Unassociated Document


    

      Exhibit
        10.1


      Separation
        Agreement and Release of Claims

       

      Separation
        Agreement and Release of Claims entered
        into on January
        5,
        2005 by
        and between Arotech
        Corporation,
        a
        Delaware corporation, and its wholly-owned subsidiary Electric Fuel (E.F.L.)
        Ltd., an Israeli limited liability company (together, “Arotech” or the
“Company”), and Avihai
        Shen,
        an
        individual residing at Avivim 3, Shaarei Tikva, Israel (the
“Employee”).

       

      W
        I T N E S S E T H
        :

       

      WHEREAS,
        the
        Company and the Employee are parties to (i) an employment agreement dated
        September 8, 1999, as amended on November 21, 2002, February 25, 2003 and
        October 18, 2004 (as so amended, the “Employment
        Agreement”),
        (ii) an option amendment agreement dated October 15, 2004, and (iii) an Employee
        Non-Disclosure and Non-Competition Agreement dated September 13, 1999 (the
        “NDA”); and

       

      WHEREAS,
        the
        Employee and the Company have agreed to (i) end the Employee’s employment
        relationship with the Company on and as of the “Separation Date” (as defined
        below), and (ii) issue additional stock options to the Employee, upon the
        terms
        and conditions herein contained; and 

       

      WHEREAS,
        For
        the
        purposes of this Agreement:
        (i) the
“Separation Date” shall be and mean March 31, 2006; and (ii) the “Interim
        Period” shall mean and refer to the time period between the date of this
        Separation Agreement and the Separation Date; and

       

      WHEREAS,
        in
        return for the consideration provided by the Company to the Employee hereunder,
        which consideration includes but is greater than that required by applicable
        law
        and/or the terms of the Employment Agreement, the Employee has agreed to
        grant a
        full release of claims to the Company and all other “Released Parties” (as
        defined below) upon the terms and conditions herein contained;

       

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

       

      1. Employment
        Termination and Representations.
        

       

      (a) The
        Company and the Employee acknowledge and agree that the employment of the
        Employee by
        the
        Company shall end
        on
        the
        Separation Date.
        The
        parties mutually agree to waive any requirement, whether legal or contractual,
        of prior notice of such cessation of employment. 

       

      (b) Effective
        on and as of the Separation Date, the Employee will cease to hold all offices
        and positions (including without limitation membership on the board of directors
        where applicable) which he currently holds in the Company and in any and
        all of
        the Company’s “Affiliates.” For
        the
        purposes of this Agreement, “Affiliates” shall mean and include any entity that
        controls, is controlled by or is under common control with the Company, where
        “control” means the direct or indirect beneficial ownership of at least fifty
        percent (50%) of the voting equity securities.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (c) The
        parties mutually represent and warrant to each other as follows: (i) that
        they
        have not filed any complaints or charges against each
        other or against any of the
        “Released Parties” (as defined in Section 5(a) below)
        with any
        agency or court, domestic or foreign; (ii) that they have not assigned any
        claim
released
        pursuant to this
        Agreement or authorized any other person or entity to assert such claim on
        their
        behalf; and (iii)
        that
        they are unaware of any claim by any other person arising out of, or in any
        way
        connected with, the Employee’s employment relationship with the Company, his
        relationship with any of the Company’s Affiliates, or the termination of any of
        these relationships under the terms of this Agreement.

       

      2. Employment
        Duties During the Interim Period.
        

       

      (a) During
        the Interim Period, the Employee will continue to act as the Company’s Vice
        President - Finance and Chief Financial Officer, rendering such business
        and
        professional services in the performance of his duties, consistent with his
        position within the Company, as shall be reasonably assigned to him by the
        Board
        of Directors, the CEO or the COO of the Company. Notwithstanding the foregoing,
        the Employee agrees that he will relinquish the title of Vice President -
        Finance and Chief Financial Officer and resign from said offices prior to
        the
        Separation Date if the Company asks him to do so because it wishes to appoint
        a
        replacement to assume the position of Vice President - Finance and Chief
        Financial Officer. Nothing in the foregoing sentence shall derogate from
        the
        Company’s obligation to pay the Employee’s salary and related benefits through
        and including the Termination Date. 

