on the
                  drawings attached to this agreement as APPENDICES B-1 - B-4
                  and forming an integral part hereof; and

Whereas           the Leased Premises are part of the Building being
                  constructed, and according to the pace of progress of the
                  construction, the Lessor anticipates that the Leased Premises
                  will be ready on the date of commencement of the lease, vacant
                  of any person or object and in the exclusive possession of the
                  Lessor; and

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Whereas           the Lessor has confirmed that the construction of the Building
                  is performed lawfully and in accordance with a lawfully issued
                  building permit and in accordance with the zoning plans, and
                  that there is no lawful or other impediment to using the
                  Leased Premises in accordance with the purpose of the lease;
                  and

Whereas           a lease agreement dated July 28, 1994 exists between the
                  parties (hereinafter: the "Original Lease Agreement"), in
                  connection with a property located near the Leased Premises
                  (hereinafter: "Premises A"); and

Whereas           the term of the lease under the Original Lease Agreement ends
                  on November 5, 1998 (hereinafter: the "End of the Original
                  Lease Period"); and

Whereas           the Lessee has expressed its wish to lease the Leased Premises
                  from the Lessor as a replacement for Premises A, after the End
                  of the Original Lease Period, by unprotected tenancy and
                  without it acquiring any rights to the Leased Premises under
                  the Tenants Protection Law (Consolidated Version) 5732-1972
                  and all regulations enacted and/or to be enacted thereunder
                  (hereinafter: the "Law") and/or any other law replacing and/or
                  supplementing it, the subject-matter of which is tenants'
                  protection,

                  THEREFORE, IT WAS BEEN DECLARED, AGREED AND STIPULATED
                        BY AND BETWEEN THE PARTIES AS FOLLOWS:

1.       INTERPRETATION

         a.       The preamble to this agreement and all the provisions thereof
                  and the appendices attached hereto constitute an integral part
                  hereof.

         b.       The headings of the clauses shall not be used for the
                  interpretation of the agreement.

2.       THE ENGAGEMENT AND THE DURATION THEREOF

         a.       The Lessor hereby leases the Leased Premises to the Lessee and
                  the Lessee hereby leases the Leased Premises from the Lessor
                  for a period commencing on March 1, 1999 and ending on
                  December 31, 2003 (hereinafter: the "Term of the Lease").

                  The Lessee shall have the option to extend the Term of the
                  Lease under this agreement for an additional five year period,
                  provided that it shall give written notice thereof to the
                  Lessor no later than 150 days prior to

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                  the expiration of the Term of the Lease (hereinafter: the
                  "Extended Lease"). The Lessor shall inform the Lessee 180-210
                  days prior to the end of the Term of the Lease of its need to
                  notify of its exercise or non-exercise of the option, and the
                  Lessee shall reply thereto no later than 150 days prior to the
                  expiration of the Term of the Lease.

                  In the event that the Lessee shall not give notice as
                  aforesaid, the lease shall end on December 31, 2003. In the
                  event that the Lessee shall have notified of its exercise of
                  the option, the Term of the Lease shall be extended by five
                  years under the terms of the agreement, MUTATIS MUTANDIS, and
                  the Lessee shall not be entitled to terminate or cease the
                  lease prior to expiration of the term of the Extended Lease,
                  as aforesaid.

                  Notwithstanding the aforesaid, it is hereby agreed that for
                  the duration of the Extended Lease, the rent charged shall be
                  7.5% higher than that charged during the Term of the Lease.

         b.       It is hereby clarified that a delay in surrendering the Leased
                  Premises due to force majeure and/or due to reasons
                  uncontrolled by the Lessor, including due to any third party,
                  the contractor constructing the Building, Bezeq, the
                  electricity company etc., shall constitute no breach of the
                  Lessor's undertakings herein and shall entitle the Lessee to
                  no remedy, provided that the Lessor shall have taken
                  reasonable measures to prevent the delay.

                  It is hereby agreed that so long as actual possession shall
                  not have been surrendered to the Lessee due to circumstances
                  not under the Lessee's responsibility and/or so long as this
                  agreement shall not yet be in effect, the lease for Premises A
                  shall continue pursuant to the Original Lease Agreement and
                  the terms specified therein, with the modifications agreed
                  upon by the parties in writing.

         c.       Without derogating from the provisions of sub-clause (b)
                  above, it is hereby agreed by the parties that the Lessor
                  shall reserve the right to notify the Lessee of a postponement
                  in the commencement of the lease, provided that the
                  postponement shall not exceed ninety days and that the Lessee
                  shall be notified thereof twenty one days prior to the date of
                  commencement of the lease. A delay in surrendering the Leased
                  Premises, not exceeding ninety days, shall constitute no
                  breach of the Lessor's undertakings herein, and shall entitle
                  the Lessee to no remedy.

                  It is hereby agreed that in the event of postponement of the
                  commencement of the lease by the Lessor, as aforesaid, the
                  Lessee shall be entitled to further postpone the date of
                  acceptance of possession of the Leased Premises by no more
                  than two more weeks, by written notice to the Lessor.

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         d.       In the event that the date of commencement of the lease shall
                  have been postponed or brought forward as set out in
                  sub-clauses (b) and (c) above, the postponed date shall be
                  deemed as the date of commencement of the lease, but the date
                  of termination of the lease shall remain unchanged, and it
                  shall end on December 31, 2003.

                  It is agreed by the parties that in no case will the Leased
                  Premises be turned over to the Lessee between March 28, 1999
                  and April 16, 1999.

         e.       The parties agree that the date determined in the Lessor's
                  notice as the date of commencement of the lease shall be
                  deemed as such even if the Lessee shall not have come to take
                  possession of the Leased Premises, provided that the date of
                  commencement of the lease shall conform with the provisions
                  hereof.

         f.       The duration of the Term of the Lease is a fundamental
                  provision hereof, and neither party shall be entitled to
                  shorten the same (in the absence of mutual consent and subject
                  to the provisions hereof), in light of the parties'
                  expectations and intent at the time they had entered into this
                  agreement.

                  Notwithstanding the provisions of this clause, the Lessee
                  shall be entitled to transfer its right to the Leased Premises
                  prior to the end of the Term of the Lease to an alternative
                  lessee (hereinafter: the "Alternative Lessee"), the identity
                  of whom shall be approved in writing by the Lessor and subject
                  to that the Alternative Lessee shall provide the Lessor with a
                  bank guarantee in the amount of six months of rent and
                  adjusted management fees and additional securities in
                  accordance with the Lessor's policy and the Alternative
                  Lessee's financial stability at the time being.

                  For the removal of doubt, the Lessor shall only be entitled to
                  object to the Alternative Lessee on reasonable grounds.

         g.       The Lessee shall be liable for the payment of the full amount
                  of the rent and the management fees under the management
                  agreement (if any), for the entire Term of the Lease, also if
                  it shall not have actually used the Leased Premises, and also
                  if possession thereof shall have returned to the Lessor prior
                  to the end of the term without the Lessor's consent.

         h.       The Lessee shall have a right of first refusal to rent the
                  area marked in blue on APPENDIX B-1, under the following
                  conditions:

                  The right of first refusal shall be for a period of six months
                  from the date of signing of this contract. The Lessor shall
                  notify the Lessee in writing of any lease in which it intends
                  to engage for the said area during the said period. The Lessee
                  shall be entitled to give written

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                  notice within 7 days from the date of receipt of the Lessor's
                  notice that it shall lease the said area under the terms
                  hereof.

