Document:

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                                                                   Exhibit 10.5

                      Amendment to Severance Pay Agreement

This agreement is made as of the 20th day of April, 1999, between Fourth Shift
Corporation, Two Meridian Crossing, Minneapolis, Minnesota 55423 (such
corporation, together with its subsidiaries, hereinafter called the "Company")
and M.M. Stuckey (hereinafter called "Executive"), residing at 46 Birch Court,
Danville, California 94506.

         WHEREAS, the Company wishes to amend the agreement dated October 21,
1997 to include the benefits as defined herein.

I.       Amendment of Agreement

         The benefits outlined in Section 4(b)(ii) of this document are amended
         to provide the Executive and Executive's dependent (if applicable) a
         life time benefit for Medical Insurance and Long Term Care Insurance as
         outlined in the Executive Retirement Plan. This agreement is in
         addition to all other compensation and benefits outlined in the
         original document dated October 21, 1997.

         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its name by a duly authorized officer, and Executive has hereunto
set his hand, all as of the date first written above.

                                       Fourth Shift Corporation

                                       By /s/ Robert Price
                                          ----------------

                                         Its Chairman, Compensation Committee
                                             --------------------------------

                                       /s/ M.M. Stuckey
                                       ----------------

PLAN SUMMARY

April 20, 1999

Fourth Shift Corporation will provide Long Term Care Insurance and coverage from
the Fourth Shift Medical Plan to M.M. Stuckey and spouse as a life time benefit.

Terms of the medical plan will be in accordance with the Fourth Shift Medical
Plan at the date of M.M. Stuckey's retirement. Major terms of the Medical Plan
are as follows:

-    Co-pay per office visit, 100% coverage for remaining expenses
-    Co-pay per prescription, 100% coverage for remaining expenses
-    100% inpatient hospitalization coverage, $1,000,000 maximum lifetime
     benefit
-    100% outpatient hospitalization coverage, $1,000,000 maximum lifetime
     benefit
-    M.M. Stuckey will pay $1,000 per month from July 1, 1999 through July 1,
     2004 to aid in funding the Medical Plan.<PAGE>

REF: F:/ZORAN/TENANCY APP./SM/29/11/99
[TRANSLATED FROM THE HEBREW]

                                APPENDIX ADDENDUM
                   TO UNPROTECTED TENANCY AGREEMENT OF 16.9.97

                Made and signed on the ___ day of __________ 1999

BETWEEN:       MATAM - HAIFA INFORMATION INDUSTRIES CENTRE LTD

               PC 51-068740-3

               (hereinafter referred to as "the Company")

                                                                OF THE ONE PART

AND:           ZORAN MICROELECTRONICS LTD

               PC 51-094944-9

               (hereinafter referred to as "the Tenant")

                                                              OF THE OTHER PART

WHEREAS        in accordance with the unprotected tenancy agreement executed on
               16th September 1997 (together with the appendices thereto), the
               Tenant is renting from the Company an area on the fifth floor and
               an area on the ground floor in a building known as building 30
               (hereinafter referred to as "the building") in the Haifa
               Information Industries Centre (hereinafter referred to as "the
               agreement" and "the premises" respectively), all as provided in
               the agreement and the appendices thereto;

AND WHEREAS    the building contains an area which is located on the sixth floor
               as outlined in green on the drawing annexed hereto as appendix
               "A" and constituting an integral part hereof, including equipment
               which was installed therein by the Company (hereinafter referred
               to as "the additional area");

AND WHEREAS    the Tenant wishes to rent the additional area from the Company in
               order that it be added to the area of the premises and to extend
               the tenancy term, for the consideration and on the terms and
               conditions set forth below;

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AND WHEREAS    the Company agrees to the increase of the premises by the
               addition of the additional area and to the extension of the
               tenancy term, for the consideration and on the terms and
               conditions set forth below;

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

1.       RECITALS AND APPENDICES

         The recitals and appendices hereto constitute an integral part hereof.

2.       INCREASE OF THE PREMISES

         2.1        The additional area shall be added from 1st February 2000,
                    subject to the Company's obligation as provided in clause
                    3.1 below, to the area of the premises and all the parties'
                    obligations pursuant to the agreement (as defined above),
                    save for clause 5(a) (with regard to the tenancy term) shall
                    apply mutatis mutandis to the area of the premises with the
                    addition of the additional area (the premises and the
                    additional area shall hereinafter jointly be referred to as
                    the "increased premises"), including, and without derogating
                    from the generality of the aforegoing, with regard to the
                    Tenant's liability, increase in the contribution towards the
                    dining room expenses and management and maintenance of the
                    common areas, increase in the payments of taxes and levies,
                    increase in the insurance cover and the like.

                    Without derogating from the aforegoing, and for the
                    avoidance of doubt, it is hereby expressed that in
                    consequence of the addition of the additional area to the
                    area of the premises, the number of designated parking bays
                    that shall be placed at its disposal shall be increased
                    relative to the increase in the area of the premises, that
                    is to say, the Tenant shall be entitled to receive from the
                    Company, during the tenancy term, a right to use a further
                    nine designated parking bays on the same terms and
                    conditions as laid down in the agreement.

                    It is agreed that the tenancy term in respect of the
                    increased premises shall come to an end on 31st May 2005 and
                    not as provided in clause 5(a) of the agreement.

         2.3        For the avoidance of doubt, it is hereby expressed that the
                    area of the "additional area" (as defined above) for the
                    purpose of computing the amount of the rent and the other
                    payments for which the Tenant is liable pursuant to the
                    agreement and this addendum, is the gross area of the

<PAGE>

                    "additional area", that is to say, 1,342 square metres,
                    including the Tenant's proportional part of the common
                    areas.

                    The monthly rent which the Tenant shall pay in respect of
                    the rental of the additional area shall be in a sum of
                    US$12.74 for every square metre of the additional area for
                    the purpose of payment of the rent together with due VAT and
                    linkage as provided in clause 7(c)(1) of the agreement. The
                    monthly rent in respect of the additional area shall be paid
                    by the Tenant at the times and in the manner mentioned in
                    clause 7 of the agreement.

3.       ORGANISATION AND EXECUTION OF THE TENANT'S WORKS

         3.1        The Company is granting the Tenant and Tenant is receiving
                    from the Company a right to use the additional area two
                    months prior to the date of delivering possession of the
                    additional area, that is to say, for a period from 1st
                    December 1999 until 1st February 2000 (hereinafter referred
                    to as "the organisation period"). In the organisation period
                    the Tenant's status in the additional area shall be that of
                    borrower pursuant to the Hire and Loan Law, 5731-1971;
                    however, subject to the Tenant's performance of all its
                    obligations pursuant to the agreement and this addendum, the
                    Company may not cancel its obligation to grant the
                    organisation period.

                    The Tenant acknowledges that the user right granted to it in
                    the organisation period is limited solely to the execution
                    of the Tenant's works in the additional area for the purpose
                    of adapting it to its requirements and that in the
                    organisation period it may not make any other use of the
                    additional area.

                    In the organisation period all the provisions of the
                    agreement, save for the obligation to pay rent, shall apply
                    to the Tenant in relation to the additional area, mutatis
                    mutandis.

         3.2        It is hereby agreed that in the organisation period the
                    Tenant shall execute, at its expense and liability, the
                    Tenant's works specified in appendix "C" hereto in
                    accordance with detailed plans that shall be prepared by the
                    Tenant pursuant to the aforementioned appendix and which
                    shall be submitted for the Company's prior written approval.

                    The Company shall approve and/or respond to the
                    aforementioned detailed plans within seven days of receiving
                    them. The Company warrants that it shall not object to the
                    plans on unreasonable grounds.

                    Once the Company has approved the detailed plans, the Tenant
                    may commence executing the Tenant's works.

<PAGE>

                    The Company shall participate in financing the cost of
                    executing the Tenant's works specified in appendix "C"
                    pursuant to the plans approved by it as provided above
                    (hereinafter referred to as "the finishing works"), which
                    shall be executed by the Tenant, in an amount not exceeding
                    a sum in NIS equal to US$200 (two hundred US dollars) for
                    every square metre of the additional area gross (as
                    specified above in sub-clause 2.3), in accordance with the
                    representative rate of the US dollar last known on the date
                    of the parties' execution hereof together with VAT and
                    linkage to the building inputs index from the index last
                    known on the date of the parties' execution hereof until the
                    index last known on the date of effecting any payment of the
                    contribution.

                    The contribution towards financing the cost of executing the
                    Tenant's works shall be paid to the Tenant on the terms and
                    conditions and at the times specified below in sub-clause
                    3.3.

         3.3        The Company shall pay the aforementioned contribution in
                    instalments (to the Tenant and/or to a third party on its
                    behalf pursuant to its written instruction) in accordance
                    with the actual progress of the Tenant's works, within 30
                    days of receiving any invoice (interim and/or final)
                    approved by the Tenant attesting to the expenses incurred by
                    the Tenant in the execution of the Tenant's works.

                    No later than the end of 90 days from the end of the
                    execution of the Tenant's works, the Tenant undertakes to
                    send the Company a report certified by an auditor confirming
                    that the expenses in respect of which the Company will be
                    requested to pay a contribution to the Tenant were indeed
                    incurred by it in the actual execution of the Tenant's
                    works.

         3.4        During the organisation period, the Tenant shall execute the
                    Tenant's works using experienced and qualified tradesmen and
                    professionals after receiving, in addition to the
                    aforegoing, all the approvals required therefor, to the
                    extent necessary, from the competent authorities and after
                    furnishing an engineer's certificate that the Tenant's works
                    are not such as to cause irreversible damage to the
                    additional area.

         3.5        In order to clarify matters, it is agreed and warranted by
                    the parties that the Company's approval as mentioned above
                    and below in this clause is not such as to impose on the
                    Company, directly and/or indirectly, expressly or impliedly,
                    any liability in relation to the quality of the Tenant's
                    works and/or their compliance with the conditions of the
                    permit, the Israeli standard and/or the manner of their
                    execution and full liability in respect

<PAGE>

                    thereof shall be borne by the Tenant and the Tenant hereby
                    waives any plea and/or claim vis-a-vis the Company in such
                    regard.

         3.6        The Tenant shall act to the best of its ability to minimise
                    disturbances and/or nuisances to the occupants of the
                    building as a result of the Tenant's works.

         3.7        The Tenant may not store or leave materials and/or equipment
                    and/or waste outside the additional area without the
                    Company's prior written approval.

         3.8        The Tenant may not execute other works in the additional
                    area that are not the Tenant's works pursuant to the
                    specifications (appendix "C"), save with the Company's prior
                    written approval. The Company shall not refuse the Tenant's
                    request to execute other works as aforesaid on unreasonable
                    grounds.

         3.9        The Tenant shall be liable for any damage or loss
                    occasioned, if at all, directly or indirectly, in the course
                    and/or in consequence of the execution of the Tenant's works
                    to any person and/or property and/or the additional area
                    and/or the Centre and/or their surroundings and/or contents.
                    Without prejudice to the generality of the aforegoing, in
                    such regard the approval of the specifications by the
                    Company shall not impose any obligation or liability on it,
                    [and] shall not constitute a waiver of any right of the
                    Company, and the Tenant hereby exempts the Company from any
                    liability in connection with approval of the specifications
                    (appendix "C") and/or deriving from such approval.

         3.10       The Tenant undertakes to repair any damage and/or loss
                    occasioned in consequence of the execution of the Tenant's
                    works to the additional area and/or the building and/or the
                    Centre or their contents or to works executed on other
                    premises or the common areas within a reasonable time in
                    accordance with the type of the damage. If the Tenant does
                    not act as aforesaid - the Company may, after giving the
                    Tenant written notice, immediately effect the necessary
                    repairs instead of the Tenant and at its expense, and the
                    Tenant shall indemnify the Company immediately upon demand
                    in respect of any expense borne by the Company in effecting
                    the repair as aforesaid, together with handling fees at a
                    rate of 20% (twenty percent).

         3.11       Without derogating from the Tenant's liability as provided
                    in clauses 3.9 and 3.10 above, the Tenant undertakes to
                    insure the Tenant's works, at its expense, from the date of
                    the organisation period's commencement until completion of
                    the execution of the Tenant's works in the additional area
                    or until the date of delivering possession of the additional
                    area, whichever is

<PAGE>

                    the later. The Tenant undertakes to comply with all the
                    insurance company's requirements, if any, in respect of the
                    execution of the Tenant's works, including - but without
                    derogating from the generality of the aforegoing - with
                    regard to safety measures and facilities, the composition of
                    materials and the like.

                    The provisions of clause 12 of the agreement shall apply to
                    the manner of issuing the aforementioned policy and the
                    format thereof, mutatis mutandis.

         3.12       It is expressly agreed that, subject to the performance of
                    the Company's obligation as provided in sub-clause 3.1, the
                    execution of the Tenant's work shall not be such as to
                    postpone the date of delivering the additional area and that
                    even if the Tenant does not complete the execution of the
                    Tenant's works, for any reason, the Tenant shall be bound,
                    from the date of delivering the additional area and
                    throughout the tenancy term, by all its obligations in
                    relation to the increased premises pursuant to the agreement
                    and this addendum, including the obligation to pay rent.

