**Exhibit      10.38**

**FOURTH      AMENDED AND RESTATED EMPLOYMENT AGREEMENT**

**THIS      AGREEMENT**

**WHEREAS**

**WHEREAS**

**WHEREAS**

**NOW**
**THEREFORE**

| (a) | The                Executive shall be employed as the Chairman of the Board and Chief                Executive Officer of Arotech. The Executive shall perform the duties,                undertake the responsibilities and exercise the authority customarily                performed, undertaken and exercised by persons situated in a similar                executive capacity in publicly-held United States corporations and                their                Israeli subsidiaries. The Executive shall exercise his authority                in a                reasonable manner and shall report to the Board of Directors of each                Company (each a “Board”). |
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| (b) | Excluding                periods of vacation and sick leave to which the Executive shall be                entitled, the Executive agrees to devote the attention and time to                the                businesses and affairs of the Companies required to discharge the                responsibilities assigned to the Executive hereunder. The Executive’s                duties shall be in the nature of management duties that demand a                special                level of loyalty and accordingly the Israeli Law of Work Hours and                Rest,                5711 - 1951 shall not apply to this                Agreement. |
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| (c) | While                the Executive is employed by the Companies hereunder, Arotech shall                use                its best efforts to cause the Executive to be elected to, and if                so                elected the Executive shall serve on, the Board of Arotech as a member                of                such Board, and shall cause the Executive to be elected to, and the                Executive shall serve on, the Board of EFL as a member of such Board. |
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| (d) | Each                Company will use its reasonable best efforts to obtain, and to keep                in                place at all times that the Executive is a director or officer of                either                Company, a directors and officers liability policy covering the Executive                in an amount and otherwise containing terms and conditions consistent                with                past practices. |
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| (e) | The                Executive agrees to serve on the board of directors of such subsidiaries                of the Companies as the Board may reasonably                request. |
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| (a) | The                Companies agree to pay or cause to be paid to the Executive a monthly                base                salary at the rate of US $33,333 per month, payable in U.S. Dollars                or in                the currency of Israel (as determined by the Representative Rate                of the                U.S. Dollar published by the Bank of Israel immediately prior to                the date                of payment of each installment thereof), or such larger amount as                the                Board may in its sole discretion determine following a review which                shall                be conducted by the Board by not later than March 31 of each year,                such                larger amount to take effect retroactively to the January 1 immediately                preceding such review (hereinafter referred to as the “Base Salary”).                Notwithstanding such review, on each anniversary of the effective                date of                this Agreement, the Base Salary shall be adjusted upward in an amount                equal to the official anticipated net Israeli inflation rate as published                by the Israeli Central Bureau of Statistics in the month of December                immediately preceding such anniversary, in each case for the year                immediately following such anniversary, as adjusted for any changes                in the                value of the New Israeli Shekel against the U.S. Dollar. |
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| (b) | The                Company will grant to the Executive a retention bonus of 200,000                shares of                restricted stock, vesting 66,667 on December 31, 2007, 66,667 on                December                31, 2008, and 66,666 on December 31, 2009, with each such vesting                being                contingent on the Executive being employed by the Company on the                scheduled                vesting date. Additionally, the Companies agree to pay or cause to                be paid                to the Executive on each anniversary of this Agreement or as soon                thereafter as may be possible in order to determine the relevant                results                of the Companies, an annual bonus, as                follows: |
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|   | (i) | If,                as of such anniversary, the Company shall have attained 90% of the                Company’s Budgeted Number (as defined below) for the year preceding such                anniversary, then Executive’s bonus shall be equal to 35% of Executive’s                gross annual Base Salary as then in effect for the year preceding                such                anniversary; |
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|   | (ii) | If,                as of such anniversary, the Companies shall have attained 120% of                the                Companies’ Budgeted Number (as defined below) for the year preceding such                anniversary, then Executive’s bonus shall be equal to 75% of Executive’s                annual Base Salary as then in effect for the year preceding such                anniversary; |
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|   | (iii) | If,                as of such anniversary, the Companies shall have attained more than                90%                but less than 120% of the Companies’ Budgeted Number (as defined below),                then Executive’s bonus shall be calculated as                follows: |
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*provided*
*however*