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3.       SURRENDER OF THE LEASED PREMISES TO THE LESSEE

         a.       The parties agree that when the Leased Premises shall be
                  turned over to the Lessee, they will be constructed in
                  accordance with the internal division plans as marked on
                  Appendices B-1 and B-2 and in accordance with the technical
                  specification attached to this agreement as APPENDIX C and
                  constituting an integral part hereof, and subject to the
                  lessee's plans, as defined hereunder, as approved by the
                  Lessor.

                  The Lessor (sic) shall pay the fees of the architect and the
                  consultants, to the extent that their engagement shall have
                  been approved by the Lessor, for their work in preparing the
                  internal division plans (excluding work, modifications and
                  additions to be required by the Lessee after approval of the
                  plans by the Lessor).

         b.       The Lessee has submitted to the Lessor a set of layout plans
                  for the Leased Premises, as marked on Appendices B-1 and B-2.

         c.       The Lessor shall examine the Lessee's plans, in accordance
                  with the limitations imposed by the building permit and/or the
                  frame and/or the existing infrastructure and subject to the
                  approval of the Lessor's architect.

                  The Lessor shall notify the Lessee of its agreement or
                  disagreement to the Lessee's plans within 15 days from the
                  date of receipt thereof. The Lessor shall not decline its
                  agreement, but on reasonable grounds. The Lessor's failure to
                  approve the plans within 15 days as aforesaid shall be deemed
                  as the approval thereof by the Lessor. The layout plans shall
                  be transferred to the architect for the preparation of work
                  plans.

         d.       The Lessee shall approve the architect's work plans within 14
                  business days from the date submitted thereto by the Lessor.

         e.       The Lessor shall perform the division of the Leased Premises
                  and all the work involved therein in accordance with the
                  Lessee's plans, as approved by the Lessor, and in accordance
                  with a schedule to be determined by the Lessor.

         f.       The Lessee shall bear the cost of any change and/or addition
                  to be made by the Lessor in accordance with the Lessee's plans
                  beyond the technical specification, according to the "Dekel"
                  price list (in addition to V.A.T.) plus 8% and, with respect
                  to work or material not appearing in the "Dekel" price list,
                  as shall be determined by the Lessor's engineers (provided
                  that they shall not exceed reasonable market prices) plus 8%.

                  The cost of the changes shall be paid by the Lessee to the
                  Lessor within 30 days from the following schedule:

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                  25%      from the date of receipt of the modification account
                           from the Lessor.

                  50%      from the date of completion of construction of the
                           internal partitions in the Leased Premises.

                  25%      from the date of surrender of possession of the
                           Leased Premises, subject to clause 2(f) above.

         g.       In the event that after approval of the Lessee's plans, the
                  Lessee shall wish to perform other changes and additions other
                  than in accordance with the Lessee's plans as submitted to the
                  Lessor, and the performance thereof shall be approved by the
                  Lessor, the cost thereof shall be paid in accordance with the
                  aforesaid, immediately upon receipt of the Lessor's demand.

                  The Lessee shall further pay for the architectural planning
                  and for the fees of the various consultants with respect to
                  the aforementioned work.

                  A request/s by the Lessee for modifications and additions,
                  after approval of the plans by the Lessor, resulting in a
                  delay in the completion of construction, shall not postpone
                  the date of commencement of the payment of rent as set forth
                  in clause 5 hereunder, for longer than 7 business days.

                  In the event that the delay shall exceed 7 days, the Lessee
                  shall be liable for the payment of rent from the eighth day
                  forth. For the removal of doubt, the overall delay shall mean
                  the delay resulting from any request submitted by the Lessee
                  for modifications and additions.

                  The cost of the changes shall be subject to indexation
                  differences, as defined herein, between the index known on the
                  date of preparation of the modification account by the Lessor
                  and the index known on the date of actual payment.

         h.       Notwithstanding the aforesaid, the Lessee shall be entitled,
                  at the discretion thereof, to pay for the modifications by way
                  of increasing the Rent by US $1.2 plus V.A.T. per m(2) for
                  each US $100 invested by the Lessor in each m(2), for the
                  entire Term of the Lease.

                  The parties agree that in the event that the Lessee shall
                  vacate the property prior to 10 full years of lease, i.e.,
                  prior to expiration of the term of the Extended Lease, the
                  Lessee shall repay the Lessor a proportionate part of the cost
                  of the modifications, including indexation differences as
                  aforesaid, for the period from the actual termination of the
                  lease until January 20, 2009.

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                  The Lessee may notify the Lessor, no later than 15 days from
                  the date of approval of any plan by the Lessor, of its waiver
                  of the performance of parts of the technical specification for
                  such plan.

                  In the event that such waiver is made by the Lessee, the
                  Lessee shall be entitled to a refund in accordance with the
                  "Dekel price list". The settlement of accounts shall be
                  performed by the parties' supervisors.

                  Plans submitted or to be submitted by the Lessee constitute a
                  notice on the part of the Lessee of a waiver or modification
                  of the technical specification, as aforesaid, to the extent
                  that they contain a waiver or modification.

         i.       The parties agree that in the event that delays shall occur in
                  the completion of the Leased Premises, for reasons under the
                  Lessee's control, including a delay in submitting the Lessee's
                  plans and/or amending the same, requests by the Lessee to
                  perform modifications of and/or additions to the Leased
                  Premises and/or of or to the Lessee's plans, in whole or in
                  part, after commencement of the internal division and so
                  forth, and in the event that the Lessee shall procrastinate
                  paying for the cost of the changes, the Lessee shall have to
                  pay rent to the Lessor and fulfill all the Lessee's
                  undertakings herein, from the date on which possession of the
                  Leased Premises could have been turned over to the Lessee but
                  for such delays and/or procrastination, although the surrender
                  of the Leased Premises shall be postponed until completion
                  thereof. For the removal of doubt, it is emphasized that the
                  Lessee shall not be entitled to postpone payment due to
                  changes in such case. The aforesaid shall not derogate from
                  the provisions of the latter part of sub-clause (g) above.

         j.       It is hereby agreed that no later than 14 days prior to the
                  date of surrender of the Leased Premises and after the main
                  systems (frame, air-conditioning, plumbing and electricity)
                  shall be operable and the lobby of the Building shall be fit
                  for use, the representatives of the parties shall inspect the
                  Leased Premises and prepare a protocol containing all defects
                  which may be discovered after reasonable examination.