         3.13       In the event that the Tenant does not perform, in the
                    organisation period, any of its obligations and/or does not
                    make any of the payments which it owes pursuant to the terms
                    and conditions of the agreement and this addendum in the
                    organisation period, all or any of them, such shall
                    constitute a fundamental breach of the agreement and this
                    addendum and the Company may, subject to giving the Tenant
                    written notice of the breach, and the breach is not
                    rectified by the Tenant within 14 days of the notice's
                    receipt, act in its exclusive discretion as follows:

                    3.13.1      Postpone the commencement of the tenancy Term in
                                respect of the additional area until the
                                performance of the Tenant's obligations and
                                the making of all the payments which it
                                owes; however, the Tenant shall be liable to
                                perform all its obligations pursuant to the
                                agreement and the addendum in full as though
                                the additional area had been delivered to it
                                on the date of commencement of the tenancy
                                term in respect of the additional area
                                specified in this addendum, all without
                                derogating from any other relief to which
                                the Company shall be entitled pursuant to
                                the agreement and the addendum and/or at
                                law.

                    3.13.2      Notify the Tenant of the addendum's termination,
                                of the completion of the organisation period and
                                evict it from the additional area immediately,
                                without the need for any warning.

<PAGE>

                                It is agreed and warranted by the parties that
                                if, notwithstanding the Company's eviction
                                notice, the Tenant and/or anyone on its behalf
                                remains in the additional area, such shall be by
                                way of trespass, and it shall be estopped from
                                doing any act against the Company and/or from
                                making any plea against it, if the Company takes
                                any steps in order to remove the Tenant from the
                                additional area and regain full possession
                                thereof.

                                The Tenant shall not be entitled to any
                                compensation and/or restitution in respect of
                                expenses borne by it in the execution of the
                                Tenant's works and/or any amount paid by it in
                                the organisation period.

         3.14       The provisions of this clause 3 with regard to the Tenant's
                    obligations are in addition to and do not derogate from the
                    Tenant's obligations pursuant to the agreement and the
                    addendum and they shall not derogate from any other and/or
                    further right and/or relief vested in the Company pursuant
                    to the agreement and/or the addendum and/or at law.

4.       EARLY VACATION OF THE BUILDING'S GROUND FLOOR

         4.1        It is hereby agreed that in consequence of the delivery of
                    the additional area to the Tenant, as provided above in
                    clause 2, the Tenant may, during the tenancy term, vacate
                    the ground floor area of a size of 304 square metres, which
                    constitutes part of the increased premises (hereinafter
                    referred to as "the ground floor area"), subject to the
                    fulfilment of all the following cumulative conditions:

                    4.1.1     The Tenant shall give the Company at least 30
                              days' written notice of its intention to vacate
                              the ground floor area.

                    4.1.2     In consideration for the Company's consent to
                              curtail the tenancy term in respect of the ground
                              floor, insofar as it relates to the ground floor
                              alone, and as a condition therefor, the Tenant
                              shall pay the Company a sum in NIS equivalent to
                              four months' rent for the ground floor area for
                              the purpose of paying rent (that is to say, the
                              gross ground floor area, including the Tenant's
                              proportional part, in connection with this area,
                              of the common areas) together with due VAT. The
                              aforementioned amount shall be paid to the Company
                              by the Tenant from the date of the Tenant's notice
                              as provided above in sub-clause 4.1.1 in four
                              instalments at the times prescribed in the
                              agreement (including this addendum) for payment of
                              the rent in respect of the increased premises and
                              the linkage conditions laid down in the agreement,

<PAGE>

                              including this addendum, shall apply in respect of
                              the aforementioned payments.

                    If the area of the premises is reduced as aforesaid, the
                    provisions of clause 2 shall be amended accordingly.

5.       COLLATERAL

         5.1        To secure the performance of all the Tenant's obligations
                    pursuant to the agreement, including this addendum, the
                    Tenant is depositing with the Company (in addition to the
                    collateral which it gave the Company pursuant to the
                    agreement, which shall continue to remain in force until the
                    end of the tenancy term in respect of the increased
                    premises), at the time of the execution hereof and as a
                    condition therefor, the following collateral:

                    5.1.1       A blank promissory note in a sum of US$ 40,000
                                (forty thousand US dollars) to the order of the
                                Company, payable upon demand, signed by the
                                Tenant (hereinafter referred to as "the note"),
                                and all the provisions of clause 10(a) of the
                                agreement shall apply in respect of the
                                aforementioned note.

                    5.1.2       In addition, the Tenant shall give the Company
                                written confirmation, to the Company's
                                satisfaction, from the parent company Zoran
                                Corporation confirming that it is familiar with
                                the provisions of this agreement and that it
                                agrees thereto and that the guarantee given by
                                it in accordance with the provisions of clause
                                10(b) of the agreement shall apply to all the
                                Tenant's obligations pursuant to the agreement,
                                including this addendum, and that this addendum
                                is not such as to howsoever derogate from the
                                guarantee given by it.

6.       THE THIRD FLOOR OF THE BUILDING

         It is agreed that if by 1st June 2000 Aurec vacates the third floor of
         the building, the Tenant shall have a right of first refusal to rent
         this area from the Company (in addition to the increased premises) for
         the balance of the tenancy term, as follows:

         6.1        The Company shall approach the Tenant with an offer to rent
                    the third floor of the building, stating the price, terms
                    and conditions required which shall be identical to the
                    terms and conditions offered to a third party.

                    If the Tenant does not notify the Company in writing of its
                    wish to exercise the said right of refusal on the terms and
                    conditions specified in the offer, within 10 days of the
                    Company's approach, the Company shall be entitled

<PAGE>

                    to offer the third floor of the building to any third party,
                    at a price and on terms and conditions not better than those
                    stated in the offer to the Tenant, and the Tenant does not
                    and shall not have any pleas and/or claims and/or demands
                    vis-a-vis the Company in such regard.

         6.2        For the avoidance of doubt, it is hereby expressed that the
                    Tenant's aforementioned right of refusal is for a limited
                    term ending on 1st June 2000 and the Tenant hereby warrants
                    that it does not and shall not have any pleas and/or claims
                    and/or demands vis-a-vis the Company in such regard.

7.       GENERAL

         It is expressly agreed that all the provisions of the agreement insofar
         as and to the extent not altered by this addendum shall remain in force
         without change and shall bind the parties for all intents and purposes.

                      AS WITNESS THE HANDS OF THE PARTIES:

(Signed and Stamped)                                      (Signed and Stamped)
--------------------                                      --------------------
The Company                                                   The Tenant

<PAGE>

                     APPENDIX "C" - TECHNICAL SPECIFICATION

A.       Division into offices with single membrane plaster board [?] (width 10
         cms with 2" rockwool insulation) of a height of up to 3 metres in a
         quantity of 440 metres in length.

B.       Doors, wooden 50% with top coat colour at the architect's election, 30
         units.

C.       Carpet. Basic price per carpet: $ 15/sq.m. including panel and laying
         down the carpet.

D.       Demolition and removal works.

E.       Electricity and telephone:

                 60 power points + with a group of three outlets at each point.

                 60 telephone points.

                 60 computer points (preparation only).

F.       Sprinklers: adaptation of sprinkler location.

G.       Air conditioning: adaptation of location of Nachshon blower units.

H.       Fiber acoustic ceiling with 60/60 measurements including [?] recessed
         units on the entire floor.

<PAGE>

Ref. GLUSMAN/MATAM/SM/07/03/98
[TRANSLATED FROM THE HEBREW]

                                    AGREEMENT

      Made and signed in Haifa this _____ day of ____________________ 1997

BETWEEN:          MATAM - SCIENCE INDUSTRIES CENTRE HAIFA LTD

                           PC 51-068740-3

                           (hereinafter referred to as "the Company")

                                                                 OF THE ONE PART

AND:                       ZORAN MICRO-ELECTRONICS LTD

                           PC 51-094944-9

                           (hereinafter referred to as "the Tenant")

                                                              OF THE OTHER PART

WHEREAS                    the Company is the exclusive possessor of and owner
                           of the rights in land situated in the Haifa Science
                           Industries Centre (hereinafter referred to as "the
                           Centre") which constitutes part of parcels 7 and 8 in
                           block 10730 (hereinafter referred to as "the plot");

AND WHEREAS                the Company has erected a building on the plot which
                           is known as building 30 (hereinafter referred to as
                           "the building");

AND WHEREAS                the building's construction was completed
                           after 20th August 1968 and the tenants' protection
                           laws, including the Tenant's Protection Law
                           (Consolidated Version), 1932-1972 does not apply to
                           the premises;

AND WHEREAS                the Tenant warrants that it is an "approved
                           enterprise" within the

1

<PAGE>

                           meaning thereof in the law and that it wishes to
                           rent the premises as defined below in order to
                           establish its plant as defined below;

AND WHEREAS                the Company wishes to let to the Tenant and
                           the Tenant wishes to rent from the Company on an
                           unprotected tenancy an area in the building as
                           specified in the technical specification and plans
                           annexed hereto as appendices "A" and "B" respectively
                           and constituting an integral part hereof;

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

1.       RECITALS AND APPENDICES

         (a)      The recitals and appendices hereto constitute an integral part
                  hereof.

         (b)      The clause headings have been introduced for reading
                  convenience only, they do not constitute a part of this
                  agreement and should not be used for the purposes of
                  interpretation.

2.       INTERPRETATION

         Without derogating from the other definitions appearing herein, the
         following expressions shall be interpreted as follows:

         "THE BUILDING" - the building known as building 30 in which the
         premises are situated;

         "THE PREMISES" - an area of approx. 1,646 square metres comprising an
         area of approx. 1,342 square metres on the fifth floor of the building
         and an area of approx. 304 square metres on the ground floor of the
         building, all as marked in the colour red on the drawing annexed hereto
         as appendix "B/1" and constituting an integral part hereof.

         It is hereby expressed that the aforementioned area includes the
         Tenant's proportional part of the building's common area as marked with
         diagonal lines in the colour blue on the drawing appendix "B/1", and
         that this area is not included in the area in which the Tenant is being
         granted, during the tenancy term as defined below, a right of
         possession, but only a use right [sic];

2

<PAGE>

         "THE TENANCY TERM" - the terms defined in clause 5 below, including a
         tenancy term that has been curtailed (if curtailed) as a result of any
         provision hereof and/or as a result of the provision of any law, and
         any additional tenancy term (if the tenancy term is extended);

         "THE PLANT" - the Tenant's business, which is the planning, development
         and manufacture of electronic components and products;

         "DELIVERY" - placing the premises at the Tenant's disposal for the
         purpose of commencing the tenancy term;

         "COMMON AREA" means as defined in the Land Law, 5729-1969, including
         the roof, the entrance area and its surroundings, the staircases and
         lobby elevators, the corridors, piping shafts, machine rooms and
         various conveniences, as marked in the colour blue on the drawing
         annexed hereto as appendix "B/2".

3.       THE NATURE OF THE TRANSACTION

         The Company is hereby letting the premises to the Tenant and the Tenant
         is hereby renting the premises from the Company, for the consideration
         and on the terms and conditions specified hereinbelow.

4.       THE CONSTRUCTION AND ACCEPTANCE OF THE PREMISES

         (a)      The premises are being constructed in a size and form pursuant
                  to the annexed technical specification and plans and the
                  finish plan which shall be annexed hereto (appendices "A",
                  "B", "C" and "C/1" hereto), and all on the terms and
                  conditions and in the manner described herein.

         (b)      The Tenant hereby confirms that the technical specification
                  and plans of building no. 30 have been furnished to it and
                  that they are suitable and appropriate for its needs and the
                  object of the tenancy pursuant hereto.

         (c)      Without prejudice to the provisions of sub-clauses (a) and (b)
                  above, it is agreed and warranted between the parties that the
                  interior finish works on the area of the premises situated on
                  the fifth floor of the building were planned and executed by
                  the Company in accordance with a principal plan which was
                  submitted to the Company by Powerspectrum Technology Ltd and
                  IBM Israel Science & Technology Ltd. The interior finish plan
                  relating to the area of the premises situated on the fifth
                  floor of the building is annexed hereto as appendix "C".

3

<PAGE>

                  It is hereby agreed that the Tenant may, from 15th May 1996
                  and thenceforth, execute at its expense alterations and/or
                  additions in the area of the premises situated on the fifth
                  floor of the building, provided that it has received the
                  Company's prior written approval for any addition and/or
                  alteration as aforesaid.

                  It is further agreed and warranted by the parties that the
                  interior finish works on the area of the premises situated on
                  the ground floor of the building shall be planned and executed
                  by the Company in accordance with an interior finish plan that
                  shall be submitted by the Tenant and approved by Powerspectrum
                  Technology Ltd (hereinafter referred to as "PST").

                  It is hereby expressed that PST's approval of the
                  aforementioned interior finish plan is one of the terms and
                  conditions for obtaining the Company's approval of the
                  interior finish plan. The interior finish plan approved by PST
                  shall be submitted by the Tenant for the Company's approval
                  within ten days of the execution hereof.

                  The Company warrants that pursuant to an agreement executed
                  between it and PST, it has been agreed that in the absence of
                  a written response to the interior finish plan from PST within
                  14 days of the date on which it is conveyed to it, the plan
                  shall be deemed to have been approved by PST.

