Document:

ex10_4.htm

    
      

    

     

    Exhibit 10.4

    

      STOCK PLEDGE
AGREEMENT

       

       

      STOCK PLEDGE AGREEMENT, dated
April 10, 2008, by and between POSITRON CORPORATION, a
publicly-owned Texas corporation (the “Pledgor”) and IMAGIN MOLECULAR CORPORATION,
a publicly-owned Delaware corporation (the “Secured Party”).

       

      W I T N E S S E T H

       

      WHEREAS, simultaneously with
the execution of this Agreement, Pledgor and Secured Party have entered into a
Promissory Note in the principal amount of $1,346,000 to formalize previous
advances made by the Secured Party to the Pledgor (the “Note”);

       

      WHEREAS, to induce the Secured
Party to make the Note to Pledgor, Pledgor has agreed to pledge, the in favor of
Secured Party, the security set forth herein, pursuant to the terms and
conditions of this Agreement; and

       

      NOW, THEREFORE, in
consideration of the premises and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the Pledgor hereby agrees as
follows:

       

      1.           Defined
Terms.  As used herein, the following terms shall have the
following meanings:

       

      “Agreement” shall mean
this Stock Pledge Agreement, as the same may from time to time be amended or
supplemented.

       

      “Pledged Securities”
shall mean the 100,000,000 shares of the Pledgor’s common stock, par value $0.01
per share, together with the certificates therefor, and any additional shares,
certificates or other property received pursuant to Section 3 of this
Agreement.

       

      “Security Interest”
shall have the meaning provided in Section 2(a) of this Agreement.

       

      “UCC” shall have the
meaning provided in Section 5(c) of this Agreement.

       

      2.           Pledge.

       

      (a)         As
security for the full payment and performance of the obligations under the Note,
the Pledgor does hereby pledge, assign, hypothecate, mortgage, transfer and
deliver to the Secured Party all of their rights and interest in and to the
Pledged Securities (together with appropriate undated, medallion guaranteed
stock powers duly executed in blank) and hereby grants to the Secured Party, as
collateral security for the payment and performance when due of all the
obligations under the Note, a continuing first priority security interest in the
Pledged Securities, together with all additions thereto, substitutions and
replacements thereof (the “Security Interest”).

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      (b)         The
Pledgor herewith deposits with the Secured Party, and the Secured Party
acknowledges receipt of, certificates representing the Pledged
Securities.  The Secured Party hereby accepts delivery of the Pledged
Securities and shall hold the Pledged Securities pursuant to this
Agreement.  The certificates representing the Pledged Securities shall
be accompanied by undated stock powers endorsed in blank for
transfer.

       

      3.           Stock Dividends,
Distributions, etc.  Subject to Section 5 of this Agreement,
if, while this Agreement is in effect, the Pledgor shall become entitled to
receive any shares of stock (including, without limitation, a distribution in
connection with any reclassification, increase or reduction of capital or in
connection with any reorganization), or any option or right to acquire shares of
stock, in substitution of, or in exchange for, any shares of Pledged Securities,
or shall receive any stock dividend with respect to any shares of Pledged
Securities, the Pledgor agrees to pledge the same as additional collateral
security for the obligations under the Note, such shares shall become part of
the Pledged Securities, the Pledgor shall deposit with the Secured Party the
certificates representing such shares (together with appropriate undated stock
powers duly executed in blank), and the Secured Party shall hold such additional
shares of Pledged Securities pursuant to this Agreement.  Any sums
paid upon or in respect of the Pledged Securities upon the recapitalization,
reorganization, liquidation or dissolution of the issuer thereof shall be paid
over to the Secured Party, as additional collateral security for the payment of
the obligations under the Note.

       

      4.           Representations and
Warranties.  The Pledgor hereby represents and warrants
that:

       

      (a)         Except
for the security interest granted to the Secured Party pursuant to this
Agreement, the Pledgor is the sole owner of the Pledged Securities, having good
and valid title thereto, free and clear of any and all liens, claims,
encumbrances, security interests, attachments, charges, rights or equitable
rights of any other persons.

       

      (b)         All
books, records and documents relating to the Security Interest are genuine, true
and correct and in all respects what they purport to be.

       

      (c)         The
security interest granted to the Secured Party pursuant to this Agreement
constitutes and creates a valid and continuing and first, prior and perfected
lien on and first security interest in the Security Interest in favor of the
Secured Party.

       

      (d)         The
Pledged Securities delivered to the Secured Party pursuant to this Agreement are
fully paid and is non-assessable as of the date of issuance. There are no
options, warrants, convertible securities or other securities exchangeable,
convertible or issuable into any of the Pledged Securities or that give the
holder thereof any rights, directly or indirectly, to any of the Pledged
Securities.

       

      5.           Covenants and
Agreements.  The Pledgor hereby agrees that, so long as the
Note has not been terminated, the Pledgor shall:

       

      (a)         Defend
the Security Interest against all claims and demands of all Persons (other than
the Secured Party) at any time claiming the same or any interest
therein.

       

      
        
          
             

          

          
            2

            
              

            

          

          
             

          

        

      

      

      (b)         Furnish
to the Secured Party such information concerning the Security Interest as the
Secured Party may from time to time reasonably request, and will allow the
Secured Party to inspect and copy, or will furnish the Secured Party with copies
of, all records reasonably requested by the Secured Party.

       

      (c)         At
any time and from time to time, upon the request of the Secured Party and at the
expense of the Pledgor promptly execute and deliver any and all such further
instruments and  documents and will cause such opinions of counsel to
be delivered and will take such further action as may be deemed necessary or
desirable in the reasonable discretion of the Secured Party to obtain, maintain
and perfect the security interest granted hereby, including, without limitation,
the provision of all instruments and documents reasonably necessary to perfect
the security interest granted hereby under Article 8 of Uniform Commercial Code
as in effect in the State of Texas (the “UCC”), and execute and deliver one or
more proxies, powers of attorney, orders, notices, statements, agreements or
other writings.