| (c) | In                addition, the Companies shall pay Executive an amount of $10,000                on each                anniversary of this Agreement to cover Executive’s tax and financial                planning expenses. The Companies acknowledge that the Executive is                owed an                amount of $20,197 in connection with tax and financial planning expenses                from previous years. |
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| (d) | To                the maximum extent permitted by law, all payments to the Executive                hereunder shall be paid in U.S. Dollars. Subject to the immediately                preceding sentence, and subject to the approval of the Executive,                which                shall not be unreasonably withheld, the Companies, in order to reflect                the                different duties of the Executive with respect to each of them, may                allocate between themselves their obligations to make the payments                and                provide the benefits specified in this Agreement. The amount paid                to the                Executive hereunder by EFL shall be referred to hereinafter as the“EFL                Base Salary”; *provided*,                that in no event shall the EFL Base Salary in any year be greater                than the                Base Salary for that year. |
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| (a) | Manager’s                Insurance.                The Companies will pay to an insurance company of the Executive’s choice,                as premiums for manager’s insurance for the Executive, an amount equal to                13.33% of each monthly payment of the Base Salary together with 2.5%                of                the Base Salary for disability, and will deduct from each monthly                payment                of the Base Salary and pay to such insurance company an amount equal                to 5%                of each monthly payment of the Base Salary, which shall constitute                the                Executive’s contribution to such premiums. Upon the termination of the                Executive’s employment with the Companies for whatever reason, including                without limitation termination for Cause or the resignation by the                Executive, the right to receive the manager’s insurance benefits shall be                automatically assigned to the Executive. |
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| (b) | Education                Fund (Keren Hishtalmut).                The Companies will contribute to an education fund of the Executive’s                choice an amount equal to 7.5% of each monthly payment of the Base                Salary,                and will deduct from each monthly payment of the Base Salary and                contribute to such education fund an additional amount equal to 2.5%                of                each such monthly payment of the Base Salary. Upon the termination                of the                Executive’s employment with the Companies for whatever reason, including                without limitation termination for Cause or the resignation by the                Executive, the right to receive any amounts in such fund shall be                automatically assigned to the Executive. All education fund contributions                or imputed income made under this Section in excess of the statutory                exemption shall be tax-effected such that the amount of contribution                net                of any taxes and withholding (including such amounts in respect of                payments pursuant to this sentence) equals the percentages specified                herein. |
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| (c) | Vacation.                The Executive shall be entitled to an annual vacation at full pay                equal to                24 work days. |
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*provided*
*however*