                  After its approval by the Company, the finish plan in respect
                  of the area of the premises situated on the ground floor of
                  the building shall be annexed hereto as appendix "C/1" and
                  shall constitute an integral part hereof. The Company shall
                  convey the approved finish plan to the Tenant together with an
                  engineering appraisal of the cost of executing the final works
                  pursuant to the finish plan, which shall be annexed hereto as
                  appendix "C/2". If after the execution of the final works it
                  emerges that there was a quantitative or qualitative deviation
                  in comparison with the technical specification (appendix "A"),
                  the Tenant shall pay the Company the actual cost of the
                  deviation as provided in clause 7(e) below, provided that in
                  the event of a deviation from the engineering appraisal of
                  more than 5%, the Tenant's prior written approval of such
                  deviation is obtained (in respect of the part exceeding a 5%
                  deviation). For the avoidance of doubt, the Tenant's prior
                  consent is not required for a deviation of up to 5% inclusive,
                  and such shall be paid by the Tenant at the Company's request.

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<PAGE>

         (d)      (1)      Prior to the delivery date, as defined in clause
                           5(a) below, of the area of the premises situated on
                           the fifth floor of the building and the area of the
                           premises situated on the ground floor of the
                           building, as the case may be, an inspection of the
                           premises shall be carried out by representatives of
                           the Company and the Tenant who shall inspect the
                           premises and confirm to the parties that they are
                           ready for delivery in accordance with appendices "A",
                           "B", "C" and "C/1".

                           If repairs are necessary in order to adapt the
                           premises to the aforegoing, and such repairs are not
                           such as to prevent the Tenant from making reasonable
                           use of the premises, the Company shall execute them
                           within 60 days, without such derogating from any
                           liability of the Tenant pursuant hereto. In the event
                           that the aforementioned repairs prevent the
                           possibility of reasonable use of the premises, the
                           delivery date shall be postponed until execution of
                           the repairs preventing reasonable use as aforesaid
                           has been completed.

                  (2)      On the delivery date of the area of the premises
                           situated on the fifth floor of the building and on
                           the delivery date of the area of the premises
                           situated on the ground floor of the building, as the
                           case may be, representatives of the Company and the
                           Tenant shall draw up delivery minutes which shall be
                           annexed hereto as appendices "D/1" and "D/2" and
                           constitute an integral part hereof. Signature of the
                           minutes shall constitute the Tenant's confirmation
                           that the Company has completed all its obligations in
                           respect of the premises pursuant to appendices "A",
                           "B", "C" and "C/1", and that it does not and shall
                           not have any complaints in respect of the premises,
                           save for complaints specified by the Tenant in the
                           body of the minutes (hereinafter referred to as "the
                           delivery minutes"). The abstention of either of the
                           parties from participating in the drawing up of the
                           minutes shall not constitute a cause for
                           non-acceptance of the premises and/or any part
                           thereof and/or for non-performance of the obligations
                           of either of the parties pursuant hereto.

         (e)      It is agreed and warranted that all the above provisions of
                  this clause regarding delivery dates shall not apply in the
                  case of force majeure, such as war, calamity, general strikes
                  and lock-outs in Israel in the building industry, a closure of
                  the territories - if and for so long as such a closure is
                  recognised by the Government of Israel in its contracts with
                  the Israeli Association of Contractors and Builders as force
                  majeure, a natural disaster which cannot be anticipated, acts
                  and/or instructions and/or orders and/or a postponement in
                  respect of omissions on the part of competent

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<PAGE>

                  authorities and the like. It is hereby expressed that the
                  duration of the postponement of the delivery date as a
                  result of an incident of force majeure shall be equal to
                  the period of time during which such incident actually
                  prevents the Company from performing its obligations
                  pursuant hereto.

5.       DELIVERY OF POSSESSION OF THE PREMISES AND THE TENANCY TERM

         (a)      The planned delivery date of the area of the premises situated
                  on the fifth floor of the building is 31st May 1996; however,
                  it is hereby expressed and the parties agree that the tenancy
                  term for the area of the premises situated on the fifth floor
                  of the building shall commence on the actual delivery date of
                  the area, written notice whereof shall be sent to the Tenant
                  seven days in advance (hereinafter referred to as "the
                  delivery date of the area of the premises situated on the
                  fifth floor") and shall end on 15th May 1999 or on the date of
                  delivering alternative premises in a new building that shall
                  be constructed in Matam, whichever is the later, but in any
                  event no later than 15th May 2003 (hereinafter referred to as
                  "the tenancy term for the area of the premises situated on the
                  fifth floor").

                  The tenancy term for the area of the premises situated on the
                  ground floor of the building shall commence within three
                  months of receipt of the interior finish plans approved by the
                  Company (as provided in clause 4(c) above) and shall terminate
                  at the end of the tenancy term for the area of the premises
                  situated on the fifth floor of the building.

                  Written notice of the actual delivery date of the area of the
                  premises situated on the ground floor of the building shall be
                  sent to the Tenant seven days in advance (hereinafter referred
                  to as "the delivery date of the area of the premises situated
                  on the ground floor").

         (b)      Notwithstanding the provisions of sub-clause (a) above, it is
                  hereby agreed between the parties that the Company may
                  postpone the delivery date of the area of the premises
                  situated on the fifth floor and/or the ground floor for a
                  further 30 days, and such being on 30 days' prior notice to
                  the Tenant.

         (c)      Commencing from the delivery date of the area of the premises
                  situated on the fifth floor of the building or the area of the
                  premises situated on the ground floor of the building, as the
                  case may be, the Tenant shall bear all the liabilities and
                  obligations deriving herefrom, including its liability for any
                  damage occasioned by an act of the Tenant or anyone acting on
                  its behalf, and the tenancy term shall commence on the
                  aforementioned date for all

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<PAGE>

                  intents and purposes, whether or not the Tenant appears on
                  such date to accept possession of the premises.

                  It is hereby expressed that the delivery date of the premises
                  or any part thereof pursuant to this clause and the
                  commencement of the tenancy term shall not be altered or
                  affected by any postponement in the premises' actual delivery
                  deriving from the execution of additions and alterations to
                  the area of the premises situated on the fifth floor at the
                  Tenant's request as provided in clause 4(c) above.

6.       PARKING AREAS

         (a)      The Tenant and/or its employees and/or invitees may randomly
                  use, without payment, the parking places at the Centre, so
                  long as and to the degree that such have not been and are not
                  in future designated by the Company in its exclusive
                  consideration for the sole use of any third party.

         (b)      The provisions of sub-clause (a) above shall not be considered
                  as imposing any obligation on the Company to make any parking
                  places available to the Tenant and/or its employees and/or
                  invitees in addition to the Tenant's parking places, and the
                  Tenant shall not have any claims vis-a-vis the Company in the
                  event that it is not possible for it to use any parking places
                  over and beyond the Tenant's quota of parking places.

         (c)      The Company undertakes to prepare one parking place in
                  addition to the parking places presently existing at Matam for
                  every 80 square metres of the premises. Of the parking places
                  prepared as aforesaid, the Company shall allot the Tenant 10
                  designated parking places at a range of 150 metres from the
                  building. The Company shall be entitled to alter the location
                  of the aforementioned parking places and to allot the Tenant
                  other parking places, on the same terms and conditions, in its
                  discretion.

7.       THE RENT

         (a)      Without derogating from the provisions of clause 5 above
                  regarding the premises' delivery date, it is hereby agreed
                  that in consideration for the premises' rental the Tenant
                  shall, commencing from 1st July 1996 and thenceforth, pay the
                  Company monthly rent in respect of the premises in an amount
                  in shekels equal to US$ 12.74 (twelve US dollars and seventy
                  four cents) per each square metre of the premises (hereinafter
                  referred to as "the rent"), together with due VAT.

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<PAGE>

                  Without derogating from the provisions hereof and for the
                  clarification of matters, the parties hereby warrant that in
                  accordance with the agreement executed between them regarding
                  the rental of an area in the building known as building 8/1 in
                  the Centre, the Tenant shall pay the Company rent and the
                  other payments (as prescribed in the agreement executed
                  between the parties regarding the premises in building 8/1) in
                  respect of the premises in building 8/1, and such being until
                  30th June 1996 inclusive.

         (b)      The rent vests with the Tenant with the right to make
                  reasonable use of the Centre's existing infrastructure,
                  including: roads, pavements, gardening, lighting, signposting,
                  parking (subject to the provisions of clause 6 above), fences,
                  sewerage lines and water lines. The Tenant's employees and all
                  its successors and assigns shall be entitled to enter the area
                  of the Centre and/or the premises without payment.

         (c)      The rent shall be paid on the 1st of every month for the
                  current month, against a due tax invoice which the Company
                  shall furnish to the Tenant. The said rent shall be linked as
                  follows:

                  (1)      until the end of the tenancy term, the monthly rent
                           for the rental of the first 1,330 square metres of
                           the area of the premises shall be linked to the
                           representative rate of the dollar known on the date
                           of payment, together with linkage to the CPI index;

                  (2)      the monthly rent for the balance of the area of the
                           premises, i.e. 316 square metres, shall, for the
                           duration of the tenancy term, be linked to the
                           Consumer Price Index in Israel, with the base rate of
                           exchange of the dollar being NIS 3.11 per US$ 1.

         (d)      The index linkage shall be computed as follows:

                  (1)      If on any date on which the rent (or any part
                           thereof) is actually paid it transpires that the new
                           index (as defined below) on the date of effecting the
                           said payment is different from the base index (as
                           defined below), the Tenant shall effect the said
                           payment to the Company with it being altered pro rata
                           to the rate of the change in the new index vis-a-vis
                           the base index, i.e. multiplied by the new index and
                           divided by the base index.

                  (2)      "The base index" means the American CPI index for
                           February 1996 as published on 15th March 1996 or the
                           Consumer Price Index for February 1996 (131.7 points,
                           as the case may be, in accordance with the provisions
                           of sub-clauses (c)(1) and (c)(2).

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<PAGE>

                  (3)      "The new index" means the American CPI index or the
                           Consumer Price Index, as the case may be, last known
                           at the time of actually effecting any payment of the
                           rent or part thereof.

         (e)      It is hereby agreed between the parties that:

                  (1)      in the period between 1st July 1996 and 31st December
                           1996 (i.e. a period of six calendar months), and in
                           this period alone, the Tenant shall be given a
                           discount on the rent prescribed in clause 7(a) in an
                           amount of US$ 1.41 (one dollar and forty one cents)
                           for each square metre of the premises.

                           In addition to the discount mentioned in this
                           sub-clause (e), the Tenant shall be given an
                           additional monthly discount on the rent in an amount
                           in shekels equal to US$ 7,500 (seven thousand five
                           hundred US dollars) for each month, and such being in
                           the period between 1st July 1996 and until the end of
                           December 1996, and in this period alone.

                           The value of the discount in shekels shall be
                           computed pursuant to the representative rate of the
                           dollar on the date of setting off the discount from
                           the rent.

                           The said discounts shall be given by setting off the
                           amount of the discount from the rent which the Tenant
                           is liable to pay the Company in respect of the period
                           mentioned in this clause (e).

                  (2)      On 1st April 1997 the Tenant shall pay the Company a
                           supplement to the monthly rent which it is liable to
                           pay the Company in respect of April in an amount in
                           shekels equal to US$ 19,000 (nineteen thousand US
                           dollars) in accordance with the representative rate
                           of the US dollar on the actual payment date.

                           It is further hereby agreed that in the period
                           between 1st January 1997 and 15th May 1999, the
                           monthly rent which the Tenant is liable to pay the
                           Company as prescribed in clause 7(a) above shall be
                           raised by 63.95 cents for each square metre of the
                           premises.

         (f)      Any amount which the Tenant is liable to pay the Company
                  pursuant hereto which the Tenant does not pay on time shall,
                  commencing from the date prescribed for the payment thereof
                  pursuant hereto and until its actual payment, bear interest at
                  a rate equal to that customary at Bank Leumi Le-Israel Ltd in
                  respect of unauthorised overdrafts.

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<PAGE>

         (g)      Payment of the rent and of any payment and/or obligation of
                  the Tenant to the Company pursuant hereto shall be effected by
                  cheque or by way of bank transfer to the Company's account,
                  the details whereof are as follows:

                  account no. 9666 at Bank Hapoalim, Hatishbi Branch (709).

8.       PROVISION OF SERVICES

         (a)      The Tenant's signature hereof shall constitute and be deemed
                  its signature on the agreement between the Company and the
                  Centre's tenants regarding the Centre's services company -
                  Shatam Haifa Ltd (hereinafter referred to as "Shatam") also in
                  respect of the premises the subject hereof. This clause shall
                  also be deemed an agreement in favour of a third party.

         (b)      In addition to the rent, the Tenant shall, commencing from the
                  delivery date, pay Shatam, subject to the performance of
                  Shatam's material obligations towards it by virtue of the
                  agreement mentioned in sub-clause (a) above, its part of the
                  payments as in force from time to time and applying to the
                  Centre's tenants, including the participation fees towards the
                  Centre's services charged by Shatam and/or any of its
                  successors and assigns, as determined from time to time by the
                  Company and at the times prescribed by it from time to time.

         (c)      The Tenant warrants that the liability to provide the services
                  at the Centre rests with the services company, i.e. Shatam,
                  and/or any of its successors and assigns, and that the Company
                  and/or the Haifa Economic Co. Ltd and/or Matam shall not bear
                  any liability and the Tenant shall not have any complaint
                  and/or claim against the Company in respect of any
                  malfunction, disturbance, inconvenience, damage or expense
                  occasioned to the Tenant as a result of the non-provision
                  and/or in respect of the defective provision of the said
                  services and/or any of them.

         (d)      The Company warrants that a clause similar to this clause 8
                  exists in all the tenancy agreements executed between the
                  Company and the companies renting areas in the Centre.

