<PAGE>

                                                                   Exhibit 10.40
                                                                   -------------

                      SHARE AND ASSETS PURCHASE AGREEMENT

This Share and Assets Purchase Agreement (this "Agreement"), dated as of March
15 2000, (the "Effective Date"), is entered into by and among Electric Fuel
Corporation, a company incorporated under the laws of Delaware, with principal
offices at Western Industrial Zone, P.O. Box 641, Bet Shemesh 99000, Israel
("EFC"), Tadiran Limited, a company incorporated under the laws of the State of
Israel, with principal offices at [_______] ("Seller"), Tadiran Batteries
Limited, a company incorporated under the laws of the State of Israel, with
principal offices at [_______] ("Tadiran") and Tadiran Electric Industries
Corporation, a company incorporated under the laws of the State of [___], with
principal offices at [_______] ("TEI").


WHEREAS   the Seller is the owner of all the issued and outstanding share
          capital of Tadiran, and subject to the terms and conditions of this
          Agreement, EFC desires to purchase and the Seller desire to sell all
          of the issued and outstanding share capital of Tadiran held by the
          Seller; and

WHEREAS   All of the marketing of Tadiran's products in the United States is
          conducted by TEI;

NOW, THEREFORE, the parties hereto agree as follows:

PURCHASE AND SALE OF TADIRAN'S ORDINARY SHARES; PURCHASE OF TEI'S CERTAIN ASSETS

Purchase and Sale of Shares: In accordance with the terms and subject to the
conditions set forth in this Agreement, at the Closing (as hereinafter defined),
EFC will purchase from the Seller and the Seller will sell, assign, transfer,
convey and deliver to EFC (the "Acquisition"), ______ Ordinary Shares of
Tadiran, NIS__ par value per share (collectively the "Purchased Shares"), free
and clear of all mortgages liens, charges, pledges, security interests, claims,
encumbrances, third party rights or claims of any other kind whatsoever
("Liens"). The Purchased Shares comprise of 100% of the outstanding share
capital of Tadiran.

Purchase and Sale of the TEI's certain assets. In addition to the purchase of
the Purchased Shares, at the Closing TEI shall sell, assign, transfer, convey
and deliver to EFC (or any other company identified by EFC) and EFC (or such
other company) shall purchase all of TEI's assets, and assume certain
liabilities (collectively, the "Certain Assets") which are used in or related to
the marketing of Tadiran's products (the "Marketing Business"), as detailed in
the list attached in Schedule 1.2 hereto. The Certain Assets include, without
                     ------------
limitation all of the inventory, customers, goodwill, liabilities and all
employees employed by TEI in connection with the marketing of Tadiran's Products
(the "Certain Employees"), who shall be employed by EFC (or any other company
identified by EFC) following the Closing.

Consideration

In accordance with the terms and subject to the conditions set forth in this
Agreement, and in consideration of the aforesaid sale of Purchased Shares and
the Certain Assets, EFC will, at the Closing, issue, grant and deliver to the
Seller 2,335,767 of EFC's Common Stock, $0.01 par value per share ("Common
Stock"), as may be adjusted to reflect any stock dividend, stock split,
consolidation, etc., prior to Closing (the "Acquisition Common Stock"). Out of
the Acquisition Common Stock, 1,868,614 Common Stock are issued in consideration
of the Purchased Shares and 467,153  Common
<PAGE>

                                      -2-



Stock are issued in consideration of the Certain Assets. The Seller shall have
registration rights with respect to the Acquisition Common Stock (and additional
shares which may be issued under Section 1.3.2 below) in accordance with the
Registration Rights Agreement attached hereto as Schedule 1.3.1.
                                                 --------------

In the event that the average closing price of EFC's Common Stock on the Nasdaq
National Market ("NASDAQ") for the 30 days ending on the day immediately
preceding the first anniversary of the Closing (the "Acquisition Adjustment
Price", and such 30 day period, the "Acquisition Adjustment Period") is below
$17.125 (the "Reduced Price"), EFC shall issue to the Seller, for no additional
consideration (the "Acquisition Adjustment"), additional Common Stock of EFC
calculated in accordance with the following formula:

                      A = (40,000,000/B - 2,335,767) * C

                      Whereas:

                      A = number of additional Common Stock issued for no
                      consideration under the Acquisition Adjustment;