| (d) | Sick                Leave.                The Executive shall be entitled to up to 30 days of fully paid sick                leave                annually; *provided*,                *however*,                that the Executive shall not be entitled to sick leave payment to                the                extent he is already covered by manager’s insurance. Sick leave may be                accumulated and at the conclusion of this Agreement for all reasons                other                than Cause, up to 30 days of accumulated but unused sick leave shall                be                converted into a cash payment to the Executive in an amount equal                to the                proportionate part of the Base Salary for such                days. |
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| (e) | Automobile.                The Companies shall make an automobile available to the Executive                during                the term of this Agreement. Such automobile shall be of a high quality                comparable to, but not less than, that of a Volvo S-80, and shall                be                subject to the approval of the Executive, which shall not be unreasonably                withheld. The Executive shall be entitled to use the automobile for                his                personal and business needs, so long as he does not allow anyone                who would                not be covered by the Companies’ insurance to drive it. The Companies                shall pay all expenses of maintaining and operating the automobile.                All                expense reimbursements or imputed income made under this Section                shall be                tax-effected such that the amount of reimbursement received by the                Executive net of any taxes and withholdings (including such amounts                in                respect of payments pursuant to this sentence) equals the expense                incurred. |
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| (f) | Recuperation                Payments (D’mai Havra-ah).                The Executive shall be entitled to Recuperation Payments in accordance                with the Companies’ policies for all of its management employees, but no                less than required by law. |
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| (g) | Benefit                Plans.                The Executive shall be entitled to participate in all incentive,                bonus,                benefit or other similar plans offered by either of the Companies,                including without limitation Arotech’s 2004 Stock Option and Restricted                Stock Purchase Plan, in accordance with the terms thereof and as                determined by the Boards from time to                time. |
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| (a) | Death.                This Agreement shall terminate upon the death of the                Executive. |
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| (b) | Disability.                The Companies may terminate the Executive’s employment after having                established the Executive’s Disability. For purposes of this Agreement,                “Disability” means a physical or mental infirmity which impairs the                Executive’s ability to substantially perform his duties under this                Agreement which continues for a period of at least one hundred and                eighty                (180) consecutive days. |
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| (c) | Cause.                The Companies may terminate the Executive’s employment for Cause. For                purposes of this Agreement, termination for “Cause” shall mean and                include: (i) conviction for fraud, crimes of moral turpitude or other                conduct which reflects on the Companies in a material and adverse                manner;                (ii) a willful failure to carry out a material directive of either                of the                Boards, *provided*                that such directive concerned matters within the scope of the Executive’s                duties, was in conformity with Sections 2(a) and 2(b) hereof, would                not                give the Executive Good Reason to terminate this Agreement and was                capable                of being reasonably and lawfully performed; (iii) conviction in a                court of                competent jurisdiction for embezzlement of funds of the Companies;                and                (iv) reckless or willful misconduct that is materially harmful to                either                of the Companies; *provided*,                *however*,                that the Companies may not terminate the Executive for Cause unless                they                have given the Executive (i) written notice of the basis for the                proposed                termination given not more than thirty (30) days after the Companies                have                obtained knowledge of such basis (“Companies’ Notice of Termination”) and                (ii) a period of at least thirty (30) days after the Executive’s receipt                of such notice in which to cure such                basis. |
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| (d) | Good                Reason.                The Executive may terminate his employment under this Agreement for                Good                Reason. For purposes of this Agreement, “Good Reason” shall mean the                occurrence of any of the events or conditions described in subsections                (i)                through (viii) hereof: |
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|   | (i) | a                  change in the Executive’s status, title, position or responsibilities                  which, in the Executive’s reasonable judgment, represents a reduction or                  demotion in the Executive’s status, title, position or responsibilities as                  in effect immediately prior                  thereto; |
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|   | (ii) | a                reduction in the Executive’s Base                Salary; |
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|   | (iii) | the                failure by the Companies to continue in effect any material compensation                or benefit plan in which the Executive is                participating; |
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|   | (iv) | the                insolvency or the filing (by any party, including the Companies)                of a                petition for the winding-up of either of the                Companies; |
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|   | (v) | any                material breach by the Companies of any provision of this                Agreement; |
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|   | (vi) | any                purported termination of the Executive’s employment for Cause by the                Companies which does not comply with the terms of Section 6(c) of                this                Agreement; |
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|   | (vii) | any                movement of either Company’s principal executive offices from the                Jerusalem/Tel Aviv area of Israel;                and |
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|   | (viii) | any                movement of the location where the Executive is generally to render                his                services to the Companies hereunder from the Jerusalem/Tel Aviv area                of                Israel; |
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*provided*
*however*

