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                                                                   Exhibit 10.68



                        SETTLEMENT AGREEMENT AND RELEASE


     AGREEMENT ("Agreement") entered into this 31 day of December,  2002, by and
between ELECTRIC FUEL CORPORATION,  a Delaware  corporation ("EFC") and ELECTRIC
FUEL (E.F.L.) LTD., an Israeli  corporation  ("EFL" and,  together with EFC, the
"Company"),  and YEHUDA HARATS, an individual  residing at 45 HaShayarot Street,
Jerusalem 92544, Israel (the "Employee").

                              W I T N E S S E T H :

     WHEREAS,  the Company and  Employee  are parties to an amended and restated
employment  agreement dated as of January 1, 2000 (the "Employment  Agreement");
and

     WHEREAS,   the  Company  and  the  Employee,   through   their   respective
representatives,   have  held  certain  discussions  concerning  the  facts  and
circumstances  surrounding the termination of the Employee's employment with the
Company; and

     WHEREAS,  both  parties  realize  the  uncertainty  of  litigation  and the
time-consuming and costly nature thereof; and

     WHEREAS,  the Company and the Employee  desire to settle and resolve  fully
and finally any and all claims,  potential claims,  controversies or differences
between  them;  and as more  specifically  set forth below and solely  under the
terms and conditions of this Settlement Agreement and Release; and

     WHEREAS,  the  Company  and the  Employee  desire to dismiss all the claims
connected  to or derived  from Motion No.  2977/02  filed by the Employee in the
labor court of Jerusalem and from the lawsuit  filed by the Company  against the
Employee at the New-York State Supreme Court;

     NOW, THEREFORE,  in consideration of the premises and the mutual agreements
hereinafter contained, the parties hereby agree as follows:

     1. Employment Termination.

     (a) The Company and  Employee  agree that the  employment  of the  Employee
shall be deemed to have ceased as of December 31, 2002.

     (b) Subject to fulfillment of all the terms of this Agreement, the Employee
represents  and  warrants  that  he has  received  full  salary  and  any  other
compensation or benefit to which he is entitled from the Company.

     (c) For the avoidance of doubt,  it is agreed that the Employee will not be
entitled  to any other  compensation  or  benefit  for his  employment  with the
Company.

     (d) Until  January 15, 2003,  the Employee  will return to the Company (and
will not keep in his possession, recreate or deliver to anyone else) any and all
devices, Company property including without limitations,  , palm pilot, cellular
telephone sets, records,  data, notes,  correspondence  developed or received by
the Employee  pursuant to  Employee's  employment  with the Company or otherwise
belonging to the Company.

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     2. Payments.

     (a) In place of whatever  amounts to which the  Employee may be entitled by
law or by contract,  and as full settlement of all mutual claims of the parties,
the  Employee  agrees to accept a payment of US  $640,000  (which  payments  and
benefits are in  substitution  for those required by any and all applicable laws
of any and all jurisdictions and/or the terms of the Employment Agreement).

     (b) US $178,579  of the amount of US  $640,000  above is a return of a loan
given by the Employee to the Company.

     (c) US $50,000 of the amount of US $640,000  above is  statutory  severance
payment.  under the Israeli Severance Pay Law-1963 for the Employee's employment
during a period of over 22 years (since July 15th, 1980).

     (d) US  $411,421 of the amount of US  $640,000  above is special  severance
payment..

     (e) Subject to  fulfillment of all the terms of this  Agreement,  the above
payment of US $640,000 shall be paid according to the following schedule:

          (i) Beginning in January 2nd 2003 and continuing through and including
     December 2005, the Company will pay the Employee,  by direct deposit to the
     Employee's bank account at Bank Igud, Main Branch Jerusalem 013 Account No.
     013433/65  (or as will be  instructed by the employee from time to time, in
     writing),  on a  monthly  basis,  a  total  of 36  monthly  payments  of US
     $7,777.77.