                  Defects preventing reasonable use of the Leased Premises shall
                  be rectified prior to the date of surrender of possession. In
                  the event that such defects shall not have been fixed, the
                  date of surrender of possession shall be deferred pending the
                  repair thereof. Defects not preventing reasonable use of the
                  Leased Premises shall be fixed within 14 days from the date of
                  preparation of the protocol and the date of surrender of
                  possession shall not be deferred as a result thereof.

         k.       The delivery of the key to the Leased Premises to the Lessee
                  shall constitute confirmation on the part of the Lessee that
                  it had examined

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                  the Leased Premises and found them to be suitable to the needs
                  thereof and in accordance with the provisions of the
                  agreement, and that it entertains no claims with respect to
                  the Leased Premises, save for claims concerning concealed
                  defects and malfunctions and/or defects not preventing
                  reasonable use of the Leased Premises as set forth in the
                  protocol to be drawn by the parties, as set out above.

                  The protocol of surrender of possession shall not exempt the
                  Lessor from the obligations thereof under this agreement and
                  any law.

         l.       In the event that the Lessor shall have notified the Lessee
                  that the Leased Premises are completed and may be made
                  available to the Lessee, and the latter shall have failed to
                  arrive in order to take possession thereof, such designated
                  day shall be deemed as the date of commencement of the lease.

                  In the event that the Lessor shall have notified the Lessee
                  that the latter should arrive in order to take possession of
                  the Leased Premises and shall have retracted such notification
                  thereafter, the Lessor shall pay for the Lessee's direct
                  damages as follows: cancellation of the engagement of the
                  carrier, packing expenses and loss of work days.

4.       PURPOSE OF THE LEASE, NATURE OF THE LEASED PREMISES AND THE SCOPE
         THEREOF

         a.       The lease herein is entered into for the purposes of operating
                  the Lessee's business, i.e., a high-tech company in the field
                  of communications, and therefore, in the absence of the
                  Lessor's consent in advance and in writing, the Lessee shall
                  not be entitled to use the Leased Premises or any part thereof
                  for any purpose other than the aforesaid purpose.

                  The Lessee further undertakes not to transfer and/or endorse
                  and/or pledge any of its rights hereunder and not to sub-lease
                  the Leased Premises and/or part thereof and not to give a
                  right of use or any other right to the Leased Premises or any
                  part thereof to any third party, whether for or without
                  consideration, without the Lessor's consent in advance and in
                  writing. Any change in the composition or rate of holdings of
                  the shareholders exceeding 50%, whether at once or in stages,
                  shall be deemed as a transfer of rights as aforesaid,
                  requiring the Lessor's consent in advance and in writing, save
                  for public offerings. The Lessor shall decline its consent
                  only on reasonable grounds.

                  Notwithstanding the aforesaid, the Lessee shall be entitled to
                  transfer the rights thereof to the Leased Premises to an
                  affiliated company, provided that the Lessee shall remain
                  liable to the Lessor with the transferee, jointly and
                  severally, for the fulfillment of all undertakings herein.

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                  It is hereby agreed that the Lessor undertakes to endeavor to
                  market the Building to entities, the activity of whom shall
                  conform to the nature of the Building and to the terms of the
                  building permit.

         b.       Subject to the foregoing provisions hereof, the Lessee
                  confirms that it has seen and examined the Building and the
                  Leased Premises, the construction and development plans and
                  the specification, and that it has examined the designation of
                  the Leased Premises and the uses thereof permitted by the
                  zoning plans and the law, and has found them to be suitable to
                  the needs thereof, and that it neither has nor shall have any
                  claim of non-conformity or of choice or of defects in the
                  Leased Premises and other such claims against the Lessor, in
                  light of the aforesaid and of the other stipulations herein,
                  save for claims with respect to concealed defects and/or
                  non-conformity.

         c.       Subject to the foregoing provisions herein, the Lessee
                  undertakes that it shall obtain, at the expense and under the
                  responsibility thereof, all the licenses, permits and
                  approvals (hereinafter: the "Licenses") required and to be
                  required by any authority or under the law in order to conduct
                  the business thereof at the Leased Premises, and the Lessee
                  further undertakes to conduct the business thereof at the
                  Leased Premises in accordance with the Licenses, any law and
                  the requirements of the competent authorities, and, in the
                  event that the Lessee shall obtain the Lessor's consent to
                  perform changes in the Leased Premises, in accordance with
                  clause 8(d) hereunder, the Lessee undertakes to perform the
                  same only after receipt of the permits as set out in the law
                  and subject thereto.

                  For the removal of doubt, it is emphasized that the Lessor is
                  not responsible for obtaining and/or maintaining the Licenses.

                  Should the Lessor suffer any damage due to the non-fulfillment
                  of any undertaking by the Lessee pursuant to this sub-clause,
                  the Lessee shall compensate and indemnify the Lessor for any
                  such damage.

         d.       The Lessee's failure to obtain the Licenses and/or the
                  permits, and/or the revocation thereof at any time shall not
                  derogate from any of the Lessee's undertakings herein,
                  including the payment of Rent.

         e.       The Lessee confirms that it is aware that various work might
                  be performed at the Leased Premises, the Building and the
                  surroundings thereof, including further construction,
                  development, renovations and any other modifications, and that
                  it shall entertain no claim against the Lessor with respect
                  thereto. The Lessee undertakes not to disrupt or object to
                  such work, provided that the reasonable use of the Leased
                  Premises, for the purpose of the lease, is not compromised.

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                  Notwithstanding the provisions of clause 4.6 of the Management
                  Agreement, work performed at the Leased Premises, after
                  surrender thereof to the Lessee, shall be made on weekdays
                  after 17:00 and on Fridays, except for emergencies.

         f.       The Lessor undertakes to allocate an area in the Building,
                  including the basement, free of rent, for a dining hall for
                  the Lessee's caterer, in the event that no restaurant, capable
                  of catering for the Lessee's employees for prices acceptable
                  at Har Hotzvim for catering services for high-tech workers,
                  shall be operated in the Building (hereinafter: the "Temporary
                  Area"). The area shall be air-conditioned, floored, lit and
                  will contain sinks for washing dishes and hands and furnished
                  as shall be determined by the management company. It is hereby
                  clarified that the Lessee's status in the Temporary Area shall
                  be that of licensee only and that it shall be responsible for
                  preventing nuisances and damage to the Leased Premises, the
                  Building, the tenants, and the guests and visitors to the
                  Building.

                  It is hereby clarified that the Lessee shall be responsible
                  for arranging for insurance, in connection with the Temporary
                  Area, as set forth in clause 10 hereunder.

                  The Temporary Area shall have a capacity of 50 people.

                  The Lessee undertakes that the Temporary Area shall be
                  returned to the Lessor upon commencement of operation of a
                  restaurant in the Building and/or upon termination of the
                  lease under this contract, whichever is earlier.

                  The Lessee is liable to the Lessor for vacation of the caterer
                  and surrender of the Temporary Area to the Lessor, in a proper
                  and usable condition, free and vacant of any person and object
                  installed at such place by the Lessee.

                  The Temporary Area shall only be used in order to operate a
                  catering service for the Lessee's employees and guests. The
                  Lessee is responsible for any negligent act or omission and
                  for any damage caused to the Lessor and/or to a third party as
                  a result of the caterer's actions.

