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                                                                 Exhibit 10.20.1
                                                                 ---------------

                                                            EXECUTION COPY
                                                            --------------

               SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT


     THIS AGREEMENT ("Agreement") is effective as of the 1/st/ day of January,
2000 and is entered into by and among Electric Fuel Corporation, a Delaware
corporation ("EFC"), and Electric Fuel Limited, an Israeli company ("EFL" and
together with EFC, the "Companies"), and Mr. Robert S. Ehrlich, Israel I.D.
Number 303673487 (the "Executive").

     WHEREAS, the Companies and the Executive entered into an Amended and
Restated Employment Agreement dated as of October 1, 1996 (the "Original
Agreement") formalizing the terms of the Executive's employment with the
Companies;

     WHEREAS, the Companies and the Executive now wish to amend and restate the
Original Agreement in its entirety in accordance with the terms of this
Agreement;

     NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, the parties agree as follows:

1.   Term.
     ----

The term of the Executive's employment under this Agreement shall be for the
period commencing on January 1, 2000, and ending on December 31, 2002 (the
"Initial Term"), provided, however, that the term of this Agreement shall be
automatically extended for additional terms of two (2) years each (each, an
"Additional Term") upon the end of the Initial Term and each Additional Term,
unless either the Executive or both Companies shall have given written notice to
the other at least one hundred fifty days (150) days prior thereto that the term
of this Agreement shall not be so extended (a "Non-Renewal"). The provisions of
this Agreement shall apply to the relationship between the parties hereto
retroactively as if this Agreement were signed on the commencement of the
Initial Term.

2.   Employment.
     ----------

(a)  The Executive shall be employed as the Chairman of the Board and Chief
     Financial Officer of each Company. 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").

(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 Companies
     acknowledge that the Executive is a director of PSC Inc., Eldat
     Communications Ltd. and Jerusalem Global Ltd. and may be or become an
     officer or director of these or other companies. In addition, the Companies
     acknowledge that the Executive is involved in certain investment banking
     activities which, together with the above mentioned positions, will consume
     a portion of his time and require him to travel. The Companies consent to
     these other positions and activities so long as these do not interfere in
     any material manner with the Ex-
<PAGE>

     ecutive's performance of his duties hereunder and do not constitute a
     violation of Section 8 hereof. 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 - 1951 shall not apply
     to this Agreement.

(c)  While the Executive is employed by the Companies hereunder, EFC 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 EFC 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.

(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.

(e)  The Executive agrees to serve on the board of directors of such
     subsidiaries of the Companies as the Board may reasonably request.

3.   Base Salary, Bonus and Financial Planning Allowance.
     ----------------------------------------------------

(a)  Base Salary.
     ------------
     The Companies agree to pay or cause to be paid to the Executive during the
     first year of this Agreement a base salary at the rate of US $20,000 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. Such Base Salary shall be payable in equal
     monthly installments.

     (b)  Bonus

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:

          (i)    If, as of such anniversary, the Companies shall have attained
80% of the Companies' Budgeted Number (as defined below) for the year preceding
such anniversary, then Executive's bonus shall be equal to 35% of Executive's
annual Base Salary as then in effect for the year preceding such anniversary;

                                      -2-
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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 90% of Executive's
annual Base Salary as then in effect for the year preceding such anniversary;

          (iii)  If, as of such anniversary, the Companies shall have attained
more than 80% but less than 120% of the Companies' Budgeted Number (as defined
below), then Executive's bonus shall be calculated as follows:

                 B =  (S x 35%) + (N-80)/40 x (S x 55%)
                                   --              ---

                 Where:

                 B =  The amount of Executive's annual bonus, as a percentage of
                 Executive's Base Salary; and

                 N =  The percentage of the Budgeted Number (as defined below)
                 that was attained by the Companies in the immediately preceding
                 fiscal year; provided, however, that N is more than 80 and less
                 than 120;

                 S =  Executive's Base Salary.

For the purposes of this Section 3(b), the Budgeted Number shall be the budgeted
results of the Companies as mutually agreed by the Boards and Executive prior to
the end of each fiscal year for the fiscal year designated in such budget.

  (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.

  (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.

4.   Employee Benefits.
     -----------------

The Executive shall be entitled to the following benefits:

                                      -3-
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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.

(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.

(c)  Vacation. The Executive shall be entitled to an annual vacation at full pay
     --------
     equal to 24 work days.