                      B = the Reduced Price;

                      C = a fraction, the numerator of which is 2,335,767 minus
                      the number of all Common Stock sold by the Seller until
                      the first anniversary of the Closing and the denominator
                      of which is 2,335,767;


          provided, however, that in no event shall EFC be required to issue
          --------  -------
          shares in excess of 583,941 additional shares of its Common Stock (as
          may be adjusted to reflect any stock dividend, stock split,
          consolidation, etc.) in satisfaction of its obligations under the
          Acquisition Adjustment (the effective price per each of the Common
          Stock purchased by the Seller hereunder after giving effect to the
          Acquisition Adjustment (if applicable) shall be referred to as the
          "Effective Price" and the total number of Common Stock issued to the
          Seller including Common Stock issued under the Acquisition Adjustment
          shall be referred to as the "Adjusted Acquisition Common Stock")

In the event that EFC is obligated to issue less than 583,941 shares of Common
Stock in satisfaction of its obligations under the Acquisition Adjustment as set
forth in Section 1.2.2 above, then the Seller shall have an option (the
"Option"), exercisable immediately upon the conclusion of the Acquisition
Adjustment Period and terminating at the close of business on the third day
thereafter, to purchase up to such number of shares of EFC's Common Stock
representing the difference between 583,941  multiplied by C (as defined in
Section 1.3.2 above) and the number of Common Stock EFC is obligated to issue in
satisfaction of its obligations under the Acquisition Adjustment. The exercise
price per share for the Option shall be $US20.55 (all as may be adjusted to
reflect any stock dividend, stock split, consolidation, etc.)

THE CLOSING

Closing Time, Date and Location: In accordance with the terms and subject to the
conditions set forth in this Agreement, the closing of the Acquisition and the
Investment contemplated by this Agreement (the "Closing") shall take place at
the offices of Meitar, Liquornik, Geva & Co., 16 Abba Hillel Sil-
<PAGE>

                                      -3-

ver Rd., Ramat-Gan, Israel, at 10:00 a.m., local time, on April 15, 2000 or
other later date mutually agreed by the parties (the "Closing Date").

Deliveries at the Closing

At the Closing, the Seller will deliver or cause to be delivered to EFC: (i) a
duly executed resolutions of its Board of Directors in the form reasonably
acceptable to EFC, (ii) if required, a duly executed resolutions of the Seller's
shareholders in the form reasonably acceptable to EFC, (iii) a validly executed
share transfer deed representing all of the Purchased Shares as well as a share
certificate representing all Purchased Shares, issued in the name of EFC, (iv)
the opinion of counsel to the Seller, dated as of the Closing Date, in the form
reasonably acceptable to EFC, and (v) the approvals, consents and permits
required as specified in Section 6.2.

At the Closing, Tadiran will deliver or cause to be delivered to EFC (i) a duly
executed resolutions of its Board of Directors in the form reasonably acceptable
to EFC, (ii) a duly executed resolutions of the Tadiran's shareholders in the
form reasonably acceptable to EFC, (iii) the opinion of  counsel to Tadiran,
dated as of the Closing Date, in the form reasonably acceptable to EFC; (iv) the
resignations letters of all members of Tadiran's Board of Directors.

At the Closing, TEI will deliver or cause to be delivered to EFC (i) a duly
executed resolutions of its Board of Directors in the form reasonably acceptable
to EFC, (ii) a duly executed resolutions of the TEI's shareholders in the form
reasonably acceptable to EFC, (iii) the opinion of  counsel to TEI, dated as of
the Closing Date, in the form reasonably acceptable to EFC,(iv) the consent of
the Certain Employees to the employment by EFC following the Closing, and (v)
the executed deed of assignment with respect to the Certain Assets in the form
reasonably acceptable to EFC.

At the Closing, EFC will deliver or cause to be delivered to Seller (i) a duly
executed resolutions of its Board of Directors in the form reasonably acceptable
to Seller,  and (ii) the opinion counsel to EFC, dated as of the Closing Date,
in the form reasonably acceptable to Seller;

REPRESENTATIONS AND WARRANTIES OF THE SELLER AND TADIRAN

     Each of Seller and Tadiran, jointly and severally, hereby represents and
     warrants to EFC that, as of the date hereof and as of the Closing Date, the
     following representations and warranties are true, accurate and complete in
     all respects and acknowledges that EFC is entering into this Agreement in
     reliance thereon.