          (ii) Prior to January  15,  2003,  the Company  shall  transfer to the
     Employee the amount of US $35,000, by direct deposit to the Employee's bank
     account  provided above (or as will be instructed by the employee from time
     to time, in writing).

          (iii) The Company  shall pay the  Employee,  by direct  deposit to the
     Employee's  bank account  provided  above (or as will be  instructed by the
     employee from time to time, in writing), an aggregate amount of $325,000 in
     ten equal installments of US $32,500. One such installment shall be due and
     payable by the last day of each of the  months of  September  and  December
     2003, March, June,  September and December 2004, and March, June, September
     and December  2005. The Employee shall be entitled to inform the Company by
     December 31, 2002, that he elects, at his sole discretion, to receive on or
     prior to December  31,  2002,  the above  amount of US $325,000 or any part
     thereof  by  check  paid in the  United  States  that  will be  immediately
     endorsed by the Employee over to the order of EFC as a loan  ("Loan").  The
     Loan shall be evidenced  by a  promissory  note and shall be payable by the
     Company to the Employee  according to the ten equal  installments  provided
     above. The Loan shall bear no interest.

          (iv) Of the above specified amounts, the first US $ 50,000 paid to the
     Employee  will be  considered  as  statutory  severance  payment  under the
     Israeli Severance Pay Law-1963 for the Employee's employment referred to in
     sub section 2 (c). The next US $ 178,579 will be  considered as a return of
     the above loan given by the  Employee  to the  Company  referred  to in Sub
     Section 2(b).



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     (e) The Employee  shall  provide the Company with a receipt for each of the
payments provided on Sub-Section (d) above.

     (f) The  Employee  acknowledges  that he is  responsible  for,  and he does
hereby  indemnify  the Company and its  shareholders,  directors,  officers  and
employees  from and  against,  the  payment  of any and all  federal  and state,
including without limitations in Israel,  income and like taxes, social security
payments or any other withholding which may be or become payable with respect to
any and all payment or any other consideration provided in this Agreement.  With
respect to any of the  payments  provided  above,  the Company  shall deduct all
statutory  withholdings under any applicable law, including without  limitations
income tax and social security  payments.  If the company will deduct any sum of
the above payments it will submit to the Employee all  documentation  concerning
such deduction.

     (g) In  addition  to the  foregoing,  the  Company  will also  release  the
Employee's  manager's  insurance  fund and study fund. The Company will take all
steps reasonably necessary to release the above funds to the Employee, including
but not limited to the prompt execution of any necessary paperwork.  The Company
declares that it does not have any rights whatsoever in the above funds and will
not have any demands in regard with those funds.

     3. Tax Refund.

     The  Employee  presently  has a petition  for a tax refund  relating to the
execution of 131,655  options in February  9th,  2000 (the  "Petition")  pending
before the Israeli tax  authorities  (the "Israeli  IRS").  With respect to such
Petition, the parties agree as follows:

          (i) The Employee  shall notify the Company  within three business days
     of receipt of any  communication  from the Israeli IRS with  respect to the
     Petition, including a copy of such communication,  if in writing (including
     e-mail), or a written summary of such communication, if not in writing.

          (ii) In the event that the  Employee  shall  actually  receive any tax
     refund,  of any size, in connection with the Petition (an "Actual Refund"),
     he shall  immediately  notify the Company both orally and in writing of the
     amount of such Actual  Refund.,  the parties  agree that an amount of money
     equal to 10% of the amount of an Actual Refund (the "Refund  Credit") shall
     be credited  against the  remaining  amount that the Company  shall owe the
     Employee at such time under Section  2(d)(iii) above. In the event that the
     Refund  Credit shall be in excess of such  remaining  amount,  the Employee
     shall immediately pay the Company any and all such excess Refund Credit.