       

      (b) Without
        limiting the generality of the foregoing, during the Interim Period the Employee
        will:

       

      (i) During
        all such times as the Employee shall continue to serve as the Company’s CFO,
        sign all regulatory filings required to be signed by a CFO, including without
        limitation the Company’s Annual Report on Form 10-K for the year ending December
        31, 2005 and related Sarbanes-Oxley certifications and all registration
        statements and related auditors’ management representation letters; provided,
        however,
        that
        nothing in the foregoing shall require the Employee to violate any relevant
        law,
        rule or regulation.

       

      (ii) Cooperate
        and work with the Company’s new CFO, when hired, to transfer all finance and
        accounting functions from the Employee to the Company’s new CFO.

       

      3. Termination
        of the
        Employment Agreement;
        Payments. 

       

      (a) The
        Company and the Employee agree that
        the
        Employment
        Agreement is hereby terminated effective on and as of
        the
        Separation Date. Except as otherwise expressly set forth in this Agreement,
        the
        Company and its Affiliates, on the one hand, and the Employee, on the other
        hand, shall henceforth have no further obligations to each other arising
        out of
        the Employment
        Agreement
        or
        otherwise,
        including without limitation in connection with payment of any salary,
        severance, expenses, bonus, compensation, benefits, or other sums
        due
        or which otherwise may have become due to the Employee from the Company or
        any
        of its Affiliates pursuant to or arising from the Employment Agreement or,
        more
        generally, the Employee’s employment relationship with, and/or the positions he
        held in, the Company, its Affiliates. Notwithstanding the foregoing, the
        Employee acknowledges and agrees that he shall continue to be bound by and
        comply with those provisions of the NDA and Sections 13 and 14 of the Employment
        Agreement, which are to survive the termination of the Employment Agreement
        in
        accordance with the terms thereof. The provisions of Sections 13 and 14 of
        the
        Employment Agreement are hereinafter referred to as the “Surviving
        Terms.”

       

      
        
          
          

        

        
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      (b) The
        Company will provide the Employee with a Severance Payment in the aggregate
        amount of $193,452, consisting of the following elements, to be paid in cash
        $96,725 within two business days after the date hereof and the remainder,
        less
        taxes and other customary withholdings (except to the extent that the Employee
        provides the Company with a written approval by the Israel IRS to the effect
        that no withholding is required), on the Separation Date, such amounts to
        be
        deposited by the Company to the “Hermon” severance fund managed by Solomon
        Shukei Hon Ltd. along with a signed release letter (in Hebrew) dated the
        date
        hereof in the form attached as Exhibit
        3(b)
        hereto:

       

      (i) $81,884,
        representing statutory
        severance under the Israeli Severance Pay Law, 5723-1963, for the Employee’s
        employment since September 13, 1999.

       

      (ii) $111,568,
        representing contractual severance in the amount of (1) $98,733, which is
        7.9
        months’ salary at the annual salary rate of $150,000 per year, and (2) $12,835,
        which is the value of 7.9 months’ of agreed benefits applicable to an annual
        salary rate of $150,000 per year.

       

      (c) The
        Employee will continue to accrue vacation time through the Separation Date.
        The
        Company will pay the Employee $595.20 for each day of the
        Employee’s vacation time that remains unused by the Employee at the Separation
        Date. The Company and the Employee agree that through the date of this
        Agreement, the Employee had accrued 20.41 unused vacation days.

       

      (d) The
        Company will release to the Employee all of the amounts that have been and
        that
        will be accumulated in the Employee’s Manager’s Insurance Fund and Continuing
        Education Fund through the Separation Date, all of which will be paid on
        the
        Separation Date.