Organization: Tadiran is duly organized and validly existing under the laws of
the State of Israel, and has full corporate power and authority to own, lease
and operate its properties and assets and to conduct its business as now being
conducted and as proposed to be conducted. Tadiran has all requisite power and
authority to execute and deliver this Agreement, and to consummate the
transactions contemplated hereby. Tadiran has all franchises, permits, licenses,
and any similar authority necessary for the conduct of its business as now being
conducted. Tadiran is not in any material default under any of such franchises,
permits, licenses, or other similar authority.

Share Capital: The authorized share capital of Tadiran consists of _____
Ordinary Shares, of which _____ are issued and outstanding, all of which are
held by the Seller. There is no other share capital and there are no other
preemptive rights, contractual obligations, convertible securities, outstanding
warrants, options, convertible securities or conversion loans or other rights to
subscribe for purchase or acquire from Tadiran any securities of Tadiran. All
issued and outstanding share capital of Tadiran is duly authorized, validly
issued and outstanding, fully paid and non-assessable and free and clear of
<PAGE>

                                      -4-

any Liens. The Purchased Shares, when transferred and delivered to EFC in
accordance with this Agreement, will be duly authorized, validly issued, fully
paid, non-assessable, and free of any preemptive rights, rights of first refusal
or any other third party rights. Tadiran's subsidiaries (the "Subsidiaries") are
as detailed in Schedule 3.2.
               ------------

Authorization; Approvals: All corporate action on the part of Tadiran and the
Seller necessary for the authorization, execution, delivery, and performance of
all its obligations under this Agreement and for the authorization of the
transfer of Purchased Shares have been (or will be) taken prior to the Closing.
This Agreement constitutes a valid and binding obligation of Tadiran and the
Seller, enforceable against them in accordance with its terms.

Financial Statements: Tadiran has furnished to EFC with Tadiran's consolidated
audited financial statements as of and for the year ended December 31, 1999,
which are attached hereto as Schedule 3.4 (the "Financial Statements").  The
                             ------------
Financial Statements  were prepared on a consistent basis in accordance with
Israeli generally accepted accounting principles ("Israeli GAAP"), and fairly
represent the financial position of Tadiran as of the date thereof.

Undisclosed Liabilities: As of December 31, 1999, (i) Tadiran and the
Subsidiaries have no liabilities, debts or obligations, whether accrued,
absolute or contingent or otherwise, and whether due or to become due, other
than those liabilities reflected or reserved against in the Financial
Statements, and (ii) Tadiran and the Subsidiaries do not have any liability or
obligation of any nature, which is not fully reflected or reserved against in
the Financial Statements (or reflected in the notes thereto), except for
commercial liabilities and obligations incurred in the ordinary course of
business consistent with past practice. Prior to the Closing, Tadiran has paid
in full (or made suitable provisions in its Financial Statements in accordance
with Israeli GAAP) all payments relating to the employment of its current and
past employees and does not owe any such employee any salaries or other related
payments other then the applicable monthly payments.

Absence of Certain Changes or Events: since the Financial Statements, there has
not been, with respect to each of Tadiran and the Subsidiaries, any (i) Material
Adverse Effect (as defined below) on its business, operations and condition,
(ii) transactions not in the ordinary course of business, and (iii) sale,
assignment, or transfer or encumbrance of any tangible or intangible asset,
including any rights to Intellectual Property, except for sales, assignments,
transfers and licenses in the ordinary course of business. The term "Material
Adverse Effect" shall mean a material adverse effect on the business,
operations, assets, condition (financial or otherwise), prospects or operating
results.