          (iii) In the event that the Employee  shall receive any  communication
     from the Israel IRS indicating  that his petition for a tax refund has been
     granted,  in whole or in part,  but shall not yet have  received  an Actual
     Refund by the time any of the last two  payments  under  Section  2(d)(iii)
     above shall have become due,  the Company  shall make such  payments (up to
     the maximum amount of the Refund Credit) into an escrow account  maintained
     by the law  firm of Dr.  J.  Segev & Co.  (the  "Escrow")  pending  a final
     determination of the status of the Actual Refund.


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     To the extent that, prior to or  contemporaneously  with the Company having
     received  notice of an Actual  Refund,  the Company shall have paid amounts
     into Escrow, an amount of money equal to the amount paid into Escrow or the
     amount of the Refund  Credit,  whichever  is the lesser,  shall be released
     from the Escrow and returned to the Company. Should the Israeli IRS reverse
     its determination and irrevocably decide that it will not give the Employee
     a refund, then these sums shall be released to the Employee.

          (iv) The Company shall use its commercially reasonable best efforts to
     assist the Employee with  obtaining a refund under the Petition  (including
     but not  limited  to the  prompt  execution  of any  necessary  paperwork),
     provided  that such  assistance  is  approved  in advance by the  Company's
     accountants.

     4. Car.

     The  Employee  shall be  entitled to continue  and hold the  Company's  car
(VOLVO S-80, registration plate # 74-526-35) currently in his possession ("Car")
as security for the Company  payments under this  agreement.  The Employee shall
return the Car to the Company by December 31, 2005. It is hereby agreed that the
Employee  may use the Car and he  shall  bear  any and all  expenses  and  taxes
related  to the Car.  The  Employee  shall  maintain  the Car in good  condition
consistent with past practice and shall maintain an insurance  policy on the Car
at all times.  To avoid doubt,  holding the Car as security will not  constitute
any employment status or other relationship between the parties.

     5. Standstill; Options.

     (a) The Employee agrees that from the date hereof until September 30, 2003,
neither he nor any member of his  family  shall,  directly  or  indirectly,  (i)
offer,  pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell,  grant any option,  right or warrant to
purchase, lend or otherwise transfer or dispose of, directly or indirectly,  any
of the shares of common stock or other  securities  of EFC  ("Shares")  nor (ii)
enter into any swap or other arrangement that transfers to another,  in whole or
in part,  any of the  economic  consequences  of ownership of any of the Shares,
whether  any such  transaction  described  in clause  (i) or (ii) above is to be
settled by delivery of Shares, in cash or otherwise.

     (b) In  consideration  for this  standstill  agreement,  the Company  shall
extend the term of the  Employee's  existing  vested stock  options to expire on
September  30,  2005.  Options  granted to the  employee in lieu of salary shall
continue to have a ten-year limitation on their term.

     (c) The parties  acknowledge  that any and all of Employee's  stock options
that shall not have vested by December 31, 2002, shall expire on that date.



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     (d)  Any   violation  of  the   provisions  of  Section  5(a)  above  shall
automatically  result in the  immediate  cancellation  of all of the  Employee's
vested and outstanding options.

     (e) The parties agree that the all the  outstanding  options and shares for
which no share  certificate  has been issued in the name of the  Employee on the
date hereof are listed on EXHIBIT A attached hereto.

     (f) Prior to September 30, 2003, the Company will. comply with the terms of
Section 16 of the Employment Agreement, provided that the Employee shall fulfill
in a timely fashion all of his obligations  under the terms of Section 16 of the
Employment Agreement

