Document:

SECURITIES PURCHASE AGREEMENT

         SECURITIES  PURCHASE AGREEMENT (the "AGREEMENT"),  dated as of July 15,
2004,  by  and  among  Arotech  Corporation,   a  Delaware   corporation,   with
headquarters located at 250 West 57th Street, Suite 310, New York, NY 10107 (the
"COMPANY"),  and the investors  listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" and collectively, the "BUYERS").

         WHEREAS:

         A. The Company and each Buyer desire to enter into this  transaction to
purchase the Purchased  Shares (as defined below) set forth herein pursuant to a
currently  effective  shelf  registration  statement  on  Form  S-3,  which  has
$7,800,000 in unallocated securities registered thereunder  (Registration Number
333-110729) (the "REGISTRATION  STATEMENT"),  which  Registration  Statement has
been  declared  effective in  accordance  with the  Securities  Act of 1933,  as
amended  (the  "1933  ACT"),  by  the  United  States  Securities  and  Exchange
Commission (the "SEC").

         B. Each Buyer wishes to purchase,  and the Company wishes to sell, upon
the terms and conditions  stated in this  Agreement,  that  aggregate  number of
shares of common  stock,  par value $.01 per share,  of the Company (the "COMMON
STOCK"),  set forth  opposite such Buyer's name in column (3) on the Schedule of
Buyers (which aggregate amount for all Buyers together shall be 4,258,065 shares
of Common Stock and shall  collectively  be referred to herein as the "PURCHASED
SHARES").

         NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

         1. PURCHASE AND SALE OF PURCHASED SHARES.

                  (a) Purchase of Purchased Shares.  Subject to the satisfaction
(or waiver) of the conditions  set forth in Sections 5 and 6 below,  the Company
shall issue and sell to each Buyer, and each Buyer  severally,  but not jointly,
agrees to purchase  from the Company on the Closing Date (as defined  below) the
number of Purchased  Shares as is set forth opposite such Buyer's name in column
(3) on the Schedule of Buyers (the  "CLOSING").  The Closing  shall occur on the
Closing Date at the offices of Schulte Roth & Zabel LLP, 919 Third  Avenue,  New
York, New York 10022.

                  (b)  Purchase  Price.  The purchase  price for each  Purchased
Share to be purchased by each Buyer at the Closing shall be $1.55 (the "PURCHASE
PRICE").

                  (c)  Closing  Date.  The  date and  time of the  Closing  (the
"CLOSING  DATE")  shall be 10:00 a.m.,  New York City Time,  on the Business Day
after  execution  and  delivery  of  this  Agreement,   after   notification  of
satisfaction  (or waiver) of the conditions to the Closing set forth in Sections
5 and 6 below (or such later date as is  mutually  agreed to by the  Company and
each Buyer).  As used herein,  "BUSINESS DAY" means any day other than Saturday,
Sunday  or  other  day on  which  commercial  banks  in The City of New York are
authorized or required by law to remain closed.

<PAGE>

                  (d) Form of Payment. On the Closing Date, (i) each Buyer shall
pay its Purchase Price to the Company for the Purchased  Shares to be issued and
sold to such Buyer at the Closing,  by wire  transfer of  immediately  available
funds in accordance with the Company's written wire  instructions,  and (ii) the
Company shall cause American  Stock  Transfer and Trust  Company,  the Company's
transfer agent (the  "TRANSFER  AGENT"),  through the  Depository  Trust Company
("DTC") Fast Automated  Securities  Transfer  Program,  to credit such aggregate
number  of  Purchased  Shares  that  such  Buyer is  purchasing  as is set forth
opposite  such  Buyer's  name in column  (3) of the  Schedule  of Buyers to such
Buyer's  or  its  designee's  balance  account  with  DTC  through  its  Deposit
Withdrawal Agent Commission system.

         2. REPRESENTATIONS AND WARRANTIES OF EACH BUYER.

                 Each Buyer  represents and warrants with respect to only itself
that:

                  (a)  Organization;  Authority.  Such  Buyer is an entity  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction of its organization with the requisite power and authority to enter
into and to  consummate  the  transactions  contemplated  by this  Agreement and
otherwise to carry out its obligations  hereunder.  The execution,  delivery and
performance  by such Buyer of the  transactions  contemplated  by this Agreement
have been duly authorized by all necessary  action on the part of such Buyer and
no further  action is  required by such Buyer or any of its  composite  entities
(such as a board of directors,  management committee,  partners or stockholders)
in connection herewith. This Agreement has been duly executed by such Buyer, and
when  delivered  by such  Buyer  in  accordance  with  the  terms  hereof,  will
constitute the valid and legally binding  obligation of such Buyer,  enforceable
against it in accordance with its terms,  except (a) as such  enforceability may
be limited by bankruptcy,  insolvency,  reorganization or similar laws affecting
creditors' rights generally,  (b) as enforceability of any  indemnification  and
contribution  provisions  may be limited under the federal and state  securities
laws and public  policy,  and (c) that the remedy of  specific  performance  and
injunctive  and other  forms of  equitable  relief may be  subject to  equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.

                  (b) No Conflicts.  The execution,  delivery and performance by
such  Buyer  of  this  Agreement  and the  consummation  by  such  Buyer  of the
transactions  contemplated  hereby  do not and  will  not (i)  conflict  with or
violate the  organizational  documents of such Buyer or (ii)  conflict  with, or
constitute  a default  (or an event  which with  notice or lapse of time or both
would  become a default)  under,  or give to others  any rights of  termination,
amendment,   acceleration  or  cancellation  of,  any  agreement,  indenture  or
instrument to which such Buyer is a party, or (iii) result in a violation of any
law, rule,  regulation,  order,  judgment or decree (including federal and state
securities  laws)  applicable to such Buyer,  except in the case of clauses (ii)
and (iii) above, for such conflicts,  defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material
adverse  effect  on the  ability  of  such  Buyer  to  perform  its  obligations
hereunder.

                  (c) Residency.  Such Buyer is a resident of that  jurisdiction
specified below its address on the Schedule of Buyers.

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                  The Company  acknowledges  and agrees that each Buyer does not
make or has not made any  representations  or  warranties  with  respect  to the
transactions contemplated hereby other than those specifically set forth in this
Section 2.

         3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company hereby makes the following  representations  and warranties
to each Buyer:

                  (a)  Subsidiaries.  There is no entity  in which the  Company,
directly  or  indirectly,  owns  capital  stock or holds an  equity  or  similar
interest other than those listed in Schedule 3.1(a) ("SUBSIDIARIES").  Except as
disclosed in Schedule 3.1(a), the Company owns,  directly or indirectly,  all of
the  capital  stock  of each  Subsidiary  free and  clear of any and all  liens,
charges,  encumbrances,  security  interests,  rights of first  refusal or other
restrictions of any kind ("LIENS"), and all the issued and outstanding shares of
capital  stock  of each  Subsidiary  are  validly  issued  and are  fully  paid,
non-assessable and free of preemptive and similar rights.

                  (b)  Organization  and  Qualification.  Except as set forth on
Schedule 3(b) hereto,  (1) each of the Company and each  Subsidiary is an entity
duly  organized,  validly  existing and in good  standing  under the laws of the
jurisdiction of its  incorporation  or organization  (as  applicable),  with the
requisite  power and authority to own and use its  properties  and assets and to
carry on its  business as currently  conducted,  (2) neither the Company nor any
Subsidiary  is  in  violation  of  any  of  the  provisions  of  its  respective
certificate  or articles of  incorporation,  bylaws or other  organizational  or
charter  documents,  and (3) each of the  Company  and each  Subsidiary  is duly
qualified to conduct  business and is in good standing as a foreign  corporation
or other  entity  in each  jurisdiction  in which  the  nature  of the  business
conducted or property  owned by it makes such  qualification  necessary,  except
where the failure to be so  qualified or in good  standing,  as the case may be,
could not,  individually or in the aggregate,  have or reasonably be expected to
result in (i) an adverse effect on the legality,  validity or  enforceability of
any Transaction  Document,  (ii) a material and adverse effect on the results of
operations,  assets,  business  or  financial  condition  of the Company and the
Subsidiaries,  taken as a whole, or (iii) an adverse impairment to the Company's
ability to  perform  on a timely  basis its  obligations  under any  Transaction
Document (any of (i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT").