Intellectual Property. Tadiran owns or has the right to use, free and clear of
all Liens, claims and restrictions, all patents, trademarks, service marks,
trade names and copyrights, all licenses and rights with respect to the
foregoing, and all trade secrets, including know-how, inventions, designs,
processes, works of authorship, computer programs and technical data and
information (collectively herein "Intellectual Property") used and deemed by
Tadiran necessary for use in the conduct of its business as now conducted. Other
than as set forth in Schedule 3.7, Tadiran is not obligated or under any
                     ------------
liability whatsoever to make any payments by way of royalties, fees or otherwise
to any owner or licensee of, or other claimant to, any patent, trademark,
service mark, trade name, copyright or other intangible asset, with respect to
the use thereof, and Tadiran has not granted or agreed to grant to any third
party any exclusive or perpetual rights relating to the Intellectual Property.
The Intellectual Property of Tadiran is as detailed in Section 3.7 hereto. Any
                                                       -----------
and all Intellectual Property of any kind currently being developed or developed
in the past by any employee or consultant of Tadiran while in the employ or
engagement of Tadiran, is the sole property of Tadiran. Neither Tadiran nor the
Seller have received notice of any asserted rights with respect to any of the
Intellectual Property, and
<PAGE>

                                      -5-

Taxes. Tadiran and the Subsidiaries have accurately prepared and timely filed
all income and payroll tax returns and filings that are required to be filed by
them (the "Tax Returns") and have paid or made provision for the payment of all
amounts due pursuant to such Tax Returns. None of the Tax Returns have been
audited by any taxing authority and no deficiency assessment or proposed
adjustment of income or payroll taxes of Tadiran and the Subsidiaries is pending
and Tadiran has no knowledge of any proposed liability for any tax to be
imposed. Other than as described in Schedule 3.8, Tadiran and the Subsidiaries
                                    ------------
are not currently liable for any tax (whether income tax, capital gains tax, or
otherwise).

Contracts: Schedule 3.9 contains a list of all material contracts and agreements
           ------------
to which Tadiran is a party or by which its property is bound (the "Contracts").
All such Contracts are valid and enforceable in accordance with their respective
terms. There are no agreements, promises or understandings in force restricting
the competitive freedom of Tadiran to provide and receive goods and services
from any person or entity. Tadiran has performed all of its material obligations
under such Contracts.

Compliance with Laws: Tadiran and the Subsidiaries own and operate, and have
owned and operated, their properties and assets, and carry on and conduct, their
business materially in compliance with all applicable laws.

Litigation: (i) Other then as set forth in Schedule 3.11, no action, claim,
                                           -------------
charge, inquiry, proceeding or governmental inquiry or investigation is pending
or, to the knowledge of the Seller and Tadiran, threatened against Tadiran and
the Subsidiaries or any of its officers, directors or employees (in their
capacity as such) or against any of their properties, assets or business before
any court, arbitration board or tribunal or administrative or other governmental
agency, and (ii) nor are Tadiran and the Seller aware that there is a basis for
any such claim.

Brokers: No Agent, broker, investment banker, person or firm acting in a similar
capacity is or will be entitled to any broker's or finder's fee in connection
with this Agreement.

Environmental Matters. Other than as set forth in Schedule 3.13, neither the
                                                  -------------
business of Tadiran and the Subsidiaries nor any of the assets of Tadiran and
the Subsidiaries violate any applicable law relating to the environment. No
condition exists nor has any event occurred which would constitute a violation
of any such law. Tadiran and the Subsidiaries have not stored or used any
pollutants, contaminants, hazardous or toxic wastes or chemicals. Tadiran and
the Subsidiaries have not received a notice or claim advising them that they are
in violation of any environmental law.

Survival of representations. Without derogating from Section 10 hereof, each
representation and warranty herein is made on the Effective Date of this
Agreement and shall survive and remain in full force following the Closing for
the following periods:

A.   With respect to the representations detailed in Sections  3.1, 3.2,
3.3, 3.7 and 3.11(i), until the expiration of the statute of limitation
applicable to claims by third parties in respect of the matter or matters which
are the subject of said representations and warranties.

B.   With respect to the representations detailed in Section 3.8, until
March 31, 2002.

C.   With respect to all other representations detailed in this Section 3
(including 3.11(ii)), until March 31, 2001.

REPRESENTATIONS AND WARRANTIES OF THE SELLER AND TEI
<PAGE>

                                      -6-

Each of Seller and TEI, jointly and severally, hereby represents and warrants to
EFC that, as of the date hereof and as of the Closing Date, the following
representations and warranties are true, accurate and complete in all respects
and acknowledges that EFC is entering into this Agreement in reliance thereon.


Authorization; Approvals: All corporate action on the part of TEI necessary for
the authorization, execution, delivery, and performance of all its obligations
under this Agreement and for the transfer of the Certain Assets have been (or
will be) taken prior to the Closing. This Agreement constitutes a valid and
binding obligation of TEI, enforceable against it in accordance with its terms.