     6. Release of Claims.

     (a) The Employee, subject to the release provided on Sub Section (b) below,
for  himself,  his heirs,  executors,  administrators,  successors  and assigns,
hereby fully and unconditionally waives,  releases, and forever discharges,  the
Company,   its  subsidiary   companies,   related  and   affiliated   companies,
predecessors,   successors,  assigns  and  its  present  and  former  directors,
officers,  agents and employees,  from any and all suits,  causes of action, and
claims of any nature whatsoever,  known or unknown,  which the Employee may have
against the  Company and the other  parties  released  hereby,  which he and his
heirs, executors,  administrators,  successors and assigns ever had, now have or
hereafter can, shall or may have,  for, upon, or by reason of any matter,  cause
or thing  whatsoever  from the  beginning of the world to the day of the date of
this  release,  including  without  limitation  any  and all  claims  in any way
resulting  from,  arising  out  of or  connected  with  his  employment  or  its
termination or pursuant to any Israeli common law, statute,  regulation or other
requirement, including without limitation (i) the Severance Payment Law of 1963,
Annual  Vacation Law of 1951,  Protection of Wages Law of 1958, Sick Payment Law
of 1976,  Prior  Notice for  Dismisal and  Resignation  Law of 2001,  recreation
payment  (Dmei  Havra'a  payment)  and any and all claims  under any  collective
bargaining  agreement  or  extension  thereof;  (ii) any other  compensation  or
consideration as a result of employment relations or end of employment relations
including without  limitation,  Bituach  Menahalim,  Keren  Hishtalmut,  pension
compensation,  and/or any  compensation  and  consideration  resulting from such
relations, or arising out of or connected with his position as a director of the
Company  and/or as a principal in the Company  and/or  connected with any act or
vote of the Company's board of directors, whether by virtue of his position as a
director,  officer, employee or shareholder,  all pursuant to any Israeli common
law,  statute,   order,  regulation  or  other  requirement  (including  without
limitation  the Companies  Ordinance [New Version] of 1983, the Companies Law of
1999, the Securities  Law of 1968,  the Torts  Ordinance [New Version],  each as
amended  from  time to time,  infliction  of any tort,  or  breach of  contract,
whether  actual or  implied,  or  whether  oral or  written)  including  without
limitation  any United  States  federal,  state or local  common  law,  statute,
regulation  or other  requirement  (including  without  limitation  the  General
Corporation  Law of the State of Delaware,  the United States  Securities Act of
1933, and the United States  Securities  Exchange Act of 1934,  Title VII of the
Civil  Rights  Act of  1964,  the Age  Discrimination  in  Employment  Act,  the
Americans with Disabilities Act, the fair employment practices laws of the state
or states in which the  Employee  have been  employed  by the  Company,  each as
amended  from  time to time,  infliction  of any tort,  or  breach of  contract,
whether actual or implied, or whether oral or written).

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     (b) The Company,  subject to the release provided on Sub Section (a) below,
for  itself,  its  subsidiary  companies,   related  and  affiliated  companies,
predecessors,   successors,  assigns  and  its  present  and  former  directors,
officers,  agents  and  employees,  hereby  fully  and  unconditionally  waives,
releases,  and  forever  discharges,   the  Employee,   his  heirs,   executors,
administrators,  successors  and  assigns,  from any and all  suits,  causes  of
action, and claims of any nature whatsoever, known or unknown, which the Company
may have against the Employee and the other parties  released  hereby,  which it
and its subsidiary companies,  related and affiliated  companies,  predecessors,
successors,  assigns and its present and former directors,  officers, agents and
employees, ever had, now have or hereafter can, shall or may have, for, upon, or
by reason of any matter,  cause or thing  whatsoever  from the  beginning of the
world to the day of the date of this release,  including without  limitation any
and all claims in any way resulting  from,  arising out of or connected with his
employment or its  termination  or arising out of or connected with his position
as a  director  of the  Company  and/or as a  principal  in the  Company  and/or
connected with any act or vote of the Employee in the board of directors, and/or
connected  with any act of the  Employee as a  shareholder,  all pursuant to any
Israeli common law, statute,  order,  regulation or other requirement (including
without limitation the Companies  Ordinance [New Version] of 1983, the Companies
Law of 1999, the Securities Law of 1968, the Torts Ordinance [New Version], each
as amended  from time to time,  infliction  of any tort,  or breach of contract,
whether  actual or  implied,  or  whether  oral or  written)  including  without
limitation  any United  States  federal,  state or local  common  law,  statute,
regulation or other  requirement  (including  without  limitation all Securities
acts,  laws  and  regulations,  the  General  Corporation  Law of the  State  of
Delaware,  the United  States  Securities  Act of 1933,  and the  United  States
Securities  Exchange Act of 1934, Title VII of the Civil Rights Act of 1964, the
Age  Discrimination  in Employment Act, the Americans with Disabilities Act, the
fair  employment  practices  laws of the states in which the Employee  have been
employed by the Company,  each as amended from time to time,  infliction  of any
tort,  or breach of  contract,  whether  actual or implied,  or whether  oral or
written).