                  (c) Authorization;  Enforcement. The Company has the requisite
corporate  power and authority to enter into and to consummate the  transactions
contemplated  by each of this  Agreement  and any other  documents or agreements
executed   in   connection   with  the   transactions   contemplated   hereunder
(collectively,  the  "TRANSACTION  DOCUMENTS")  and  otherwise  to carry out its
obligations  hereunder  and  thereunder  and to issue  the  Purchased  Shares in
accordance with the terms hereof and thereof. The execution and delivery of each
of the  Transaction  Documents by the Company and the  consummation by it of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the  Purchased  Shares,  have been duly  authorized by all necessary
action on the part of the  Company  and no  further  action is  required  by the
Company,  its Board of Directors or its stockholders in connection  herewith and
therewith.  Each Transaction Document has been (or upon delivery will have been)
duly  executed by the Company and, when  delivered in accordance  with the terms
hereof,  will  constitute  the  valid  and  binding  obligation  of the  Company
enforceable against the Company in accordance with its terms, except (a) as such

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enforceability  may be  limited by  bankruptcy,  insolvency,  reorganization  or
similar laws affecting creditors' rights generally, (b) as enforceability of any
indemnification and contribution provisions may be limited under the federal and
state  securities  laws and public  policy,  and (c) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable  defenses  and to  the  discretion  of  the  court  before  which  any
proceeding therefor may be brought.

                  (d) No Conflicts.  The execution,  delivery and performance of
the Transaction  Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without limitation,
the issuance of the  Purchased  Shares) do not and will not (i) conflict with or
violate any  provision  of the  Company's  or any  Subsidiary's  certificate  or
articles of  incorporation,  any  certificate of  designations,  preferences and
rights  of  any  outstanding   series  of  preferred  stock,   bylaws  or  other
organizational  or charter  documents,  or (ii)  conflict  with, or constitute a
default  (or an event that with  notice or lapse of time or both would  become a
default)  under,  or  give to  others  any  rights  of  termination,  amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement,  credit facility,  debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other  understanding to which the Company or
any  Subsidiary  is a party or by which any  property or asset of the Company or
any Subsidiary is bound or affected,  or (iii) result in a violation of any law,
rule, regulation,  order, judgment,  injunction,  decree or other restriction of
any court or  governmental  authority  to which the Company or a  Subsidiary  is
subject  (including  federal  and  state  securities  laws  and  regulations  of
whichever of the New York Stock Exchange, Inc., the American Stock Exchange, the
Nasdaq National  Market (the  "PRINCIPAL  MARKET") or The Nasdaq SmallCap Market
that the Common  Stock is listed or quoted for  trading on the date in  question
(any of the foregoing, a "TRADING MARKET"), or by which any property or asset of
the Company or a Subsidiary is bound or affected;  except in the case of each of
clauses (ii) and (iii),  such as could not,  individually  or in the  aggregate,
have or reasonably be expected to result in a Material Adverse Effect.

                  (e) Filings,  Consents and Approvals.  Neither the Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or order
of,  give any  notice  to,  or make any  filing or  registration  (collectively,
"CONSENTS") with, any court or other federal, state, local or other governmental
authority or any  regulatory or  self-regulatory  agency or other  individual or
corporation,  partnership,  trust,  incorporated or unincorporated  association,
joint venture, limited liability company, joint stock company, government (or an
agency or  subdivision  thereof)  or other  entity of any kind (a  "PERSON")  in
connection  with the execution,  delivery and  performance by the Company of the
Transaction Documents,  other than (i) the filing with the SEC of the prospectus
supplement required by the Registration  Statement pursuant to Rule 424(b) under
the 1933 Act (the  "PROSPECTUS  SUPPLEMENT")  supplementing  the base prospectus
forming  part  of  the  Registration  Statement  (the  "PROSPECTUS"),  (ii)  the
application(s)  to the Principal  Market for the listing of the Purchased Shares
for trading thereon in the time and manner required  thereby,  (iii) all filings
required  pursuant to Section 4(f) hereof,  and (iv) those Consents set forth in
Schedule 3.1(e), which Consents have been obtained prior to the date hereof.

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                  (f) Issuance of the Purchased Shares. The Purchased Shares are
duly authorized and, upon issuance in accordance with the terms hereof,  will be
duly and  validly  issued,  fully paid and  nonassessable,  free from all taxes,
Liens and charges with respect to the issue thereof. The issuance by the Company
of the Purchased  Shares has been  registered  under the 1933 Act and all of the
Purchased  Shares are freely  transferable  and  tradable by the Buyers  without
restriction.  The Purchased Shares are being issued pursuant to the Registration
Statement  and the issuance of the Purchased  Shares has been  registered by the
Company  under  the 1933  Act.  The  Registration  Statement  is  effective  and
available for the issuance of the Purchased  Shares  thereunder  and the Company
has not  received  any  notice  that the SEC has  issued or  intends  to issue a
stop-order with respect to the Registration  Statement or that the SEC otherwise
has  suspended or withdrawn the  effectiveness  of the  Registration  Statement,
either temporarily or permanently, or intends or has threatened in writing to do
so. The "Plan of Distribution" section under the Registration  Statement permits
the issuance and sale of the  Purchased  Shares  hereunder.  Upon receipt of the
Purchased  Shares  and  making  payment  for them in  accordance  with the terms
hereof,  the Buyers will have good and marketable title to such Purchased Shares
and the Purchased Shares will be freely tradable on the Principal Market.

                  (g)  Capitalization.  The  number  of  shares  and type of all
authorized,  issued and outstanding capital stock of the Company is set forth in
Schedule 3.1(g).  Except as set forth in Schedule  3.1(g),  no securities of the
Company are  entitled to  preemptive  or similar  rights,  and no Person has any
right of first refusal, preemptive right, right of participation, or any similar
right  to  participate  in the  transactions  contemplated  by  the  Transaction
Documents.  Except as a result of the purchase and sale of the Purchased  Shares
and except as disclosed in Schedule  3.1(g),  there are no outstanding  options,
warrants,  scrip rights to subscribe to, calls or  commitments  of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exchangeable  for, or giving any Person any right to  subscribe  for or acquire,
any  shares  of Common  Stock,  or  contracts,  commitments,  understandings  or
arrangements  by which the Company or any  Subsidiary  is or may become bound to
issue additional shares of Common Stock, or securities or rights  convertible or
exchangeable  into  shares of  Common  Stock.  Except  as set forth in  Schedule
3.1(g), the issue and sale of the Purchased Shares will not, immediately or with
the passage of time,  obligate  the Company to issue  shares of Common  Stock or
other  securities to any Person (other than the Buyers) and will not result in a
right of any holder of Company  securities to adjust the  exercise,  conversion,
exchange or reset price under such securities.

                  (h) SEC Reports;  Financial Statements.  The Company has filed
all  reports  required  to be filed by it under the 1933 Act and the  Securities
Exchange Act of 1934, as amended (the "1934 ACT"), including pursuant to Section
13(a) or 15(d)  thereof,  for the two years  preceding  the date hereof (or such
shorter  period as the Company was  required by law to file such  reports)  (the
foregoing  materials being collectively  referred to herein as the "SEC REPORTS"
and, together with the Schedules to this Agreement,  the "DISCLOSURE MATERIALS")
on a timely basis or has  received a valid  extension of such time of filing and
has filed any such SEC Reports prior to the  expiration  of any such  extension.
The Company has  delivered to the Buyers a copy of all SEC Reports not available
on the EDGAR system.  As of their respective  dates, the SEC Reports complied in
all material respects with the requirements of the 1933 Act and the 1934 Act and
the rules and regulations of the SEC promulgated thereunder, and none of the SEC
Reports,  when  filed,  contained  any untrue  statement  of a material  fact or

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omitted to state a material fact  required to be stated  therein or necessary in
order to make the statements  therein,  in the light of the circumstances  under
which  they were  made,  not  misleading.  The  Registration  Statement  and any
prospectus  included  therein,  including  the  Prospectus  and  the  Prospectus
Supplement,  complied in all material respects with the requirements of the 1933
Act and the  1934  Act and the  rules  and  regulations  of the SEC  promulgated
thereunder,  and none of such  Registration  Statement  or any such  prospectus,
including the Prospectus and the Prospectus Supplement, contain or contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated  therein or necessary in order to make the statements  therein,  in
the case of any  prospectus in the light of the  circumstances  under which they
were made, not misleading.  The Company is in compliance with the Sarbanes-Oxley
Act of  2002,  and the  rules  and  regulations  promulgated  thereunder  by all
government and regulatory  authorities and agencies. The financial statements of
the Company  included in the SEC Reports  comply in all material  respects  with
applicable accounting requirements and the rules and regulations of the SEC with
respect  thereto as in effect at the time of filing.  Such financial  statements
have been prepared in accordance with generally accepted  accounting  principles
applied on a consistent  basis during the periods involved  ("GAAP"),  except as
may be otherwise  specified in such  financial  statements or the notes thereto,
and fairly  present in all  material  respects  the  financial  position  of the
Company and its  consolidated  Subsidiaries  as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the  case  of  unaudited  statements,  to  normal,  immaterial,  year-end  audit
adjustments.