5.       RENT, THE RATE AND DATES OF PAYMENT THEREOF

         In consideration for the rights of lease which are the subject of this
         agreement, the Lessee undertakes to pay the Lessor, during the Term of
         the Lease, rent (hereinafter: "Rent") as follows:

         a.       The Lessee shall pay the Lessor monthly Rent in NIS in the
                  amount of NIS 126,448 in addition to V.A.T. at the lawful rate
                  thereof on the date

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                  of payment, linked to the consumer price index; the base index
                  is the index of October 1998, published on November 15, 1998,
                  i.e., 164.1 points.

         b.       On the date of commencement of the lease, the Lessee shall pay
                  Rent for the first 3 months of the lease.

                  The Rent shall be paid on a quarterly basis, for each quarter
                  in advance, on the first business day of the months of
                  January, April, July and October of each year.

                  For the removal of doubt, it is clarified that if the Term of
                  the Lease shall commence on a date other than one of the
                  aforementioned dates, an adjustment shall be made prior to the
                  beginning of the second quarter of the Term of the Lease so
                  that the Rent shall be paid at the beginning of each quarter
                  in advance, as aforesaid.

         c.       Until notified otherwise by the Lessor, and without derogating
                  from the Lessor's right to demand payment of the Rent in
                  another way, the Rent shall be paid directly into the Lessor's
                  account # 265219 at Bank Hapoalim Ltd., Hameasfim branch in
                  Tel Aviv, branch # 510. A tax invoice shall be duly issued
                  immediately after payment shall be made.

6.       LINKAGE OF THE RENT TO THE CONSUMER PRICE INDEX

         The Rent set forth in clause 5 above shall be calculated and paid
         subject to indexation as follows:

         a.       In the event that the publication of the index shall indicate
                  that the new index is higher than the base index, the nominal
                  rate of each Rent payment made by the Lessee shall be
                  increased at a rate equal to the increase of the new index
                  proportionately to the base index.

                  However, should it transpire that the new index is equal to or
                  lower than the base index, the Lessee shall make the payment
                  at the nominal value thereof in the previous quarter.

         b.       For the purposes of such indexation, the following terms shall
                  be defined as set forth beside them:

                  The index -       the consumer  price index,  including
                                    fruit and vegetables, published by the
                                    Central Bureau of Statistics and Economic
                                    Research, or any other official index
                                    replacing it, if published by any other
                                    governmental institution, whether or note
                                    based on the same data on which the current
                                    index is based.

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                                    In the event that another index shall be
                                    introduced as aforesaid and the said Bureau
                                    shall not determine the ratio between it and
                                    the index replaced thereby, within six
                                    months from the date of replacement, the
                                    said ratio shall be determined in accordance
                                    with the ratio named for index-linked loans
                                    at Bank Hapoalim Ltd.

                  The base index -  the index, as defined above, decided upon by
                                    the parties and determined in clause 5(a)
                                    herein.

                  The new index -   the latest index published prior to the date
                                    of actual payment.

7.       ADDITIONAL PAYMENTS IMPOSED ON THE LESSEE

         a.       Throughout the Term of the Lease, the Lessee shall pay all
                  taxes, municipal taxes, levies, fees and other obligatory
                  payments of any kind, payable to the local authority and/or to
                  any governmental authority in connection with the Leased
                  Premises, the maintenance and use thereof, save for property
                  tax and/or other obligatory payments to be lawfully imposed on
                  property owners, which shall be paid by the Lessor.

                  The Lessee shall further pay, throughout the Term of the
                  Lease, all the payments and expenses involved in the
                  maintenance, care and operation of the Leased Premises in good
                  and proper condition, including payments to the co-op board
                  and/or to the management company, if any, including, but not
                  only, for the maintenance of gardens, yards and parking lots
                  included in the Leased Premises and the joint property etc.
                  The Lessee shall further pay for the consumption of water,
                  electricity and telephone. The Lessee shall also pay for the
                  air-conditioning system and for water consumption according to
                  the proportion between the area of the Leased Premises and the
                  leased areas of the Building, as set forth in the Management
                  Agreement attached hereto, and in accordance with the
                  provisions of clause 9 hereunder.

                  For the removal of doubt, it is emphasized that the Lessee
                  shall bear all such payments and expenses also for the period
                  in which the Lessee shall occupy the Leased Premises in the
                  event of failure to vacate the same.

         b.       The Lessee undertakes to sign contracts with the electricity
                  company and with the municipality of Jerusalem for the supply
                  of electricity and water to the Leased Premises. The Lessor
                  shall act in order to perform the aforesaid and the Lessee
                  shall assist the Lessor as required in order

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                  to perform the undertaking as aforesaid. Payment for the
                  electricity meter shall be borne by the Lessor.

                  The Lessor and/or the management company, as the case may be,
                  shall be responsible for placing the Leased Premises at the
                  Lessor's disposal with the Building and frame systems in
                  proper working order.

         c.       The Lessee shall timely pay all bills for the payments and
                  expenses imposed thereon as aforesaid, and in the event of
                  failure to do so, the Lessee shall further pay any additional
                  payment imposed due to such arrears. The Lessee shall provide
                  the Lessor with receipts for payments made thereby, pursuant
                  to the Lessor's demand.

                  In the event that the Lessor shall pay any amount on account
                  of expenses and payments imposed on the Lessee as set forth
                  herein, the Lessee undertakes to repay such amounts
                  immediately upon the Lessor's demand and in addition to
                  interest as set out in clause 16 hereunder.

         d.       In addition to Rent, indexation differences and payments under
                  this agreement, the Lessee shall pay value added tax one day
                  prior to the date of payment thereof to the authorities, at
                  the current rate from time to time on the date of making any
                  payment pursuant to the terms hereof. After the payment, the
                  Lessor shall provide the Lessee with a lawful tax invoice.

8.       USE OF THE LEASED PREMISES AND THE MAINTENANCE THEREOF

         a.       The Lessee undertakes to leave no movables outside the Leased
                  Premises and to make no use of any part of the Building other
                  than the Leased Premises, including the public areas of the
                  Building, for any purpose, save for access to the Leased
                  Premises. The Lessee further undertakes to use the Leased
                  Premises so as to produce no nuisance, as defined under any
                  law, noise, odor, poisonous substance, smoke, shock or
                  inconvenience to others in the Building.

         b.       The Lessee undertakes to use the Leased Premises and the
                  surroundings thereof in a cautious manner, to maintain and
                  preserve the same in proper order and to immediately repair,
                  at its expense, any damage and/or breakage caused to the
                  Leased Premises, save for damage and/or breakage caused to the
                  Leased Premises due to construction defects and reasonable
                  wear and tear. For the purpose of performing the repairs, the
                  Lessee shall contact the management company, and if the latter
                  shall refuse to perform the repairs, the Lessee may resort to
                  other service providers.

                  It is hereby agreed that the Lessee's undertaking to use the
                  services of the management company for repairs in the Leased
                  Premises is subject

                                      14

<PAGE>

                  to reasonable demands for payment on behalf of the management
                  company.

                  The Lessee may perform repairs unrelated to the systems of the
                  Building through the employees thereof, provided that they are
                  experts therefor.

                  The Lessor and/or the management company, as the case may be,
                  shall be responsible for placing the Leased Premises at the
                  Lessor's disposal with the Building and frame systems in
                  proper working order.