| (e) | Change                in Control.                The Executive may terminate this Agreement if there is a “Change in                Control.” For purposes of this Agreement, a “Change in Control” shall mean                any of the following events: |
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|   | (i) | the                acquisition from Arotech in any public or offering or private placement                of                equity or equivalent securities by any person or entity of beneficial                ownership of fifty (50%) or more of the combined voting power of                Arotech’s                then outstanding voting securities;                or |
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|   | (ii) | the                acquisition other than from Arotech in any public or offering or                private                placement of equity or equivalent securities by any person or entity                of                beneficial ownership of twenty percent (20%) or more of the combined                voting power of Arotech’s then outstanding voting securities;                or |
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|   | (iii) | individuals                who, as of January 1, 2007, were members of the Board of Arotech                (the                “Original Arotech Board”), together with individuals approved by a vote of                at least two-thirds (2/3) of the individuals who were members of                the                Original Arotech Board and are then still members of the Board of                Arotech,                cease for any reason to constitute at least one-third (1/3) of the                Board                of Arotech; or |
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|   | (iv) | approval                by the shareholders of either of the Companies of a complete winding-up                of                such Company or an agreement for the sale or other disposition of                all or                substantially all of the assets of either of the                Companies. |
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| (f) | Termination                Date, Etc.** **“Termination                Date” shall mean in the case of the Executive’s death, his date of death,                or in all other cases, the date specified in the Notice of Termination                subject to the following: |
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|   | (i) | if                the Executive’s employment is terminated by the Companies for Cause or due                to Disability, the date specified in the Companies’ Notice of Termination                shall be at least thirty (30) days from the date the Notice of Termination                is given to the Executive, *provided*                that in the case of Disability the Executive shall not have returned                to                the full-time performance of his duties during such period of at                least                thirty (30) days; |
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|   | (ii) | if                the Executive’s employment is terminated for Good Reason, or because there                has been a Change in Control, the Termination Date specified in the                Executive’s Notice of Termination shall not be more than sixty (60) days                from the date the Notice of Termination is given to the                Companies. |
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| (g) | Termination                at Will.                Subject to the other provisions of this Section 6, the Executive                may                terminate his employment with the Companies for any reason other                than the                other reasons specified in this Section 6 (“Termination at Will”), by                giving to the Companies written Notice of Termination specifying                the                Termination Date, which Termination Date shall be at least one hundred                and                twenty (120) days from the date of such Notice of                Termination. |
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| (a) | If                the Executive’s employment is terminated by the Companies for Cause or if                the Executive’s employment is terminated by the Executive other than with                either Good Reason, because there has been a Change in Control, due                to                Termination at Will, or by this Agreement coming to the end of the                Term,                then the Companies shall pay the Executive all amounts of Base Salary                and                the employee benefits specified in clauses (a), (b) and (c) of Section                4                of this Agreement earned or accrued hereunder through the Termination                Date                but not paid as of the Termination Date (collectively, “Accrued                Compensation”). |
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| (b) | If                the Executive’s employment by the Companies shall be terminated (1) due to                Disability, (2) by the Executive for Good Reason, (3) by the Executive                because there has been a Change in Control, (4) by the Executive’s death,                (5) due to Termination at Will, or (6) by this Agreement coming to                the end                of the Term, then the Executive shall be entitled to the benefits                provided                below (in addition to and not instead of whatever other benefits                he may be                entitled to by reason of operation of                law): |
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|   | (i) | The                Companies shall pay the Executive (a) all Accrued Compensation, (b)                a                bonus at the rate that would otherwise be payable pursuant to the                provisions of Section 3(b) above for the year in which the Termination                Date occurs, of Executive’s annual Base Salary as of the Termination Date,                *pro                rated*                based on the number of days in such year which occurred prior to                the                Termination Date, and (c) the amounts referred to in Sections 4(d)                and (e)                above, to the extent earned or accrued hereunder through the Termination                Date but unpaid as of the Termination                Date. |