                  (i)  Material  Changes.  Since the date of the latest  audited
financial  statements  included  within the SEC Reports,  except as specifically
disclosed  in the SEC  Reports,  (i)  there  has been no  event,  occurrence  or
development  that has had or that could  reasonably  be  expected to result in a
Material  Adverse  Effect,  (ii) the Company has not  incurred  any  liabilities
(contingent  or otherwise)  other than (A) trade  payables and accrued  expenses
incurred in the ordinary  course of business  consistent  with past practice and
(B)  liabilities  not  required  to be  reflected  in  the  Company's  financial
statements pursuant to GAAP or required to be disclosed in filings made with the
SEC,  (iii) the Company has not altered its method of accounting or the identity
of its  auditors,  (iv) the  Company has not  declared  or made any  dividend or
distribution  of  cash or  other  property  to its  stockholders  or  purchased,
redeemed or made any  agreements to purchase or redeem any shares of its capital
stock,  (v) the Company  has not issued any equity  securities  to any  officer,
director  or any  Person  that,  directly  or  indirectly  through  one or  more
intermediaries,  controls or is controlled by or is under common  control with a
Person, as such terms are used in and construed under Rule 144 promulgated under
the 1933  Act,  as  amended  (or a  successor  rule  thereto)  ("RULE  144") (an
"AFFILIATE"),  except  pursuant to existing  stock  option plans of the Company,
(vi) the Company has not sold any assets,  individually or in the aggregate,  in
excess of  $250,000  outside of the  ordinary  course of  business  or (vii) the
Company has not had capital expenditures,  individually or in the aggregate,  in
excess of $250,000. The Company does not have pending before the SEC any request
for confidential treatment of information.

                  (j) Litigation.  Except as set forth in Schedule 3.1(j), there
is no Action which (i) adversely affects or challenges the legality, validity or
enforceability  of any of the Transaction  Documents or the Purchased  Shares or
(ii)  could,  if there  were an  unfavorable  decision,  individually  or in the
aggregate,  have or  reasonably  be  expected  to result in a  Material  Adverse

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Effect.  Neither  the Company nor any  Subsidiary,  nor any  director or officer
thereof, is or has been the subject of any claim, action or proceeding involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary  duty.  There has not been, and to the knowledge of
the Company, there is not pending or contemplated,  any investigation by the SEC
involving  the  Company  or any  current  or former  director  or officer of the
Company.  The SEC has not issued any stop order or other  order  suspending  the
effectiveness  of  any  registration  statement  filed  by  the  Company  or any
Subsidiary  under  the 1934  Act or the 1933  Act,  including  the  Registration
Statement.

                  (k) Labor  Relations.  No material labor dispute exists or, to
the  knowledge of the Company,  is imminent with respect to any of the employees
of the Company.

                  (l) Compliance.  Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both,  would result in a default by
the Company or any  Subsidiary  under),  nor has the  Company or any  Subsidiary
received  notice  of a  claim  that  it is in  default  under  or  that it is in
violation of, any indenture,  loan or credit agreement or any other agreement or
instrument  to which it is a party  or by which it or any of its  properties  is
bound  (whether or not such default or violation  has been  waived),  (ii) is in
violation  of  any  order  of  any  court,  arbitrator,  governmental  body,  or
regulatory or self-regulatory  authority or (iii) is or has been in violation of
any statute, rule or regulation of any governmental authority, including without
limitation  all  foreign,  federal,  state and  local  laws  relating  to taxes,
environmental  protection,  occupational health and safety,  product quality and
safety  and  employment  and labor  matters,  except in each case as could  not,
individually or in the aggregate,  have or reasonably be expected to result in a
Material Adverse Effect.

                  (m)  Regulatory  Permits.  The  Company  and the  Subsidiaries
possess all certificates,  authorizations  and permits issued by the appropriate
federal,  state,  local or foreign regulatory  authorities  necessary to conduct
their  respective  businesses as described in the SEC Reports,  except where the
failure to possess such permits  would not,  individually  or in the  aggregate,
have or reasonably be expected to result in a Material Adverse Effect ("MATERIAL
PERMITS"), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.

                  (n) Title to Assets.  The  Company and the  Subsidiaries  have
good and marketable  title in fee simple to all real property owned by them that
is material to their respective  businesses and good and marketable title in all
personal property owned by them that is material to their respective businesses,
in each case free and clear of all Liens, except as set forth in Schedule 3.1(n)
and except for Liens as do not materially  affect the value of such property and
do not  materially  interfere  with the use made and proposed to be made of such
property by the Company and the  Subsidiaries.  Any real property and facilities
held under  lease by the  Company  and the  Subsidiaries  are held by them under
valid,   subsisting  and  enforceable  leases  of  which  the  Company  and  the
Subsidiaries are in compliance in all material respects.

                  (o) Patents and Trademarks.  The Company and the  Subsidiaries
have,  or have rights to use,  all  patents,  patent  applications,  trademarks,
trademark  applications,  service marks, trade names,  copyrights,  licenses and

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other similar  rights that are necessary or material for use in connection  with
their  respective  businesses  as  described  in the SEC  Reports  and which the
failure to so have could,  individually or in the aggregate,  have or reasonably
be  expected  to  result  in  a  Material  Adverse  Effect  (collectively,   the
"INTELLECTUAL  PROPERTY Rights"). The Company does not have any knowledge of any
infringement by the Company or its Subsidiaries of Intellectual  Property Rights
of others.  There is no claim, action or proceeding being made or brought, or to
the  knowledge  of the  Company,  being  threatened,  against the Company or its
Subsidiaries regarding its Intellectual Property Rights.

                  (p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized  financial  responsibility  against such losses and risks
and in such amounts as are prudent and customary in the  businesses in which the
Company and the Subsidiaries  are engaged.  The Company has no reason to believe
that it or its  Subsidiaries  will not be able to renew its  existing  insurance
coverage as and when such coverage  expires or to obtain  similar  coverage from
similar  insurers  as may be  necessary  to  continue  its  business  without  a
significant  increase in cost,  other than  anticipated  increases in the market
price of officers' and directors' liability insurance generally.

                  (q)  Foreign  Corrupt  Practices.  Neither the Company nor any
direct  director,  officer or employee acting on behalf of the Company or any of
its  Subsidiaries  has, in the course of its  actions  for, or on behalf of, the
Company  (i) used any  corporate  funds  for any  unlawful  contribution,  gift,
entertainment or other unlawful  expenses relating to political  activity;  (ii)
made any  direct  or  indirect  unlawful  payment  to any  foreign  or  domestic
government  official or employee from corporate  funds;  (iii) violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended;  or (iv) made any unlawful bribe,  rebate,  payoff,  influence payment,
kickback  or other  unlawful  payment  to any  foreign  or  domestic  government
official or employee.

                  (r) Transactions With Affiliates and Employees.  Except as set
forth in the SEC Reports,  none of the officers or directors of the Company and,
to the  knowledge  of the  Company,  none of the  employees  of the  Company  is
presently a party to any transaction  with the Company or any Subsidiary  (other
than for services as employees, officers and directors), including any contract,
agreement or other  arrangement  providing for the  furnishing of services to or
by,  providing for rental of real or personal  property to or from, or otherwise
requiring payments to or from any officer,  director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee  has a  substantial  interest  or is an officer,  director,  trustee or
partner.

                  (s) Tax Status.  The Company and each of its  Subsidiaries (i)
has made or filed all  federal  and  state  income  and all  other tax  returns,
reports and  declarations  required by any  jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental  assessments and charges that are
material in amount,  shown or determined to be due on such returns,  reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books provision reasonably adequate for the payment of all material taxes
for  periods  subsequent  to the  periods  to which  such  returns,  reports  or
declarations  apply. There are no unpaid taxes in any material amount claimed to

                                       8
<PAGE>

be due by the taxing  authority  of any  jurisdiction,  and the  officers of the
Company know of no basis for any such claim.

                  (t)  Internal  Accounting   Controls.   The  Company  and  the
Subsidiaries  maintain a system of internal  accounting controls which the audit
committee of the board of directors reasonably believes is sufficient to provide
reasonable  assurance  that (i)  transactions  are executed in  accordance  with
management's general or specific authorizations,  (ii) transactions are recorded
as necessary to permit  preparation of financial  statements in conformity  with
generally accepted accounting  principles and to maintain asset  accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific  authorization,  and (iv) the recorded  accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

                  (u) Solvency.  Based on the financial condition of the Company
as of the  date  hereof  and as of the  Closing  Date,  (i) the  Company's  fair
saleable value of its assets exceeds the amount that will be required to be paid
on or  in  respect  of  the  Company's  existing  debts  and  other  liabilities
(including  known  contingent  liabilities)  as they mature;  (ii) the Company's
assets do not constitute unreasonably small capital to carry on its business for
the  current  fiscal  year as now  conducted  and as  proposed  to be  conducted
including  its  capital  needs  taking  into  account  the  particular   capital
requirements  of the business  conducted by the Company,  and projected  capital
requirements and capital  availability  thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets,  after taking into account all anticipated  uses of
the cash,  would be  sufficient  to pay all amounts on or in respect of its debt
when such amounts are required to be paid.  The Company does not intend to incur
debts  beyond its ability to pay such debts as they mature  (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).