                  The provisions of this clause shall override those of clause
                  4.1 of the Management Agreement.

         c.       Whenever the Lessee shall fail to perform the undertakings
                  thereof under this clause, the Lessor shall be entitled, but
                  not obliged, to perform the same and to charge the Lessee with
                  the payment of the expenses, provided that it shall have given
                  the Lessee a 10 day prior notice in writing of its intention
                  to do so, unless the repair is required as a matter of
                  emergency.

                  The Lessor may demand and receive from the Lessee the cost of
                  repairs performed thereby, or the estimated cost of repairing
                  damages, in the event that the Lessee shall have left the
                  Leased Premises, regardless of whether or not the Lessor shall
                  have actually performed the repair. The aforesaid shall not
                  derogate from any other remedy to which the Lessor is entitled
                  under this agreement and/or any law.

         d.       The Lessee undertakes to perform no constructional changes in
                  the Leased Premises involving systems, without the prior
                  written consent of the Lessor to the Lessee's modification
                  request, to which detailed plans shall be attached.

                  The Lessor shall not deny its consent to the modifications but
                  on reasonable grounds.

                  The Lessor's failure to reply in writing within 15 days from
                  the date of the Lessee's request for modifications shall be
                  deemed and regarded as the Lessor's consent thereto.

                  In no case will the Lessee be entitled to make changes in the
                  frame and/or the internal and/or external systems of the
                  Building, without the Lessor's consent as aforesaid and
                  subject to fulfillment of the provisions of any law.

                  For the removal of doubt, it is emphasized that if the Lessor
                  shall condition its consent, INTER ALIA, on the receipt of
                  approvals from

                                      15

<PAGE>

                  various consultants, such consultants' fees and expenses shall
                  be borne by the Lessee.

                  Shortly prior to the end of the Term of the Lease under this
                  agreement, the Lessee shall reinstate the former condition of
                  the Leased Premises, as at the beginning of the Term of the
                  Lease, at its expense and under its responsibility, in
                  accordance with modifications performed by the Lessee from
                  time to time subject to the Lessor's approval, and shall
                  dismantle any modification, addition and facility installed
                  thereby while preserving the frame and systems of the
                  Building. The Lessee shall further repair, at its expense, any
                  damage caused to the Leased Premises as a result of such
                  actions.

         e.       The Lessee undertakes to allow the Lessor and/or the
                  management company and/or their representatives to enter the
                  Leased Premises at any reasonable time, and, to the extent
                  possible, after prior coordination (except for urgent cases in
                  which prior coordination will not be possible) in order to
                  examine the condition of the Leased Premises and/or perform
                  repairs in the Leased Premises or of other parts of the
                  Building, and in order to show the Leased Premises to others.

                  For the removal of doubt, it is emphasized that nothing in
                  this clause shall impose any obligation on the Lessor.

         f.       The Lessee undertakes to post no signs on the external walls
                  of the Leased Premises or signposts exceeding the boundaries
                  of the Leased Premises or signposts located within the Leased
                  Premises but facing outwards, without the written approval of
                  the Lessor and/or of the management company and after receipt
                  of any permit required by law.

                  It is agreed that the Lessor may determine the location, shape
                  and character of signposts of any kind, at the sole discretion
                  thereof, in order to maintain a uniform appearance of the
                  Building. The signposts in the Building shall be similar to
                  the signposts of the other tenants in the Building.

                  The Lessor shall be entitled to oblige the Lessee to install
                  internal signposts according to the former's determination, at
                  the latter's expense.

                  For the removal of doubt, all rights to post signs on the
                  external walls of the Building belong to the Lessor.

         g.       In times of emergency, the other tenants shall be entitled to
                  pass through and to use the sheltered areas.

9.       THE MANAGEMENT COMPANY

                                      16

<PAGE>

         a.       The Lessee confirms that it has been informed that the Lessor
                  may, at the sole discretion thereof, turn the rendering of
                  management and maintenance services over to a management
                  company.

                  The Lessor shall be entitled to replace the management company
                  with another, or to decide not to turn the rendering of the
                  services over to a management company, or to perform them
                  itself all in accordance with the sole discretion thereof.

         b.       The terms of the management agreement between the Lessee and
                  the management company - if any shall be as set forth in the
                  management agreement attached to this agreement as APPENDIX D
                  and forming an integral part hereof (hereinafter: the
                  "Management Agreement"). The Lessee's signing of this
                  agreement shall be tantamount to signing the Management
                  Agreement.

                  The Lessee undertakes to fulfill the provisions of the
                  Management Agreement and it is agreed that the Lessee's breach
                  of the Management Agreement shall constitute a breach of this
                  agreement too, and a breach of this agreement shall also
                  constitute a breach of the Management Agreement.

         c.       Notwithstanding the provisions of clause 5 of the Management
                  Agreement, the management expenses and fees imposed on the
                  Lessee, including the air-conditioning expenses and an
                  insurance premium shall in no case exceed NIS 10 per m2 gross
                  plus V.A.T. in the first two years of the Term of the Lease,
                  and in the remaining Term of the Lease, the management
                  expenses and fees imposed on the Lessee, including
                  air-conditioning expenses and an insurance premium, shall not
                  exceed NIS 11 per m2 gross plus V.A.T. The said amounts shall
                  be linked to the base index set out in clause 5(a) above.

                  For the removal of doubt, the aforesaid does not refer to
                  special additional services to be required by the Lessee from
                  the management company as set forth in the latter part of
                  clause 3.2 of the Management Agreement.

10.      LIABILITY AND INSURANCE

         a.       The Lessor and/or the management company shall insure the
                  building (without content) in an extended fire insurance at
                  the Lessee's expense, for the duration of the Term of the
                  Lease, against fire hazards, explosions, damage caused by
                  water, flooding, storms and tempests, earthquakes, loss of
                  Rent and any other hazard as the Lessor shall deem fit.

                  It is hereby agreed that the issuance of the said insurance
                  shall not exempt the Lessee from liability under this
                  agreement and/or any law.

                                      17

<PAGE>

                  The said insurance shall contain a clause waiving the right of
                  subrogation against the Lessee on the part of the insurer,
                  except for damages caused to the building by the Lessee
                  intentionally. The amounts of the insurance and of the
                  co-payment shall be determined by the Lessor and/or the
                  management company and the Lessee agrees to such amounts and
                  shall pay them immediately upon demand.

                  The Lessor and/or the management company shall be entitled,
                  from time to time, to change and/or cancel and/or replace the
                  policies and/or to issue additional insurance, all at the sole
                  discretion thereof.

         b.       The Lessee shall be liable to the Lessor for any damage or
                  loss caused to the Leased Premises as a result of an act or
                  omission on the part of the Lessee, the invitees, licensees,
                  customers and suppliers thereof, which are not covered or
                  should not have been covered had the Lessor or the management
                  company issued the building insurance in accordance with
                  clause 10(a) above, and had the Lessor or the management
                  company fulfilled all the undertakings thereof in accordance
                  with such insurance, including its undertaking to pay the
                  premium. The Lessee shall be liable to the Lessor for any
                  damage or loss caused to the person or property of any third
                  party on the Leased Premises or within the boundaries thereof.