       

      (d)         Not
sell, assign, transfer, exchange, or otherwise dispose of, or grant any option
with respect to, the Pledged Securities, or create, incur or permit to exist any
adverse claim or Lien with respect to any of the Pledged Securities, or any
interest therein, or any proceeds thereof, except for the security interest
provided for by this Agreement.

       

      (e)         Require
the Secured Party to present, send or file any claim or notices, perform any
services, exercise any rights of collection, enforcement, conversion or
exchange, vote, pay for any insurance, pay any taxes or other charges, make any
demand, make any inquiry as to the nature or sufficiency of any payment received
by them or take any action of any kind in connection with the management
thereof, and the Secured Party's only duty with respect thereto shall be to use
reasonable care in the custody and preservation of the Security Interest while
the Security Interest is in its actual possession, which shall not include any
steps necessary to preserve rights against prior or  third
parties.

       

      (f)          File,
record, make, execute and deliver all such acts, deeds, things, notices and
instruments as may be reasonably necessary or desirable to vest in and assure to
the Secured Party a continuing first priority security interest in and to the
collateral and the enforcement of, and giving effect to, the rights, remedies
and powers hereunder.

       

      (g)         In
the event that all or any part of the securities constituting the Security
Interest are lost, destroyed or wrongfully taken while such securities are in
the possession of the Secured Party, cause the issuance of new securities in
place of the lost, destroyed or wrongfully taken securities upon request
therefor by the Secured Party without the necessity of the provision by the
Secured Party of any indemnity bond or other security, other than the Secured
Party's agreement of indemnity therefor.

       

      (h)         Not
redeem, or permit the redemption, of any part of the Security Interest, or sell
or permit the sale or other transfer of any of the Pledged
Securities.

       

      (i)          Not
declare, or permit the declaration of, any dividends on or make any distribution
in respect of the Pledged Securities, or purchase, redeem or acquire for value
any shares of the Pledged Securities.

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      (j)           Not
take any action which the Secured Party may reasonably request in order for the
Secured Party to obtain and enjoy the full rights and benefits granted to it by
this Agreement and the Note.

       

      6.           Voting
Rights.  The Pledgor has classified the Pledged Securities as
“issued but not outstanding”.  However, unless and until an Event of
Default shall have occurred and be continuing, the Pledgor shall retain the
right to vote the Pledged Securities and to give consents, waivers and
ratifications in respect of the Pledged Securities to the extent same
exist.  Once an Event of Default shall have occurred and so long as it
is continuing, the Secured Party shall have the right to vote the Pledged
Securities and to give consents, waivers and ratification in respect of the
Pledged Securities.

       

      7.           Events of
Default.  The occurrence of an Event of Default under the Note
shall constitute an Event of Default hereunder.

       

      8.           Rights and Remedies Upon an
Event of Default.  If an Event of Default shall have occurred
and be continuing, subject to the receipt of all required regulatory
approvals:

       

      (a)         The
Secured Party shall, after giving written notice to the Pledgor specifying the
action to be taken, register any or all shares of the Pledged Securities held by
the Secured Party in the name of the Secured Party.

       

      (b)        
The Secured Party may demand, sue for, collect or make any compromise or
settlement the Secured Party deems suitable in respect of the Pledged Securities
held by it hereunder.

       

      (c)         The
Secured Party shall have all of the rights and remedies with respect to the
Pledged Securities of a secured party under the UCC.

       

      (d)         The
Secured Party may, upon fifteen (15) days prior written notice to the Pledgor of
the time and place, with respect to the Pledged Securities, sell, lease, assign
or otherwise dispose of all or any of such Pledged Securities, at such place or
places as the Secured Party deems best, and for cash or on credit for future
delivery (without thereby assuming any credit risk), at public or private sale,
without demand of performance or notice of intention to erect any such
disposition or of time or place thereof (except such notice as is required
hereunder or by applicable statute and cannot be waived) and the Secured Party
or anyone else may be the purchaser, lessee, assignee or recipient of any or all
of the Pledged Securities so disposed of at public sale (or, to the extent
permitted by law, at any private sale), and thereafter hold the same absolutely,
free from any claim or right of whatsoever kind, including any equity of
redemption, of the Pledgor, any such demand, notice or right and equity being
hereby expressly waived and released.  The net proceeds of any sale of
Pledged Securities pursuant to this Section 8 shall be applied first to the
repayment of the outstanding principal and accrued interest under the Note and
any reasonable costs and expenses of Secured Party (including attorney's fees,
costs and disbursements) incurred by Secured Party in enforcing its rights under
this Agreement and only after so applying such net proceeds and after such
payment need the Secured Party account for the surplus, if any, to the Pledgor,
or to whomsoever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction my direct.

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      9.           Private Sale and Compliance with
Law.

       

      (a)         The
Secured Party shall incur no liability as a result of the sale of the Pledged
Securities, or any part thereof, at any private sale conducted in a commercially
reasonable manner.  The Pledgor hereby waives any claim against the
Secured Party arising by reason of the fact that the price at which the Pledged
Securities may have been sold at such a private sale conducted in a commercially
reasonable manner was less than the price which might have been obtained at a
public sale or was less than the aggregate amount due under the Note, even if
the Secured Party accepts the first offer received and does not offer the
Pledged Securities to more than one offeree.