     (c) The Employee has carefully read this Agreement, knows its contents, and
freely and voluntarily  agrees to all of its terms and conditions.  The Employee
acknowledges  that he has had  reasonable  time to  consider  and  discuss  this
Agreement  with  his  attorney.   By  signing  this   Agreement,   the  Employee
specifically acknowledges that he has read it; he understands it and knows he is
giving up important  rights; he agrees with everything in it; he is aware of his
right to consult an  attorney  of his own choice  before  signing it; and he has
signed it knowingly and voluntarily.

     (d) This  Agreement also  constitutes a compromise  agreement and notice of
final  clearance in according  with Article 29 of the  Severance  Payment Law of
1963.

     (e) Subject to the  registration of the lien according to section 10 below,
the parties  shall submit to the labor court of Jerusalem a petition in the form
attached  hereto as EXHIBIT  B1, to strike out Motion No.  2977/02  filed by the
Employee.



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     (f) Immediately upon execution of this Agreement,  the parties shall submit
to the labor court of Jerusalem the executed petition attached hereto as EXHIBIT
B2,  requesting  the  release of the  Company's  holdings  in M.D.T.  Protective
Industries  Ltd.  from any  limitation  or ant other  obligation  undertaken  in
connection with Motion No. 2977/02 filed by the Employee.

     (g) The Company will withdraw the lawsuit filed by it in the New York State
Supreme  Court,  County of New York,  and/or any other lawsuit  and/or  petition
filed by it against the  Employee,  within 5 working days and will submit to the
Employee a copy of such  petition to dismiss the  lawsuit  immediately  upon its
submission.

     7. Surviving Terms of Employment  Agreement.  The Employee acknowledges and
agrees that he shall  continue to be bound by and comply with the  provisions of
Section 8 of the Employment  Agreement (entitled  "Confidentiality;  Proprietary
Rights; Competitive Activity").

     8.  Approval.  The Company  hereby  declares  that the  Company's  Board of
Directors  has approved this  Agreement,  and empowered Mr. Robert S. Ehrlich to
sign this  Agreement  in the name of EFL & EFC.  The  resolution  adopted by the
board and all its details and  provisions  and  authorizing  Mr. Ehrlich to sign
this Agreement is attached hereto as EXHIBIT C.

     9.  Attorney  Fees.  The  Company  shall  pay  directly  to the  Employee's
attorney,  Dr. J. Segev & Co.,  of 4  Wissozki  St.,  Tel Aviv,  an amount of US
$89,500, as follows:

     (a) An amount of US $34,500, on or prior to January 15, 2003.

     (b) An amount of US $55,000  in ten equal  installments  of US $5,500.  One
such installment  shall be due and payable by the last day of each of the months
of September and December 2003,  March,  June,  September and December 2004, and
March, June, September and December 2005.

     (c) The Company will add VAT (at the rate determined by law at the time any
payment  hereto) to all payments under this Section 9 and receive an invoice for
any such payment.

     (d) The  Company  will pay Dr. J. Segev & Co.,  all sums  setforth  in this
section by direct deposit to Dr. J. Segev & Co.'s bank account at Bank Hapoalim,
Pinkas Branch Tel-Aviv (754) Account No. 187772 (or as will be instructed by the
employee from time to time, in writing).

     (e) This Section 9 and Section 10 below shall  constitute  an agreement for
the benefit of third party.