                  Without derogating from the Lessee's liability under this
                  agreement and/or any law, and in addition thereto, the Lessee
                  undertakes to take out the following insurance, with a
                  lawfully authorized and reputable insurance company, at its
                  expense, from the date of commencement of the lease until the
                  end of the Term of the Lease:

                  1.      The Lessee undertakes to insure the content of the
                          Leased Premises, including the furniture, equipment,
                          facilities and stock thereof, and any modification,
                          improvement, renovation and addition of any kind
                          performed and/or to be performed at or to the Leased
                          Premises, and to update the amount of the insurance
                          from time to time, so as to always reflect the full
                          value of the insured property.

                  2.      The Lessee undertakes to insure its use of the Leased
                          Premises and any activity thereof at the Leased
                          Premises and in the Temporary Area, in employers'
                          liability insurance with a limit of liability no less
                          than that acceptable in the insurance market at the
                          time of issuance of the policy, and in insurance
                          against liability to third parties, including the
                          Lessor, the management company and any third party,
                          for an amount no less than $750,000 per incident and
                          $1,500,000 per period. The policy shall include a
                          "cross liability" clause.

                                      18

<PAGE>

         c.       The Lessee undertakes to arrange for the content insurance to
                  be extended so as to include a clause of waiver of subrogation
                  against the Lessor, the management company and others on their
                  behalf, except for damage caused maliciously. With respect to
                  the employers' liability policy, it shall be extended so as to
                  cover the lawful liability of the Lessor and of the management
                  company in the event that they shall be deemed as employers of
                  the Lessee's employees. With respect to the third party
                  liability insurance, it shall be extended so as to cover the
                  liability of the Lessor and of the management company due to
                  an act or omission on the part of the Lessee.

         d.       The Lessee shall present the insurance policy to the Lessor
                  upon commencement of the lease and upon any renewal or
                  amendment of the policy at the Lessor's demand and shall
                  provide an insurance confirmation from the insurance company,
                  in the form attached hereto and constituting an integral part
                  hereof.

                  The Lessee undertakes to add to and/or update and/or amend the
                  insurance policies to the Lessor's satisfaction. The Lessor's
                  failure to demand the policies shall not be deemed as a waiver
                  of the Lessee's undertakings.

         e.       Insurance payments received shall be applied first and
                  foremost to repairing the damage.

         f.       The Lessee undertakes that the policies to be issued thereby
                  shall contain an explicit condition whereby the insurer
                  explicitly waives any right of subrogation against the Lessor
                  and/or anyone on its behalf, including the co-op board and/or
                  the management company.

         g.       In the event that the Lessee shall fail to fulfill the
                  undertaking thereof to issue insurance as set out in this
                  clause, the Lessor and/or the management company shall be
                  entitled to issue such insurance at the Lessee's expense, and
                  the Lessee shall be obliged to repay the Lessor, immediately
                  upon the demand thereof, any amount expended by the Lessor
                  and/or by the management company for this purpose, but the
                  aforesaid in this clause shall impose no obligation on the
                  Lessor and/or the management company to act as aforesaid.

         h.       During the Term of the Lease, no insurance policy shall be
                  revoked, for whatever cause or reason, without notice to the
                  Lessor at least 30 days in advance. The Lessee undertakes to
                  provide the Lessor with confirmations of the renewal of the
                  policies, 30 days prior to the date of renewal thereof, by way
                  of a temporary confirmation from the insurer, and after
                  renewal the Lessee shall provide copies of the policies.

                  All such insurance policies shall be valid throughout the Term
                  of the Lease.

                                      19

<PAGE>

         i.       The Lessee undertakes to notify the insurance company and the
                  Lessor of any damage caused to the Leased Premises and/or to a
                  person and/or his property. Notice under this clause shall be
                  made by registered post and shall contain the details of the
                  incident and the estimated amount of the damage.

                  The Lessee shall further notify the Lessor of any damage which
                  may affect the Lessor's rights, decrease the value of the
                  Leased Premises or expose the Lessor to any claim.

         j.       The Lessee undertakes to indemnify the Lessor and/or
                  compensate the latter for any damage caused thereto and/or
                  imposed thereon due to the breach by the Lessee of the
                  provisions of this clause including all sub-clauses thereof
                  and/or due to the breach of the terms of the policies.

                  For the purposes of this clause, the word "damage" shall also
                  mean the insurance payments which the Lessor could have
                  received but for the circumstances causing such payments not
                  to be made, and any liability imposed on the Lessor including
                  principal, interest and indexation differences, expenses and
                  legal fees due to the claim of any injured party, and if the
                  Lessor shall have paid such liability, the Lessee undertakes
                  to repay the Lessor any amount paid immediately upon the
                  Lessor's first demand, provided that the Lessor shall have
                  notified the Lessee of the claim and the Lessee shall have
                  been given the opportunity to defend itself against it.

         k.       For the removal of doubt, it is clarified that the Lessee
                  shall bear the amounts of the co-payment.

         l.       The Lessee undertakes to provide to the Lessor, prior to the
                  commencement of the lease, the insurance annex attached to
                  this agreement as APPENDIX D and constituting an integral part
                  hereof, signed by the insurance company.

                  The Lessee undertakes to fill all conditions precedent to the
                  coverage under the insurance policies issued thereby.

11.      RIGHT OF USE OF PARKING SPACES

         a.       Throughout the entire Term of the Lease, the Lessee shall be
                  entitled to use 6 fixed and marked parking spaces in the
                  parking lot of the Building (hereinafter: "Right of Use").

         b.       The Lessee shall pay a fee to the Lessor and/or the operator
                  of the parking lot and/or whomever shall be directed by the
                  Lessor for the Right of Use of such parking spaces, in the
                  amount of NIS 2,160 plus

                                      20

<PAGE>

                  V.A.T. at the lawful rate thereof on the date of payment, per
                  month (hereinafter: the "Fee").

                  The Fee shall be linked to the consumer price index and shall
                  be paid together with the Rent under this agreement, and the
                  provisions of this agreement referring to the lease of the
                  Leased Premises and to the payment of Rent (including the base
                  index) shall be applicable thereto, MUTATIS MUTANDIS and
                  subject to the following provisions.

         c.       The Lessee confirms that it has been informed that the parking
                  lot will be operated by either the Lessor or another entity
                  who can operate the parking lot, INTER ALIA, as a commercial
                  parking lot, according to arrangements to be determined by the
                  Lessor at the sole discretion thereof, provided that the
                  Lessor's right to use the parking lot under this agreement
                  shall not be compromised.

                  The Lessee undertakes to comply with all provisions and
                  directives, as being from time to time, with respect to the
                  parking lot, in all matters concerning entry, parking, exit,
                  security, operation, order in the parking lot, hours of
                  operation etc.

         d.       For the removal of doubt, it is emphasized that the aforesaid
                  shall be regarded as the rendering of permission to park only,
                  and that no safekeeping relationship and/or contract either
                  exists or shall exist between the Lessor and/or the operator
                  of the parking lot and the Lessee with respect to the
                  rendering of the parking permission, and in no case will the
                  Lessor and/or the operator of the parking lot be deemed, for
                  this matter, as a "guard" under the Guards Law.