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|   | (ii) | the                Companies shall pay into the Account (as defined in Section 7(b)(v)                below), as a retirement payment (the “Retirement Payment”) and in lieu of                any further salary for periods subsequent to the Termination Date                (except                as provided in Section 7(b)(i) above), a total of $1,625,400 (the                parties                acknowledge that $617,240 of this amount has previously been paid                into the                Account (the “Pre-Payment”)). Subject to the proviso contained in Section                7(b)(v) below, the Retirement Payment will vest and be funded into                the                Account in installments as provided in Section 7(b)(iii) below, and                will                be released from the Account to the Employee as                follows: |
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| (a)   | In                the event of termination due to Good Reason, Disability, Change of                Control, death or any other termination without Cause by the Companies,                all unvested and/or unfunded installments of the Retirement Payment                will,                notwithstanding the provisions of Section 7(b)(iii) below, vest                immediately and become due and payable on the Termination                Date. |
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| (b)   | In                the event of termination due to Non Renewal or Termination at Will,                the                Employee will be entitled only to that portion of the Retirement                Payment                that shall have vested or shall vest prior to the Termination Date,                which                amount will become due and payable on the Termination                Date. |
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|   | (iii) | The                installments of the Retirement Payment in excess of the Pre-Payment                will                vest and (subject to the proviso contained in Section 7(b)(v) below)                be                funded as follows: |
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| (a)   | First                installment (vests on June 30, 2007): $504,080 in cash;                and |
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| (b)   | Final                installment (vests on December 31, 2007): $504,080 in cash. |
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|   | (iv) | For                thirty-six (36) months after the Executive ceases to be an officer                of                either of the Companies, the Companies shall at their expense continue                to                provide the Executive with his then-current automobile (the operating                expenses and tax on such automobile to be borne by the Executive),                a                cellular telephone, an e-mail account, and an office if the Company                or any                of its subsidiaries otherwise maintains office space in Beit Shemesh,                Israel, or if not then a home office allowance of $1,000 per month.                The                Executive will also be authorized in his discretion to hire a secretary                at                a salary of no more than $2,000 per month. The Executive will be                solely                responsible for any taxes levied on the above                benefits. |
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|   | (v) | The                Companies have previously established certain accounts owned by the                Company but maintained for the benefit of the Executive (the “Account”).                The Companies will fund vested amounts of the Retirement Payment                into the                Account as they vest; *provided,                howver*,                that a vested amount will not be funded upon vesting if the CFO,                the Audit                Committee and the Compensation Committee of Arotech inform the Executive                in writing and in good faith that they believe that such funding                would                jeopardize the Companies’ cash position; any such deferred amount will be                funded as soon as the cash position of the Companies permits such                funding,                and in any event upon the Termination Date. Even after a payment                is funded                into the Account the risk of gain or loss with respect to such payment                remains with the Company. |
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| (c) | The                Companies may procure life insurance on the Executive in order to                secure                the payment of its obligations arising in the event of termination                under                Section 6(a) hereof. Such insurance shall be payable to the Company,                which                shall remain primarily liable for the payment of all such obligations                to                the Executive. |
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| (d) | All                stock options that are unvested shall vest on termination (except                for                Termination for Cause) and shall be extended for the longer of their                term                or the term by which Arotech director options are generally extended                upon                a director of Arotech leaving Arotech’s Board of Directors. In the event                of a termination due to Change of Control, all of the Executive’s stock                options, whether or not they have yet vested, shall immediately vest                and                shall be extended for a period of the later of (x) the expiration                date                thereof, and (y) the second anniversary of such Change of Control.                In the                event of termination due to any other reason except for Termination                for                Cause, the Executive’s stock options shall be extended for a period of the                earlier of (x) the expiration date thereof, and (y) two years after                such                termination. |
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| (e) | As                of the date of this Agreement, the Executive holds a total of 440,000                shares of restricted stock (including the 200,000 shares referred                to in                Section 3(b) above) (“Restricted Shares”), which number does not include                106,071 shares of restricted stock (26,071 granted in August 2004                and                80,000 granted in December 2006) the restrictions on which have already                elapsed as of the date of this Agreement. Pursuant to the terms of                grant,                the restrictions on 106,667 of these Restricted Shares elapse on                December                31, 2007, the restrictions on 66,667 of these Restricted Shares elapse                on                December 31, 2008, and the restrictions on 66,666 of these Restricted                Shares elapse on December 31, 2009 (these 240,000 Restricted Shares                are                hereinafter referred to as the “Non-Performance Restricted Shares”). The                removal of the restrictions on the remaining 200,000 Restricted Shares                is                or may be subject to performance criteria (these 200,000 Restricted                Shares                are hereinafter referred to as the “Performance Restricted Shares”). On                termination (except Termination for                Cause): |