       

      (b)         The
Pledgor agrees that in any sale of any of the Pledged Securities whenever an
Event of Default shall have occurred and be continuing, the Secured Party is
hereby authorized to comply with any limitation or restriction in connection
with such sale as it may be advised by counsel is necessary in order to avoid
any violation of applicable law (including, without limitation, compliance with
such procedures as may restrict the number of prospective bidders and purchasers
or require that such prospective bidders and purchasers be persons who will
represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or resale of such Pledged
Securities), or in order to obtain any required approval of the sale or of the
purchaser by any governmental regulatory authority or official, and the Pledgor
further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall the Secured Party be liable or accountable to the Pledgor for any
discount allowed by the reason of the fact that such Pledged Securities is sold
in compliance with any such limitation or restriction.

       

      10.         Retention of
Collateral.  Notwithstanding any provision of this Agreement to
the contrary, the Secured Party may in its discretion retain all or a portion of
the Security Interest in satisfaction of any or all due and payable obligations
under the Note.  The portion of the Security Interest that may in its
discretion be retained by the Secured Party in satisfaction of such obligations
shall be that portion having a fair market value or cash value, as applicable,
equal to the amount of such obligations at the time such public or private sale
would have been held.  Such fair market value or cash value, as
applicable, shall be determined jointly by the Pledgor and the Secured Party,
and the parties hereby agree to cooperate in such determination.  In
the event that the parties are unable to agree on such fair market value or cash
value, as applicable, it shall be determined by a recognized actuarial or
accounting firm jointly selected by the Pledgor and the Secured
Party.  All expenses of such determination, including without
limitation the fees and expenses of such actuarial or accounting firm, shall he
borne by the Pledgor.

       

      11.         Further
Assurances.  The Pledgor agrees that at any time and from time
to time upon the written request of the Secured Party, it will execute and
deliver such further documents and do such further acts and things as the
Secured Party may reasonably request in order to affect the purposes of this
Agreement.

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      12.         No Waiver; Cumulative
Remedies.  The Secured Party shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder and no waiver shall be valid unless in writing, and then only to the
extent therein set forth.  A waiver by the Secured Party of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Secured Party would otherwise have on any future
occasion.  No failure to exercise nor any delay in exercising on the
part of the Secured Party of any right, power or privilege hereunder, shall
operate as a waiver thereof by the Secured Party; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege.

       

      13.         Notices.  All
communications, notices, instructions or demands given under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
to, or on the third business day after the same is mailed by prepaid registered
or certified mail addressed to, or when sent by facsimile to, the party for whom
intended, as follows, or to such other address as may be furnished by such party
by notice in the manner provided herein:

       

      
        	
                 
      

              	
                To
      the Pledgor:

              	
                Positron
      Corporation

              

      

      1304
Langham Creek Drive, #300

      Houston,
Texas 77084

      Fax:
(282) 492-2961

      

      
        	
              	
                To
      the Secured Party:

              	
                Imagin
      Molecular Corporation

              

      

      104 W.
Chestnut Street, #215

      Hinsdale,
Illinois 60521

      Fax:
(630) 371-5584

      

      
        	
                 
      

              	
                With
      a Copy to:

              	
                Peter
      Campitiello, Esq.

              

      

      Tarter,
Krinsky & Drogin, LLP

      New York,
New York 10018

      Fax:  (212)
216-8001

      

      14.         Waivers,
Amendments.  None of the terms or provisions of this Agreement
may be waived, altered, modified or amended except by an instrument in writing,
duly executed by the Pledgor and the Secured Party.

       

      15.         Indemnification.  Without
limitation of any of the provisions of the Note, Pledgor hereby covenants and
agrees to pay, indemnify, and hold the Secured Party harmless from and against
any and all other out-of-pocket liabilities, costs, expenses or disbursements of
any kind or nature whatsoever arising in connection with any claim or litigation
by any Person resulting from the execution, delivery, enforcement, performance
and administration of this Agreement, provided, however, that the
Pledgor shall have no obligation hereunder with respect to indemnified
liabilities directly or primarily arising from, the willful misconduct or gross
negligence of the Secured Party. The provisions in this Section 15 shall survive
repayment of the loan facility under the Note and termination of this
Agreement.

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      16.         Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the heirs, executors, administrators, successors and assigns of the
Pledgor and the Secured Party.  The benefits of this Agreement may not
be assigned or transferred by the Secured Party without the prior written
consent of the Pledgor.  The rights and obligations of the Pledgor may
not be assigned or transferred by the Pledgor without the prior written consent
of the Secured Party.

       

      17.         Governing Law; Severability;
Submission to Jurisdiction.

       

      (a)         THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND FULLY TO BE PERFORMED THEREIN BY RESIDENTS
THEREOF.  The provisions of this Agreement are severable and if any
clause or provisions shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision in this Agreement in any jurisdiction.

       

      (b)         THE
PLEDGOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
TEXAS STATE COURT LOCATED IN NEW YORK, NEW YORK OR ANY FEDERAL COURT LOCATED IN
NEW YORK, NEW YORK FOR THE ADJUDICATION OF ANY MATTER ARISING OUT OF OR RELATING
TO THIS AGREEMENT AND CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED OR
CERTIFIED MAIL TO ITS ADDRESS SET FORTH IN SECTION 13 HEREOF OUT OF ANY SUCH
COURT.  NOTHING CONTAINED IN THE FOREGOING SHALL AFFECT THE RIGHT OF
THE SECURED PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER OR TO BRING ANY
PROCEEDING HEREUNDER OR UNDER THE NOTE IN ANY JURISDICTION WHERE THE BORROWER
MAY BE AMENABLE TO SUIT.  THE BORROWER HEREBY WAIVES ANY CLAIM THAT
ANY NEW YORK STATE COURT LOCATED IN NEW YORK, NEW YORK OR ANY FEDERAL COURT
LOCATED IN NEW YORK, NEW YORK IS AN INCONVENIENT FORUM.