     Vacation days may be accumulated and may, at the Executive's option or
     automatically upon termination, be converted into cash payments in an
     amount equal to the proportionate part of the Base Salary for such days;
     provided, however, that if the Executive accumulates more than two (2)
     times his then current annual entitlement of vacation days, such excess
     shall be automatically converted into the right to receive such a cash
     payment in respect of such excess. Payments to which the Executive is
     entitled pursuant to this Section 4(c) shall be made promptly after the
     Executive's request therefor.

(d)  Sick Leave. The Executive shall be entitled to 30 days of fully paid sick
     ----------
     leave; 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 may, at the Executive's option, be
     converted into cash payments in an amount equal to the proportionate part
     of the Base Salary for such days. Payments to which the Executive is
     entitled pursuant to this Section 4(d) shall be made promptly after the
     Executive's request therefor.

(e)  Automobile. Every three years, the Companies shall make a new 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 current (2001, with respect to the Initial Term) model Honda
     Accord, to other cars 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

                                      -4-
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     by the Executive net of any taxes and withholdings (including such amounts
     in respect of payments pursuant to this sentence) equals the expense
     incurred.

(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.

(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 EFC's 1993 Stock Option and
     Restricted Stock Purchase Plan, in accordance with the terms thereof and as
     determined by the Boards from time to time.

5.   Expenses.
     --------

The Executive shall be entitled to receive prompt reimbursement of all expenses
reasonably incurred by him in connection with the performance of his duties
hereunder. Without limiting the generality of the foregoing, the Companies shall
pay all of the Executive's expenses in the use of telephones for the Companies'
businesses. The Executive shall be entitled to receive room, board and travel
reimbursement in connection with the performance of his duties other than at the
principal executive office of either Company, as is customary for senior
executives in publicly-held United States and Israeli companies. All expense
reimbursements 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.

6.   Termination.
     -----------

The Executive's employment hereunder shall and/or may be terminated under the
following circumstances:

(a)  Death. This Agreement shall terminate upon the death of the Executive.
     -----

(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.

(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
     know-

                                      -5-
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     ledge 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.

(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:

     (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;

     (ii)    a reduction in the Executive's Base Salary;

     (iii)   the failure by the Companies to continue in effect any material
             compensation or benefit plan in which the Executive is
             participating;

     (iv)    the insolvency or the filing (by any party, including the
             Companies) of a petition for the winding-up of either of the
             Companies;

     (v)     any material breach by the Companies of any provision of this
             Agreement;

     (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;

     (vii)   any movement of either Company's principal executive offices from
             the Jerusalem/Tel Aviv area of Israel; and

     (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;

     provided, however, that the Executive may not terminate his employment
     under this Agreement for Good Reason unless he has given the Companies (i)
     written notice of the basis for the proposed termination given not more
     than thirty (30) days after the Executive has obtained knowledge of such
     basis ("Executive's Notice of Termination") and (ii) a period of at least
     thirty (30) days after the Companies' receipt of such notice in which to
     cure such basis.

(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:

     (i)     the acquisition (other than from EFC in any public offering or
             private placement of equity securities) by any person or entity of
             beneficial ownership of twenty (20%) or more of the combined voting
             power of EFC's then outstanding voting securities; or

     (ii)    individuals who, as of January 1, 2000, were members of the Board
             of EFC (the "Original EFC Board"), together with individuals
             approved by a vote of at least two-thirds (2/3) of the individuals
             who were members of the Original EFC Board and are then still
             members of the Board of EFC, cease for any reason to constitute at
             least one-third (1/3) of the Board of EFC; or

                                      -6-
<PAGE>

     (iii)   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.

     The Executive shall give to the Companies an Executive's Notice of
     Termination if the Executive desires to terminate his employment because
     there has been a Change in Control, such notice to specify the date of such
     termination which shall be not less than thirty (30) days after such notice
     is received by the Companies. Any such notice, to be effective with respect
     to any Change in Control, must be sent no later than twenty-four (24)
     months after such Change in Control.

(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:

     (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;

     (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.

(g)  Retirement. At any time beginning 150 days prior to his 68th birthday, the
     ----------
     Executive may retire from his positions with the Companies ("Retirement")
     by giving to the Companies written Notice of Retirement specifying the
     Retirement Date, which Retirement Date shall be at least one hundred and
     fifty (150) days from the date of such Notice of Retirement.

(h)  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 fifty (150) days from the date of such Notice of Termination.

7.   Compensation upon Termination.
     -----------------------------

Upon termination of the Executive's employment hereunder, the Executive shall be
entitled to the following benefits:

(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
     Non-Renewal, due to Termination at Will or due to Retirement, 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

                                      -7-
<PAGE>

     through the Termination Date but not paid as of the Termination Date
     (collectively, "Accrued Compensation").