                  (v) Placement  Agent's Fees.  The Company shall be responsible
for the payment of any placement agent's fees, financial advisory or consultancy
fees,  brokers'  commissions or finder's fee (other than for persons  engaged by
any  Buyer  or  its  investment  advisor)  relating  to or  arising  out  of the
transactions  contemplated  hereby, which fees are set forth on Schedule 3.1(v).
The Company shall pay, and hold each Buyer harmless against, any liability, loss
or expense  (including,  without  limitation,  attorney's fees and out-of-pocket
expenses) arising in connection with any such claim.

                  (w)  No  Integrated   Offering.   None  of  the  Company,  its
Subsidiaries,  any of their  Affiliates,  and any Person  acting on their behalf
has,  directly  or  indirectly,  made any  offers  or sales of any  security  or
solicited any offers to buy any security,  under  circumstances that would cause
this offering of the Purchased  Shares to be integrated  with prior offerings by
the Company for  purposes of any  applicable  stockholder  approval  provisions,
including,  without limitation,  under the rules and regulations of any exchange
or automated  quotation system on which any of the securities of the Company are
listed or designated.  None of the Company,  its Subsidiaries,  their Affiliates
and any Person acting on their behalf will take any action or steps  referred to
in the preceding  sentence that would cause the offering of the Purchased Shares
to be integrated with other offerings.

                                       9
<PAGE>

                  (x) Certain  Registration  Matters. The Company is eligible to
register the sale of its Common Stock under Form S-3 promulgated  under the 1933
Act.  Except as  described  in Schedule  3.1(x),  the Company has not granted or
agreed to grant to any Person any rights  (including  "piggy-back"  registration
rights) to have any  securities  of the Company  registered  with the SEC or any
other governmental authority that have not been satisfied.

                  (y) Listing and Maintenance Requirements.  Except as set forth
in the SEC Reports or as set forth in Schedule  3.1(y),  the Company has not, in
the two years preceding the date hereof,  received notice (written or oral) from
any Trading  Market on which the Common Stock is or has been listed or quoted to
the effect that the Company is not in compliance with the listing or maintenance
requirements  of such  Trading  Market.  Except for the  maintenance  of the $10
million minimum in  stockholders'  equity (pursuant to the rules and regulations
of the Principal  Market),  the Company is currently in compliance with all such
listing and  maintenance  requirements.  The issuance and sale of the  Purchased
Shares  hereunder does not contravene the rules and regulations of the Principal
Market and no approval of the  stockholders  of the Company is required  for the
Company  to issue and  deliver to the  Buyers  the  maximum  number of shares of
Common Stock contemplated by this Agreement.

                  (z)  Investment  Company.  The  Company is not,  and is not an
Affiliate  of, an  "investment  company"  within the  meaning of the  Investment
Company Act of 1940, as amended.

                  (aa)  Application  of  Takeover  Protections.  The Company has
taken all necessary action, if any, in order to render  inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights  agreement) or other similar  anti-takeover  provision  under the
Company's  Certificate of  Incorporation  (or similar charter  documents) or the
laws of its state of  incorporation  that is or could become  applicable  to the
Buyers  solely  as a result  of the  Buyers  and the  Company  fulfilling  their
obligations  or  exercising  their  rights  under  the  Transaction   Documents,
including without  limitation the Company's issuance of the Purchased Shares and
the Buyers' ownership of the Purchased Shares.

                  (bb) Disclosure. Other than in connection with the acquisition
of Armour of America, Incorporated (the "AOA ACQUISITION"), the Company confirms
that  neither it nor any Person  acting on its  behalf has  provided  any of the
Buyers or their agents or counsel with any information that the Company believes
constitutes  material,  non-public  information.  The  Company  understands  and
confirms  that  the  Buyers  will  rely  on the  foregoing  representations  and
covenants in effecting  transactions  in securities of the Company.  The Company
has provided  each Buyer with a true,  correct and  complete  copy of all of the
executed  documentation in connection with the AoA  Acquisition.  All disclosure
provided to the Buyers regarding the Company, its business,  the AoA Acquisition
and the  transactions  contemplated  hereby,  furnished  by or on  behalf of the
Company  (including  the Company's  representations  and warranties set forth in
this Agreement) are true and correct and do not contain any untrue  statement of
a material  fact or omit to state any material  fact  necessary in order to make
the statements made therein,  in the light of the circumstances under which they
were made, not misleading.

                  (cc)  Acknowledgment  Regarding  Buyer's Purchase of Purchased
Shares. The Company  acknowledges and agrees that each Buyer is acting solely in

                                       10
<PAGE>

the capacity of arm's length purchaser with respect to the Transaction Documents
and the transactions  contemplated  hereby and thereby,  and that no Buyer is an
officer or director of the Company.  The Company  further  acknowledges  that no
Buyer is acting as a financial  advisor or  fiduciary  of the Company (or in any
similar capacity) with respect to the Transaction Documents and the transactions
contemplated  hereby and thereby,  and any advice given by a Buyer or any of its
representatives  or agents in connection with the Transaction  Documents and the
transactions  contemplated  hereby  and  thereby  is merely  incidental  to such
Buyer's purchase of the Purchased Shares. The Company further represents to each
Buyer that the Company's  decision to enter into the  Transaction  Documents has
been  based  solely  on the  independent  evaluation  by  the  Company  and  its
representatives.

         4.       COVENANTS.

                  (a) Best Efforts. Each party shall use its best efforts timely
to satisfy each of the  covenants  and the  conditions  to be satisfied by it as
provided in Sections 5 and 6 of this Agreement.

                  (b)  Prospectus  Supplement  and Blue Sky.  On or  before  the
execution of this Agreement,  the Company shall have  delivered,  and as soon as
practicable after the Closing the Company shall file, the Prospectus  Supplement
with respect to the Purchased  Shares as required  under and in conformity  with
the 1933 Act, including Rule 424(b) thereunder.  If required, the Company, on or
before the Closing Date,  shall take such action as the Company shall reasonably
determine is  necessary  in order to obtain an  exemption  for or to qualify the
Purchased  Shares  for  sale  to the  Buyers  at the  Closing  pursuant  to this
Agreement  under  applicable  securities or "Blue Sky" laws of the states of the
United  States (or to obtain an exemption  from such  qualification),  and shall
provide  evidence  of any such  action so taken to the Buyers on or prior to the
Closing  Date.  The Company  shall make all filings and reports  relating to the
offer and sale of the Purchased Shares required under  applicable  securities or
"Blue Sky" laws of the states of the United States following the Closing Date.

                  (c) Listing.  The Company shall promptly secure the listing of
all of the Purchased Shares upon each national securities exchange and automated
quotation system, if any, upon which the Common Stock is then listed (subject to
official notice of issuance) and shall maintain,  so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable under the terms of the Transaction Documents.  The Company
shall  maintain the Common  Stock's  authorization  for listing on the Principal
Market.  Neither the Company nor any of its  Subsidiaries  shall take any action
which would be  reasonably  expected to result in the delisting or suspension of
the Common Stock on the  Principal  Market.  The Company  shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(c).

                  (d) Fees.  At the  Closing,  the Company  shall pay an expense
allowance of $25,000 to Smithfield  Fiduciary LLC (a Buyer) or its  designee(s),
which amount shall be withheld by such Buyer from its aggregate  Purchase  Price
at the  Closing.  The  Company  shall  be  responsible  for the  payment  of any
placement agent's fees,  financial advisory fees, or broker's commissions (other
than for  Persons  engaged  by any  Buyer)  relating  to or  arising  out of the

                                       11
<PAGE>

transactions  contemplated  hereby.  The Company  shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation,
reasonable  attorney's fees and  out-of-pocket  expenses)  arising in connection
with any claim  relating to any such  payment.  Except as otherwise set forth in
this  Agreement or in the  Transaction  Documents,  each party to this Agreement
shall bear its own expenses in connection with the sale of the Purchased  Shares
to the Buyers.