       

      18.         Termination.

       

      (a)         This
Agreement shall terminate upon the payment in full of the obligations under the
Note.

       

      (b)         Upon
termination of this Agreement, the Secured Party shall deliver the Pledged
Securities to the Pledgor and all instruments evidencing the Pledged Securities
and necessary to transfer such Pledged Securities, and the Secured Party will
execute and deliver to the Pledgor all such further agreements and instruments
as the Pledgor shall reasonably request in order to terminate the security
interest in the Pledged Securities and this Agreement.

       

      [Remainder
of this page left intentionally blank.]

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered on the day and year first above written.

       

      

      

      
        	 
      	
                IMAGING
      MOLECULAR CORPORATION

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                By:

              	 
      
	 
      	 
      	
                COREY
      S. CONN,

              
	 
      	 
      	
                CHIEF
      FINANCIAL OFFICER

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                POSITRON
      CORPORATION

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                By:

              	 
      
	 
      	 
      	
                PATRICK
      G. ROONEY,

              
	 
      	 
      	
                CHAIRMAN

              

      

       

    

     

     8ex10_12-1.htm

    
      
        

      

    

    Exhibit 10.12

       

      AMENDED
AND RESTATED EMPLOYMENT AGREEMENT

       

      THIS
AMENDED AND RESTATED AGREEMENT (“Agreement”) is signed on the 14th day of
April, 2008, effective as of the 1st day of
January, 2008, by and between Electric Fuel (E.F.L.) Ltd., an Israeli
corporation (the “Company”), and Mr. Steven Esses (the
“Executive”).

       

      WHEREAS, the Executive has
worked for the Company since October 2002; and

       

      WHEREAS, the Company and the
Executive entered into an Employment Agreement effective as of January 1, 2005
(the “Original Agreement”); and

       

      WHEREAS, the Company and the
Executive now wish to extend the Executive’s employment and 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 January 1, 2008 and ending on December 31, 2010 (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 the Company shall have
given written notice to the other at least ninety days (90) days prior thereto
that the Initial Term or any Additional 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 President and Chief Operating Officer of
      the 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 Israeli subsidiaries of publicly-held corporations. The
      Executive shall exercise his authority in a reasonable manner and shall
      report to the Chief Executive Officer of the Company (the
      “CEO”).

              

      

       

      
        	
                (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 Company required to discharge the
      responsibilities assigned to the Executive hereunder. The Company
      acknowledges that the Executive is a director of multiple non-profit
      organizations. In addition, the Company acknowledges that the Executive is
      involved in certain investment activities which, together with the above
      mentioned positions, will consume a portion of his time. The Company
      consents to these other positions and activities so long as these do not
      interfere in any material manner with the Executive’s performance of his
      duties hereunder and do not constitute a violation of Section 8
      hereof.

              

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	
                (c)

              	
                While
      the Executive is employed by the Company hereunder, the Company shall use
      its best efforts to cause the Executive to be elected to the Board of
      Directors of the Company (the “Board”) and on the board of directors of
      such of the Company’s Israeli subsidiaries as the CEO shall determine, as
      a member of such Board(s).

              

      

       

      
        	
                (d)

              	
                The
      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 the
      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 and on the board of directors of
      such Israeli subsidiaries of the Company as the CEO may
      request.

              

      

       

      
        	
                (f)

              	
                The
      Executive shall be required to travel on a periodic basis. Air travel
      shall be business class.

              

      

       

      3.        
    Base Salary, Bonus and
Financial Planning Allowance.

       

      
        	
                (a)

              	
                Base Salary.
      The Company agrees to pay or cause to be paid to the Executive, for his
      services to the Company, during the first year of this Agreement a monthly
      base salary at the rate of NIS 53,023.5 per month, or such larger amount
      as the Compensation Committee of the Board (the “Compensation Committee)
      may in its sole discretion determine following a review which shall be
      conducted by the CEO and the Compensation Committee 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”).  The Base Salary will, effective January
      1 of each year beginning January 1, 2009, be increased annually by six
      percent (6%) to reflect changes in the Consumer Price Index during the
      previous year, irrespective of the actual extent of any such
      changes.

              

      

       

      
        	
                (b)

              	
                Retention Stock
      Bonus. The Company has granted to the Executive a retention bonus
      of up to 200,000 shares of restricted stock, vesting (i) 25,000 shares on
      December 31, 2008, 25,000 shares on December 31, 2009, and 25,000 shares
      on December 31, 2010, with each such vesting being contingent on the
      Executive being employed by the Company on the scheduled vesting date,
      (ii) 25,000 shares on December 31, 2008, 25,000 shares on December 31,
      2009, and 25,000 shares on December 31, 2010, with each such vesting being
      contingent on the Executive being employed by the Company on the scheduled
      vesting date and on performance criteria to be established by the
      Compensation Committee of the Board of Directors, and (iii) 50,000 shares
      on January 1, 2011, with such vesting being contingent upon the Executive
      succeeding to the position of Chief Executive Officer by such
      date.

              

      

       

      
        	
                (c)

              	
                Bonus. The
      Company agrees 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 Company, an annual bonus,
      as follows:

              

      

      
        
           

        

        
          - 2
-

          
            

          

        

        
           

        

      

      (i)             If,
as of such anniversary, the Company shall have attained 90% of the Company’s
Budgeted Number (as defined below) for the year preceding such anniversary, then
Executive’s bonus shall be equal to 25% of Executive’s gross annual Base Salary
as then in effect for the year preceding such anniversary;

       

      (ii)            If,
as of such anniversary, the Company shall have attained 120% of the Company’s
Budgeted Number (as defined below) for the year preceding such anniversary, then
Executive’s bonus shall be equal to 75% of Executive’s gross annual Base Salary
as then in effect for the year preceding such anniversary;

       

      (iii)           If,
as of such anniversary, the Company shall have attained more than 90% but less
than 120% of the Company’s Budgeted Number (as defined below), then Executive’s
bonus shall be calculated as follows:

       

      B  =         (S
x 25%) + (N-90)/30 x (S x 50%)

       

      Where:

       

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

       

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

       

      S  =    
     Executive’s gross annual Base Salary.