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|   | (i) | All                  of the Executive’s 200,000 Performance Restricted Shares shall immediately                  become unrestricted and freely tradable (subject to applicable                  securities                  laws). |
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|   | (ii) | Any                Non-Performance Restricted Shares the restrictions on which shall                have                lapsed as of the date of termination (meaning the last day of the                Executive’s employment under this Agreement) shall continue to be                unrestricted and freely tradable (subject to applicable securities                laws). |
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|   | (iii) | Non-Performance                Restricted Shares the restrictions on which shall not have lapsed                as of                the date of termination (meaning the last day of the Executive’s                employment under this Agreement), as well as all Restricted Shares                the                restrictions on which shall not have lapsed as of the date of Termination                for Cause, shall be returned to the Company for                cancellation. |
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| (a) | Confidentiality.                Executive recognizes and acknowledges that the technology, developments,                designs, inventions, improvements, data, methods, trade secrets and                works                of authorship which the Companies own, plan or develop, including                without                limitation the specifications, documentation and other information                relating to the Companies’ zinc-air battery systems, and businesses and                equipment related thereto (in each case whether for their own use                or for                use by their clients) are confidential and are the property of the                Companies. Executive also recognizes that the Companies’ technology,                customer lists, supplier lists, proposals and procedures are confidential                and are the property of the Companies. Executive further recognizes                and                acknowledges that in order to enable the Companies to perform services                for                their clients, those clients may furnish to the Companies confidential                information concerning their business affairs, property, methods                of                operation or other data. All of these materials and information will                be                referred to below as “Proprietary Information”; *provided*,                *however*,                that such information shall not include any information known generally                to                the public (other than as a result of unauthorized disclosure by                the                Executive). |
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| (b) | Non-Disclosure.                Executive agrees that, except as directed by the Companies, and in                the                ordinary course of the Companies’ businesses, Executive will not during                Executive’s employment with the Companies and thereafter, disclose to any                person or entity or use, directly or indirectly for Executive’s own                benefit or the benefit of others, any Proprietary Information, or                permit                any person to examine or make copies of any documents which may contain                or                be derived from Proprietary Information; *provided*,                *however*,                that the Executive’s duties under this Section 8(b) shall not extend to                (i) any disclosure that may be required by law in connection with                any                judicial or administrative proceeding or inquiry or (ii) any disclosure                which may be reasonably required in connection with any actions or                proceedings to enforce the Executive’s rights under this Agreement.                Executive agrees that the provisions of this paragraph shall survive                the                termination of this Agreement and Executive’s employment by the                Companies. |
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| (c) | Competitive                Activity.                The Executive undertakes not, directly or indirectly (whether as                owner,                partner, consultant, employee or otherwise) at any time, during and                for                sixty (60) months following termination of his employment with the                Companies, to engage in or contribute his knowledge to any work or                activity that involves a product, process, service or development                which is                then directly (in any material manner) competitive with the Companies’                businesses as then constituted. Notwithstanding the foregoing, the                Executive shall be permitted to engage in the aforementioned proposed                work                or activity if the Companies furnishes him with written consent to                that                effect signed by an authorized officer of each                Company. |
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| (d) | No                Solicitation.                During the period specified in 8(c) hereof, Executive will not solicit                or                encourage any customer or supplier of either Company or of any group,                division or subsidiary of either Company, to terminate its relationship                with either Company or any such group, division or subsidiary, and                Executive will not, directly or indirectly, recruit or otherwise                seek to                induce any employee of either Company or any such group, division                or                subsidiary to terminate his or her employment or violate any agreement                with or duty to either Company or any such group, division or                subsidiary. |
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| (e) | Equitable                Relief.                The Executive agrees that violations of the material covenants in                this                Section 8 will cause the Companies irreparable injuries and agrees                that                the Companies may enforce said covenants by seeking injunctive or                other                equitable relief (in addition to any other remedies the Companies                may have                at law for damages or otherwise) from a court of competent jurisdiction.                In the event such court declares these covenants to be too broad                to be                specifically enforced, the covenants shall be enforced to the largest                extent as may be allowed by such court for the Companies’ protection.                Executive further agrees that no breach by the Companies of, or other                failure by the Companies under this Agreement shall relieve the Executive                of any obligations under Sections 8(a) and 8(b)                hereof. |
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| (a) | This                Agreement shall be binding upon and shall inure to the benefit of                each                Company, its successors and assigns and the Companies shall require                any                successor or assign to expressly assume and agree to perform this                Agreement in the same manner and to the same extent that the Companies                would be required to perform it if no such succession or assignment                had                taken place. The term the “Companies” as used herein shall include such                successors and assigns. The term “successors and assigns” as used herein                shall mean a corporation or other entity acquiring all or substantially                all the assets and business of either Company (including this Agreement)                whether by operations of law or                otherwise. |
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| (b) | Subject                to Section 16 hereof, neither this Agreement nor any right or interest                hereunder shall be assignable or transferable by the Executive, his                beneficiaries or legal representatives, except by will or by the                laws of                descent and distribution. This Agreement shall inure to the benefit                of and                be enforceable by the Executive’s legal personal                representative. |
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|   | The                Companies: | Arotech                Corporation |
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|   | and | Electric                  Fuel Limited |
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|   | The                  Executive:  | Robert                  S. Ehrlich |
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| (a) | If                Arotech at any time proposes to register any of its securities under                the                Securities Act of 1933, as from time to time in effect (together                with the                rules and regulations thereunder, all as from time to time in effect,                the                “Securities Act”), for its own account or for the account of any holder of                its securities, on a form which would permit registration of Common                Stock                of Arotech at the time held or obtainable upon the exercise of options,                warrants or rights, or the conversion of convertible securities,                at the                time held by the Executive (“Registrable Securities”), for sale to the                public under the Securities Act, Arotech will each such time give                notice                to the Executive of its intention to do so. Such notice shall describe                such securities and specify the form, manner and other relevant aspects                of                such proposed registration. The Executive may, by written response                delivered to Arotech within 15 days after the giving of any such                notice,                request that all or a specified part of the Registrable Securities                be                included in such registration. Arotech will thereupon use its best                efforts                as part of its filing of such form to effect the registration under                the                Securities Act of all Registrable Securities which Arotech has been                so                requested to register by the Executive, to the extent required to                permit                the disposition (in accordance with the intended methods thereof                as                aforesaid) of the Registrable Securities to be so                registered. |
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| (b)   | The                Executive may, by notice to Arotech specifying the intended method                or                methods of disposition, given at any time and from time to time after                Arotech has registered any shares of its Common Stock under the Securities                Act, request that Arotech effect the registration under the Securities                Act                of all or a specified part of the Registrable Securities; *provided*,                *however*,                that Arotech shall not be required to effect a registration pursuant                to                this Section 16(b) unless such registration may be effected on a                Form S-3                (or any successor or similar Form); and *provided*,                *further*,                that each registration pursuant to this Section 16(b) shall cover                a number                of Registrable Shares equal to not less than 2% of the aggregate                number of                shares of Arotech Common Stock then outstanding. Arotech will then                use its                best efforts to effect the registration as promptly as practicable                under                the Securities Act of the Registrable Securities which Arotech has                been                requested to register by the Executive pursuant to the Section                16(b). |