                  (e) Disclosure of Transactions and Other Material Information.
The Company shall, on or before 8:30 a.m., New York City Time, on July 15, 2004,
issue a  press  release  reasonably  acceptable  to the  Buyers  disclosing  all
material terms of the transactions  contemplated  hereby as well as the material
terms of the AoA Acquisition (the "PRESS RELEASE").  On or before 8:30 a.m., New
York Time,  on the second  Business Day  following the execution and delivery of
this  Agreement,  the Company shall file a Current Report on Form 8-K describing
the terms of the transactions  contemplated by the Transaction Documents and the
AoA Acquisition in the form required by the 1934 Act, and attaching the material
Transaction  Documents  (including,   without  limitation,  this  Agreement)  as
exhibits to such filing (including all attachments,  the "8-K FILING"). From and
after the filing of the Press  Release,  no Buyer shall be in  possession of any
material,   nonpublic   information  received  from  the  Company,  any  of  its
Subsidiaries or any of its respective officers, directors,  employees or agents,
that is not  disclosed in such Press  Release.  The Company shall not, and shall
cause each of its Subsidiaries  and its and each of their  respective  officers,
directors,  employees  and agents,  not to,  provide any Buyer with any material
nonpublic  information regarding the Company or any of its Subsidiaries from and
after the filing of the press release  referred to in the first sentence of this
Section  without  the  express  written  consent of such  Buyer.  Subject to the
foregoing,  neither the Company nor any Buyer shall issue any press  releases or
any other  public  statements  with  respect  to the  transactions  contemplated
hereby; provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with
respect to such  transactions (i) in substantial  conformity with the 8-K Filing
and  contemporaneously  therewith and (ii) as is required by applicable  law and
regulations,  including the  applicable  rules and  regulations of the Principal
Market (provided that in the case of clause (i) each Buyer shall be consulted by
the Company in connection with any such press release or other public disclosure
prior to its  release).  Without  the prior  written  consent of any  applicable
Buyer,  the  Company  shall not  disclose  the name of any Buyer in any  filing,
announcement, release or otherwise.

                  (f) Use of Proceeds.  The Company  shall use the proceeds from
the sale of the Purchased Shares for the AOA Acquisition and as set forth in the
Prospectus Supplement.

                  (g) Subsequent Registrations and Subsequent Placements.

                        (i)  Prior to June  30,  2005,  the  Company  will  not,
directly or indirectly,  offer, sell, grant any option to purchase, or otherwise
dispose of (or  announce  any offer,  sale,  grant or any option to  purchase or
other  disposition of) any of Common Stock or Common Stock Equivalents or any of
its  Subsidiaries'  equity  or  Common  Stock  Equivalents,   including  without
limitation, pursuant to a private placement, an equity line of credit or a shelf
registration  statement in accordance  with Rule 415 under the  Securities  Act,
(such offer,  sale,  grant,  disposition or announcement  being referred to as a

                                       12
<PAGE>

"SUBSEQUENT  PLACEMENT"),  unless:  (i) the Company delivers to each Purchaser a
written notice (the  "SUBSEQUENT  PLACEMENT  NOTICE") of its intention to effect
such Subsequent  Placement,  which Subsequent Placement Notice shall describe in
reasonable detail the proposed terms of such Subsequent Placement, the amount of
proceeds intended to be raised thereunder,  the Person with whom such Subsequent
Placement  is proposed  to be  effected,  and  attached to which shall be a term
sheet or similar  document  relating  thereto and (ii) such Purchaser  shall not
have  notified  the  Company by 6:30 p.m.  (New York City  time) on the  seventh
Trading Day after (but not including)  its receipt of the  Subsequent  Placement
Notice of its  willingness  to provide (or to cause its  designee  to  provide),
subject to completion of mutually acceptable documentation,  all or part of such
financing to the Company on the same terms set forth in the Subsequent Placement
Notice.  If the  Purchasers  shall  fail  to so  notify  the  Company  of  their
willingness to participate in full in the Subsequent Placement,  the Company may
effect the remaining  portion of such  Subsequent  Placement on the terms and to
the Persons set forth in the  Subsequent  Placement  Notice.  The Company  shall
provide  the  Purchasers  with a  second  Subsequent  Placement  Notice  and the
Purchasers  will again have the right of first refusal set forth in this Section
4.4(b), if the Subsequent  Placement subject to the initial Subsequent Placement
Notice  is not  consummated  for any  reason  on the  terms  set  forth  in such
Subsequent  Notice  within  45  Trading  Days  after  the  date  of the  initial
Subsequent  Placement  Notice  with  the  Person  identified  in the  Subsequent
Placement Notice. If the Purchasers  indicate a willingness to provide financing
in excess of the amount set forth in the Subsequent  Placement Notice, then each
Purchaser  will be entitled  to provide  financing  pursuant to such  Subsequent
Placement  Notice  up to an amount  equal to such  Purchaser  Percentage  of the
financing,  but the Company shall not be required to accept  financing  from the
Purchasers  in an amount in excess  of the  amount  set forth in the  Subsequent
Placement Notice.  For purposes hereof, (x) "COMMON STOCK EQUIVALENTS" means any
securities of the Company or any Subsidiary  which entitle the holder thereof to
acquire  Common  Stock at any  time,  including  without  limitation,  any debt,
preferred stock,  rights,  options,  warrants or other instrument that is at any
time  convertible  into or  exchangeable  for, or otherwise  entitles the holder
thereof to receive,  Common Stock or other securities that entitle the holder to
receive,  directly or indirectly,  Common Stock.;  (y) "TRADING DAY" means (i) a
day on which the  Common  Stock is traded  on a Trading  Market,  or (ii) if the
Common Stock is not listed on a Trading Market,  a day on which the Common Stock
is traded in the over-the-counter market, as reported by the OTC Bulletin Board,
or (iii) if the Common Stock is not quoted on the OTC Bulletin  Board,  a day on
which the Common Stock is quoted in the  over-the-counter  market as reported by
Pink Sheets LLC (formerly the National  Quotation Bureau  Incorporated)  (or any
similar organization or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i), (ii) and (iii) above,  then Trading Day shall mean a Business Day;
and (z) "PURCHASER PERCENTAGE" means, with respect to each Buyer, the percentage
equal to the  product of (x) a  fraction,  the  numerator  of which shall be the
number of  Purchased  Shares  acquired by such Buyer on the Closing Date and the
denominator  of which shall be the aggregate  number of Purchased  Shares issued
hereunder on the Closing Date. times (y) 100.

                        (ii) The provisions  contained in Sections 4(g)(i) shall
not apply to (x) a bona fide firm commitment underwritten public offering with a
nationally recognized  underwriter which generates gross proceeds to the Company
in excess of $30,000,000  (other than an "at-the-market  offering" as defined in

                                       13
<PAGE>

Rule  415(a)(4)  under the 1933 Act and  "equity  lines");  (y) the  issuance of
securities  upon the  exercise or  conversion  of any Common  Stock  Equivalents
issued by the Company prior to the date of this  Agreement;  , provided that the
terms of such Common Stock  Equivalents are not amended,  modified or changed on
or after  the date  hereof,  or (z) the grant of  options  or  warrants,  or the
issuance of  additional  securities,  under any duly  authorized  Company  stock
option, restricted stock plan or stock purchase plan in existence on the Closing
Date  (but not as to any  amendments  or other  modifications  to the  number of
shares of Common Stock issuable thereunder,  the terms set forth therein, or the
exercise price set forth therein).

         5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

                  The obligation of the Company  hereunder to issue and sell the
Purchased Shares to each Buyer at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following  conditions,  provided that
these  conditions  are for the  Company's  sole benefit and may be waived by the
Company at any time in its sole  discretion  by providing  each Buyer with prior
written notice thereof:

                        (i) Such Buyer shall have  executed  this  Agreement and
delivered the same to the Company.

                        (ii) Such Buyer shall have  delivered to the Company the
Purchase  Price for the  Purchased  Shares being  purchased by such Buyer at the
Closing (less,  in the case of Smithfield  Fiduciary  LLC, the amounts  withheld
pursuant  to Section  4(d)) by wire  transfer  of  immediately  available  funds
pursuant to the wire instructions provided by the Company.

                        (iii) The  representations  and warranties of such Buyer
shall be true and correct in all material  respects as of the date when made and
as of the Closing Date as though made at that time  (except for  representations
and  warranties  that speak as of a specific  date),  and such Buyer  shall have
performed,  satisfied and complied in all material  respects with the covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by such Buyer at or prior to the Closing Date.

         6. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.

                  The  obligation  of  each  Buyer  hereunder  to  purchase  the
Purchased Shares at the Closing is subject to the satisfaction, at or before the
Closing  Date,  of  each  of  the  following  conditions,  provided  that  these
conditions  are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole  discretion  by providing  the Company  with prior  written
notice thereof:

                        (i) The Company shall have (i) executed and delivered to
such Buyer each of the Transaction Documents, and (ii) caused the Transfer Agent
to have  electronically  delivered the Purchased  Shares being purchased by such
Buyer at the Closing pursuant to this Agreement.

                                       14
<PAGE>

                        (ii) Such Buyer shall have  received  the opinion of the
Company's counsel, dated as of the Closing Date, in a form reasonably acceptable
to the Buyers.

                        (iii)  The  Common  Stock  (I)  shall be  listed  on the
Principal Market and (II) shall not have been suspended, as of the Closing Date,
by the SEC or the  Principal  Market from  trading on the  Principal  Market nor
shall suspension by the SEC or the Principal Market have been threatened,  as of
the Closing Date,  either (A) in writing by the SEC or the  Principal  Market or
(B) by  falling  below  the  minimum  listing  maintenance  requirements  of the
Principal Market.

                        (iv) The Company  shall have  delivered  to such Buyer a
certificate,  executed  by the  Secretary  of the  Company  and  dated as of the
Closing Date, as to (i) the  resolutions  consistent  with this  transaction  as
adopted by the Company's Board of Directors in a form  reasonably  acceptable to
such Buyer,  (ii) the Certificate of  Incorporation  and (iii) the Bylaws of the
Company,  each as in  effect  at the  Closing,  in the form  attached  hereto as
Exhibit A.

                        (v) The  representations  and  warranties of the Company
shall be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for  representations  and warranties that speak
as of a specific  date) and the  Company  shall have  performed,  satisfied  and
complied in all respects with the covenants,  agreements and conditions required
by the Transaction Documents to be performed,  satisfied or complied with by the
Company  at or prior to the  Closing  Date.  Such Buyer  shall  have  received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form attached hereto as Exhibit B.

                        (vi) The Company shall have  obtained all  governmental,
regulatory or third party consents and approvals, if any, necessary for the sale
of the Purchased Shares.

                        (vii) The Registration  Statement shall be effective and
available  for the issuance and sale of the Purchased  Shares  hereunder and the
Company  shall  have  delivered  to such  Buyer the  Prospectus  and  Prospectus
Supplement as required thereunder.

                        (viii) The Company  shall have  delivered  to such Buyer
such other documents relating to the transactions contemplated by this Agreement
as such Buyer or its counsel may reasonably request.

         7.  TERMINATION.  In the event that the Closing shall not have occurred
with respect to a Buyer on the Closing Date due to the Company's or such Buyer's
failure to satisfy the  conditions  set forth in Sections 5 and 6 above (and the
nonbreaching  party's  failure  to waive  such  unsatisfied  condition(s)),  the
nonbreaching  party  shall  have the option to  terminate  this  Agreement  with
respect to such  breaching  party at the close of business on such date  without
liability  of any  party to any other  party;  provided,  however,  that if this
Agreement is  terminated  pursuant to this  Section 7, the Company  shall remain
obligated  to reimburse  the Buyers for the  expenses  described in Section 4(d)
above.

                                       15
<PAGE>

         8.       MISCELLANEOUS.

                  (a) Governing  Law;  Jurisdiction;  Jury Trial.  All questions
concerning the construction,  validity,  enforcement and  interpretation of this
Agreement  shall be  governed  by the  internal  laws of the  State of New York,
without  giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other  jurisdictions)  that would cause
the  application  of the laws of any  jurisdictions  other than the State of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts  sitting in The City of New York,  Borough of Manhattan
for the adjudication of any dispute hereunder or in connection  herewith or with
any transaction  contemplated hereby or discussed herein, and hereby irrevocably
waives,  and agrees not to assert in any suit,  action or proceeding,  any claim
that it is not personally  subject to the  jurisdiction of any such court,  that
such suit, action or proceeding is brought in an inconvenient  forum or that the
venue of such  suit,  action  or  proceeding  is  improper.  Each  party  hereby
irrevocably  waives  personal  service of process and consents to process  being
served in any such suit,  action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient  service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner  permitted by law. EACH PARTY HEREBY  IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE,  AND AGREES NOT TO  REQUEST,  A JURY TRIAL FOR THE
ADJUDICATION  OF ANY DISPUTE  HEREUNDER OR IN CONNECTION  WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

                  (b)  Counterparts.  This  Agreement  may be executed in two or
more identical  counterparts,  all of which shall be considered one and the same
agreement and shall become effective when  counterparts have been signed by each
party and  delivered to the other  party;  provided  that a facsimile  signature
shall be  considered  due  execution  and shall be  binding  upon the  signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

                  (c)  Headings.   The  headings  of  this   Agreement  are  for
convenience   of   reference   and  shall  not  form  part  of,  or  affect  the
interpretation of, this Agreement.

                  (d) Severability.  If any provision of this Agreement shall be
invalid   or   unenforceable   in   any   jurisdiction,   such   invalidity   or
unenforceability  shall  not  affect  the  validity  or  enforceability  of  the
remainder  of  this   Agreement  in  that   jurisdiction   or  the  validity  or
enforceability of any provision of this Agreement in any other jurisdiction.

                  (e) Entire Agreement;  Amendments.  This Agreement  supersedes
all other prior oral or written  agreements  between the  Buyers,  the  Company,
their  Affiliates and Persons acting on their behalf with respect to the matters
discussed  herein,  and this  Agreement and the  instruments  referenced  herein
contain  the entire  understanding  of the parties  with  respect to the matters
covered  herein and therein  and,  except as  specifically  set forth  herein or
therein,  neither the Company nor any Buyer makes any representation,  warranty,
covenant or  undertaking  with  respect to such  matters.  No  provision of this
Agreement may be amended  other than by an  instrument in writing  signed by the

                                       16
<PAGE>

Company and the holders of Purchased Shares  representing at least a majority of
the amount of the Purchased Shares, or, if prior to the Closing Date, the Buyers
listed on the  Schedule  of Buyers as being  obligated  to  purchase  at least a
majority  of the amount of the  Purchased  Shares.  No  provision  hereof may be
waived other than by an instrument  in writing  signed by the party against whom
enforcement is sought.  No such amendment  shall be effective to the extent that
it  applies  to less  than  all of the  holders  of the  Purchased  Shares  then
outstanding. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or  modification  of any provision of any of the Transaction
Documents unless the same consideration also is offered to all of the parties to
the Transaction  Documents or holders of Purchased  Shares,  as the case may be.
The Company has not, directly or indirectly, made any agreements with any Buyers
relating to the terms or  conditions  of the  transactions  contemplated  by the
Transaction Documents except as set forth in the Transaction Documents.

                   (f)  Notices.  Any  notices,   consents,   waivers  or  other
communications  required  or  permitted  to be  given  under  the  terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt,  when delivered  personally;  (ii) upon receipt, when sent by facsimile
(provided   confirmation  of  transmission  is  mechanically  or  electronically
generated  and kept on file by the sending  party);  or (iii) one  Business  Day
after deposit with an overnight courier service, in each case properly addressed
to the party to receive the same.  The addresses and facsimile  numbers for such
communications shall be:

                  If to the Company:

                  Arotech Corporation
                  250 West 57th Street
                  Suite 310
                  New York, New York 10107
                  Facsimile No.: (212) 258-3281
                  Telephone No.: (212) 258-3222
                  Attn.:  Chief Executive Officer

                  With a copy to:

                  Electric Fuel (E.F.L.) Ltd.
                  One HaSolela Street, POB 641
                  Western Industrial Park
                  Beit Shemesh 99000, Israel
                  Facsimile No.: 011-972-2-990-6688
                  Telephone No.: 011-972-2-990-6623
                  Attn.: General Counsel

If to a Buyer, to its address and facsimile  number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers,

                  With a copy (for informational purposes only) to:

                                       17
<PAGE>

                  Schulte Roth & Zabel LLP
                  919 Third Avenue
                  New York, New York 10022
                  Facsimile No.:   (212) 593-5955
                  Telephone No.:  (212) 756-2000
                  Attn.: Eleazer Klein, Esq.

or to such other address and/or facsimile number and/or to the attention of such
other Person as the  recipient  party has  specified by written  notice given to
each  other  party  five (5) days  prior to the  effectiveness  of such  change.
Written  confirmation  of receipt  (A) given by the  recipient  of such  notice,
consent,  waiver or other  communication,  (B)  mechanically  or  electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile  number  and an image of the first  page of such  transmission  or (C)
provided  by an  overnight  courier  service  shall be  rebuttable  evidence  of
personal  service,  receipt by facsimile  or receipt  from an overnight  courier
service in accordance with clause (i), (ii) or (iii) above, respectively.

                  (g)  Successors and Assigns.  This Agreement  shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Purchased Shares. The Company shall not
assign this Agreement or any rights or obligations  hereunder  without the prior
written  consent of the  holders of  Purchased  Shares  representing  at least a
majority  of  the  number  of the  Purchased  Shares,  including  by  merger  or
consolidation.  A Buyer may assign some or all of its rights  hereunder  without
the consent of the Company, in which event such assignee shall be deemed to be a
Buyer hereunder with respect to such assigned rights.

                  (h) No Third Party  Beneficiaries.  This Agreement is intended
for the benefit of the parties hereto and their respective  permitted successors
and  assigns,  and is not for the  benefit of, nor may any  provision  hereof be
enforced by, any other Person.

                  (i)  Survival.  Unless  this  Agreement  is  terminated  under
Section 7, the  representations  and  warranties  of the  Company and the Buyers
contained  in  Sections  2 and 3, the  agreements  and  covenants  set  forth in
Sections 4 and 8 shall survive the Closing. Each Buyer shall be responsible only
for its own representations, warranties, agreements and covenants hereunder.

                  (j) Further  Assurances.  Each party shall do and perform,  or
cause to be done and  performed,  all such  further  acts and things,  and shall
execute and deliver all such other  agreements,  certificates,  instruments  and
documents,  as any other party may reasonably  request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

                  (k)  Indemnification.  (i) In  consideration  of each  Buyer's
execution and delivery of the Transaction  Documents and acquiring the Purchased
Shares  thereunder  and in addition to all of the  Company's  other  obligations
under the Transaction Documents,  the Company shall defend,  protect,  indemnify
and hold harmless  each Buyer and each other holder of the Purchased  Shares and
all of their shareholders, partners, members, officers, directors, employees and

                                       18
<PAGE>

direct or indirect  investors and any of the foregoing  Persons' agents or other
representatives  (including,  without  limitation,  those retained in connection
with  the  transactions  contemplated  by  this  Agreement)  (collectively,  the
"INDEMNITEES")  from and against any and all actions,  causes of action,  suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith  (irrespective of whether any such Indemnitee is a party to
the  action  for which  indemnification  hereunder  is  sought),  and  including
reasonable  attorneys' fees and disbursements  (the "INDEMNIFIED  LIABILITIES"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any  misrepresentation  or breach of any  representation or warranty made by the
Company in the  Transaction  Documents or any other  certificate,  instrument or
document  contemplated  hereby  or  thereby,  (b) any  breach  of any  covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate,  instrument or document contemplated hereby or thereby or
(c) any cause of action,  suit or claim brought or made against such  Indemnitee
by a third party  (including for these  purposes a derivative  action brought on
behalf of the Company) and arising out of or resulting  from (i) the  execution,
delivery,  performance or enforcement of the Transaction  Documents or any other
certificate,  instrument or document  contemplated  hereby or thereby,  (ii) any
transaction  financed  or to be  financed  in  whole  or in  part,  directly  or
indirectly,  with the proceeds of the issuance of the Purchased Shares, or (iii)
the status of such Buyer or holder of the Purchased Shares as an investor in the
Company.  To the extent  that the  foregoing  undertaking  by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and  satisfaction  of each of the Indemnified  Liabilities  which is
permissible under applicable law.

                        (ii) Promptly after receipt by an Indemnitee  under this
Section  8(k)  of  notice  of the  commencement  of  any  action  or  proceeding
(including  any  governmental  action or  proceeding)  involving an  Indemnified
Liability,  such  Indemnitee  shall, if a claim for  indemnification  in respect
thereof is to be made against any  indemnifying  party under this Section  8(k),
deliver to the indemnifying party a written notice of the commencement  thereof,
and the  indemnifying  party shall have the right to participate in, and, to the
extent the indemnifying  party so desires,  jointly with any other  indemnifying
party similarly  noticed,  to assume control of the defense thereof with counsel
mutually  satisfactory to the indemnifying  party and the Indemnitee;  provided,
however,  that an Indemnitee shall have the right to retain its own counsel with
the fees and  expenses of not more than one counsel  for such  Indemnitee  to be
paid by the indemnifying party, if, in the reasonable opinion of the Indemnitee,
the  representation by such counsel of the Indemnitee and the indemnifying party
would be inappropriate  due to actual or potential  differing  interests between
such  Indemnitee  and  any  other  party  represented  by such  counsel  in such
proceeding.  Legal counsel  referred to in the  immediately  preceding  sentence
shall be selected by the Investors  holding at least a majority of the Purchased
Shares.  The Indemnitee  shall  cooperate fully with the  indemnifying  party in
connection  with any  negotiation  or defense of any such action or  Indemnified
Liabilities  by the  indemnifying  party and shall  furnish to the  indemnifying
party all  information  reasonably  available to the Indemnitee  that relates to
such action or Indemnified  Liabilities.  The indemnifying  party shall keep the
Indemnitee  fully  apprised  at all times as to the status of the defense or any
settlement  negotiations  with respect thereto.  No indemnifying  party shall be
liable for any settlement of any action,  claim or proceeding  effected  without
its prior written consent, provided,  however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying party

                                       19
<PAGE>

shall, without the prior written consent of the Indemnitee,  consent to entry of
any judgment or enter into any  settlement  or other  compromise  which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to  such  Indemnitee  of a  release  from  all  liability  in  respect  to  such
Indemnified Liabilities or litigation. Following indemnification as provided for
hereunder,  the  indemnifying  party  shall be  subrogated  to all rights of the
Indemnitee with respect to all third parties,  firms or corporations relating to
the  matter for which  indemnification  has been  made.  The  failure to deliver
written  notice  to the  indemnifying  party  within  a  reasonable  time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnitee  under this Section 8(k),  except to the extent that
the indemnifying party is prejudiced in its ability to defend such action.

                        (iii) The indemnification  required by this Section 8(k)
shall be made by periodic  payments of the amount  thereof  during the course of
the  investigation  or defense,  as and when bills are  received or  Indemnified
Liabilities are incurred.

                        (iv) The indemnity  agreements contained herein shall be
in  addition  to (i) any  cause of  action or  similar  right of the  Indemnitee
against  the  indemnifying  party  or  others,  and  (ii)  any  liabilities  the
indemnifying party may be subject to pursuant to the law.

                  (l)  No  Strict  Construction.   The  language  used  in  this
Agreement  will be deemed to be the  language  chosen by the  parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.

                  (m)  Remedies.  Each  Buyer and each  holder of the  Purchased
Shares shall have all rights and remedies set forth in the Transaction Documents
and all rights and  remedies  which such  holders  have been granted at any time
under any other  agreement  or contract and all of the rights which such holders
have under any law.  Any Person  having any rights  under any  provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other  security),  to  recover  damages by reason of any breach of any
provision of this  Agreement  and to exercise  all other rights  granted by law.
Furthermore,  the Company recognizes that in the event that it fails to perform,
observe,  or  discharge  any or all of its  obligations  under  the  Transaction
Documents,  any remedy at law may prove to be  inadequate  relief to the Buyers.
The Company therefore agrees that the Buyers shall be entitled to seek temporary
and  permanent  injunctive  relief in any such case  without  the  necessity  of
proving actual damages and without posting a bond or other security.

                  (n) Rescission and Withdrawal Right.  Notwithstanding anything
to the contrary  contained in (and without  limiting any similar  provisions of)
the  Transaction  Documents,  whenever  any Buyer  exercises a right,  election,
demand or option  under a  Transaction  Document and the Company does not timely
perform its related  obligations within the periods therein provided,  then such
Buyer may rescind or  withdraw,  in its sole  discretion  from time to time upon
written notice to the Company, any relevant notice,  demand or election in whole
or in part without prejudice to its future actions and rights.

                                       20
<PAGE>

                  (o) Payment Set Aside.  To the extent that the Company makes a
payment or  payments  to the Buyers  hereunder  or  pursuant to any of the other
Transaction  Documents or the Buyers enforce or exercise their rights  hereunder
or thereunder,  and such payment or payments or the proceeds of such enforcement
or exercise or any part  thereof are  subsequently  invalidated,  declared to be
fraudulent  or  preferential,  set aside,  recovered  from,  disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including,  without limitation,  any
bankruptcy  law, state or federal law, common law or equitable cause of action),
then to the  extent  of any such  restoration  the  obligation  or part  thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such  payment had not been made or such  enforcement  or setoff
had not occurred.

                  (p) Independent Nature of Buyers'  Obligations and Rights. The
obligations  of each Buyer under any  Transaction  Document  are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the  performance of the  obligations of any other Buyer under any
Transaction  Document.  Nothing  contained  herein or in any  other  Transaction
Document,  and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to  constitute  the  Buyers as a  partnership,  an  association,  a joint
venture or any other kind of entity, or create a presumption that the Buyers are
in any way acting in concert or as a group with respect to such  obligations  or
the transactions  contemplated by the Transaction Documents. Each Buyer confirms
that it has  independently  participated  in the  negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors.  Each Buyer
shall be entitled to  independently  protect and enforce its rights,  including,
without limitation, the rights arising out of this Agreement or out of any other
Transaction  Documents,  and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose.

                            [SIGNATURE PAGE FOLLOWS]

                                       21
<PAGE>

         IN  WITNESS  WHEREOF,  each Buyer and the  Company  have  caused  their
respective  signature  page  to the  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

COMPANY:

AROTECH CORPORATION

By:
   --------------------------------------
   Name:  Robert S. Ehrlich
   Title:   Chief Executive OfficerExhibit 10.1

                   LEASE AND SERVICES AGREEMENT (UKM-473/2001)

Consummated between the Hungarian Academy of Sciences Csilleberc research park
developer KFKI Uzemelteto Kft. (Budapest, XII. Konkoly Thege Miklos u 29-33,
Corporate ID#: 01-09-161645, Managing Director: Ferenc Szlavik, Bank account No:
OKHB 1042166 21625048 00000000), from now on the "LEASER" and 10charge Kft (1121
Budapest, Konkoly Thege Miklos ut 29-33 represented by: Jozsef Marinka Toth,
Corporate ID#: 01-09-696408 Tax No: 12643819-2-46 Bank account No: K&H
10400126-01208380) furthermore as LESSEE regarding building No 6. of the KFKI
the premise as per the following conditions.

                             1. SUBJECT OF CONTRACT

1.1   LESSOR rents rooms and corresponding communal areas listed in Appendix 1
      for usage by LESSEE together with services listed in Appendix 2

1.2   LESSOR offers extended services listed in Appendix 3 for extra cost based
      on actual usage

                      2. RIGHTS AND OBLIGATIONS OF LESSOR

2.1   Obligation of LESSOR is to maintain and service utilities relating to
      rooms listed in Appendix 1, and to deliver services listed in Appendix 2
      and 3

2.2   LESSOR guarantees proper conditions - as set forth in MSZ (Hungarian
      Standards) - for work, fire, radiation, safety and security issues for the
      rooms listed in Appendix 1

2.3   LESSOR has the right to check proper usage - primarily relating to fire,
      radiation and security issues - and enforce reimbursement for damages
      caused by improper use.

2.4   LESSOR has the right to terminate this contract without reason by giving
      12 months notice. In case of lease termination LESSEE has no right for any
      further property use.

2.5   Outside of the scope of standard termination, LESSOR has the right to
      prematurely terminate this contract if any of the following conditions
      exist:

      -     LESSEE has not paid his/her invoices regarding rent and services
            within 30 days of due date.

      -     LESSEE is using rooms and territories contra-contract and/or non
            properly

      -     LESSEE breaks rules regarding life, fire, and radiation safety, or
            conduct acts against private property

      -     LESSEE initiates building remodeling works without written consent
            from LESSOR

Extraordinary termination is immediate. In case of extraordinary termination by
LESSOR, LESSEE must give back all rooms and territories to LESSOR in proper
condition within 15 days of notice. All unpaid invoices are due on the day of
relinquishing property.

LESSOR has mortgage rights on LESSEE's properties up to the amount due by
LESSEE.

                                       1
<PAGE>

                      3. RIGHTS AND OBLIGATIONS OF LESSEEE

3.1   LESSEE shall use properties listed in Appendix 1 properly and as directed
      and stated in contract, and shall pay rent and utilities as described in
      Appendix 1 and 3.

3.2   LESSEE's obligation is to keep all regulations regarding work-, fire-,
      security-, radiation-, and maintenance safety issues and all internal
      maintenance regulations. LESSEE's obligation is to make sure all employees
      obey these rules too.

3.3   LESSEE acknowledges that the usage right does not include the right to
      internally remodel room. These types of work may be done only with the
      advance written consent of LESSOR, and based on permits received with the
      permission of LESSOR.

Internal renovation works - at the value agreed upon on permit date - may be
deducted from rent in a separate agreement, but the maximum deduction may not be
higher than 50% of the rent. Value increasing works do not constitute a right of
ownership.

3.4   LESSEE acknowledges, that rooms and territories may not be given to third
      parties either in full or part time. Any cooperation, entrepreneurial or
      other contract that requires third parties to spend considerable time
      (conduct work) on the premises may be signed only with the written consent
      of the LESSOR. For any contract of this type, LESSEE must ask the
      permission of LESSOR.

3.5   LESSEE has the right to ask for reimbursement for damages caused by
      LESSOR's services being not proper quality or not delivered and may
      terminate the contract immediately if non-delivery of these services is
      maintained for 30 day after written notice to LESSOR. In case LESSOR is
      not responsible for service level decrease - due to reasons outside of
      LESSOR's control - LESSEE may not ask for reimbursement or for damages,
      nor can it immediately terminate the contract.

3.6.  In case a condition arise that preventing normal use by fault of LESSOR,
      LESSOR must cease the cause in the shortest possible time.

      In case LESSOR does not terminate cause within 15 days of written notice,
      LESSEE may at its discretion - in case the amount in question is more than
      100 000 Forints - request according to point 3.3:

      -     Termination of the problem or reimbursement of service at LESSOR's
            expense

      -     ask for new, temporary premises for immediate use

3.7   LESSEE may terminate the lease of any independently usable room or
      territory with 2 month written notice, or may terminate this contract with
      3 months written notice. LESSEE's payment duties are terminated with the
      termination of the lease when room(s) are returned in usable condition. In
      case of late handover LESSEE shall pay 3 times of the normal fee.

                        4. PAYMENT METHOD AND DUE DATES

4.1   Rent for the territories listed in Appendix 1 and services listed in
      Appendix 2 is 2041 HUF per square meter, excluding VAT, for the year 2001.
      Revision of the rent is conducted yearly, on the 1st of January, and
      LESSOR may modify rent fee maximum by the consumer price index published
      by KSH (Hungarian Statistical Office).

                                       2
<PAGE>

4.2   LESSEE shall pay (over the amount in point 4.1) at the time of signing, as
      a one time entrance fee, 408,232 HUF +VAT to the bank account of LESSOR
      which amount is for the LESSOR, and may not be reimbursed under any
      circumstances, ad it may not be used to decrease payments.

4.3   LESSOR states that value-adding renovation works conducted by ISSO Kft.
      with the consent of LESSOR, can be deducted by LESSEE up to the amount of
      2,784,000 HUF + VAT. This will be consisting of: LASSOR shall pay from the
      1st of May 2001 only 50% of the fee in 4.1 until the above mentioned
      2,784,000 HUF + VAT is reached. In case LESSEE reduces rented space, the
      time is increased proportionally. In case the contract is terminated
      before the amount is reached LESSEE may not be reimbursed for the
      remaining amount unless the cause of the termination is the ordinary
      termination by LESSOR.

4.4   LESSOR invoices LESSEE by the 20th of the each month, payment for which is
      due in 30 days of issue. First day of rent is May 1st 2001.

4.5   LESSEE shall pay fees for services used and listed in Appendix 3 against
      an invoice of LESSOR within 30 days of issue. LESSOR will invoice LESSEE
      only after receiving invoices for the services from any third parties.

4.6   In case of late payment LESSEE shall pay a late payment fee that is twice
      of the current base rate.

                              5. TERM OF CONTRACT

5.1   This contract is unlimited in time and is effective when signed.

5.2   This contract is valid with Appendixes 1-3

                         6. OTHER TERMS AND CONDITIONS

6.1   LESSEE shall give back any space in the condition received in with changes
      approved as described in 3.3 and with usage do to natural use. Parties may
      disregard this rule by mutual agreement.

6.2   Parties state that any information relating to knowledge, business matter,
      invoices, financial transactions, contracts and agreements are handled as
      confidential and will not disclose this kind of information to third
      parties.

6.2   Any matters not described here are ruled by the Hungarian Civil Code.

Budapest, 2001. April 28.
/s/                                               /s/ Jozsef Marinka Toth
-------------------------                         ------------------------------
LESSOR                                            LESSEE
KFKI Uzemelteto Kft                               ISSO R&D Kft
1121 BP Konkoly Thege ut 29-33                    1121 BP Konkoly Thege ut 29-33
P.O. Box H1525 BP                                 T: 392-2772
T: 395-9165                                       Fax: 392-2773
Fax: 395-9299

                                       3
<PAGE>

Appendix 1

LESSOR rents to LESSEE the following room in Building 6 of the Hungarian Academy
of Sciences Csilleberc research park

1.    Room 64 comprising 17.5 square meters

2.    Room 65 comprising 17.5 square meters

3.    Room 66 comprising 30 square meters

4.    Room 67 comprising 15 square meters

LESSEE also has access to communal areas such as rest room facilities and
smoking hall located on the same floor of Building 6 as rented room.

Appendix 2

LESSOR offers the following services to LESSEE as part of the rental agreement:

      1.    Availability of electricity in all rooms

      2.    Availability of running water in select rooms

      3.    Lighting in all rooms

      4.    Winter heating in all rooms

      5.    Availability of KFKI campus internal computer network in all rooms

Appendix 3

As added service, LESSOR offers the following services to LESSEE for additional
cost:

1. Availability of Internet access for extra charge as billed by third party
service provider on a monthly basis.

                                       4

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