       

      (e) The
        above
        payments do not include payment of salary at
        the
        annual salary rate of $150,000 per year through the Separation Date, which
        will
        continue to be paid in arrears through the Separation Date in accordance
        with
        the Company’s usual and customary practices. 

       

      (f) Without
        duplication of the foregoing, during the Interim Period the Company will
        continue to provide the Employee with the other benefits to which the Employee
        is entitled in accordance with the Employment Agreement.

       

      (g) No
        later than the Separation Date, the Employee will return to the Company (and
        will not keep in his possession or deliver to anyone else) any and all devices
        that are Company property, including without limitation PDA, records, data,
        notes, and correspondence, whether in written, magnetic or other form, developed
        or received by the Employee pursuant to Employee’s employment with the Company
        or otherwise belonging to the Company, excepting only the property described
        in
        Section 5(a) below.

       

      
        
          
          

        

        
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      4.  Stock
        Options

       

      (a) The
        parties agree that on the date hereof the Employee has 619,653 vested stock
        options (the “Vested Options”) and 30,000 shares of the Company’s common stock
        that were granted to the Employee on December 8, 2004 subject to and contingent
        upon his being employed by the Company on December 8, 2006 (the “Restricted
        Stock”). 

       

      (b) Of
        the
        Vested Options, 527,177 options are exercisable at exercise prices above
        $0.61.
        Effective the Separation Date and contingent upon the Company fulfilling
        its
        obligations under Section 4(d) below, the Employee hereby forfeits and renounces
        forever all such options.

       

      (c) With
        respect to the remaining 92,476 Vested Options that have exercise prices
        at
        $0.61 and below, the parties agree that the expiration date of such remaining
        Vested Options shall be the second anniversary of the Separation
        Date.

       

      (d) Contingent
        upon the Company’s receipt on the Separation Date of a Release and
        Representation, fully executed by the Employee, in the form of Exhibit
        4(d)
        hereto,
        the Company will grant to the Employee on the Separation Date 170,000 stock
        options at an exercise price of $0.42, vesting on the Separation Date, having
        a
        term expiring on the first anniversary of the Separation Date, and having
        such
        other terms and conditions as are generally contained in the Company’s standard
        form of stock option letter, mutatis
        mutandis.

       

      (e) The
        Employee agrees to return the share certificate representing the Restricted
        Stock to the Company on or prior to the Separation Date, and the Restricted
        Stock shall be marked as cancelled and voided on the stock register of the
        Company.

       

      5. Discounted
        Purchase of Company Property. 

       

      (a) Provided
        that the Employee remains available to work during the Interim Period as
        requested by the Company, and contingent upon (i) his good faith execution
        of
        any duties assigned to him by the Company during that period, and (ii) the
        Company’s receipt on the Separation Date of a Release and Representation, fully
        executed by the Employee, in the form of Exhibit
        4(d)
        hereto,
        the Employee shall be entitled to purchase the following property for the
        purchase price set forth below, such purchase price to be deducted from the
        Severance Payment:

       

      (i) The
        Mazda
        MPV automobile, license no. 27-399-35,
        that is currently in the Employee’s possession, for a purchase price of NIS
        40,320;

       

      (ii) The
        Company-owned laptop computer and other computer equipment and cellular
        telephone equipment that are currently in the Employee’s possession at the
        Employee’s residence, for no charge;

       

      (iii) The
        frequent flyer points that the Employee has accrued to the Employee’s frequent
        flyer accounts while traveling on Company business, for no charge.

       

      
        
          
          

        

        
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      (b) The
        Employee agrees that the foregoing constitutes good and adequate consideration
        in exchange for his promises, covenants and releases contained
        herein.

       

      (c) The
        Employee acknowledges that the payments and benefits afforded to him through
        this Agreement are greater than any payments, benefits or other consideration
        to
        which he may presently be entitled, including: (1) pursuant to the Employee
        Agreement or any other any express or implied agreement, contract or
        understanding with the Company; or (2) under any prior or current the Company
        policies, practices or employee benefit plans, including but not limited
        to
        compensation, vacation, bonus, severance, or other fringe benefit plans.
        Further, except as expressly provided in this Agreement, after the Separation
        Date, the Employee will not accrue or be entitled to any employee benefit,
        bonus, award, vacation, scheduled time off, or other fringe benefit under
        any
        policy or plan maintained by the Company for full-time employees.