12.      ASSIGNMENT OF THE LESSOR'S RIGHTS

         The Lessor may at any time assign its rights and undertakings with
         respect to the Leased Premises, in whole or in part, or its rights
         under this agreement - in whole or in part - to whomever it shall deem
         fit, provided that the assignee shall undertake to assume the Lessor's
         undertakings to the Lessee under this agreement.

13.      NON-APPLICABILITY OF TENANT PROTECTION LAWS

         The Lessee declares that it is aware that no protection by the Tenant
         Protection Law (Consolidated Version), 5732-1972 and the regulations
         thereunder shall apply to the lease under this agreement, and that the
         lease under this agreement is not protected under the said law. The
         Lessee further declares that it has paid no key money, nor undertaken
         to pay key money, and that no limitations on lease payments and/or Rent
         shall apply to the lease under this agreement, and that this agreement
         is unprotected under the law.

                                      21

<PAGE>

         For the removal of doubt it is emphasized that all investments to be
         made by the Lessee in the Leased Premises, if any, shall be made for
         the needs thereof only, and shall constitute no payment of key money or
         payment under Article 82 of the Tenant Protection Law (Consolidated
         Version), 5732-1972.

14.      OBSERVANCE OF THE PROVISIONS OF LAWS AND AGREEMENTS

         a.       The Lessee shall abide by any provision in effect from time to
                  time, in any law or legislation, including municipal
                  regulations, orders and regulations, to the extent applicable
                  to the Leased Premises and to the business conducted thereon.

                  The Lessee shall refrain from any act or omission which may
                  violate the said provisions or constitute an offense
                  thereunder, and from any act or omission, the result of which
                  may compromise the Lessor, the reputation thereof or the
                  engagement under this agreement or the Lessor's engagement
                  with other lessees in the Building.

         b.       The Lessee shall ensure that the said provisions are observed
                  by any other user of the Leased Premises in accordance with
                  the terms of this agreement.

         c.       The Lessee undertakes to indemnify the Lessor for any damage
                  caused thereto and/or imposed thereon and for any liability
                  and/or payment it shall undertake including principal,
                  interest and indexation differences, and including any
                  liability pursuant to a judgment, expenses and legal fees due
                  to the breach of the provisions of this clause by the Lessee
                  and any user of the Leased Premises, whether the Lessor is
                  sued alone and/or jointly with others, within 7 days from the
                  day it shall be required by the Lessor to do so.

                  Notice of damage as set out in this clause shall be given by
                  the Lessor to the Lessee upon learning thereof.

15.      SURRENDER AND RETURN OF POSSESSION

         a.       Upon expiration of the Term of the Lease under this agreement
                  and/or upon lawful shortening or revocation thereof by the
                  Lessor, the Lessee undertakes to vacate the Leased Premises
                  forthwith and to surrender possession thereof to the Lessor,
                  as per clause 8(d) above, the Leased Premises being vacant of
                  any person and object and in good and proper condition as
                  received thereby.

                  At the time of surrender of possession of the Leased Premises
                  to the Lessor, the representatives of the Lessor and of the
                  Lessee shall prepare a protocol recording the repairs
                  necessary in order to bring the Leased Premises to the
                  condition in which the Lessee needs to return the same to the
                  Lessor.

                                      22

<PAGE>

                  The Lessee undertakes to perform all the repairs recorded in
                  the protocol, at its expense, within 30 days from the date of
                  preparation thereof.

                  In the event that the Lessee shall have failed to perform the
                  said repairs, in whole or in part, the Lessee shall be
                  required to pay to the Lessor the cost and/or the estimated
                  cost of the repairs, regardless of whether or not the Lessor
                  shall have actually performed the repairs.

                  In the event that performance of the said repairs shall extend
                  no later than 30 additional days beyond the Term of the Lease,
                  it shall not be deemed as a delay in the vacation of the
                  Leased Premises and such period shall be subject to the
                  provisions of this agreement. In the event that the
                  performance of the repairs shall extend beyond the said 30 day
                  period, it shall be deemed as a delay in vacation of the
                  Leased Premises and the provisions of sub-clause (b) hereunder
                  shall apply, MUTATIS MUTANDIS.

                  The aforesaid shall not derogate from any other remedy to
                  which the Lessor shall be entitled under this agreement and/or
                  any law.

         b.       In the event that the Lessee shall fail to vacate the Leased
                  Premises upon expiration of the Term of the Lease and/or upon
                  the lawful shortening and/or revocation of this agreement, as
                  aforesaid, then in addition to all remedies available to the
                  Lessor by law and/or under this agreement, the Lessee shall
                  pay the Lessor liquidated damages for each day of delay in
                  vacating the Leased Premises, at a rate equal to three times
                  the proportionate Rent due for the Leased Premises for the
                  period of delay, in addition to indexation differences.

                  The liquidated damages shall be paid to the Lessor on the
                  dates to be determined thereby.

16.      PAYMENT IN ARREARS

         Any payment or pecuniary obligation imposed on a party under this
         agreement, not paid on the due date, and any payment which the Lessor
         shall pay, the duty of payment of which is imposed on the Lessee, who
         shall have failed to pay the same, shall be returned and repaid in
         full, and until actual repayment thereof shall bear interest at the
         rate of debit interest charged from time to time by Bank Hapoalim Ltd.
         on the date of actual payment with respect to irregular interest
         charged in debit accounts.

                                      23

<PAGE>

17.      SECURITIES

         In order to secure all the Lessee's undertakings and various
         obligations under this agreement and the Management Agreement, the
         Lessee shall provide the Lessor with the following securities:

         a.       An autonomous, unconditioned bank guarantee by an Israeli
                  bank, linked to the index, in the amount of NIS 386,000 and
                  valid for twelve months. The guarantee shall be renewed prior
                  to the expiration thereof, year by year, and shall remain in
                  effect throughout the Term of the Lease and for 3 months after
                  expiration thereof (hereinafter: the "Guarantee").

                  The Guarantee shall be split up and delivered to the Lessor as
                  follows:

                  1.      On the date of signing of this contract, the Lessee
                          shall provide a bank guarantee in the amount of NIS
                          200,000.

                  2.      Immediately prior to the day of receipt of possession
                          of the Leased Premises, the Lessee shall submit the
                          remaining bank guarantee in the amount of NIS 186,000.

         b.       At the time of signing of this agreement, the Lessee shall
                  further provide a guarantee by the parent company, Phasecom
                  Inc., which shall sign on the margins of this agreement and
                  the form of guarantee attached to this agreement as APPENDIX F
                  and constituting an integral part hereof, as guarantor for all
                  the Lessee's undertakings herein.

         c.       The provision of the bank guarantee and the guarantor's
                  signature as aforesaid shall constitute a condition precedent
                  for the commencement of the lease on the date of commencement
                  thereof and/or for the continuation of the Term of the Lease.