       

      For the
purposes of this Section 3(b), the Budgeted Number shall be the budgeted results
of the Company as agreed by the Board prior to the end of each fiscal year for
the fiscal year designated in such budget, and may include targets for any or
all of the following factors: (i) revenues; (ii) cash flow, and (iii) EBITDA. In
the event that some but not all targets are reached, the Compensation Committee
shall made a determination as to what percentage of the Budgeted Number was
attained.

       

      
        	
                (c)

              	
                Equity Grants.
      The Executive will receive annual stock option or restricted stock bonus
      grants in respect of the common stock of the Company’s parent corporation,
      Arotech Corporation (“Arotech”), in amounts to be determined based on the
      recommendation of the CEO and the decision of the Compensation Committee
      of Arotech.

              

      

       

      
        	
                (d)

              	
                Tax Planning
      Reimbursement. The Company shall pay Executive an amount of up to
      NIS 45,000 on each anniversary of this Agreement to cover Executive’s
      legal, tax and financial planning expenses, against invoices or receipts;
      any excess in any given year may be used by the Executive to fund
      supplemental health or life insurance policies, if any. Any amounts not
      used in a given year shall roll over to future years, but amounts unused
      at notice of termination of this Agreement shall expire. Legal expenses
      may not be used to finance legal advice or litigation against the
      interests of the Company.

              

      

      
        
           

        

        
          - 3
-

          
            

          

        

        
           

        

      

      
        	
                (e)

              	
                Retention
      Bonus. The Company will pay to the Executive under the conditions
      described in the separate Salary Increment Agreement of even date
      herewith, a retention bonus (the “Retention Bonus”) of NIS 900,000, if
      paid in U.S. dollars at the rate of exchange on the date prior to the day
      of payment as published by the Bank of Israel, which Retention Bonus will
      be funded into a separate earmarked account on or before December 31,
      2009. The Retention Bonus shall be payable to the Executive 90 days after
      the Executive leaves the employment of the Company, as
      follows:

              

      

       

      (i)    Prior to
December 31, 2009, for any of the following reasons, as such reasons are defined
below: (1) due to Disability, (2) by the Executive for Good Reason, (3) by the
Executive because there has been a Change in Control or a Change of Location,
(4) by the Executive’s death, or (5) due to Non-Renewal; and

       

      (ii)    Subsequent to
December 31, 2009, for any reason other than termination by the Company for
Cause.

       

      To avoid
doubt, it is hereby clarified that once funds have been deposited in the
earmarked account, the Company’s obligation in respect of the Retention Bonus
shall be extinguished, and all the benefit of all gains and the risk of all
losses in respect of the Retention Bonus funds shall belong exclusively to the
Executive.

       

      4.          
  Employee
Benefits.

       

      The
Executive shall be entitled to the following benefits:

       

      
        	
                (a)

              	
                Life and Disability
      Insurance. The Company will pay to an insurance company of the
      Executive’s choice, as premiums for life and disability 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
      Company for whatever reason, including without limitation termination for
      Cause or the resignation by the Executive, the right to receive the life
      and disability insurance benefits shall be automatically assigned to the
      Executive. At the Executive’s option, in lieu of providing life and
      disability insurance, the Company shall pay the amount it would otherwise
      pay for such insurance to the trust referred to in Section 7(b)(ii)
      hereof.

              

      

       

      
        	
                (b)

              	
                Education Fund.
      The Company 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. Additionally, the Company will pay a
      supplementary amount to the education fund in the amount of 20% of the
      Base Salary. Upon the termination of the Executive’s employment with the
      Company 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.

              

      

      
        
           

        

        
          - 4
-

          
            

          

        

        
           

        

      

      
        	
                (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 a maximum aggregate of 30 days of fully
      paid sick leave (inclusive of days accrued under the Original Agreement),
      accruing at the rate of 2.5 days per month; 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 Company 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
      (2007, with respect to the Initial Term) model Volvo SUV, 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 Company’s insurance to drive it. The Company shall
      pay all expenses of maintaining and operating the automobile. All expense
      reimbursements or imputed income made under this Section shall be
      tax-effected such that the amount of reimbursement received by the
      Executive net of any taxes and withholdings (including such amounts in
      respect of payments pursuant to this sentence) equals the expense
      incurred.

              

      

       

      
        	
                (f)

              	
                Benefit Plans.
      The Executive shall be entitled to participate in all incentive, bonus,
      benefit or other similar plans offered by the Company, including without
      limitation the Company’s 2004 Stock Option and Restricted Stock Purchase
      Plan, in accordance with the terms thereof and as determined by the Board
      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 Company shall
pay all of the Executive’s expenses in the use of Internet and telephones for
the Company’s 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 the Company, as is customary for
senior executives of publicly-held 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.

      
        
           

        

        
          - 5
-

          
            

          

        

        
           

        

      

      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
      Company 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
      Company 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 Company in a material and adverse manner; (ii) a
      willful failure to carry out a material directive of the CEO, 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 Company; and (iv)
      reckless or willful misconduct that is materially harmful to the Company;
      provided, however, that the
      Company may not terminate the Executive for Cause unless they have given
      the Executive written notice of the basis for the proposed termination
      (“Company’s Notice of
Termination”).