Title to the Certain Assets; Encumbrances: TEI has good, valid and marketable
title to the Certain Assets (real, personal and mixed), free and clear from any
Lien. The Certain Assets constitute the entire assets and rights used by TEI in
connection with the Marketing Business.

Contracts: The contracts which are part of the Certain Assets are as detailed in
Schedule 4.3. Other than as described in Schedule 4.3 all such contracts are
------------
valid and enforceable in accordance with their respective terms. TEI has
performed all of its material obligations under such Contracts and is not aware
that any other party is in material breach of any obligation under such
contracts.

The transfer of the Certain Assets to Tadiran at the Closing shall not have a
Material Adverse Effect on a consolidated basis on Tadiran following the
Closing.

Other then the Certain Assets EFC does not assume any obligation or liability of
TEI relating to its activities which are not part of the Marketing Business.

Each representation and warranty herein is made on the Effective Date of this
Agreement and shall survive and remain in full force and effect until the
expiration of the statute of limitation applicable to claims by third parties in
respect of the matter or matters which are the subject of said representations
and warranties.

REPRESENTATIONS AND WARRANTIES OF EFC

EFC hereby represents and warrants to the Seller and Tadiran, that the following
is true and correct as of the date hereof, as follows:

It is a corporation duly organized and validly existing under the laws of
Delaware, certain of its shares are traded on the NASDAQ and it has the right
and corporate authority to enter into this Agreement, to issue, grant and
deliver the Acquisition Common Stock;

SEC Filings. EFC's annual report on Form 10-K for its fiscal years ended
December 31, 1998 and December 31, 1999 and EFC's periodic reports on Form 10-Q
for the periods ending on March 31, 1999, June 30, 1999 and September 30, 1999,
as submitted to the SEC, were, when submitted, materially true and correct, and
did not omit to state any material fact required to be stated therein.

Since the December 31, 1999 financial statements of EFC, there has not been a
Material Adverse Effect on the business, operations and condition of EFC.

The Acquisition Common Stock, when issued to the Seller, shall be duly
authorized, validly issued, fully paid, non-assessable, and free of any
preemptive rights, rights of first refusal or any other third party rights.

COVENANTS OF THE PARTIES; FURTHER ACTIONS
<PAGE>

                                      -7-

Conduct of Business. During the period from the Effective Date to the Closing
Date, Tadiran and the Seller will cause Tadiran to conduct Tadiran's business
solely within the normal course of business and will not undertake any
transaction nor incur any liability other than in the normal course of its
business, consistent with past practices. In addition, TEI shall conduct the
Marketing Business and manage the certain Assets solely within the normal course
of business and will not undertake any transaction nor incur any liability other
than in the normal course of its Marketing Business, consistent with past
practices. Without derogating from the above, Tadiran shall, subject to
applicable law, consult with EFC with respect to any material action of Tadiran
and material action of TEI which is part of the Marketing Business prior to
Closing.

Consents of Third Parties. The Seller shall use its respective best efforts to
obtain at the earliest practicable date and prior to the Closing the approval
and/or consent of the following entities to the transactions contemplated
hereby: (i) the Israel Restrictive Trade Practices Authority, and (ii) Israeli
Chief Scientist, (iii) Israeli Investment Center, and (iv) any other applicable
approvals.

Access to Information. Tadiran shall permit EFC and its representatives and
agents to have reasonable access during normal business hours to all of
Tadiran's properties, books and records, as well as TEI's books and records (as
long as such information is related to the Marketing Business or the Certain
Assets).

Tadiran shall not issue any shares or any options, warrants or any other
convertible security, and shall not effect any stock split, stock divided,
recapitalization, etc.

Public Announcements. Following the signature of this Agreement the parties
shall issue a mutually agreed press release.

No Solicitation. From the Effective Date until the Closing Date, the Seller and
Tadiran will not, and will not permit their respective directors, officers,
investment bankers and affiliates to, solicit or accept any inquiries or
proposals that constitute, or could reasonably be expected to lead to, any
merger, consolidation or similar transaction involving Tadiran.