       

      6. Release
        of Claims. 

       

      (a) For
        the
        purposes of this Agreement:

       

      (i) “Additional
        Consideration” shall mean and include all
        benefits and consideration provided to the Employee by this Agreement which
        are
        not
        otherwise required by applicable law or the terms of the Employment Agreement
        or
        under any prior or current the Company policies, practices or employee benefit
        plans.

       

      (ii) “Released
        Parties” shall mean and include (1) the Company, (2) its Affiliates, and (3) all
        of the Company’s and its Affiliates’ respective shareholders, officers,
        directors, employees, agents, representatives, successors and
        assigns.

       

      (iii) “Claims”
        shall mean and include all manner of actions, causes of action, suits, debts,
        covenants, contracts, controversies, agreements, promises, claims and demands,
        known and unknown, whatsoever.

       

      (b) In
        consideration of the Company’s
        obligations under this Agreement, including without limitation the payment
        of
        the Additional Consideration, the
        Employee, on his own behalf and on behalf of his heirs, beneficiaries and
        representatives and all others connected with him, does hereby remise, release,
        acquit, satisfy, and forever discharge the Released Parties, both individually
        and in each of their respective official capacities, of and from all Claims
        which Employee ever had, now has, or which any personal representative,
        successor, heir or assign of Employee hereafter can, shall or may have, against
        any of the Released Parties, by reason of any matter, cause or thing whatsoever,
        from the beginning of time to and including the date upon which this
Release
        is signed, whether arising from any intentional or unintentional act or
        omission, including but not limited to Claims for debts, sums of money, wages,
        salary, severance pay, bonuses, compensation, unvested stock options (without
        derogating from the Employee’s rights in connection with stock options pursuant
        to the terms of this Agreement), vacation pay, sick pay, fees and costs,
        attorneys fees, losses, penalties, damages, arising, directly or indirectly,
        out
        of any promise, agreement
        (including
        without limitation
        the
        Employment Agreement), contract, understanding, common law, tort, the laws,
        statutes, and/or regulations of the State of Israel or any other jurisdiction,
        (i)
        the
        Severance Payment Law, 5723-1963, Annual Vacation Law, 5711-1951, Protection
        of
        Wages Law, 5718-1958, Sick Payment Law, 5736-1976, Prior Notice for Dismissal
        and Resignation Law, 5761-2001, recreation 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, manager’s insurance, continuing education fund, 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, to the extent applicable, the Companies Ordinance [New Version],
        5743-1983, the Companies Law, 5759-1999, the Securities Law, 5728-1968, 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, to the extent applicable, 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, federal
        and state wage and hour laws, federal and state whistleblower laws,
        Title
        VII of the Civil Rights Act of 1964, the Civil
        Rights Act of 1991, the Employment Retirement Income Security Act, the
Age
        Discrimination in Employment Act, OSHA,
        the
        Americans with Disabilities Act, the New
        York
        State Human Rights Laws,
        the
New
        York
        City Human Rights Laws,
        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. This
        releases all Claims including those of which Employee is not aware and those
        not
        mentioned in this Release. Employee specifically releases any and all Claims
        arising out of Employee’s employment with Arotech or the termination thereof and
        any and all Claims arising out of the Employment Agreement or the termination
        thereof. In
        signing this release of claims, Employee acknowledges
        that he has been represented by counsel of his choosing prior to signing
        this
        Release, and that he is signing this Release voluntarily and with full
        understanding of its terms.