     10. Security. Debts.

          (a)  The payments  provided in Sections 2 and 9 above shall be secured
               by a lien in favor of the  Employee  and/or  Dr. J.  Segev & Co.,
               that will be registered on those of the assets of EFL that relate
               exclusively  to EFL's  Water-Activated  Battery line (the "WAB"),
               the Instant Power consumer battery  business,  including  patents
               related exclusively thereto, and the Company's rights in the Car,
               a breakdown  of which is  provided  in EXHIBIT D attached

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               hereto  ("Lien").  For the  avoidance  of doubt,  it is expressly
               understood  that the Lien shall include only such items  provided
               on  EXHIBIT D and  shall not  include  any  shares  owned by EFL,
               including  without   limitations  shares  of  M.D.T.   Protective
               Industries  Ltd., and that the Lien shall not include any patents
               owned by EFC which  relate,  in whole or in part, to the field of
               batteries for military use or to electric  vehicles.  The Company
               shall be  empowered  to sell assets  subject to the Lien and take
               off the Lien,  and the Employee will make all necessary  steps to
               take  off the  Lien  including  but  not  limited  to the  prompt
               execution of any necessary documents,  provided that the proceeds
               from such sale are applied to reduction of the remaining  sums to
               be due at such  time  under  Section  2 and 9 above  and that the
               total consideration of such sale exceeds the remaining sums to be
               due at such time under Section 2 and 9 above.

          (b)  The Company shall maintain the WAB in good  condition  consistent
               with its current  practice and shall maintain an insurance policy
               on the WAB.

          (c)  During the year 2003 the Company shall maintain the Instant Power
               consumer battery  business in good condition  consistent with its
               current  practice.  However,  the  Company  may elect at any time
               during  the  year  2003 to stop  maintaining  the  Instant  Power
               consumer battery business.  In such event the company will notify
               in  writing  its  decision  not to  maintain  the  Instant  Power
               consumer  battery  business during or after 2003 and the Employee
               shall  have two  months  in which he may try to sell the  Instant
               Power  consumer  battery  business.  During  these two months the
               Company  shall  continue to maintain the Instant  Power  consumer
               battery business in its current condition.  In the event that the
               Employee is successful in selling,  the  consideration out of the
               selling will be taken off from the Company  payments in section 2
               and 9 above.  Subject  to full  maintenance  fee such as rent and
               salaries  which will be taken off from the  Company  Payments  in
               section 2 and 9 above the Employee may prolong in writing the two
               months in which he will try to sell the  Instant  Power  consumer
               battery business.

          (d)  In the event the Company  maintains  the Instant  Power  consumer
               battery business until October 30 2003 the Company, following the
               Employee written request, shall notify in writing its decision re
               the  maintenance of the Instant Power consumer  battery  business
               and in the event the  Company  decision  is not to  continue  the
               maintenance  of the Instant Power consumer  battery  business the
               Employee  shall  have two  months  in which he may try to sell it
               according to  subsection 10 c. To avoid any doubt in no event the
               employee  shall have more than two months to sell and the Company
               may elect not to maintain  the  Instant  Power  consumer  battery
               business  after  December  31 2003 or during  2003  after the two
               months   given  to  the   Employee   for  selling   according  to
               subsection10c-10d.

     (e) The Company  hereby  declares  that other than its  obligations  to the
Office of the Chief Scientist, all assets to be pledged under section 10 (a) are
free from any lien,


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attachment or any other third party rights.  The  Company's  obligations  to the
Chief Scientist are attached hereto as EXHIBIT E

     (f) Upon the execution of this agreement the Company will execute a deed of
pledge  of the lien in favor of the  Employee  and/or  Dr.  J.  Segev & Co.to be
registared  at the Registrar of Pledges  and/or the Registrar of Companies.  The
pledge shall comply with all the obligations of the Company toward the Office of
the Chief Scientist.