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<PAGE>

9.       TAXES, LEVIES AND COMPULSORY PAYMENTS

         (a)      In respect of the tenancy term, the Tenant shall bear and pay
                  the business tax if existing in respect of the plant that
                  shall be managed in the premises, and it shall pay and/or
                  reimburse the Company, if the Company pays in its stead, save
                  for property tax and/or taxes and/or levies and/or official
                  fees obligation for the payment whereof is imposed on the
                  owners of the land pursuant to law, all the other taxes,
                  levies and compulsory payments whatsoever applicable and/or
                  which shall be applicable to the plant and/or the premises in
                  respect of the proportional part of the Centre and/or the
                  Tenant (including the Tenant's parking places) and/or in
                  connection therewith, including, but not only, the payment of
                  rates, official fees and routine charges for sewerage, water,
                  electricity, telephone and the like, and it shall furnish the
                  Company with appropriate certificates in respect of the said
                  payments immediately upon first being requested to do so or
                  reimburse the Company as aforesaid the payments which the
                  Company has paid in its stead within seven days of the
                  request, against the Company furnishing payment references to
                  the Tenant and provided that prior notice is sent to the
                  Tenant of the Company's intention to effect payment/s as
                  aforesaid in the Tenant's stead.

         (b)      Value added tax and/or any other tax applicable to possessors
                  in accordance with the law, as shall be from time to time, is
                  not included in the rent, and it shall be borne and paid by
                  the Tenant together with any payment in respect whereof it is
                  applicable, against the production of an appropriate tax
                  invoice.

         (c)      For the avoidance of doubt, the Tenant hereby confirms that
                  any depreciation deductions in respect of the building and/or
                  the premises, as shall be from time to time, shall be to the
                  credit of the Company alone, save for improvements in the
                  premises effected by the Tenant and at its expense, the
                  Tenant's equipment and the chattels belonging to it.

         (d)      In addition to the rent and the other payments which the
                  Tenant is liable to pay the Company as provided herein, the
                  Tenant hereby undertakes to pay the Company the payments
                  specified below:

                  (1)      An amount in shekels equal to US$ 30,000 (thirty
                           thousand US dollars) was paid by the Tenant to the
                           Company in two equal payments (i.e. an amount of US$
                           15,000 in each payment), the first on 4th April 1996
                           and the other within 30 days of the delivery date of
                           the premises situated on the fifth floor of the
                           building (15th July 1996).

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<PAGE>

                           The aforementioned payment is in respect of the
                           Tenant's share of the expenses of executing the
                           finish works on the area of the premises, and it was
                           paid against the production of an invoice. The amount
                           which the Tenant paid the Company was computed
                           pursuant to the representative rate of the dollar on
                           the date of actually effecting each payment.

                  (2)      An amount in shekels equal to US$ 31,666 (thirty one
                           thousand six hundred and sixty six US dollars) was
                           paid by the Tenant to the Company by 23rd May 1996,
                           and such being as the Tenant's participation towards
                           the expenses of planning the area of the premises.
                           The payment was effected against the production of
                           receipts and/or invoices attesting to the
                           aforementioned expenses.

         (e)      On 4th June 1997 the Tenant gave the Company a deposit in an
                  amount in shekels equal to US$ 49,000 (forty nine thousand US
                  dollars) pursuant to the representative rate of the US dollar
                  known on the date of giving the deposit (hereinafter referred
                  to as "the deposit").

                  It is hereby expressly agreed that the Tenant may instruct the
                  Company in writing to set off from the deposit monies payment
                  of the rent supplement in an amount of US$ 19,000 (nineteen
                  thousand US dollars) which the Tenant is liable to pay the
                  Company on 1st April 1997 (as prescribed in clause 7(e)(2)
                  above) as well as the monthly rent which the Tenant is liable
                  to pay the Company commencing from 1st April 1998 and
                  thenceforth.

10.      COLLATERALS

         To secure the performance of all its obligations the subject hereof,
         the Tenant shall, upon the execution hereof, give the Company the
         following collaterals:

         (a)      A promissory note in an amount of $ 40,000 (forty thousand US
                  dollars) made out in blank to the order of the Company,
                  payable upon demand, signed by the Company (hereinafter
                  referred to as "the note"), guaranteed by the Tenant's parent
                  company Zoran Corporation. The amount fixed in the note shall
                  be linked to the index in the manner provided in clause 7(d)
                  above and the following provisions shall apply in respect
                  thereof:

                  (1)      the Company may present the note for payment, in
                           whole or in part, for the purpose of performing any
                           of the Tenant's obligations pursuant hereto, and such
                           being after seven days' prior written warning;

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<PAGE>

                  (2)      for the purpose of presenting the note, the Company
                           may fill in and complete the missing details and/or
                           add any detail necessary for the purpose of
                           presenting them [sic] for payment;

                  (3)      the Tenant hereby warrants and confirms that it
                           agrees to the note's presentation for payment as
                           provided and that it shall not have any claim and/or
                           complaint regarding the validity of the note and/or
                           the manner of filling in the note's missing and/or
                           additional details and/or in respect and/or in
                           consequence of their [sic] presentation for payment;

                  (4)      if the note is presented for payment, in whole or in
                           part, the Tenant undertakes to deposit with the
                           Company, within seven days of its payment date, a new
                           note in the amount paid up as aforesaid;

                  (5)      the Tenant undertakes to advise the note's guarantors
                           of the provisions of this clause prior to their
                           signing the note.

                           If one of the note's guarantors becomes bankrupt
                           and/or goes into receivership and/or is wound up, the
                           Tenant shall furnish an alternative guarantor to the
                           Company's satisfaction within seven days of the
                           aforementioned incident;

                  (6)      if the tenancy comes to an end and the note has
                           not been presented for payment, it shall be
                           returned to the Tenant within 90 days, provided
                           that it has complied with all its obligations
                           pursuant hereto.

         (b)      The guarantee of the parent company Zoran Corporation for the
                  performance of all the Tenant's obligations pursuant hereto
                  and for the indemnification of the Company in respect of any
                  expenses and damages occasioned to it in consequence of a
                  breach hereof by the Tenant in the form of wording acceptable
                  to the Company and annexed as appendix "F/1" hereto, and such
                  being immediately upon receipt of the Company's written
                  request.

         (c)      It is expressly agreed that the delivery of the aforementioned
                  guarantees and/or note to the Company and/or their
                  presentation for payment by the Company shall not prejudice
                  the Company's right to collect from the Tenant in any other
                  manner possible any debt and/or full compensation in respect
                  of the damages occasioned to it in consequence of a breach of
                  any of the Tenant's obligations pursuant hereto and/or grant
                  the Tenant any right and/or deprive the Company of any
                  additional or other remedy to

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<PAGE>

                  which it is entitled pursuant to any law and/or agreement.

11.      LIABILITY

         (a)      The Tenant alone shall be liable vis-a-vis Matam and/or any
                  third party, as the case may be, for any injury, loss or
                  damage to person or property (and without derogating from the
                  generality of the aforegoing, including the property of the
                  Tenant, its employees and guests) occurring or occasioned in
                  the area of the premises and/or the Centre in consequence of
                  an act and/or omission of the Tenant and/or anyone acting on
                  its behalf and/or Matam and/or anyone acting on its behalf,
                  and such liability shall not be borne by Matam, subject to the
                  following provisions.

                  For the avoidance of doubt, it is hereby expressed that the
                  Tenant's liability as provided above in this clause, insofar
                  as it relates to any act or omission of Matam and/or those
                  acting on its behalf, is limited to an act or omission of
                  Matam and/or those acting on its behalf in the premises (save
                  for damage occasioned by Matam and/or those acting on its
                  behalf maliciously) and shall be in accordance with that
                  defined under the third party liability insurance policy as
                  provided in clause 12(c)(3) below, with it being limited to an
                  amount of up to one million US dollars per event and in total
                  for the entire insurance term.

         (b)      Notwithstanding the provisions of sub-clause (a) above, the
                  Tenant alone shall be liable for any damage whatsoever that
                  shall be occasioned:

                  (1)      to contents of the premises brought onto the premises
                           by the Tenant and/or anyone acting on its behalf;

                  (2)      to the premises' structure, with the exception of
                           those risks in connection with the premises'
                           structure which may not be insured on the Israeli
                           insurance market, save for reasonable wear and tear
                           and save for damage in consequence of acts of terror
                           and/or war.

         (c)      If a third party claim is filed against Matam in respect of
                  damage for which the Tenant is liable pursuant to this clause
                  11, the Tenant shall be liable to indemnify Matam, within
                  seven days of the date on which the Company is requested to
                  pay the said amount, in respect of any amount which Matam is
                  held liable to pay a third party in consequence of a final
                  court judgment, together with all Matam's expenses in respect
                  of conducting the trial with the third party, and without
                  prejudice to the generality of the aforegoing the principal,
                  interest, linkage, advocates' professional fees, official
                  fees, trial costs, VAT and any other expenses deriving from
                  the claim.

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<PAGE>

                  Indemnity of the Company by the Tenant shall be conditional
                  upon the Tenant being sent notice regarding the existence of
                  the proceedings against the Company and upon the Tenant being
                  given the opportunity to defend itself against the claims
                  raised within the framework of the aforementioned proceedings.

         (d)      The provisions of this clause 11 do not refer to damage
                  occasioned as a result of a latent defect in the premises
                  which could not be detected in inspections carried out by the
                  Tenant and/or anyone acting on its behalf and/or on reasonable
                  inspection.

         (e)      The sub-clauses of this clause supplement and do not derogate
                  from each other.

         (f)      It is not the intention of this clause, with all its
                  sub-clauses, to create rights in favour of any third party,
                  save for Matam as defined in clause 12(n) below.

12.      INSURANCE

         (a)      Without derogating from the Tenant's obligations pursuant
                  hereto and pursuant to law, prior to the date of commencement
                  of the Tenant's business in the premises or prior to the date
                  of placing any assets in the premises - whichever is the
                  earlier - the Tenant undertakes to take out and maintain, at
                  its expense and liability, so long as this agreement is in
                  force, the insurances detailed below in this clause (which
                  shall hereinafter be called "the premises' insurance") with a
                  duly authorised insurance company.

                  (1)      Insurance of the premises' contents, the equipment
                           serving the premises which the Tenant owns and/or for
                           which it is responsible and which is situated outside
                           the premises in the area of the plot, and any repair,
                           alteration, improvement, renovation and addition to
                           the premises effected and/or that shall be effected
                           by the Tenant and/or for it, and any furniture,
                           equipment, installations and inventories, against
                           loss or damage in consequence of fire, smoke,
                           lightning, explosion, earthquake, riots, strikes,
                           malicious damage, flood, storm and tempest, damage by
                           a vehicle, damage by an aircraft, water damages,
                           electrical damages and break-in.

                  (2)      Insurance against loss of profits and consequential
                           damage to the Tenant, in appropriate amounts and for
                           an appropriate indemnity

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<PAGE>

                           period, as a result of loss or damage to the
                           Tenant's property and/or the premises' contents
                           and/or the premises' structure.

                           It is hereby agreed that the Tenant may refrain from
                           taking out loss of profits insurance as aforesaid,
                           but in such case Matam shall not bear any liability,
                           and the Tenant does and shall not have any complaint
                           and/or demand and/or claim against it, as if the
                           insurance had been taken out as aforesaid.

                           The Tenant undertakes to procure that the policy
                           mentioned in sub-clauses 12(a)(1) and (2) includes an
                           express condition pursuant whereto the insurer waives
                           any right of subrogation vis-a-vis Matam and all
                           those acting on its behalf, vis-a-vis the other
                           tenants and residents of the building (if there is a
                           parallel condition in their policies of the insurer's
                           waiver of any right of subrogation vis-a-vis the
                           Tenant) and vis-a-vis all the successors and assigns
                           of the parties mentioned above, save for damage
                           occasioned with malicious intent.

                  (3)      Third party liability insurance with a limit of
                           liability not less than an amount in shekels equal to
                           US$ 1,000,000 (one million US dollars) per event.
                           This insurance is not subject to any restriction
                           regarding liability deriving from fire, explosion,
                           panic, lifting, loading and unloading instruments,
                           defective sanitary installations, poisoning, any
                           harmful substance in food or beverage and any claims
                           by the National Insurance Institute. The insurance
                           shall be extended to indemnify Matam in respect of
                           its liability for the Tenant's acts and/or omissions,
                           and in respect of its liability in the area of the
                           premises alone by virtue of its being the owner of
                           the premises and the provider of services in respect
                           thereof.

                  (4)      Employers' liability insurance in respect of the
                           Tenant's liability vis-a-vis all those employed by it
                           and on its behalf with the highest limits of
                           liability customary on the Israeli insurance market
                           at the time of taking out the insurance and/or on the
                           date of its renewal.

                           This insurance shall not include any restriction
                           regarding contractors, sub-contractors and their
                           employees, baits and poisons and regarding the
                           employment of youth.

                           The said insurance shall be extended to indemnify
                           Matam in the event that it is deemed as the employer
                           of the Tenant's employees or any of them.

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         (b)      The Tenant undertakes to update the insurance amount in
                  respect of the insurance taken out pursuant to clause 12(a)(1)
                  above from time to time, so that it always reflects the full
                  value of the property insured pursuant thereto.

                  The Tenant undertakes to use the monies received from the
                  insurance company pursuant to the insurance mentioned in
                  clause 12(a)(1) above solely for the immediate restoration of
                  the damages the subject of the said insurance.