              

      

       

      
        	
                (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 (vi) hereof:

              

      

       

      
        	
                 
      

              	
                (i)

              	
                a
      change (1) 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, or (2) in the primary location from
      which the Executive shall have conducted his business activities during
      the 60 days prior to such change;

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                a
      reduction in the Executive’s Base
Salary;

              

      

       

      
        	
                 
      

              	
                (iii)

              	
                the
      failure by the Company to continue the Executive as a participant in any
      material compensation or benefit plan in which the other vice presidents
      of the Company are participating unless agreed to by the
      Executive;

              

      

      
        
           

        

        
          - 6
-

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (iv)

              	
                the
      insolvency or the filing (by any party, including the Company) of a
      petition for the winding-up of the Company or of
  Arotech;

              

      

       

      
        	
                 
      

              	
                (v)

              	
                any
      material breach by the Company of any provision of this
      Agreement;

              

      

       

      
        	
                 
      

              	
                (vi)

              	
                any
      purported termination of the Executive’s employment for Cause by the
      Company which does not comply with the terms of Section 6(c) of this
      Agreement;

              

      

       

      provided, however, that the Executive
may not terminate his employment under this Agreement for Good Reason unless he
has given the Company (i) written notice of the basis for the proposed
termination 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 Company’s 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 the Company in any public offering or private
      placement of equity or equivalent securities) by any person or entity of
      beneficial ownership of thirty percent (30%) or more of the combined
      voting power of Arotech’s then outstanding voting securities;
      or

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                individuals
      who, as of January 1, 2004, were members of the Board of Arotech (the
      “Original Board”), together with individuals approved by a vote of at
      least two-thirds (2/3) of the individuals who were members of the Original
      Board and are then still members of the Board of the Company, cease for
      any reason to constitute at least one-third (1/3) of the Board of Arotech;
      or

              

      

       

      
        	
                 
      

              	
                (iii)

              	
                approval
      by the shareholders of Arotech of a complete winding-up of Arotech or an
      agreement for the sale or other disposition of all or substantially all of
      the assets of Arotech.

              

      

       

      The
Executive shall give to the Company 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 Company. Any
such notice, to be effective with respect to any Change in Control, must be sent
no later than six (6) months after such Change in Control.

       

      
        	
                (f)

              	
                Change of
      Location. The Executive may terminate this Agreement if there is a
      “Change of Location.” For purposes of this Agreement, a “Change of
      Location” shall mean a change of more than 100 kilometers in the primary
      location from which the business activities of the Executive shall have
      been conducted during the 60 days prior to such
  change.

              

      

      
        
           

        

        
          - 7
-

          
            

          

        

        
           

        

      

      
        	
                (g)

              	
                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 Company for Cause or due
      to Disability, the date specified in the Company’s 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
      Company.

              

      

       

      
        	
                (h)

              	
                Retirement. At
      any time during the period beginning (i) 150 days prior to his 65th
      birthday (“Retirement”) or (ii) from 150 days prior to his 55th birthday
      until 150 days prior to his 65th birthday (“Early Retirement”), the
      Executive may retire from his positions with the Companies 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.

              

      

       

      
        	
                (i)

              	
                Termination Without
      Cause. Termination other than as set forth above shall constitute
      termination “Without Cause.”

              

      

       

      7.    
        Compensation upon
Termination.

       

      Upon
termination of the Executive’s employment hereunder, in addition to any
severance sums due to the Executive by operation of law, the Executive shall be
entitled to the following benefits:

       

      
        	
                (a)

              	
                If
      the Executive’s employment is terminated by the Company for Cause or if
      the Executive’s employment is terminated by the Executive Without Cause,
      then the Company shall pay the Executive all amounts of Base Salary and
      the employee benefits specified in clauses (a), (b) and (c) of Section 4
      of this Agreement earned or accrued hereunder through the Termination Date
      but not paid as of the Termination Date (collectively, “Accrued
      Compensation”).

              

      

       

      
        	
                (b)

              	
                If
      the Executive’s employment by the Company 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 or a Change of Location, (4) by
      the Executive’s death, (5) due to Non-Renewal, (6) due to Retirement or
      Early Retirement, or (7) by the Company Without Cause, then the Executive
      shall be entitled to the additional benefits provided below, which, in the
      case of death, Disability, Retirement or Early Retirement, shall be in
      lieu of any further salary for periods subsequent to the Termination
      Date):

              

      

       

      
        	
                 
      

              	
                (i)

              	
                The
      Company shall pay the Executive (a) all Accrued Compensation, (b) a bonus
      at a rate of the higher of (i) 20%, 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;

              

      

      
        
           

        

        
          - 8
-

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (ii)

              	
                The
      Company shall pay into a trust to be established pursuant to a separate
      trust agreement (the “Trust”) as termination pay and in lieu of any
      further salary for periods subsequent to the Termination Date (except as
      provided in Section 7(b)(i) above), as follows: (A) before the end of the
      first year of this Agreement, a total of (i) $30,400 plus (ii) eighteen
      (18) times the monthly Base Salary at the highest rate in effect at any
      time within the ninety (90) day period ending on the Termination Date; (B)
      before the end of the second year of this Agreement, a total of (i)
      $56,000 plus (ii) twenty (20) times the monthly Base Salary at the highest
      rate in effect at any time within the ninety (90) day period ending on the
      Termination Date; (C) before the end of the third year of this Agreement,
      a total of (i) $81,600 plus (ii) twenty-two (22) times the monthly Base
      Salary at the highest rate in effect at any time within the ninety (90)
      day period ending on the Termination Date; or (D) at or after the end of
      the third year of this Agreement, a total of (i) $107,200 plus (ii)
      twenty-four (24) times the monthly Base Salary at the highest rate in
      effect at any time within the ninety (90) day period ending on the
      Termination Date (together, the “Base Termination Pay”), subject to
      subparagraph (v) below. Base Termination Pay will vest and be funded into
      the Trust as provided in Section 7(b)(iv)
below.