       

      
        
          
          

        

        
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      (c) In
        consideration of the
        Employee’s
        obligations under this Agreement, including without limitation the release
        provided in Section 6(b) above, the Company, on its own behalf and on behalf
        of
        the other Released Parties, does hereby remise, release, acquit, satisfy,
        and
        forever discharge the Employee, his heirs, executors, administrators, successors
        and assigns, of and from all Claims which the Company ever had, now has,
        or
        which any successor or assign of the Company hereafter can, shall or may
        have,
        against the Employee, by reason of any matter, cause or thing whatsoever,
        from
        the beginning of time to and including the date upon which this Release
        is signed, whether arising from any intentional or unintentional act or
        omission, including but not limited to Claims for debts, sums of money, fees
        and
        costs, attorneys fees, losses, penalties, damages, arising, directly or
        indirectly, out of any promise, agreement
        (including
        without limitation
        the
        Employment Agreement), contract, understanding, common law, tort, the laws,
        statutes, and/or regulations of the State of Israel or any other jurisdiction,
        all
        pursuant to any Israeli common law, statute, order, regulation or other
        requirement (including without limitation, to the extent applicable, the
        Companies Ordinance [New Version], 5743-1983, the Companies Law, 5759-1999,
        the
        Securities Law, 5728-1968, 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, to
        the
        extent applicable, 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, each
        as
        amended from time to time), infliction of any tort, or breach of contract,
        whether actual or implied, or whether oral or written; provided,
        however,
        that
        the foregoing Release shall not extend to any intentional breach by the Employee
        not known to the Company as of the date of this Agreement of any fiduciary
        duty
        to any Released Party.

       

      
        
          
          

        

        
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      (d) Nothing
        in the foregoing shall be construed to affect the Employee’s present and future
        entitlement vel
        non to
        the
        benefits of the Company’s directors’ and officers’ insurance policy in
        accordance with the terms thereof.

       

      (e) This
        Agreement also constitutes a compromise agreement and notice of final clearance
        in according with Article 29 of the Severance Payment Law,
        5723-1963.

       

      7. Additional
        Covenants.
        In
        further consideration of the
        Additional Consideration, the Employee hereby covenants to, and agrees with,
        the
        Company as follows:

       

      (a) After
        the
        Separation Date, the Employee will cooperate fully and in good faith in
        assisting in defending any and all pending or future lawsuits against the
        Company which arose or may arise from activities which occurred during the
        course of his employment.  If any such lawsuits arise subsequent to
        Separation Date, the Company will compensate the Employee at a rate of the
        lesser of $125 per hour or $1,000 per day plus reasonable expenses, including
        reasonable attorney’s fees, as necessary.

       

      (b) After
        the
        Separation Date, the Employee will make himself reasonably available to answer
        questions from the Company’s new CFO and others in order to continue the orderly
transition
        of responsibility for oversight of all finance and accounting functions from
        the
        Employee to the Company’s new CFO.
        

       

      (c) Neither
        party will at any time hereafter directly or indirectly (i) disparage the
        other
        party, its or his Affiliates, or any of their respective products, technology,
        reputation or potential, or (ii) take any action which could reasonably be
        expected to harm or otherwise cause damage to the other party, its or his
        Affiliates or any of the other Released Parties. This covenant is an essential
        part of this Agreement. 

       

      8. Miscellaneous.

       

      (a) All
        notices and other communications required or permitted under this Agreement
        shall be in writing and shall be sent by fax transmission to the other party
        at
        the fax number set forth below, with a copy sent by first class mail or express
        courier to said party at the address set forth below, or to such other fax
        number and/or address as a party may hereinafter designate by notice to the
        other. Notices shall be effective on the date they are sent by facsimile
        transmission if the facsimile transmission report confirms receipt by the
        receiving fax.

       

      (b) The
        laws
        of the State of Israel, exclusive of conflict of laws provisions, shall govern
        this Agreement in all respects. 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 an arbitrator
        to be agreed in writing between the Employee and the Company on or before
        the
        Termination Date or, in the absence of such agreement, the arbitrator will
        be
        appointed by the president of the Israeli Chamber of Advocates. This section
        constitutes an arbitration agreement. 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. 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. The costs of the arbitration, including without limitations
        attorneys fees, shall be borne in accordance with the decision of the
        Arbitrator.

       

      
        
          
          

        

        
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      (c) If
        any
        provision of this Agreement, under all the then relevant circumstances, is
        held
        to be invalid, illegal or unenforceable, the other provisions shall remain
        in
        full force and effect, and the relevant provision shall automatically be
        modified by substituting for the unenforceable provision an enforceable
        provision which most closely approximates the intent and economic effect
        of the
        invalid provision.

       

      (d) This
        Agreement shall be binding upon or injure to the benefit of the successors
        and
        assigns of the Company and the personal representatives, successors, heirs
        or
        assigns of the Employee.

       

      (e) The
        headings contained in this Agreement are intended solely for ease of reference
        and shall be given no effect in the construction or interpretation of this
        Agreement.

       

      (f) The
        preamble to this Agreement constitutes an integral part hereof.

       

      9. Entire
        Agreement.
        This
        Agreement constitutes the entire agreement between the parties with respect
        to
        the subject matter hereof, and supersedes all prior negotiations and agreements,
        whether written or oral, including without limitation the Employment Agreement;
        provided,
        however,
        that
        the terms of this Agreement, the NDA and the Surviving Terms of the Employment
        Agreement shall remain in full force and effect and shall survive the
        termination of the Employment Agreement and any termination, cancellation
        or
        expiration of this Agreement. This Agreement may be amended, modified, or
        supplemented only by a written instrument signed by both of the parties hereto.
        No waiver or failure to act by either party with respect to any breach or
        default hereunder, whether or not the other party has notice thereof, shall
        be
        deemed to be a waiver with respect to any subsequent breach or default, whether
        of similar or different nature.

       

      IN
        WITNESS WHEREOF,
        the
        parties have executed this Separation Agreement and Release of Claims this
        5th
        day of
        January, 2006.

       

      
        	Arotech
                Corporation 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	By:	 	 	 	 
	 	Robert S. Ehrlich	 	 	
                Avihai
                  Shen

              
	 	
                Chairman,
                  President and CEO

              	 	 	 


      

       

      
         

        
          	Electric Fuel
                  (E.F.L.)
                  Ltd.	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	By:	 	 	 	 
	 	Neal Naimer	 	 	
                
	 	
                  Chairman

                	 	 	 


        

         

      

       

      
        
          
          

        

        
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      Exhibit
        3(b)


      [Text
        of Release Letter - on Electric Fuel Ltd. Letterhead]

       

      


      


      January
        5, 2006

       

      Magen
        Insurance Company Ltd.

      Pension
        Fund Branch

      Capital
        -
        Retirement Fund/Education Fund

      Migdal
        Insurance Company Ltd.

      Solomon
        Shukie Hon - Hermon Retirement Fund

       

      Re: Mr.
        Avihai Shen, I.D. No. 023555550 - End of Employment

       

      To
        Whom
        it May Concern:

       

      We
        hereby
        certify that Mr. Avihai Shen, ID No. 023555550, will finish his employment
        with
        us on March 31, 2006.

       

      We
        hereby
        irrevocably release the policies/pension fund/retirement funds/education
        fund in
        his name.

       

      The
        above
        amounts released includes severance in the amount of $193,452 that will be
        deposited to the “Hermon” severance fund (Solomon Shukei Hon) contingent upon
        the approval of the Income Tax Authorities. A total of $96,725 will be deposited
        at the beginning of the month of January 2006 and the remainder will be
        deposited in April 2006.

       

      Respectfully
        yours,

       

      


       

      Electric
        Fuel (E.F.L.) Ltd.