         (c)      The Tenant warrants that it shall not have any complaint
                  and/or demand and/or claim against Matam for damage in respect
                  whereof it is entitled to indemnity under the insurance taken
                  out pursuant to clauses 12(a)(1) and 12(a)(2) above, and it
                  hereby exempts Matam from any liability for such damage.

         (d)      Without the need for any request by the Company, the Tenant
                  undertakes, no later than the date of commencing the Tenant's
                  business in the premises or prior to the date of placing any
                  assets in the premises, whichever is the earlier, to furnish
                  the Company with a certificate regarding the taking out of the
                  premises' insurance in accordance with the form of wording in
                  the "Certificate of the Premises' Insurances" (annexed hereto
                  and marked as appendix "F"), duly signed by the insurer.

                  The Tenant warrants that it is aware that the furnishing of
                  the "Certificate of the Premises' Insurance" as aforesaid is a
                  suspensory condition and condition precedent for the delivery
                  of possession of the premises and/or the placing of any assets
                  in the premises, and the Company shall be entitled to prevent
                  the Tenant from commencing its business in the premises and/or
                  from placing assets as aforesaid if the said certificate is
                  not furnished prior thereto and at the time indicated above.

         (e)      For the avoidance of doubt, it is expressed that the failure
                  to furnish the insurance certificates on time as provided in
                  clause 12(d) above shall not affect the Tenant's obligations
                  pursuant hereto, including, and without prejudice to the
                  generality of the aforegoing, any payment obligation
                  applicable to the Tenant, and the Tenant undertakes to perform
                  all its obligations pursuant hereto even if it is prevented
                  from executing works and/or receiving possession of the
                  premises and/or placing assets in the premises and/or
                  commencing its business in the premises as a result of the
                  failure to furnish the certificates on time.

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<PAGE>

         (f)      The Tenant undertakes to comply with the terms and conditions
                  of the policies, to pay the insurance fees in full and on
                  time, and to procure and ascertain that the premises'
                  insurance policies are renewed from time to time as necessary
                  and are valid for the duration of the tenancy term.

         (g)      No later than 14 days prior to the end of the term of the
                  premises' insurances, the Tenant undertakes to deposit a
                  certificate with the Company of the taking out of insurance as
                  provided in clause 12(f) above in respect of an extension of
                  their validity [sic] for an additional year and within 30 days
                  of the renewal of the insurance as aforesaid the Tenant shall
                  deposit the original copies of the premises' insurances. The
                  Tenant undertakes to redeposit a certificate of the taking out
                  of the insurance, at the times fixed, each insurance year so
                  long as this agreement is in force.

         (h)      The Tenant warrants and undertakes that the Company's right to
                  review and inspect the insurance certificates and to instruct
                  alterations does not impose any liability and/or
                  responsibility upon the Company and/or anyone acting on its
                  behalf in respect of the nature and scope of the said
                  insurance certificates and policies or in respect of their
                  absence, and does not derogate from any obligation imposed
                  upon the Tenant pursuant hereto.

         (i)      The Tenant undertakes not to do and/or permit others to do any
                  act or omission in the premises and/or the building which is
                  likely to cause an explosion and/or conflagration and/or which
                  might increase the insurance expenses for which Matam and/or
                  the other tenants are liable in respect of the insurance of
                  the building or the premises situated therein.

         (j)      Without derogating from the Tenant's obligations pursuant
                  hereto and pursuant to any law, Matam shall purchase and
                  maintain, for the duration of the tenancy term, all or any of
                  the insurance policies specified below, in its exclusive
                  discretion:

                  (1)      employers' liability insurance - for the insurance of
                           Matam's liability vis-a-vis its employees pursuant to
                           the Civil Wrongs Ordinance (New Version), in respect
                           of any bodily injury to an employee during and in
                           consequence of his employment in the building and/or
                           its surroundings;

                  (2)      third party liability insurance - for the insurance
                           of Matam's and the Tenant's liability vis-a-vis any
                           third party within the common areas, with limits of
                           liability that shall not be less than US$ 1,000,000
                           (one million US dollars) per event and in total for
                           the insurance term.

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<PAGE>

                           The policy shall include a "cross liability" clause.

                           For the avoidance of doubt, the policy shall not
                           insure the Tenant's liability in respect of bodily
                           injury and/or damage to property in the premises
                           and/or the rented areas and/or the areas designated
                           for rental in the building;

                  (3)      property insurance - insurance of the building and
                           any other property belonging to Matam in the area of
                           the building and its surroundings, against loss or
                           damage in consequence of the following risks: fire,
                           explosion, earthquake, storm, tempest, flood, water
                           damages, aircraft, collision, strikes, riots,
                           malicious damage, break-in, glass breakage and any
                           further risk necessary in the opinion of the Company
                           and/or the management company.

                           The said insurance shall include a clause regarding
                           waiver of the right of subrogation vis-a-vis the
                           Centre's tenants in respect of damage unintentionally
                           occasioned by them to the building. For the purpose
                           of this clause, the expression "building" shall
                           include all the systems comprising an integral part
                           of the building, and shall expressly not include the
                           contents of the building's rented areas and any
                           addition, improvement or extension effected to the
                           building's rented areas by or for the tenants;

                  (4)      insurance against loss of rent occasioned to Matam by
                           reason of damage caused to the premises' structure or
                           by reason of the destruction of the premises'
                           structure as a result of the risks specified in
                           clause 12(j)(3) for an indemnity period of 12
                           (twelve) months.

         (k)      The Company shall furnish the Tenant with a certificate of the
                  existence of the insurances specified in clause 12(j) within
                  seven days of the parties' execution hereof.

         (l)      The following provisions shall apply to the policies mentioned
                  in clause 12(j) above:

                  (1)      Matam is entitled from time to time to alter and/or
                           cancel and/or replace the policies and/or to take out
                           additional insurances, all in its exclusive
                           discretion;

                  (2)      the policies shall be made available for the Tenant's
                           inspection at

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<PAGE>

                           the Company's offices by prior coordination. The
                           Tenant may, at its expense, purchase any other,
                           additional or supplementary insurance besides the
                           aforementioned policies in its discretion, if the
                           aforementioned policies are not to its full
                           satisfaction or do not, in its opinion, meet the
                           needs of the structure and/or the premises;

                  (3)      the Tenant undertakes to meticulously and fully
                           comply with all the provisions of the policies in
                           order to preserve the rights of Matam, the management
                           company and the other tenants within the framework of
                           the policies;

                  (4)      the Tenant shall cooperate with Matam in the event
                           that a claim is submitted to the insurance company
                           and shall immediately furnish any document, testimony
                           and the like required for the purpose of submitting
                           the claim.

         (m)      The Tenant warrants that it shall not have any complaint
                  and/or demand and/or claim against Matam in respect of any
                  damage for which it is entitled to indemnity (or for which it
                  would be entitled to indemnity were it not for the excess
                  fixed in the policy) under the insurances taken out pursuant
                  to clause 12(a) above, and it hereby exempts Matam from any
                  liability for such damage. As aforesaid, the provisions of
                  this clause shall add to (and not derogate from) any other
                  provision hereof regarding exemption from liability vis-a-vis
                  Matam.

                  Furthermore, the Tenant exempts the other tenants and
                  residents in the building from any liability for damage as
                  aforesaid, provided that the tenancy agreements or any other
                  agreement vesting them with rights in the building include a
                  parallel clause regarding exemption from liability in favour
                  of the Tenant.

         (n)      In clause 11 above and in this clause 12, the following
                  expressions shall bear the following meanings:

                  (1)      "damage" - as defined in the Civil Wrongs Ordinance,
                           including indirect damage, derivative damage,
                           consequential damage, loss of income and damage to
                           goodwill;

                  (2)      "Matam" - Matam Science Industries Centre Haifa Ltd,
                           the Haifa Economic Co. Ltd, Haifa Municipality and
                           Shatam Haifa Ltd.

                           The Company shall be the agent for all the entities
                           mentioned in this sub-clause (n) insofar as the
                           provisions of this clause are concerned.

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<PAGE>

13.      TRANSFER OR CHARGE OF RIGHTS AND RIGHT OF PRE-EMPTION

         (a)      The Tenant's rights by virtue hereof may not be howsoever
                  charged, in whole or in part.

         (b)      The Tenant may not howsoever transfer and/or assign its rights
                  and/or obligations pursuant hereto or any of them to another
                  or others (for consideration or otherwise), unless it has
                  received the Company's prior written consent thereto. The
                  Company shall not withhold its consent on unreasonable
                  grounds. In any event of a transfer of rights and/or
                  obligations, the Tenant shall remain liable for the
                  performance of its obligations pursuant hereto.

                  Notwithstanding the above provisions of this sub-clause (b),
                  it is agreed that the Tenant may assign its rights pursuant
                  hereto to its parent company, Zoran Corporation, whose
                  registered office is located at 2041 Mission College
                  Boulevard, Santa Clara, California 95054, USA (hereinafter
                  referred to as "the parent company"), subject to all the terms
                  and conditions specified below:

                  (1)      the Tenant shall send the Company at least two
                           months' prior written notice of its intention to
                           assign its rights to the parent company;

                  (2)      from the assignment date the parent company shall be
                           liable for the performance of all the Tenant's
                           obligations pursuant hereto, and for the performance
                           of all the Tenant's past obligations if and insofar
                           as such have not been performed by it;

                  (3)      without derogating from the above provisions of
                           sub-clause (b)(2), it is hereby expressed that the
                           assignment of the Tenant's rights to the parent
                           company shall not howsoever derogate from the
                           Tenant's obligations pursuant hereto until the
                           assignment date and/or shall not derogate from and/or
                           constitute a waiver by the Company of any complaint
                           and/or right available to the Company pursuant hereto
                           and/or pursuant to any law;

                  (4)      the parent company shall, prior to the date of
                           assignment of the Tenant's rights and as a condition
                           therefor, give the Company, for the purpose of
                           securing the performance of all its obligations
                           pursuant hereto, an autonomous bank guarantee to the
                           Company's satisfaction in an amount of US$ 90,000
                           from a bank that shall be

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<PAGE>

                           approved by the Company in advance and in writing.

                           The guarantee shall be valid until 90 days have
                           elapsed from the end of the tenancy term. The
                           aforementioned bank guarantee shall replace the
                           promissory notes given by the Tenant to the Company
                           in accordance with the provisions hereof.

         (c)      The Company may transfer and/or assign and/or charge its
                  rights and/or any of them pursuant hereto (including the
                  ownership of the premises) to another or others without
                  requiring the Tenant's consent, provided that the Tenant's
                  rights pursuant hereto are not prejudiced.

         (d)      In order to clarify matters, its is agreed and warranted by
                  the parties that the rights to build on the roof of the
                  building shall belong to the Company alone, and the Tenant
                  hereby grants its consent to building on the roof of the
                  building as the Company decides from time to time, provided
                  that such does not disturb, to the extent possible, the
                  Tenant's ordinary operations in the premises.

                  Notwithstanding the aforegoing, the Company warrants that it
                  shall not build on the building's roof until May 1999.

14.      PROVISIONS REGARDING THE USE OF THE PREMISES

         (a)      The Tenant may use the premises solely for the purpose of
                  conducting its business and not for any other object.

                  Furthermore, the Tenant confirms that it is aware that another
                  tenant (other tenants) shall use the common area of the
                  premises and the building, and the Tenant undertakes not to
                  prevent such tenant (or tenants) from making reasonable use of
                  the common area, including the grant of access to the common
                  area, as necessary.

                  The Company hereby confirms that its tenancy agreements with
                  the tenants of the Centre and the building contain clauses
                  similar to sub-clauses (a) to (l) below.

         (b)      The Tenant shall procure that the plant shall function in
                  accordance with the custom in the Centre and the Tenant shall
                  obey and comply with all the instructions given to it from
                  time to time by the Company and/or Shatam in connection with
                  the rules of conduct therein. The Tenant shall ascertain and
                  ensure that its employees and/or successors and assigns also
                  act pursuant to the provisions of this clause.

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<PAGE>

         (c)      (1)      The Tenant may not execute alterations and/or install
                           anything in the premises, save for minor alterations
                           that do not amount to rigid construction, unless it
                           obtains the Company's prior written consent thereto
                           and pursuant to terms and conditions that the Company
                           shall determine. The Company shall not refuse the
                           execution of such alterations and repairs, save on
                           reasonable grounds.

                           Any structural alteration executed in contravention
                           of the provisions of this sub-clause shall be removed
                           by the Tenant at its expense immediately upon receipt
                           of the Company's request to do so, whether during the
                           tenancy term or thereafter. If the Company approves
                           an alteration as aforesaid, such alterations and/or
                           installations shall be removed from the premises, at
                           the Company's request, at the end of the tenancy
                           term, at the Tenant's expense, in order that the
                           premises be restored to the Company in their original
                           condition. If the Company does not request removal as
                           aforesaid and the Tenant decides to leave the
                           alterations and/or installations, the aforementioned
                           alterations and/or installations shall remain owned
                           by the Company, and the Tenant shall not be entitled
                           to request any compensation in respect thereof.

                  (2)      Any alterations and/or installations executed in the
                           premises in accordance with the provisions of
                           sub-clause (c)(1) above shall be effected by the
                           Tenant at its full expense and liability, and the
                           Company shall not be howsoever liable as landlord
                           and/or owner.

         (d)      The Tenant shall maintain order and cleanliness in the
                  premises and shall comply with all the instructions of the
                  Company, Shatam and the municipal by-laws in connection with
                  the cleaning arrangements, the manner of disposing of garbage
                  and waste and maintaining the proper working order of the
                  building's drainage and sewerage system. The failure to give
                  instructions as aforesaid shall not release the Tenant from
                  its obligations pursuant to this clause.

         (e)      The Tenant warrants that it is presently in possession of, or
                  will obtain by the commencement of the tenancy term, all the
                  approvals and licenses necessary for the management of the
                  plant and/or the use of the premises in accordance with the
                  provisions hereof and the provisions of any law, and that it
                  shall, pursuant to the provisions of the law and the
                  regulations in connection therewith, keep and always be
                  equipped with appropriate valid licenses and approvals in
                  respect of any activity connected with the management of the
                  plant and/or the use of the premises which require approval or
                  a license pursuant to law.

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<PAGE>

                  The failure to obtain the said licenses and/or any of them
                  shall not constitute a cause for the termination hereof and/or
                  for the non-performance of the Tenant's obligations pursuant
                  hereto and in particular for non-payment of the rent and the
                  other payments pursuant hereto.

         (f)      The placing of any sign or advertising means or other display
                  on behalf of the Tenant on the premises' external walls or in
                  the building's common areas or in the vicinity thereof shall
                  require the Company's prior written approval.

         (g)      In addition to the provisions of clause 8 above and in
                  addition to all the payments for which the Tenant is liable
                  pursuant hereto, the Tenant shall pay the Company for the
                  costs of maintaining the common areas of the building,
                  including the dining room costs, all as provided in appendix
                  "I" hereto which constitutes an integral part hereof.

         (h)      The Tenant shall comply with the instructions of the Company
                  and any other competent authority in connection with fire
                  extinguishing and fire prevention arrangements and procedures,
                  the Civil Defence, safety and security, and shall purchase
                  and/or install, at its expense and by prior written
                  coordination with the Company, pursuant to the instructions of
                  the above entities, all the preventative and safety equipment
                  required for the application and maintenance of the above
                  instructions. The equipment shall remain owned by the Tenant
                  which may remove it from the premises at the end of the
                  tenancy term and it shall do so if requested by the Company.

         (i)      DISTURBANCES, AVOIDANCE OF NUISANCES AND PRESERVATION OF THE
                  ENVIRONMENT

                  (1)      The Tenant shall manage the plant and use the
                           premises by refraining from bothering neighbours and
                           by refraining from creating a nuisance in the
                           premises or its surroundings and all in accordance
                           with the practice in the building and/or the Centre
                           and/or with the Company.

                  (2)      The Tenant hereby confirms that its plant does not
                           constitute an ecological hazard and that it shall not
                           constitute such during the tenancy term pursuant
                           hereto.

                  (3)      Without derogating from all the above provisions, the
                           Tenant shall act and instruct its employees and
                           anyone acting on its behalf to act in accordance with
                           the provisions of the Abatement of Nuisances Law,
                           5721-1961 and the Maintenance of Cleanliness Law,
                           5744-

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<PAGE>

                           1984 and all the regulations and orders
                           thereunder and of all the by-laws of the Haifa
                           Municipality and the local authority.

         (j)      The Tenant undertakes to refrain from any act or omission in
                  the premises, and to refrain from permitting an act or
                  omission by another or others in the premises, which is likely
                  to impose liability upon the Company pursuant to law,
                  including damages to person and/or property.

         (k)      The Tenant shall totally refrain from taking any possession of
                  the common area.

15.      WARRANTY FOR THE QUALITY OF THE BUILDINGS AND THE PREMISES

         (a)      The Company shall, within the framework of the warranty of the
                  contractor which built the premises for it (hereinafter
                  referred to as "the contractor"), be liable to repair the
                  defects and/or faults detected and/or arising in the premises
                  within one year of the delivery date (hereinafter referred to
                  as "the warranty period") and deriving from defective work
                  and/or the use of defective materials. The Tenant must notify
                  the Company in writing of any such defect immediately upon its
                  detection.

                  If the Tenant does not notify the Company of defects at the
                  aforesaid time, such shall be deemed confirmation on its part
                  that there were no such defects in the premises.

         (b)      If the Tenant notifies the Company after the end of the
                  warranty period of a defect in respect whereof the Company has
                  a warranty from the contractor which executed the work in the
                  premises for a period longer than the warranty period as
                  defined in sub-clause (a) above, the Company shall exercise
                  its right pursuant to the aforementioned warranty, such that
                  the performing contractor shall repair the defect, and such
                  being without recognising any obligation and/or liability on
                  the Company's part.

                  The Company shall act to the best of its ability in order to
                  realise the contractors' full liability towards it as provided
                  in sub-clause (a) above and in this sub-clause.

                  If the parties decide to enable the Tenant to exercise the
                  Company's rights pursuant to the contractor's warranty as
                  provided above, the Company shall assign all its rights
                  pursuant to the agreement between it and the contractor, and
                  the Tenant for its part may not have recourse to the Company
                  for any reason. The Company may not refuse to assign its
                  rights as aforesaid, save on reasonable grounds.

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<PAGE>

         (c)      The Tenant shall be liable, at its expense, for the routine
                  maintenance of the premises and their systems, including the
                  air conditioning systems, and shall, at its expense, repair
                  all the routine faults discovered in the premises, as speedily
                  as possible in the circumstances of the case.

         (d)      Without derogating from the aforegoing, the Tenant shall use
                  the premises with appropriate care, maintain them in good and
                  proper condition (including whitewashing and painting)
                  throughout the tenancy term and effect, without delay and at
                  its expense, all the repairs necessary in order to perform its
                  obligation pursuant to this clause.

         (e)      If the Tenant and/or the Company do not perform their
                  obligations as provided above in this clause, the second party
                  may (but is not obliged), after giving the other party ten
                  days' prior written notice during which the obligation is not
                  performed or the performance thereof is not commenced, itself
                  perform the maintenance and repairs for which the other party
                  is liable, and the Tenant or the Company, as the case may be,
                  shall reimburse the second party with all the expenses
                  incurred by it for such purpose, immediately upon its first
                  demand and in accordance with the provisions of such request.

16.      NON-APPLICABILITY OF THE TENANTS' PROTECTION LAWS

         The parties hereby warrant that:

         (a)      the construction of the building and the premises was
                  completed after 5728-1968 and that the Tenants' Protection Law
                  (Consolidated Version), 5732-1972 shall not apply to the
                  tenancy by virtue hereof, or at all;

         (b)      no key money or other similar payment has been or shall be
                  paid to the Company or any other person and such has not been
                  nor shall be received from the Tenant in consideration for the
                  delivery of use of the premises and everything connected
                  therewith;

         (c)      the Tenants' Protection Law (Consolidated Version), 5732-1972
                  and/or any other law for the protection of tenants presently
                  existing or which shall be promulgated in the future shall not
                  apply in respect of this agreement and to the parties'
                  relations by virtue hereof.

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<PAGE>

17.      RIGHT OF ENTRY TO THE PREMISES

         The Company's representatives shall have a right of entry to the
         premises (subject to security restrictions) during reasonable hours and
         by prior coordination with the Tenant in order to ascertain the degree
         to which the provisions hereof are being performed and/or in order to
         show the premises to others and/or in order to do the acts and take the
         steps prescribed herein or in any law and obliging entry to the
         premises, provided that any damage occasioned to the Tenant as a result
         of its refusal to permit entry in the said cases and for the said
         objects or its refraining from coordinating entry as aforesaid to the
         premises shall be borne by the Tenant alone, and the Tenant shall not
         have any complaint and/or claim against the Company by reason thereof.

         The Company shall act to the best of its ability to ensure that the
         disturbance to the Tenant shall be as minor as possible and that the
         premises are restored to their previous condition as soon as possible
         and insofar as possible.

18.      VACATION OF THE PREMISES

         (a)      No later than the date on which the tenancy term comes to an
                  end, the Tenant shall vacate the premises and return
                  possession thereof to the Company, with them being vacant of
                  any person and object (save for equipment and accessories
                  belonging to the Company) and in good and proper condition as
                  delivered to the Tenant, save for reasonable wear and tear.

         (b)      In respect of and for each day of delay in returning
                  possession of the premises contrary to the provisions of
                  sub-clause (a) above, the Tenant shall pay the Company the
                  full month's rent for the last month of the tenancy term
                  divided by 10 together with due VAT. This payment, which shall
                  be deemed pre-agreed liquidated damages, shall not derogate
                  from any other remedy to which the Company is entitled
                  pursuant to any law and/or agreement.

         (c)      On the vacation date, the representatives of the Company and
                  the Tenant shall draw up vacation minutes which shall state
                  the defects and repairs which the Tenant must effect in order
                  to restore the premises to a good and proper condition and
                  pursuant to the timetable agreed upon.

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<PAGE>

                  Notwithstanding the aforegoing, Matam may effect the repairs
                  itself and the Tenant shall reimburse Matam with the costs of
                  effecting the repairs pursuant to invoices submitted to it by
                  Matam. Matam may withhold the collaterals mentioned in clause
                  10 until completion of the repairs by the Company and if
                  necessary it may realise the collaterals as cover for its
                  aforementioned expenses.

19.      NEGATION OF REPRESENTATION, THE TENANT'S EMPLOYEES

         (a)      The provisions hereof and/or the parties' conduct by virtue
                  hereof shall not be interpreted as empowering one party to
                  appear in the other party's name or stead, or as conferring,
                  pursuant to the aforesaid, the status of representative of the
                  other party.

         (b)      The employees of one party shall not be deemed the
                  employees of the other party in any circumstances and for
                  any object.

20.      FUNDAMENTAL BREACH OF THE AGREEMENT

         Without derogating from the provisions of any law, each of the
         following acts or omissions shall be deemed a fundamental breach of the
         agreement by the Tenant and shall serve as a cause for vacation of the
         premises forthwith and for their return to the exclusive possession of
         the Company, and all on prior written notice of 21 days, unless the
         fundamental breach hereof is rectified by the Tenant to the Company's
         satisfaction by the date fixed in the aforementioned notice:

         (a)      the cessation of the Tenant's activity for a period exceeding
                  180 days, save in circumstances of force majeure alone, and/or
                  the submission of an application for the Tenant's winding up
                  and for the appointment of a receiver over a material part of
                  the Tenant's property, and the application or appointment,
                  respectively, is not cancelled within 60 days;

         (b)      a delay in payment of the rent, including the supplemental
                  rent, or in effecting any of the other payments for which the
                  Tenant is liable by virtue hereof and/or the breach thereof
                  for a period exceeding 30 (thirty) days from the time fixed
                  for the payment thereof, provided that the Tenant is sent
                  notice thereof requesting that the payments be made and it
                  does not comply therewith within seven days;

         (c)      the grant of a use right or the transfer or charge of rights
                  or any of them in contravention of the provisions of clause 14
                  above;

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<PAGE>

         (d)      the Tenant's failure to take out and/or maintain the insurance
                  in contravention of the provisions of clause 13 above;

         (e)      the failure to return possession of the premises at the time,
                  in the manner and in the condition specified herein;

         (f)      the grant of an order in connection with the Tenant containing
                  an arrangement with creditors and/or an arrangement in favour
                  of creditors and/or a receivership and/or bankruptcy and/or
                  winding up of any type whatsoever and/or the dissolution of
                  business in any manner, and the order is not cancelled within
                  sixty days;

         (g)      the non-performance of the obligations pursuant to the
                  agreement between the Tenant and Matam and the failure to
                  comply with the instructions of Shatam, the Centre's services
                  company;

         (h)      the Tenant causes any nuisance pursuant to clause 15(h)
                  hereof;

         (i)      effecting alterations in the premises without obtaining the
                  Company's prior written permission;

         (j)      the non-performance of the obligation to use the premises as
                  provided in clause 15 hereof;

         The provisions of this clause do not prejudice the Company's right to
         any other relief to which it is entitled against the Tenant pursuant to
         law and/or agreement in respect of its breach.

21.      EARLY VACATION OR ABANDONMENT

         If the Tenant vacates or abandons the premises or is evicted from the
         premises prior to the end of the tenancy term or in the case of a
         breach of this agreement without the Company's prior written consent,
         the Tenant shall continue paying the Company rent and all the other
         payments for which it is liable by virtue hereof until the end of the
         tenancy term, as if it had continued to possess and use the premises.
         The provisions hereof shall not derogate from the Company's right to
         terminate the agreement on the basis of the provisions of clause 20
         above.

         It is agreed and warranted by the parties that this clause shall not
         apply in the case of force majeure as defined below:

         for the purpose of this clause 21, force majeure means:_______________

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         __________________

         It is agreed and warranted by the parties that the Tenant shall be
         entitled to bring an alternative tenant in its stead, provided that all
         the following cumulative conditions are fulfilled:

         (a)      the Tenant fulfills all the terms and conditions of the
                  agreement until the date on which the premises are actually
                  transferred to the alternative tenant who shall be approved by
                  the Company as provided below; and

         (b)      the Company is given at least two months' prior written notice
                  thereof; and

         (c)      the alternative tenant is approved by the Company, whose
                  decision shall be exclusive and final; however, the Company
                  shall not withhold its consent, save on reasonable grounds;
                  and

         (d)      the terms and conditions of the new tenancy agreement with the
                  alternative tenant shall be agreed between it and the Company
                  to the Company's satisfaction, provided that they shall not be
                  inferior to the terms and conditions hereof; and

         (e)      subject to the provisions of sub-clause (d) above, the
                  alternative tenant shall perform all the Tenant's obligations
                  and give the Company collaterals / guarantees to its
                  satisfaction.