                  The Guarantee shall be returned to the Lessee after expiration
                  of the Term of the Lease and after the Lessee shall have
                  provided the Lessor with receipts indicating its fulfillment
                  of all the undertakings thereof under the agreement.

18.      STAMPING EXPENSES

         Stamp duty due on this agreement shall be paid by the Lessee.

19.      BREACHES AND REMEDIES

         a.       In the event that the Lessee shall breach or shall fail to
                  fulfill a material provision or condition listed hereunder or
                  shall do so through any other user - the Lessor shall be
                  entitled, in addition to any other remedy, to demand that the
                  Lessee vacate the Leased Premises forthwith and the

                                      24

<PAGE>

                  Lessee shall be obliged to vacate the same as early as
                  possible, and no later than 30 (thirty) days after the date
                  of receipt of the demand.

         b.       The provisions of clauses 2, 5, 7, 10, 15 and 17 are
                  fundamental conditions of this agreement, as are the dates
                  stated therein.

         c.       The provisions of this clause shall not derogate from any
                  remedy or relief set out in other clauses of this agreement.

         d.       All remedies available to the Lessor under the terms of this
                  agreement are separate and independent and/or supplementary
                  and do not derogate from any remedy and/or relief, whether
                  lawful or contractual.

         e.       In addition to, and without derogating from the provisions of
                  this agreement, each of the following events shall also be
                  deemed as a fundamental breach of this agreement:

                  1.      The passing of a resolution of voluntary dissolution
                          by the Lessee and/or the filing of an application for
                          dissolution, whether by the Lessee or by a creditor
                          and/or the appointment of a temporary liquidator for
                          the Lessee and/or the filing of an application for
                          receivership and/or an application to declare the
                          Lessee bankrupt, as the case may be.

                  2.      The attachment of a material asset of the Lessee's by
                          a court or an execution office, which is not revoked
                          within 30 days from the date of placement thereof.

                  3.      The foreclosure of a material asset of the Lessee's
                          and/or the institution of proceedings for the
                          foreclosure of an asset as aforesaid, by a creditor of
                          the Lessee's.

                  4.      A change in the composition or rate of holdings of the
                          Lessee's shareholders exceeding 50%, whether at once
                          or in stages, save for public offerings.

                  The Lessee hereby undertakes to inform the Lessor immediately
                  upon any demand and/or application and/or upon the occurrence
                  of any of the events listed in clauses 1-4 above.

                  Notwithstanding the provisions of sub-clauses 1-4 above, the
                  Lessor shall take no action for 180 days from the date of
                  occurrence of any event under these clauses if it shall
                  receive a declaration from a lawyer or CPA of the Lessee
                  whereby the event shall not compromise the Lessee's ability to
                  fulfill the undertakings thereof under this agreement.

                  The declaration of the lawyer or the CPA shall be given, in
                  this case, within 7 days from the date of the Lessor's demand
                  from the Lessee.

                                      25

<PAGE>

         f. The Lessee hereby waives his right to setoff under any law.

20.      The parties hereby determine that the court in Tel Aviv Jaffa shall be
         the only venue in all matters relating to this agreement or resulting
         therefrom.

21.      ADDRESSES

         The parties' addresses for the purposes of this agreement shall be as
         stated in the preamble to the agreement and, from the date of
         commencement of the Term of the Lease, the Lessee's address shall be at
         the Leased Premises. Any notice sent by registered post to either party
         at the address thereof shall be deemed to have been received 3 days
         after dispatch thereof at a postal branch, and if delivered in person,
         at the time of delivery thereof, and if transmitted by fax, at the time
         of transmission thereof.

          IN WITNESS WHEREOF, THE PARTIES HAVE HERETO SET THEIR HANDS,

         /s/                                                  /s/
-------------------------                            ---------------------------
The Lessor                                           The Lessee

                                  CONFIRMATION

I, the undersigned, ______________, Adv., of _______________, hereby confirm
that on ____________, appeared before me the managers of Phasecom (Israel) Ltd.
and signed this agreement in my presence, that the signature was duly made in
accordance with the company's by-laws and with the resolutions thereof and that
the signature of the said managers binds the company.

----------------------

                                      26<PAGE>

                                                                   EXHIBIT 10.21

                             SECURED PROMISSORY NOTE

$249,980                      Cupertino, California             January 16, 2000

         FOR VALUE RECEIVED, the undersigned, ERAN PILOVSKY (hereinafter the
"MAKER"), hereby promises to pay to PHASECOM, INC. (hereinafter the "PAYEE"), or
order, in Cupertino, California, or at such other place as PAYEE may from time
to time designate, in United States of America currency, the sum of Two Hundred
Forty-Nine Thousand Nine Hundred Eighty Dollars ($249,980), with interest on the
unpaid principal balance. Interest shall accrue from the date of this Note at
the rate of six percent (6.0%) per annum.

         The principal amount under this Note and any accrued and unpaid
interest thereon shall be due and payable in full on the earlier to occur of (i)
January 16, 2003, or (ii) the date on which MAKER ceases to be an employee of or
consultant to the PAYEE; provided, however, that in the event that from time to
time MAKER sells, assigns, makes any short sale of, gives or otherwise transfers
any of the 200,000 shares of PAYEE's common stock securing this Note, then MAKER
shall at such time repay to PAYEE a percentage of the original principal amount
under this Note, and interest accrued on such principal, equal to the percentage
that the number of shares transferred by MAKER represents of the total of
200,000 shares securing this Note: for example, if MAKER transfers 10%, or
20,000, of the 200,000 shares, then MAKER shall repay to PAYEE 10% of the
principal under this Note, or $24,998, plus interest accrued thereon.

         The MAKER shall have the right to prepay all or any part of the unpaid
principal of this Note from time to time without any penalty or premium,
provided that any such prepayments shall be applied first against any accrued
interest, and then against principal.

         In the event of default in the payment of any installment of principal
or interest for more than thirty (30) days after such comes due, the entire
outstanding balance of principal and interest shall become immediately due and
payable at the option of the holder of this Note.

         If a party breaches this Note, the breaching party shall pay all costs
and attorneys' fees incurred by the other party in connection with such breach,
whether or not any litigation is commenced.

         All principal and interest hereunder shall be secured by Two Hundred
Thousand (200,000) shares of PAYEE=s common stock owned by MAKER pursuant to the
terms and conditions of a Pledge Agreement entered into on even date herewith by
and between MAKER and PAYEE.

         Consent by the PAYEE to waive one default shall not be deemed to be a
waiver of the right to require consent to waive future or successive defaults.

         This Note shall be governed as to its construction, interpretation and
enforcement and in all other respects by the laws of the State of California
without regard to the conflicts of laws provisions thereof.

         This Note shall not be modified, amended or canceled except in writing
by the MAKER and PAYEE or other assignee of this Note.

<PAGE>

         The MAKER waives demand, presentment, protest, notice of nonpayment,
notice of protest and any and all lack of diligence or delays which may occur in
the collection of this Note.

         IN WITNESS WHEREOF, the MAKER has caused this Note to be duly executed
in Cupertino, California.

                                           /S/ ERAN PILOVSKY
                                           -------------------------------
                                           ERAN PILOVSKY

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