(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 Non-Renewal, (6) due to Termination at Will, or (7) due to
     Retirement, then the Executive shall be entitled to the benefits provided
     below:

     (i)     the Companies shall pay the Executive (a) all Accrued Compensation,
             (b) a bonus at a rate of the higher of (i) 35%, or (ii) 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;

     (ii)    the Companies shall pay the Executive as severance pay (in addition
             to any amounts payable as severance under law) and in lieu of any
             further salary for periods subsequent to the Termination Date
             (except as provided in Section 7(b)(i) above), in a single payment
             an amount in cash equal to:

             (c)   In the event of termination due to Good Reason, Change in
                   Control, Non Renewal, Retirement, Disability, death or any
                   other termination without Cause by the Companies, the annual
                   Base Salary at the highest rate in effect at any time within
                   the ninety (90) day period ending on the Termination Date (or
                   if the Executive's employment is terminated due to Change in
                   Control, the Base Salary rate in effect immediately prior to
                   such Change in Control, if greater), multiplied by three (3).

             (d)   In the event of termination due to Termination at Will, the
                   sum of five hundred twenty thousand dollars ($520,000).

     (iii)   for a number of months equal to the lesser of (A) thirty six (36)
             or (B) the number of months remaining until the Executive's 68th
             birthday, the Companies shall at their expense continue on behalf
             of the Executive and his dependents and beneficiaries all of the
             benefits, including without limitation manager's insurance, life
             insurance, disability, medical, dental and hospitalization benefits
             and use of an automobile, which were being provided to the
             Executive at the time Notice of Termination is given (or, if the
             Executive terminates his employment for Good Reason or because a
             Change in Control has occurred, the benefits provided to the
             Executive at the time immediately preceding when such Good Reason
             arose or such Change in Control occurred, if greater, or if such
             benefits are being provided after the Executive's death, the date
             of his death), provided that the Companies' obligation hereunder
             with respect to the foregoing benefits shall be limited to the
             extent that the Executive obtains any such benefits pursuant to a
             subsequent employer's benefit plans; and

                                      -8-
<PAGE>

     (c)  The Companies shall 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.

     As a condition to receiving the payments described in this Section 7, the
     Executive shall execute and deliver to the Companies a release in the form
     attached hereto as Exhibit A.

8.   Confidentiality; Proprietary Rights; Competitive Activity.
     ---------------------------------------------------------

(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).

(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.

(c)  Competitive Activity. The Executive undertakes not, directly or indirectly
     --------------------
     (whether as owner, partner, consultant, employee or otherwise) at any time,
     during and for thirty-six (36) 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' zinc-air energy systems and the same as or similar to a
     product, process, service or development specifically related to the
     Companies' zinc-air energy system on which the Executive worked or with
     respect to which the Executive had access to Proprietary Information while
     with the Companies. 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.

                                      -9-
<PAGE>

(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.

(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.

9.   Successors and Assigns.
     ----------------------

(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.

(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.

10.  Notice.
     ------

For the purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or sent by registered mail, postage
prepaid, addressed to the respective addresses set forth below or last given by
each party to the other. All notices and communications shall be deemed to have
been received on the date of delivery thereof or on the eighth business day
after the mailing thereof, except that notice of change of address shall be
effective only upon receipt.

The initial addresses of the parties for purposes of this Agreement shall be as
follows:

     The Companies:    Electric Fuel Corporation
                       120 Wood Avenue South, Suite 300
                       Iselin, New Jersey 08830

                                      -10-
<PAGE>

                          Attention: Yehuda Harats, President

        and               Electric Fuel Limited
                          Western Industrial Park
                          P.O. Box 461
                          Beit Shemesh 99000
                          Israel

        The Executive:    Robert S. Ehrlich
                          21 Nahal Sorek
                          Ramat Beit Shemesh
                          Israel

11.     Miscellaneous.
        -------------

No provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing and signed by the
Executive and the Companies. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreement or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement.

12.     Governing Law; Venue.
        --------------------

This Agreement shall be governed by and construed and enforced in accordance
with the laws of Israel without application of any conflicts of laws principles
which would cause the application of the domestic substantive laws of any other
jurisdiction. Each of the Executive and the Companies hereby irrevocably waives
any objection it may now or hereafter have to the laying of venue in the courts
of the State of Israel for any legal suit or action instituted by any party to
the Agreement against any other with respect to the subject matter hereof.

13. Severability.
    ------------

The provisions of this Agreement shall be deemed severable, and the invalidity
or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.

14.     Entire Agreement.
        ----------------

This Agreement constitutes the entire agreement between the parties hereto and
supersedes all prior agreements, understandings and arrangements, oral or
written, between the parties hereto with respect to the subject matter hereof
including, without limitation the Original Agreement.