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| (c)   | Notwithstanding                the provisions of Section 16(b), in the event that Executive has                requested                pursuant to Section 16(b) that Arotech effect a registration of                securities, and (i) the Board of Arotech determines that it would                be                seriously detrimental to Arotech to effect a registration pursuant                to                Section 16(b), or (ii) the Board of Arotech determines in good faith                that                (A) Arotech is in possession of material, non-public information                concerning an acquisition, merger, recapitalization, consolidation,                reorganization or other material transaction by or of Arotech or                concerning pending or threatened litigation and (B) disclosure of                such                information would jeopardize any such transaction or litigation or                otherwise materially harm Arotech, then Arotech shall promptly notify                Executive of the occurrence of any of the events described in the                foregoing clauses (i) or (ii). Upon the occurrence of any of the                events                described in clauses (i) or (ii) hereof, Arotech shall be allowed                to defer                a registration of securities pursuant to Section 16(b) above, and                if a                registration statement had already been filed at such time, Executive                shall not dispose of his Registrable Securities under such registration                statement until it is so advised in writing by Arotech that the                registration of securities under 16(b) may be effected or resumed.                Notwithstanding the foregoing, any such deferment or prohibition                on                disposition shall not be in effect for more than 90 days in any 12                months                period. |
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| (d) | Arotech                shall not be obligated to effect any registration of Registrable                Securities under Section 16(a) hereof incidental to the registration                of                any of its securities in connection with mergers, acquisitions, exchange                offers, dividend reinvestment plans or stock option or other employee                benefit plans. |
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| (e) | Arotech                hereby agrees to pay, or cause to be paid, all legal, accounting,                printing                and other expenses (other than the fees and expenses of the Executive’s                own counsel and other than underwriting discounts and commissions                attributable to the Registrable Securities) in connection with each                registration of Registrable Securities pursuant to this Section                16. |
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| (f) | In                connection with each registration of Registrable Securities pursuant                to                this Section 16, Arotech and the Executive will enter into such                agreements, containing such terms and conditions, as are customary                in                connection with public offerings, such agreements to contain, without                limitation, customary indemnification provisions, representations                and                warranties and opinions and other documents to be delivered in connection                therewith, and to be, if requested, with                underwriters. |
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| (g) | The                provisions of this Section 16 shall be subject to any agreement entered                into by Arotech, in good faith, with any underwriter of Arotech’s                securities or any person or entity providing financing to Arotech,                in each                case containing reasonable limitations on the Executive’s rights and                Arotech’s obligations hereunder. |
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| (h) | The                provisions of this Section 16 shall survive the termination of the                other                provisions of this Agreement. The rights of the Executive under this                Section 16 are assignable, in whole or in part, by the Executive                to any                person or other entity acquiring securities of Arotech from the                Executive. |
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| (i) | Notwithstanding                anything in the foregoing to the contrary, the Executive shall not                demand                a registration during the 180 days following an underwritten public                offering of the Common Stock of the                Company. |
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| (j) | Without                the prior written consent of the underwriters managing any public                offering, for a period beginning ten days immediately preceding the                effective date of any registration statement filed by the Company                under                the Securities Act of 1933, as amended, and ending on the earlier                of (i)                180 days after the effective date of such registration statement                and (ii)                the end of the shortest period generally applicable to any “affiliate” (as                defined in the Securities Act of 1933, as amended) of Arotech who                is a                selling shareholder pursuant to such registration statement or who                is                otherwise subject to a lockup provision, the Executive (whether or                not a                selling shareholder pursuant to such registration statement) shall                not                sell or otherwise transfer any securities of Arotech except pursuant                to                such registration statement. |
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| 17. | Taxes. |
|-----|--------|

**IN      WITNESS WHEREOF**

|       |                           |   |   |   |
|------------|--------------------------------|--------|--------|--------|
| By:        |                           |   |   |   |
| Its:  | President              and COO |   |   |        |

|   |                           |   |   |      |
|--------|--------------------------------|--------|--------|-----------|
| By:    |                           |   |   |      |
| Its:   | President              and CEO |   |   | Executive |

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*provided*
*however*

|   |                                      |   |
|--------|-------------------------------------------|--------|
|   | EXECUTIVE                                 |
|   |                                      |   |
|   |                                 |   |
|   | Name: Robert              S. Ehrlich |

|         |                             |         |
|--------------|----------------------------------|--------------|
|         | AROTECH              CORPORATION |
|    |                        |    |
|         | By:                    |         |
|         | Title:                           |

|         |                                                  |         |
|--------------|-------------------------------------------------------|--------------|
|         | ELECTRIC              FUEL              (E.F.L.) LTD. |
|    |                                             |    |
|         | By:                                         |         |
|         | Title:                                                |

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