At the Closing EFC or Tadiran and the Seller shall enter into a ten year
sublease agreement (with one year notice of termination right by EFC or Tadiran)
attached hereto as Schedule 6.7 (the "Sublease Agreement") for the sublease of
                   ------------
the premises currently used by Tadiran, in terms equal to the current sublease
of such premises by Tadiran, and the Transfer of Building Agreement attached
hereto as Schedule 6.7A which shall be attached to the Sublease Agreement.
          -------------

Following the Closing, EFC and its affiliates  shall have the unlimited right to
use the brand name "Tadiran" or any derivatives thereof in connection with its
batteries activities or products,  as well as all brand names owned or used by
Tadiran prior to Closing. The Seller, Tadiran and their affiliates shall not
have the right to use such brand names which are related to the batteries
business following the Closing.

Following the date hereof, TEI will cooperate with EFC and use its best efforts
to allow and persuade the Certain Employees to terminate their employment with
TEI and to be employed by EFC, and shall be liable to all claims of the such
Certain Employees related to their employment prior to the Closing. At EFC's
request, TEI shall use its best efforts to transfer all accrued benefits with
respect to the past employment of such Certain Employees to EFC, and following
the completion of such transfer TEI shall not be liable to the past employment
of such Employees.

CLOSING CONDITIONS
<PAGE>

                                      -8-

The obligations of EFC to effect the transactions contemplated hereby shall be
subject to the fulfillment on or before the Closing Date of the following
conditions, any one or more of which may be waived by EFC in its sole
discretion.

Accuracy of Representations and Warranties. Each of the representations and
warranties made by the Seller and Tadiran shall have been true, complete and
accurate in all respects as of the date of this Agreement, and shall be accurate
in all material respects as of the Closing Date as if made on the Closing Date.

Consents. All consents required to be obtained in connection with the
transactions contemplated by this Agreement shall have been obtained prior to
the Closing and shall be in full force and effect.

Documents. EFC shall have received all documents set forth in Section 2.2.1,
2.2.2 and 2.2.3.

Koor Industries Limited shall have completed an equity investment in EFC in
accordance with the terms of the Share Purchase Agreement attached hereto as
Schedule 7.1.4 dated as of the date of this Agreement.

The Voting Rights Agreement attached hereto as Schedule 7.1.5 has been duly
executed by all parties thereto.

The Tax Ruling (as defined in Section 7.2 below) obtained by the Seller is in
form reasonably acceptable to EFC.

The obligations of the Seller and Tadiran to effect the transactions
contemplated hereby shall be subject to the receipt by the Seller of
confirmation of the Israeli Revenue Authorities (the "Tax Ruling") of deferral
of tax upon sale of the Purchased Shares in form reasonably acceptable to the
Seller.


FURTHER CONDITIONS

     Without derogating from Section 7 above, EFC shall have 10 days following
     the date hereof to (a) review the Schedules to this agreement to be
     provided by Tadiran following the signature hereof, and (b) conduct its due
     diligence with respect to Tadiran and the Certain Assets. If (i) the
     Schedules to this agreement shall contain details and facts reasonably
     unacceptable to EFC, or (ii) such due diligence discloses any information
     with respect to Tadiran or the Certain Assets not previously known to EFC
     which reasonably has or can be reasonably expected to have a Material
     Adverse Effect on Tadiran, EFC shall have the option of terminating this
     Agreement without any compensation to either party hereto.

Indemnification:

The Seller, with respect to the representations, warranties, covenants and
undertakings provided by the Seller, Tadiran and TEI, hereby agree and undertake
to indemnify, defend and hold harmless EFC, against all liability, loss, damage
or injury and all, reasonable costs and expenses, including without limitation,
interest, penalties, costs of preparation and investigation and the reasonable
fees and expenses of attorneys, accountants and other professional advisers
(collectively, "Losses"), suffered or incurred by EFC from or as a result of a
breach of any representation, warranty or agreement of the Seller, Tadiran or
TEI. Such indemnification shall not apply in respect of any Loss in the
aggregate amount of less than US$100,000, and shall cover Losses in the
following manner:
<PAGE>

                                      -9-

If the event that the average closing price (the "Closing Price") of EFC's
Common Stock on NASDAQ for the 10 days ending on the day immediately preceding a
"Certain Date" (as defined in Section 9.3 below) is equal to or higher than the
Effective Price, the Seller shall indemnify EFC in cash with respect to all
Losses up to a total amount of $US40,000,000.