                  The above provisions of this paragraph do not derogate from
                  the Tenant's obligations pursuant hereto.

22.      SELF-HELP

         Wherever an obligation is imposed on a party hereto and such party does
         not absolutely perform it or does not perform it properly, for any
         reason whatsoever, the second party may (but is not bound to) perform
         or complete the performance of any such obligation itself and/or by
         others, within a reasonable time, and all the reasonable expenses
         involved therein shall be borne by the other party. Such expenses shall
         be reimbursed to the second party on the production of an invoice
         (based on appropriate references) submitted by it to the other party
         within 30 days of the invoice's submission. If the Tenant incurs any
         such expense, it may deduct it from the rent if it has given the
         Company 30 days' prior written notice thereof and the Company has
         failed to indemnify it in respect of the said expense.

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<PAGE>

23.      CONSTRUCTION, REPAIRS, IMPROVEMENTS AND DEVELOPMENT WORKS

         The provisions hereof shall not prevent the Company and Shatam from
         erecting installations and executing construction, repairs,
         improvements and development works in the building, the premises, its
         surroundings and/or the Centre, so long as such do not unreasonably
         disturb the Tenant in the management of its plant. The Tenant shall not
         object to the execution of the above acts and shall cooperate with the
         Company and/or Shatam as aforesaid and at their expense insofar as the
         execution thereof is concerned.

         It is agreed that the aforementioned works shall be at the Company's
         liability and expense, unless the parties otherwise agree in writing.

24.      EVIDENCE AND MODIFICATION OF THE AGREEMENT

         (a)      Any alteration hereto and/or modification hereof shall only be
                  effected in an express written document that shall be signed
                  by the parties hereto.

         (b)      The consent of a party hereto to a deviation from the terms
                  and conditions hereof in a particular case or in a series of
                  cases shall not constitute a precedent and no inference shall
                  be drawn therefrom in the same case and/or in any other case
                  in the future.

         (c)      If a party to this agreement has not used or has delayed in
                  using any of the rights vested in it pursuant hereto in a
                  particular case or in a series of cases, such shall not be
                  deemed a waiver of any of its rights.

         (d)      It is agreed between the parties that the acceptance of a
                  cheque or notes does not constitute payment, until they have
                  actually been paid.

25.      JURISDICTION

         It is agreed between the parties that any dispute and/or difference
         and/or judicial proceeding in connection herewith and the obligations
         deriving herefrom shall be decided solely and exclusively pursuant to
         the Israeli law, and that the sole and exclusive place of jurisdiction
         is the competent court in Haifa.

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26.      STAMP DUTY

         (a)      All the costs of stamping this agreement and the copies hereof
                  shall be borne and paid by the parties in equal shares.

         (b)      Stamps tax applicable to the collaterals mentioned in clause 9
                  above (including the costs of obtaining them) shall be paid by
                  the Tenant.

27.      CONFIDENTIALITY

         For so long as the agreement is in force, the parties undertake to
         maintain confidentiality in respect of all the plans connected with the
         building, the floor and its systems, with the aim of preventing any
         malicious sabotage of the building.

         Wherever such a disclosure is obliged, the parties undertake to obtain
         from the person receiving the plans, save for government entities, a
         written undertaking to maintain confidentiality in respect thereof and
         to return them when the need to continue holding them comes to an end.

         Furthermore, the parties undertake to maintain confidentiality in
         respect of the terms and conditions hereof, save for the commercial
         details insofar as such are required by an external entity or external
         entities or for the Tenant's activity.

28.      NOTICES AND WARNINGS

         (a)      Any notice and/or warning and/or request sent from one party
                  to the other in connection herewith shall be sent by
                  registered mail or delivered by hand to the addresses of the
                  parties set forth below (or any other address of which
                  appropriate written notice is given), and such notice or
                  warning shall be deemed to have been delivered to the
                  addressee upon its actual delivery - if delivered by hand, and
                  if sent by mail in Israel - at the end of 72 hours from being
                  placed in the mail, with the postage fees having been fully
                  paid in advance.

         (b) The addresses of the parties as aforesaid are:

                  (1)      the Company - Matam - Science Industries Centre Ltd,
                           Postal Agency Matam 31905 Haifa;

                  (2)      the Tenant - at the premises.

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<PAGE>

29.      The parties warrant and confirm that they have read this agreement and
         all the clauses and appendices hereto and they have understood the
         contents, nature and significance thereof and agree to the provisions
         thereof.

                      AS WITNESS THE HANDS OF THE PARTIES:

--------------------                                        --------------------
THE COMPANY                                                 THE TENANT

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                                  APPENDIX "I"

                     ADDENDUM TO THE TENANCY AGREEMENT DATED

BETWEEN:          MATAM - SCIENCE INDUSTRIES CENTRE HAIFA LTD

                  PC 51-068740-3

                  (hereinafter referred to as "the Company")

                                                                 OF THE ONE PART

AND:              ZORAN MICRO-ELECTRONICS LTD

                  PC 51-094944-9

                  (hereinafter referred to as "the Tenant")

                                                               OF THE OTHER PART

WHEREAS           the Tenant wishes the Company to manage the building's common
                  areas (as defined below);

AND WHEREAS       the Company has agreed to see to the management and
                  maintenance of the building's common areas for the
                  consideration and subject to the terms, conditions and
                  provisions specified in this addendum (hereinafter referred
                  to as "the addendum") and the appendices hereto;

AND WHEREAS       the Tenant wishes catering services to be provided in the
                  building to its employees and guests;

AND WHEREAS       the Company has agreed to assign a section of the
                  building's common areas which shall serve as a dining room
                  (as defined below) for the purpose of providing catering
                  services to the companies renting areas in the building and
                  their guests for the consideration and subject to the
                  terms, conditions and provisions specified in this addendum
                  and the appendices hereto;

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

1.       RECITALS

         1.1      The recitals and appendices hereto constitute an integral part
                  hereof.

         1.2      This addendum constitutes an integral part of the tenancy
                  agreement executed between the parties on __________________
                  (hereinafter referred to as "the agreement").

2.       DEFINITIONS

         In this addendum -

         "THE BUILDING" - as defined in the tenancy agreement;

         "THE CONTRACTOR" - Norcate Ltd, which has undertaken to supply catering
         services to the tenants in building 30 and its guests in accordance
         with the terms and conditions of the agreements executed between it and
         each of the tenants in building 30 or any other contractor elected by
         the tenants in building 30 in accordance with the terms and conditions
         of the agreements executed between them and the contractor;

         "THE TENANTS IN BUILDING 30" - i.e. Aurec, ABB, Madge Israel and/or
         anyone renting areas in the building from the Company instead of any of
         them;

         "THE TENANT'S EMPLOYEES" - the Tenant's employees and guests and/or
         anyone permitted by the Tenant's representative (as defined below) to
         enter the dining room (as defined below) and to use the catering
         services as defined below in this clause, all in accordance with the
         written guidelines given by the representative to the contractor;

         "THE COMPANY'S REPRESENTATIVE" - anyone appointed from time to time by
         the Company in its exclusive discretion to supervise and monitor the
         use made of the dining room;

         "THE TENANT'S REPRESENTATIVE" - a representative appointed by the
         Tenant, whose position involves the ordering of the catering services,
         approval of the contractor's invoices and the payment thereof, and any
         routine acts in connection with the catering services;

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<PAGE>

         "THE DINING ROOM" - an area of approx. 315 square metres in building 30
         as marked in red in appendix "A" which is designated for the purpose of
         operating a dining room and the provision of the catering services as
         defined below, which includes a dining hall (designated to accommodate
         approx. 120 seats for diners) and a kitchen for heating and/or
         rewarming;

         "THE CATERING SERVICES" - the preparation of meals and their service to
         the Tenant's employees in the dining room in the manner, to the extent
         and subject to the terms, conditions and provisions provided
         hereinbelow;

         "COMMON AREA" or "COMMON AREAS" - as defined in the tenancy agreement
         and together with the dining room as defined above;

         "THE ROUTINE EXPENSES" - expenses in respect of maintaining the common
         areas, including, inter alia, the following components:

         (a)      the cleaning and maintenance of the common area (including the
                  building's external walls and roof);

         (b)      the maintenance of the common equipment, elevators, air
                  conditioning equipment and the like;

         (c)      electricity in the common area;

         (d)      water in the building (including water in the conveniences on
                  all the floors);

         (e)      the costs of operating the dining room, including structural
                  insurance, the maintenance of the dining room structure and
                  rates, and save for the cost of obtaining the catering
                  services from the contractor for which the Tenant and all the
                  other tenants in building 30 are solely and exclusively
                  liable;

         "THE INDEX" - the consumer price index published by the Central Bureau
         of Statistics and Economic Research, including such index even if
         published by another government institution, whether built on the same
         data on which the existing index is built or not. If the index is
         replaced as aforesaid, the Central Bureau of Statistics shall determine
         the ratio between it and the cost of living index which replaces it;

         "THE BASE INDEX" - the index for March 1996 which was published on 15th
         April 1996 and which stands at 133.0 points, save where this addendum
         expressly otherwise provides;

         "THE DETERMINING INDEX" - the index known on the date of actually
         effecting any payment;

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<PAGE>

         "THE PROPORTIONAL PART OF THE ROUTINE EXPENSES" - the Tenant's part of
         the routine expenses, which shall be computed pursuant to the
         proportional part rented by the Tenant in the building in relation to
         the total area of the building, i.e. 21.6%;

         "OVERHEADS AND MANAGEMENT FEES" - payment for the general management of
         the common area which shall constitute 12% of the proportional part of
         the routine expenses;

         "THE DINING ROOM EXPENSES" - payment for the assignment of an area in
         the building for the operation of the dining room and the expenses
         involved therein.

3.       MANAGEMENT OF THE COMMON AREAS

         3.1        The parties hereby agree and undertake that the Company
                    and/or someone acting on its behalf shall manage the
                    maintenance of the common areas in the building on standards
                    acceptable in buildings which were constructed in the
                    Centre, and in consideration the Tenant shall pay the
                    Company the proportional part of the routine expenses as
                    defined above.

                    The Tenant shall pay the proportional part of the routine
                    expenses in accordance with the provisions of clause 5
                    below.

         3.2        It is hereby agreed that in addition to payment of the
                    proportional part of the routine expenses as provided above,
                    the Tenant shall also pay the Company, at the same times,
                    overheads and management fees as defined above for managing
                    the maintenance of the common areas.

         3.3        In addition to and without derogating from the provisions of
                    sub-clauses 3.1 and 3.2 above, the Tenant shall pay the
                    Company in respect of the dining room expenses as provided
                    below:

                    3.3.1       the area of the premises for the purpose of
                                paying rent for the premises each month, as
                                prescribed in clause 1(a) of the agreement (i.e.
                                1,646 square metres) shall be increased by 5.3%
                                to 1,733 square metres, commencing from the date
                                of the dining room's operation;

                    3.3.2       for the avoidance of doubt, it is hereby agreed
                                that the increase of the area of the premises as
                                provided in sub-clause 3.3.1 above is for the
                                purpose of charging for the dining room

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<PAGE>

                                expenses alone and such shall not add to
                                and/or alter the Tenant's rights insofar as
                                the rental of areas in the building are
                                concerned and/or increase the actual area of
                                the premises.

         3.4        It is hereby agreed between the parties that the Company's
                    representative may permit the provision of catering services
                    in the dining room to the employees and guests of companies
                    which are not renting areas in building 30 (hereinafter
                    referred to as "the external company"), provided that prior
                    written consent thereto is given by the tenants in building
                    30 together renting more than 66% of the areas being let in
                    the building, and subject to the external company
                    participating in the dining room expenses at a rate
                    determined by the Company's representative.

                    Monies for participation in expenses collected from the
                    external company as provided in this sub-clause shall be
                    distributed amongst the tenants in building 30 which
                    participate in the dining room expenses as provided in
                    clause 3.3 above. The distribution shall be effected pro
                    rata to the tenants' share of the payment of the dining room
                    expenses.

         3.5        It is hereby agreed that the Company and/or the Company's
                    representative may use the dining room to hold special
                    functions, provided that use as aforesaid may only be made
                    by prior coordination with Zoran in order to prevent,
                    insofar as possible, impairment of the catering services.

                    It is further hereby agreed that the Tenant and/or any of
                    the tenants in building 30 may hold special functions in the
                    dining room, provided that the date of holding the special
                    function is coordinated with the Tenant in building 30
                    [sic].

                    If a preferred date for the holding of a function by one of
                    the tenants in building 30 overlaps with a preferred date
                    for the holding of a function by a third party, preference
                    shall be given to the tenant in building 30.

                    For the avoidance of doubt and without derogating from the
                    Tenant's liability as provided in the agreement and this
                    addendum, it is hereby expressed that the Tenant shall be
                    liable for any damage to person and/or property occasioned
                    to the Tenant's employees and/or to any third party which is
                    directly or indirectly connected with a special function
                    held by the Tenant and/or anyone on its behalf in the dining
                    room.

                    If a claim is filed against Matam by any of the Tenant's
                    employees or by any third party in respect of damage for
                    which the Tenant is liable pursuant to this sub-clause, the
                    Tenant shall indemnify Matam, subject to

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<PAGE>

                    the Tenant being given notice regarding the existence of
                    the proceedings against the Company and to it being given
                    the opportunity to defend itself against the claims
                    raised within the framework of the aforementioned
                    proceedings, in respect of any amount which Matam is made
                    liable to pay any of the Tenant's employees and/or any
                    third party, together with trial costs and including
                    principal, interest, linkage, official fees, advocates'
                    professional fees, VAT and any other expenses deriving
                    from the claim.