              

      

       

      
        	
                 
      

              	
                (iii)

              	
                The
      Company shall pay to the Executive, in respect of all benefits, an
      additional sum in the amount of (i) $75,000, in the case of Termination
      due to Disability, Good Reason, the Executive’s death, or Non-Renewal, or
      (ii) $150,000, in the case of Termination due to Early Retirement,
      Retirement, Change of Control or Change of Location. Additionally, the
      Company shall transfer to the Executive title to the Volvo SUV currently
      in the possession of the Executive, upon payment by the Executive to the
      Company, in advance, of all taxes that the Company in good faith believes
      will be due and owing as a result of the transfer of such
      title.

              

      

       

      
        	
                 
      

              	
                (iv)

              	
                The
      termination pay will be funded into the Trust in two installments, the
      first $100,000 of which has already been funded, and the remainder of
      which is to be paid by December 31,
2008.

              

      

       

      
        	
                 
      

              	
                (v)

              	
                In
      the event of a termination due to Change of Control or a Change in
      Location, all of the Executive’s stock options, whether or not they have
      yet vested, shall immediately vest and shall be extended for a period of
      the later of (x) the expiration date thereof, and (y) the second
      anniversary of such Change of Control or Change of Location, and all of
      the Executive’s restricted stock shall immediately become unrestricted and
      freely tradable (subject to applicable securities laws). In the event of
      termination due to any other reason except for Termination for Cause, the
      Executive’s then-vested stock options shall be extended for a period of
      the earlier of (x) the expiration date thereof, and (y) two years after
      such termination.

              

      

      
        
           

        

        
          - 9
-

          
            

          

        

        
           

        

      

      Such sums
are intended to be in addition to any severance sums due to the Executive by
operation of law (in respect of which the Company hereby acknowledges that the
Executive’s employment with the Company began in October 2002), and any such
sums paid to the Executive as a result of statutory or other legal requirements
shall not be deducted from the sums above. Such sums are not intended to be in
lieu of amounts payable pursuant to any separate agreements entered into
contemporaneously with or subsequent to the date of this Agreement.

       

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

       

      
        	
                (c)

              	
                All
      U.S. dollar amounts payable under this Section 7 shall, at the Company’s
      option, be paid either in U.S. dollars or in New Israeli Shekels at the
      rate of exchange on the date prior to the day of payment as published by
      the Bank of Israel.

              

      

       

      
        	
                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 Company owns, plans or develops, including without
      limitation the specifications, documentation and other information
      relating to the Company’s 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
      Company. Executive also recognizes that the Company’s technology, customer
      lists, supplier lists, proposals and procedures are confidential and are
      the property of the Company. Executive further recognizes and acknowledges
      that in order to enable the Company to perform services for its clients,
      those clients may furnish to the Company 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 Company, and in the
      ordinary course of the Company’s business, Executive will not during
      Executive’s employment with the Company 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
  Company.

              

      

      
        
           

        

        
          - 10
-

          
            

          

        

        
           

        

      

      
        	
                (c)

              	
                Competitive
      Activity. The Executive undertakes not, directly or indirectly
      (whether as owner, partner, consultant, employee or otherwise) at any
      time, during and for twelve (12) months following termination of his
      employment with the Company, 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 any business that the Company has conducted during the term of this
      Agreement or any extension hereof on which the Executive worked or with
      respect to which the Executive had access to Proprietary Information while
      with the Company. Notwithstanding the foregoing, the Executive shall be
      permitted to engage in the aforementioned proposed work or activity if the
      Company furnishes him with written consent to that effect signed by an
      authorized officer of the Company.

              

      

       

      
        	
                (d)

              	
                No
      Solicitation. During the period specified in 8(c) hereof, Executive
      will not solicit or encourage any customer or supplier of the Company or
      of any group, division or subsidiary of the Company, to terminate its
      relationship with the Company or any such group, division or subsidiary,
      and Executive will not, directly or indirectly, recruit or otherwise seek
      to induce any employee of the Company or any such group, division or
      subsidiary to terminate his or her employment or violate any agreement
      with or duty to the 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 Company irreparable injuries
      and agrees that the Company may enforce said covenants by seeking
      injunctive or other equitable relief (in addition to any other remedies
      the Company 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
      Company’s protection. Executive further agrees that no breach by the
      Company of, or other failure by the Company 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 the
      Company, its successors and assigns and the Company 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 Company would
      be required to perform it if no such succession or assignment had taken
      place. The term the “Company” 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 the Company (including this Agreement) whether by
      operations of law or otherwise.

              

      

       

      
        	
                (b)

              	
                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.

              

      

      
        
           

        

        
          - 11
-

          
            

          

        

        
           

        

      

      
        	
                (c)

              	
                Nothing
      to the contrary in the foregoing notwithstanding, the Executive may assign
      this Agreement to any company of which he is a “control person” within the
      meaning of the Securities Exchange Act of 1934, provided, that the
      Executive shall continue to be obligated to fulfill the duties set forth
      in Section 2 above, and provided, further, that the
      Executive shall continue to be bound by the terms and provisions of
      Section 8 of this Agreement notwithstanding any such
      assignment.

              

      

       

      
        	
                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
      Company:

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

              

      

                                                              
One HaSolela Street, Western Industrial Park

                                                              
Beit
Shemesh 99000, Israel

       

      
        	
                 
      

              	
                The
      Executive:

              	
                Steven
      Esses

              

      

                                                               
P.O. Box 1307

                                                               
Efrat, 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 Company. 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;
      Arbitration; 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. All disputes under this Agreement that cannot be resolved by the
parties shall be submitted to arbitration under the rules and regulations of the
Israel Institute of Commercial Arbitration. Either party may invoke this
paragraph after providing 30 (thirty) days written notice to the other party.
All costs of arbitration shall be divided equally between the parties. The
arbitrator(s) shall award to the prevailing party, if any, as determined by the
arbitrator(s), all of its costs and fees. “Costs and Fees” means all reasonable
pre-award expenses of the arbitration, including arbitration fees,
administrative fees, travel expenses, out-of-pocket expenses such as copying and
telephone, court costs, witness fees and reasonable attorneys’ fees. In the
event that notwithstanding the foregoing arbitration provision there is
nevertheless litigation in respect of this Agreement, each of the Executive and
the Company hereby irrevocably waives any objection it may now or hereafter have
to the laying of venue in the courts of the State of Israel, City of
Tel-Aviv-Yafo, for any legal suit or action instituted by any party to the
Agreement against any other with respect to the subject matter
hereof.

      
        
           

        

        
          - 12
-

          
            

          

        

        
           

        

      

      
        	
                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.

       

      
        	
                15.

              	
                Registration
      Rights.

              

      

       

      
        	
                (a)

              	
                If
      the Company 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 the Company 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, the Company 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 the Company 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. the Company 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 the Company 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.

              

      

       

      
        	
                (b)

              	
                The
      Executive may, by notice to the Company specifying the intended method or
      methods of disposition, given at any time and from time to time after the
      Company has registered any shares of its Common Stock under the Securities
      Act, request that the Company effect the registration under the Securities
      Act of all or a specified part of the Registrable Securities; provided, however, that the
      Company shall not be required to effect a registration pursuant to this
      Section 15(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 15(b) shall cover a number of
      Registrable Shares equal to not less than 2% of the aggregate number of
      shares of the Company Common Stock then outstanding. the Company will then
      use its best efforts to effect the registration as promptly as practicable
      under the Securities Act of the Registrable Securities which the Company
      has been requested to register by the Executive pursuant to the Section
      15(b).

              

      

      
        
           

        

        
          - 13
-

          
            

          

        

        
           

        

      

      
        	
                (c)

              	
                Notwithstanding
      the provisions of Section 15(b), in the event that Executive has requested
      pursuant to Section 15(b) that the Company effect a registration of
      securities, and (i) the CEO of the Company determines that it would be
      seriously detrimental to the Company to effect a registration pursuant to
      Section 15(b), or (ii) the CEO of the Company determines in good faith
      that (A) the Company is in possession of material, non-public information
      concerning an acquisition, merger, recapitalization, consolidation,
      reorganization or other material transaction by or of the Company or
      concerning pending or threatened litigation and (B) disclosure of such
      information would jeopardize any such transaction or litigation or
      otherwise materially harm the Company, then the Company 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, the Company shall be allowed to
      defer a registration of securities pursuant to Section 15(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 the Company that the
      registration of securities under 15(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.

              

      

       

      
        	
                (d)

              	
                The
      Company shall not be obligated to effect any registration of Registrable
      Securities under Section 15(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)

              	
                The
      Company 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
      15.

              

      

       

      
        	
                (f)

              	
                In
      connection with each registration of Registrable Securities pursuant to
      this Section 15, the Company 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 15 shall be subject to any agreement entered
      into by the Company, in good faith, with any underwriter of the Company’s
      securities or any person or entity providing financing to the Company, in
      each case containing reasonable limitations on the Executive’s rights and
      the Company’s obligations
hereunder.

              

      

       

      
        	
                (h)

              	
                The
      provisions of this Section 15 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 the Company from the
      Executive.

              

      

      
        
           

        

        
          - 14
-

          
            

          

        

        
           

        

      

      
        	
                (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 the Company 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 the Company except pursuant
      to such registration statement.

              

      

       

      
        	
                16.

              	
                Taxes.

              

      

       

      All sums
referred to herein are gross, not net.

       

      IN
WITNESS WHEREOF, the Company has caused this Amended and Restated Agreement to
be executed by its duly authorized officer and the Executive has executed this
Amended and Restated Agreement as of the effective date first above
written.

       

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

              	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                By:

              	 
      	 
      	 
      
	 
      	
                Name:

              	 
      	
                Steven
      Esses

              
	 
      	
                Title:

              	 
      	 
      

      

      
        
           

        

        
          - 15
-

          
            

          

        

        
           

        

      

      Exhibit
A

       

      FORM
OF MUTUAL RELEASE

       

      This
mutual release is executed and delivered by and between the undersigned employee
of Arotech Corporation, a Delaware corporation (the “Company”) and the
undersigned’s successors, assigns, executors, estates and personal
representatives (collectively, the “Executive”), on the one hand, and the
Company and its affiliates, agents, successors and assigns (collectively, the
“Company”), on the other hand. For and in consideration of the Executive
receiving the compensation referred to in Section 7 of the Amended and Restated
Employment Agreement dated December ___, 2007 and other good and valuable
consideration, the adequacy and receipt of which are hereby acknowledged by the
Executive and the Company, the Executive hereby remises, releases and forever
discharges the Company, and the Company hereby remises, releases and forever
discharges 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 Company pursuant to the Employment Agreement nor to release
the Company from any of its obligations to the Executive pursuant to the
Employment Agreement.

       

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

       

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

              	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                By:

              	 
      	 
      	 
      
	 
      	
                Name:

              	 
      	
                Steven
      Esses

              
	 
      	
                Title:

              	 
      	 
      

      

       

       

      - 16 -

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