If the event that the Closing Price immediately preceding a "Certain Date" (as
defined in Section 9.3 below) is less than the Effective Price, the Seller shall
indemnify EFC in cash or in Common Stock of EFC with respect to all Losses up
total amount equal to the Closing Price multiplied by the Adjusted Acquisition
Common Stock.

The term "Certain Date" shall be deemed to be the first date upon which any fact
that would result in the obligation of the Seller to indemnify EFC under this
Section 9 becomes known to the public.

Anything herein to the contrary notwithstanding, in any event of indemnification
pursuant to this Agreement by the Seller, the Seller agrees that it shall have
no right of indemnity or contribution from Tadiran.

Without derogating from the above, the Seller shall not be liable to indemnify
EFC against:

Losses that suitable provision is made in respect thereof in the Financial
Statements.

Losses as a result of or attributable to a change in the accounting policies of
Tadiran introduced or having effect after the Closing Date.

Losses covered under Tadiran's applicable insurance policies (EFC shall procure
that Tadiran shall take reasonable steps to enforce such recovery under such
policies).

Promptly after receipt by EFC of commencement of action, proceeding or
investigation in respect of which indemnify may be sought, EFC (the
"Indemnitee") shall inform the Seller (the "Indemnitor") which shall be entitled
to assume the defense of the Indemnitee with counsel reasonably satisfactory to
the Indemnitee and the fees and expanses of such counsel shall be at the sole
cost and expanse of the Indemnitor. The Indemnitee shall cooperate with the
Indemnitor in the defense. The Indemnitor shall not be liable for a settlement
by the Indemnitee effected without its consent, which consent shall not be
unreasonably withheld.

LIABILITY OF SELLER FOR PAST ENVIRONMENTAL RELATED CLAIMS

     Notwithstanding anything else to the contrary in this Agreement, the Seller
     acknowledges, undertakes and agrees that any and all liability related to
     personal damage or injury arising from or related to third party
     environmental related claims, which are related to the conduct of Tadiran's
     business prior to the Closing hereunder (such as, without limiting the
     generality of the above, claims relating to the Cadmium and Alkaline
     batteries produced or sold by Tadiran), and including all such personal
     injury or damage environmental related claims as may be detailed in
     Schedule 3.11 (collectively, the "Environmental Claims"), shall be borne
     solely by the Seller, and EFC shall not be liable to any such Environmental
     Claims. Therefore, the Seller undertakes for an indefinite period of time
     to fully indemnify in cash EFC against any and all Environmental Claims if
     such claims are brought against EFC. If an Environmental Claim is brought
     against EFC the provisions of Section 9.5 shall also apply to such
     Environmental Claim.

TERMINATION
<PAGE>

                                      -10-

This Agreement may be terminated without liability at any time prior to the
Closing by:

Mutual consent of the Seller and EFC.

Either the Seller or EFC, if the Closing shall not have occurred on or before 4
months as of the date hereof.

Either the EFC or the Seller, if any court of competent jurisdiction or other
competent governmental entity shall have issued a statute, rule, regulation,
order, decree or injunction or taken any other action permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement.

MISCELLANEOUS PROVISIONS

Notices. All notices and other communications hereunder shall be in writing and
shall be deemed given at delivery, if delivered personally, or four (4) business
days following it being sent, if sent by registered or certified mail (return
receipt requested), postage prepaid, to the parties at the following addresses:

          EFC: Yehuda Harats, Electric Fuel Ltd., Western Industrial
          Zone, P.O. Box 641, Bet Shemesh 99000, Israel, with a copy
          to Dan Geva or Raanan Lerner, Adv., Meitar, Liquornik, Geva
          & Co., 16 Abba Hillel Silver Road, Ramat Gan 52506, Israel.


          Tadiran:___________________________

          TEI:_______________________________

          The Seller:________________________

Expenses. All costs and expenses incurred by Seller and Tadiran in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the Seller and all such costs by EFC shall be paid by EFC.

Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Israel without giving effect to the provisions
thereof relating to conflicts of law.


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                                      -11-


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


________________     ________________     _______________    _________________
 Electric Fuel       Tadiran Electric     Tadiran Limited    Tadiran Batteries
 Corporation            Industries
                        Corporation

By: /s/                 By:________       By:____________    By:______________
    ------------