     (g) The parties hereof  acknowledge  that the only debts which the Employee
has to the  Company  that  will  continue  in  existence  after the date of this
Agreement are the debts in the principal  total amount of US $957,966  ("Debts")
for which the Employee has executed  non-recourse  promissory  notes on December
28, 1998 and February 9, 2000  ("Promissory  Notes").  The Promissory  Notes are
attached hereto as EXHIBIT F.

     (h) The parties hereof acknowledge that the shares specified in each of the
non-recourse Promissory Notes, respectively, are the sole security for the debts
provided  in  sub-section  (b)  above;  that the  Debts  will be  governed  only
according to the  provisions  and conditions set forth in each of the Promissory
Notes,  respectively;  that  the  recourse  of  the  Debts  under  each  of  the
non-recourse Promissory Notes shall only be the pledged shares specified in each
of the Promissory Notes,  respectively;  and that the Debts will not be released
by this Agreement.

     (i) Upon any  event  that  the  Company  becomes  adjudged  insolvent  or a
trustee,  receiver or similar  officer shall be appointed for the Company or any
substantial  part  of its  property;  or any  bankruptcy,  reorganization,  debt
arrangement,  recovery  process  or other  proceeding  under any  bankruptcy  or
insolvency law or any dissolution or liquidation proceedings shall be instituted
by or against the Company,  all remaining payments set forth in sections 2 and 9
above will  mature  immediately  and it will enable the  Employee  and/or Dr. J.
Segev & Co. to realize the Lien immediately.

     11. Binding Effect. This Agreement be binding upon or injure to the benefit
of the  successors  and assigns of the Company and the Employee and his personal
representative(s).

     12. Binding Arbitration.

     (a) This Agreement,  the  performance  thereof and all matters arising from
and connected with the Agreement, shall be governed by and construed, solely and
exclusively, in accordance with the laws of Israel.

     (b) Any dispute hereunder shall be finally settled by a binding arbitration
held in Tel Aviv, Israel, in the Hebrew language (except that witnesses shall be
permitted  to speak  in  English),  by one  arbitrator,  a  retired  judge  with
commercial  background  to be chosen by the  parties  and if the  parties do not
consent about the arbitrator,  the arbitrator will be appointed by the president
of the Israeli  Chamber of Certified  Accountants.  This section  constitutes an
arbitration agreement.

     (c) The  decision or award of the  arbitrators  shall be  published to each
party and will be final and binding upon all of the parties. Each of the parties
hereby  irrevocably  and expressly  agrees to comply  promptly and in good faith
with any and all such decisions or awards.



                                     - 9 -
<PAGE>

     (d) The arbitration  hereunder shall be the exclusive and conclusive method
for resolving disputes under this Agreement and no court shall have the power to
adjudicate such disputes.

     (e) The costs of the arbitration,  including without limitations  attorneys
fees, shall be borne by the non-prevailing party.

     13. Severability. If one or more of the provisions of this Agreement or any
application thereof shall be invalid,  illegal, or unenforceable in any respect,
the validity,  legality and  enforceability of the remaining  provisions thereof
shall in no way be affected or impaired.

     14. Entire  Agreement.  The foregoing  contains the entire agreement of the
parties and may not be altered,  amended,  or terminated except by an instrument
in writing signed by the parties hereto.

     15. Joint and Several Obligations.  The obligations and liabilities of each
company  hereunder (EFC and EFL) shall be joint and several with the obligations
and liabilities of the other company hereunder.

     16. Execution in counterparts. This agreement may be executed in any number
of separate  counterparts,  each of which shall  together be deemed an original,
but the several  counterparts  shall  together  constitute  but one and the same
agreements of the parties hereto.

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

                                      ELECTRIC FUEL CORPORATION



                                      By:
                                         --------------------------------------
                                         Name: Robert S. Ehrlich
                                         Title: Chairman, President and CEO

                                         ELECTRIC FUEL (E.F.L.) Ltd.



                                      By:
                                         --------------------------------------
                                         Name: Robert S. Ehrlich
                                         Title: Chairman, President and CEO




                                         --------------------------------------
                                                   Yehuda Harats


                                     - 10 -
<PAGE>