         3.6        Without derogating from the provisions of clauses 3.1 to 3.3
                    above and for the avoidance of doubt, it is hereby expressed
                    that on the ground floor and fourth floor of the building
                    there are expenses relating to the maintenance of the common
                    area which shall only be borne by the companies renting
                    areas on such floors pursuant to their proportional part of
                    the area let by the Company on such floors in relation to
                    the entire floor area.

4.       LIABILITY WITH REGARD TO THE COMMON AREAS

         4.1        The Tenant hereby warrants that it is aware and agrees that:

                    4.1.1       The catering services in the dining room,
                                including the payment in respect thereof, are
                                regulated in the agreement between the
                                contractor and the Tenant which is annexed
                                hereto as appendix "B".

                                Matam shall not be howsoever liable for the
                                catering services and, inter alia and without
                                derogating from the generality of the
                                aforegoing, for the quality of the food and/or
                                any damage to person and/or property occasioned
                                to the Tenant and/or any third party which is
                                directly and/or indirectly connected with the
                                catering services.

                    4.1.2       Without derogating from the provisions of clause
                                11 of the agreement, the Tenant alone shall be
                                liable vis-a-vis Matam and/or any third party,
                                as the case may be, for any injury, loss or
                                damage to person or property (and without
                                derogating from the generality of the
                                aforegoing, including property of the Tenant,
                                its employees and guests) which occurs or is
                                occasioned in the domain of the common areas in
                                consequence of an act and/or omission of the
                                Tenant and/or anyone acting on its behalf and/or
                                Matam and/or anyone acting on its behalf and the
                                aforementioned liability shall not be borne by
                                Matam, subject to the provisions set forth
                                below.

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<PAGE>

                                The Tenant's liability as provided above in this
                                sub-clause, insofar as it relates to an act or
                                omission of Matam and/or those acting on its
                                behalf, shall be in accordance with that defined
                                under the third party liability insurance policy
                                as provided in clause 12(a)(3) of the agreement,
                                with it being limited to an amount of US$
                                5,000,000 per event and in total for the entire
                                insurance term.

                    4.1.3       If a claim is filed against Matam by any third
                                party in respect of damage for which the Tenant
                                is liable pursuant to this clause 4, the Tenant
                                shall be liable to indemnify Matam, immediately
                                upon being requested to do so, in respect of any
                                amount which Matam shall be held liable to pay
                                the third party, together with all Matam's
                                expenses in respect of conducting the trial with
                                the third party and, without prejudice to the
                                generality of the aforegoing, principal,
                                interest, linkage, advocates' professional fees,
                                official fees, trial costs, VAT and any other
                                expenses deriving from the claim.

                                Matam's indemnity by the Tenant shall be
                                conditional upon the Tenant being given notice
                                regarding the existence of the proceedings
                                against Matam and upon the Tenant being given an
                                opportunity to defend itself against the claims
                                raised within the framework of the
                                aforementioned proceedings.

                    4.1.4       The Tenant undertakes to indemnify and/or
                                compensate Matam immediately upon being
                                requested to do so in respect of any damage
                                and/or expense occasioned to Matam in
                                consequence and in respect of a breach of the
                                Tenant's obligations pursuant to this addendum.

                    4.1.5       It is not the intention of this clause, and all
                                the sub-clauses hereof, to create rights in
                                favour of any third party.

                    4.1.6       The sub-clauses of this clause supplement and do
                                not derogate from each other.

                    4.1.7       For the purpose of clause 3.5 and this clause 4,
                                the expressions "damage" and "Matam" shall bear
                                the meaning prescribed in clause 12 of the
                                agreement.

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<PAGE>

5.       PAYMENT IN RESPECT OF THE MANAGEMENT AND MAINTENANCE OF THE COMMON
         AREAS

         5.1        Subject to the transfer of data on the planned budget as
                    provided in clause 5.4 below, the Tenant undertakes to pay
                    the Company, at the time of paying the rent as prescribed in
                    the agreement, the proportional part of the routine
                    expenses, as defined in clause 2 above, overheads and
                    management fees and dining room expenses, as provided in
                    this addendum and the appendices hereto.

         5.2        The amount of the routine expenses and overheads and
                    management fees that shall be paid to the Company by the
                    Tenant, as prescribed in this addendum and the appendices
                    hereto, shall be detailed in a written request that the
                    Company shall give the Tenant from time to time, and they
                    shall be paid by the Tenant to the Company upon effecting
                    the next rent payment following the receipt of any request.

                    It is hereby agreed between the parties that the Tenant may
                    request from the Company, and the Company hereby undertakes
                    to furnish to the Tenant following receipt of such a
                    request, invoices or other documents approved by the
                    Company's comptroller (including agreements) attesting to
                    the amount of the routine expenses incurred by the Company
                    within the framework of maintaining the common areas.

         5.3        For the avoidance of doubt, it is expressed and agreed by
                    the parties that the payment of monies by the Tenant to the
                    Company for the maintenance and management of the common
                    areas as prescribed in sub-clause 5.1 and 5.2 above shall be
                    effected commencing from the delivery of the premises to the
                    Tenant as provided in the agreement and until the end of the
                    tenancy term.

         5.4        It is hereby agreed that one month before the commencement
                    of each calendar year during the tenancy term the Company
                    shall convey to the Tenant, for its inspection, data on the
                    planned budget for the management and maintenance of the
                    common areas (hereinafter referred to as "the planned
                    budget") for the coming calendar year. A deviation of more
                    than 5% from the planned budget shall necessitate the
                    Tenant's prior written consent (in respect of a deviation of
                    more than 5%).

                    For the avoidance of doubt, a deviation of up to 5% does
                    not require the Tenant's consent.

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<PAGE>

6.       GENERAL

         6.1        The Tenant hereby warrants that it is aware that pursuant to
                    the agreement that shall be executed/has been executed
                    between the Company and the contractor for the provision of
                    catering services, the Company is reserving unto itself,
                    inter alia, the right to bring about early termination of
                    the term for borrowing the dining room that shall be
                    given/has been given to the contractor, and such being by
                    giving 30 days' prior written notice to the contractor and
                    without being required to give grounds for its said
                    decision.

                    The Tenant warrants and undertakes that it does not and
                    shall not have any complaints and/or claims and/or demands
                    against the Company in connection therewith, provided that
                    the Company contracts with another contractor for the
                    provision of catering services and that the provision of the
                    catering services to the tenants in building 30 is not
                    affected.

         6.2        It is hereby  agreed that save for the  provisions of this
                    addendum and the  appendices  hereto,  there shall be no
                    alteration to the terms and conditions of the agreement and
                    the appendices thereto.

                      AS WITNESS THE HANDS OF THE PARTIES:

--------------------                                        --------------------
THE TENANT                                                  THE COMPANY

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<PAGE>

                      SPECIAL TERMS AND CONDITIONS APPENDIX

1.       The Company warrants that it intends erecting in the area of the
         Science Industries Park in Haifa, including the area known as Matam
         West (hereinafter referred to as "the Centre") a building of a total
         area of approx. 5,000 square metres (hereinafter referred to as "the
         planned building") which shall be built on the basis of a specification
         that shall be agreed between the parties and which shall not be
         inferior to the specification of building 30 and building 23 which were
         built by the Company in the Centre.

         The location of the planned building shall be determined by Matam
         within Matam West Park, by consent with Zoran - and Zoran shall not
         object to the location on unreasonable grounds.

2.       The Tenant warrants that it wishes to rent an area of approx. 2,500
         square metres in the planned building for a term of seven years,
         commencing at the end of the tenancy term in respect of the premises in
         building 30, i.e. commencing from 15th May 1999.

3.       It is hereby agreed that the location and size of the planned building
         shall be determined by the Company in its discretion, having regard to
         the Tenant's requirements.

4. It is further agreed between the parties that:

         4.1        The Tenant  shall  notify the  Company in writing by 15th
                    May 1997 if it wishes to  increase  or reduce the area which
                    it shall rent in the planned building by 500 metres.

         4.2        The Tenant may sub-let an area of up to 40% and not more
                    than 1,000 square metres of the area which it shall rent in
                    the planned building for a period of up to
                    ____________________; however, it is hereby expressed that a
                    sub-tenancy as aforesaid shall be conditional upon obtaining
                    the Company's prior written approval and to fulfillment of
                    the terms and conditions set forth below:

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<PAGE>

                    4.2.1       The Tenant shall give a written prior
                                undertaking to the Company's satisfaction that
                                it shall remain liable for the performance of
                                all its obligations to the Company, including
                                pursuant to the tenancy agreement and the
                                appendices thereto, that it shall be liable for
                                all the acts and/or omissions of the sub-tenant,
                                and that the sub-letting of the premises and/or
                                any part thereof by it shall not howsoever
                                derogate, directly or indirectly, expressly or
                                impliedly, from the Tenant's obligations to the
                                Company pursuant to the tenancy agreement and
                                the appendices thereto.

                    4.2.2       The Tenant shall give the Company written
                                approval from its parent company
                                ____________________ that it agrees to the
                                Tenant sub-letting the premises and/or any part
                                thereof and that it is aware and agrees that the
                                guarantee which it has given for the performance
                                of the Tenant's obligations pursuant to the
                                tenancy agreement shall remain in force
                                unaltered and that the sub-letting shall not
                                howsoever derogate from its obligations and/or
                                the Tenant's obligations vis-a-vis the Company
                                as provided in the tenancy agreement and the
                                appendices thereto.

                                For the avoidance of doubt, it is hereby
                                expressed that the collaterals that the Tenant
                                shall give the Company, including the guarantee
                                of the parent company, shall serve to secure the
                                obligations of the Tenant and the sub-tenant.

                    4.2.3       The sub-tenant may not transfer and/or assign
                                and/or charge its rights in the premises to any
                                other entity.

                    4.2.4       The object of the sub-tenant and the nature of
                                its activity accord, in the Company's exclusive
                                discretion, with the normal activity in the
                                Centre.

         4.3        The remaining areas in the planned building that are not let
                    to the Tenant shall be let to other entities in the
                    Company's exclusive discretion. Letting to other entities as
                    aforesaid shall be for a term of up to three years, and such
                    being in order to enable Zoran's future expansion by the
                    letting of additional areas in the planned building.

                    Notwithstanding the above provisions in this sub-clause, it
                    is hereby expressed that a decision regarding the entities
                    to which the areas in the planned building should be let and
                    for what period of time is within the Company's exclusive
                    discretion.

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<PAGE>

         4.4        It is agreed between the parties that the rent which the
                    Tenant shall pay the Company for the rental of an area in
                    the planned building or for the alternative premises (as
                    defined in clause 6 below) shall be as provided below:

                    4.4.1       The monthly rent for each 1 square metre of the
                                area of the premises in the planned building or
                                in the alternative premises, as the case may be,
                                shall be $ 12.74 (twelve US dollars and seventy
                                four cents) together with due VAT and linkage to
                                the index (with the base index being the index
                                for February 1996), as follows:

                                4.4.1.1     the rent for 1,330 square metres
                                            shall be linked, from the
                                            commencement of the tenancy term and
                                            until 15th May 2003, to the rate of
                                            the dollar together with CPI
                                            linkage;

                                4.4.1.2     in respect of the entire area rented
                                            that is in excess of 1,330 square
                                            metres, the rent shall be linked to
                                            the Consumer Price Index in Israel,
                                            with the base rate of exchange being
                                            NIS 3.11 per US$ 1;

                                4.4.1.3     the rent for 1,330 square metres of
                                            the area of the premises, as
                                            provided in sub-clause 4.4.1 above,
                                            shall, commencing from 16th May
                                            2003, be identical to the average of
                                            the rent for the area of the
                                            premises in excess of 1,330 square
                                            metres in accordance with the
                                            provisions of sub-clause (2) and the
                                            rent in NIS in May 2003 computed
                                            pursuant to clause (1).

5.       The Tenant hereby warrants that it is aware and agrees that the Company
         is not undertaking to erect the planned building and that it does not
         and shall not have any complaints and/or claims against the Company in
         such regard.

         The Tenant further warrants that it is aware that the decision on the
         planned building's erection is conditional, inter alia, on obtaining
         the approval of the Company's board of directors and on obtaining
         approvals from the various competent authorities.

45

<PAGE>

6.       The parties hereby agree that if the planned building is not erected
         for whatsoever reason, the Company shall let to the Tenant, and the
         Tenant shall rent from the Company, alternative premises of an area of
         approx. 1,330 square metres the specification whereof shall be of a
         standard similar to that existing in the premises in building 30
         mutatis mutandis (hereinafter referred to as "the alternative
         premises").

         The alternative premises shall be let to the Tenant for a period
         commencing from 16th May 1999 and ending on 15th May 2003.

7.       It is hereby agreed that all the other terms and conditions of the
         tenancy agreement that shall be executed between the parties regarding
         the area in the planned building or the alternative premises, as the
         case may be, shall be in accordance with the terms and conditions of
         the agreement executed between the parties regarding the rental of an
         area in the building known as building 30 in the Centre, mutatis
         mutandis.

                      AS WITNESS THE HANDS OF THE PARTIES:

--------------------                                        --------------------
THE COMPANY                                                 THE TENANT

46

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