       

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      



      Exhibit
        4(d)


      RELEASE
        AND REPRESENTATION

       

      All
        capitalized terms used and not otherwise defined herein shall have the meanings
        ascribed to such terms in the Separation Agreement and Release of
        Claims (the
        “Separation Agreement”) entered
        into on January
        5,
        2006 by
        and between Arotech Corporation, a Delaware corporation, and its wholly-owned
        subsidiary Electric Fuel (E.F.L.) Ltd., an Israeli limited liability company
        (together, “Arotech” or the “Company”), and Avihai Shen
        (“Releasor”).

       

      In
        consideration of the Company’s
        obligations under the Separation Agreement, including without limitation
        the
        payment of the Additional Consideration, Releasor, on his own behalf and
        on
        behalf of his heirs, beneficiaries and representatives and all others connected
        with him, does hereby remise, release, acquit, satisfy, and forever discharge
        the Released Parties, both individually and in each of their respective official
        capacities, of and from all Claims which Releasor ever had, now has, or which
        any personal representative, successor, heir or assign of Releasor hereafter
        can, shall or may have, against any of the Released Parties, by reason of
        any
        matter, cause or thing whatsoever, from the beginning of time to and including
        the date upon which this Release
        is signed, whether arising from any intentional or unintentional act or
        omission, including but not limited to Claims for debts, sums of money, wages,
        salary, severance pay, bonuses, compensation, unvested stock options (without
        derogating from the Employee’s rights in connection with stock options pursuant
        to the terms of this Agreement), vacation pay, sick pay, fees and costs,
        attorneys fees, losses, penalties, damages, arising, directly or indirectly,
        out
        of any promise, agreement
        (including
        without limitation
        the
        Employment Agreement), contract, understanding, common law, tort, the laws,
        statutes, and/or regulations of the State of Israel or any other jurisdiction,
        (i)
        the
        Severance Payment Law, 5723-1963, Annual Vacation Law, 5711-1951, Protection
        of
        Wages Law, 5718-1958, Sick Payment Law, 5736-1976, Prior Notice for Dismissal
        and Resignation Law, 5761-2001, recreation 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, manager’s insurance, continuing education fund, 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, to the extent applicable, the Companies Ordinance [New Version],
        5743-1983, the Companies Law, 5759-1999, the Securities Law, 5728-1968, 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, to the extent applicable, 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, federal
        and state wage and hour laws, federal and state whistleblower laws,
        Title
        VII of the Civil Rights Act of 1964, the Civil
        Rights Act of 1991, the Employment Retirement Income Security Act, the
Age
        Discrimination in Employment Act, OSHA,
        the
        Americans with Disabilities Act, the New
        York
        State Human Rights Laws,
        the
New
        York
        City Human Rights Laws,
        the
        fair employment practices laws of the state or states in which the Releasor
        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. This
        releases all Claims including those of which Releasor is not aware and those
        not
        mentioned in this Release. Releasor specifically releases any and all Claims
        arising out of Releasor’s employment with Arotech or the termination thereof and
        any and all Claims arising out of the Employment Agreement or the termination
        thereof. In
        signing this release of claims, Releasor acknowledges
        that he has been represented by counsel of his choosing prior to signing
        this
        Release, and that he is signing this Release voluntarily and with full
        understanding of its terms.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Releasor
        represents and warrants to the Company and to each of the Released Parties
        as
        follows: (i) that he has not filed any complaints or charges against any
        of
the
        Released Parties with
        any
        agency or court, domestic or foreign; (ii) that he has not assigned any claim
        released
        pursuant to the
        Employee Agreement or the Separation Agreement or authorized any other person
        or
        entity to assert such claim on his behalf; and (iii) that he is unaware of
        any
        claim by any other person arising out of, or in any way connected with, his
        employment relationship with the Company, his relationship with any of the
        Company’s Affiliates, or the termination of any of those relationships under the
        terms of the Separation Agreement.

       

      IN
        WITNESS WHEREOF,
        the
        said Releasor has hereunto set hand and seal on and as of the Separation
        Date,
        this 31st
        day of
March,
        2006.

       

       

      
        	 	
                 

                  

                

                Avihai
                  Shen

              


      

      


       

      


       

       

      


      
        
          
          

        

        
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