15.     Joint and Several Obligations.
        -----------------------------

The obligations and liabilities of each Company hereunder shall be joint and
several with the obligations and liabilities of the other Company hereunder.

                                      -11-
<PAGE>

16.  Registration Rights.
     -------------------

(a)  If EFC 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 EFC 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, EFC 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
     EFC 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. EFC 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 EFC 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.

(d)  The Executive may, by notice to EFC specifying the intended method or
     methods of disposition, given at any time and from time to time after EFC
     has registered any shares of its Common Stock under the Securities Act,
     request that EFC effect the registration under the Securities Act of all or
     a specified part of the Registrable Securities; provided, however, that EFC
     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 EFC Common
     Stock then outstanding. EFC will then use its best efforts to effect the
     registration as promptly as practicable under the Securities Act of the
     Registrable Securities which EFC has been requested to register by the
     Executive pursuant to the Section 16(b).

(e)  Notwithstanding the provisions of Section 16(b), in the event that
     Executive has requested pursuant to Section 16(b) that EFC effect a
     registration of securities, and (i) the Board of EFC determines that it
     would be seriously detrimental to EFC to effect a registration pursuant to
     Section 16(b), or (ii) the Board of EFC determines in good faith that (A)
     EFC is in possession of material, non-public information concerning an
     acquisition, merger, recapitalization, consolidation, reorganization or
     other material transaction by or of EFC or concerning pending or threatened
     litigation and (B) disclosure of such information would jeopardize any such
     transaction or litigation or otherwise materially harm EFC, then EFC 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, EFC 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 EFC 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.

                                      -12-
<PAGE>

(d)  EFC 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.

(e)  EFC 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.

(f)  In connection with each registration of Registrable Securities pursuant to
     this Section 16, EFC 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.

(g)  The provisions of this Section 16 shall be subject to any agreement entered
     into by EFC, in good faith, with any underwriter of EFC's securities or any
     person or entity providing financing to EFC, in each case containing
     reasonable limitations on the Executive's rights and EFC's obligations
     hereunder.

(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 EFC from the Executive.

(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.

(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 EFC 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 EFC except pursuant to such
     registration statement.

                                      -13-
<PAGE>

     IN WITNESS WHEREOF, the Companies have caused this Agreement to be executed
by its duly authorized officer and the Executive has executed this Agreement as
of the day and year first above written.


ELECTRIC FUEL CORPORATION


By:  /s/ Yehuda Harats
   ------------------------
Its: President and CEO



ELECTRIC FUEL LIMITED



By:  /s/ Yehuda Harats                          /s/ Robert S. Ehrlich
   ------------------------                -------------------------------
Its: President and CEO                                 Executive

                                      -14-
<PAGE>

                                                                       Exhibit A
                                                                       ---------


                            FORM OF MUTUAL RELEASE
                            ----------------------


     This mutual release is executed and delivered by and between the
undersigned employee of Electric Fuel Corporation, a Delaware corporation
("EFC") and Electric Fuel Limited ("EFL") and the undersigned's successors,
assigns, executors, estates and personal representatives (collectively, the
"Executive"), on the one hand, and EFC and EFL and each of their respective
affiliates, agents, successors and assigns (collectively, the "Companies"), on
the other hand. For and in consideration of the Executive receiving the
compensation referred to in Section 7 of the Second Amended and Restated
Employment Agreement dated as of January 1, 2000 and other good and valuable
consideration, the adequacy and receipt of which are hereby acknowledged by the
Executive and the Companies, the Executive hereby remises, releases and forever
discharges the Companies, and the Companies hereby remise, release and forever
discharge the Executive, of and from any and all manner of action and actions,
cause and causes of actions, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, covenants, contracts, controversies, executions,
claims and demands of any kind and nature whatsoever in law or in equity, known
or unknown, against the other party which ever existed prior to the date hereof,
or may ever have on and after the date hereof with respect to matters arising,
and dealings with the other party occurring, prior to the date hereof; provided,
however, that nothing contained herein shall be construed to release the
Executive from any obligations to the Companies pursuant to the Employment
Agreement nor to release the Companies from any of their obligations to the
Executive pursuant to the Employment Agreement.

     IN WITNESS WHEREOF, the Executive and the Companies have each caused this
Release to be executed as of __________________.

                                    EXECUTIVE


                                    ______________________________
                                    Name:


                                    ELECTRIC FUEL CORPORATION


                                    By:___________________________
                                    Title:


                                    ELECTRIC FUEL LTD.


                                    By:___________________________
                                    Title: