Document:

exv10w6

 

Exhibit 10.6

CONFIDENTIAL RELEASE AND SEPARATION AGREEMENT

     This CONFIDENTIAL RELEASE AND SEPARATION AGREEMENT (the “Agreement”) is made and entered
into by Martin Headley (“HEADLEY”) and Teleflex Incorporated, its past, present and future
subsidiaries, parents, and affiliates and their past, present, and future employees, officers,
directors, agents, insurers and legal counsel (hereinafter collectively referred to as the
“COMPANY”).

     1. HEADLEY’S EMPLOYMENT. HEADLEY will cease to be employed by the COMPANY effective March 16,
2007 (the “Termination Date”). The COMPANY wishes to provide HEADLEY with an orderly transition
from the COMPANY and both HEADLEY and the COMPANY wish to settle any and all issues and potential
issues which relate or may relate to HEADLEY’s employment with and departure from the COMPANY.
Accordingly, HEADLEY will be entitled to the following separation payment and benefits under the
terms of this Agreement.

     2. SEPARATION PAYMENT. In consideration for the releases and other covenants set forth in
this Agreement, after this Agreement becomes effective, the COMPANY agrees to provide HEADLEY:

          a. The gross amount of $636,679.50, which equals eighteen (18) months (hereinafter referred to
as the “Separation Period”) of HEADLEY’s base salary at the time of his termination of employment
with the COMPANY, payable in an equal amount per month, subject to all applicable withholdings and
deductions.

          b. Continuation, during the Separation Period, of HEADLEY’s applicable medical, dental and
prescription benefits on the same basis as, and at the same contribution rate paid by, similarly
situated active employees of the COMPANY. During the Separation Period, the COMPANY will continue
to make at the same rates as it did before the Termination Date the contributions of the employer
to the chosen benefit plans as well as to HEADLEY’s flexible spending account. In the first
payment made under Paragraph 2(a) as described in the last section below (the lump sum check paid
six (6) months and one (1) day after the Termination Date), the Company shall deduct the amount of
the employer’s contributions to HEADLEY’s chosen benefits plans and flexible spending account made
during that six (6) month and one (1) day period. Continuation of benefits may cease in the event
that HEADLEY accepts employment at any time during the Separation Period with an employer from whom
he is eligible to receive medical, dental and prescription benefits, vehicle or vehicle allowance,
as the case may be, or as provided in paragraph 17 of this Agreement, below.

          c. After the end of the Separation Period on September 16, 2008 (or if earlier, the date
benefits cease under paragraph 2(b)), HEADLEY shall be entitled to elect to continue coverage under
COMPANY’s Group Health Plan benefits for the full period of time provided
under Section 4980B of the Internal Revenue Code of 1986, as amended (commonly

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referred to as
“COBRA”). HEADLEY will be required to pay the full premium for such COBRA coverage.

          d. The COMPANY will not contest any claim for government sponsored unemployment compensation
that HEADLEY may file.

          e. Payment for executive outplacement services during the year following the Termination Date
through Right Management or at such other executive outplacement services firm designated by
HEADLEY, such services not to exceed $20,000.00. In the event that HEADLEY does not utilize the
full amount of outplacement services to which he is entitled under this Agreement, the remaining
amount shall not be converted into a cash payment to HEADLEY.

     HEADLEY acknowledges and agrees that the Separation Payment outlined above does not constitute
monies to which he would otherwise be entitled as a result of his prior employment with the
COMPANY, and that these monies constitute fair and adequate compensation for the promises and
covenants of HEADLEY set forth in this Agreement. In addition, the COMPANY and HEADLEY agree as
follows relative to other benefit plans in which HEADLEY participated prior to the Termination
Date:

          f. HEADLEY will cease to be covered under the following programs as of the Termination Date:
short and long term disability, travel accident, vacation accrual, basic and supplemental
accidental death & dismemberment insurance and life insurance, executive life insurance, pension,
car allowance, 401(k) plans, deferred compensation plans, short and long term incentive or bonus
compensation plans, and equity award or compensation plans.

          g. HEADLEY will be provided with paperwork required to continue basic and/or executive life
insurance coverage under the plan’s conversion and/or portability features at HEADLEY’s own expense
and to the extent permitted by the carrier.

          h. HEADLEY will be paid four weeks’ accrued vacation in a lump sum, subject to all applicable
withholdings and deductions, on the regularly scheduled payroll date immediately following the
expiration of the 7-day revocation period set forth in paragraph 20 of this Agreement.

          i. HEADLEY will be allowed to maintain the use of the company car provided to him through the
term of the current lease which is due to expire in or about August 2007. Following the expiration
of the current lease, the COMPANY shall pay HEADLEY a car allowance of $2,200.00 per month during
the remainder of the Separation Period.

          Amounts paid pursuant to sections 2(a) and (i) of this Agreement, above, shall be paid in
accordance with the COMPANY’s normal payroll schedule and payroll practices in effect from time to
time; provided, however, that in accordance with Section 409A of the Internal Revenue Code of 1986,
as amended, (“Section 409A”), the payment shall be made on COMPANY’s regularly scheduled payroll
date which immediately follows the date that is six (6) months and one (1) day after the
Termination Date (or such earlier date as is permitted by

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Section 409A). The first payment after
the six (6) month and one (1) day delay shall be equal to
the sum of all payments otherwise payable from HEADLEY’S Termination Date until actual
commencement of payments in a single lump sum with all following payments under this Agreement made
at the regularly scheduled payroll interval. Each payment comprising the delayed initial lump sum
payment shall be credited with interest at the rate of 6% per annum for the period of delay after
the appropriate payroll date.

          Separation payments may stop as provided in paragraph 17 of this Agreement below.

     3. HEADLEY’S RELEASE OF CLAIMS. For and in consideration of the Separation Payment as
described in Paragraph 2 of this Agreement, HEADLEY hereby irrevocably and unconditionally releases
and forever discharges the COMPANY from any and all claims and causes of action of any nature, both
past and present, known and unknown, foreseen and unforeseen, which HEADLEY has or which could be
asserted on his behalf by any other person or entity, resulting from or relating to any act or
omission of any kind occurring on or before the date of the execution of this Agreement. HEADLEY
understands and agrees that this Release includes, but is not limited to, the following:

     a. All claims and causes of action arising under contract, tort or other common
law, including, without limitation, breach of contract, fraud, estoppel,
misrepresentation, express or implied duties of good faith and fair dealing,
wrongful discharge, discrimination, retaliation, harassment, negligence, gross
negligence, false imprisonment, assault and battery, conspiracy, intentional or
negligent infliction of emotional distress, slander, libel, defamation, refusal to
perform an illegal act and invasion of privacy.

     b. All claims and causes of action arising under any federal, state, or local
law, regulation, or ordinance, including without limitation, the Civil Rights Act of
1964, as amended, the Civil Rights Act of 1866, the Americans With Disabilities Act,
the Age Discrimination in Employment Act (“ADEA”) (which prohibits age
discrimination in employment), the Older Workers Benefit Protection Act, the Fair
Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement
Income Security Act, the Sarbanes-Oxley Act and/or any other federal or state
whistleblower protection laws, and relevant state laws including, but not limited to
the Pennsylvania Human Relations Act, as well as any claims for wages, employee
benefits, vacation pay, severance pay, pension or profit sharing benefits, health or
welfare benefits, bonus compensation, vesting of stock options, stock, commissions,
deferred compensation or other remuneration, or employment benefits or compensation.

     c. All claims and causes of action for past or future loss of pay or benefits,
expenses, damages for pain and suffering, mental anguish or emotional distress
damages, liquidated damages, punitive damages, compensatory damages, attorney’s
fees, interest, court costs, physical or mental injury, damage to

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reputation, and
any other injury, loss, damage or expense or any other legal or equitable remedy of
any kind whatsoever.

     d. All claims and causes of action arising out of or in any way connected with,
directly or indirectly, HEADLEY’s employment with the COMPANY, or any incident
thereof, including, without limitation, HEADLEY’s treatment by the COMPANY; the
terms and conditions of the HEADLEY’s employment; and the separation of HEADLEY’s
employment.

     HEADLEY understands that this Agreement does not release his right, if any, to benefits
HEADLEY is entitled to under any COMPANY plan qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the “Code”), including the Teleflex Incorporated Retirement
Income Plan and the Teleflex 401(k) Savings Plan, and COBRA benefits pursuant to Section 4980B of
the Code.

     4. RETURN OF COMPANY PROPERTY. HEADLEY shall return, in good working order, any and all
property of the COMPANY that is in his possession, custody or control on or before April 15, 2007.
Such property includes, but is not limited to, keys, software, calculators, equipment, credit
cards, forms, files, manuals, correspondence, business cards, personnel data, lists of or other
information regarding customers, contacts and/or employees, contracts, contract information,
agreements, leases, plans, brochures, catalogues, training materials, computer tapes and diskettes
or other portable media.

     5. TAX ISSUES. HEADLEY and the COMPANY will report, as may be required by law for income tax
purposes, their respective payment and receipt of the Separation Payment. Each party shall bear
his/its respective tax liabilities, if any, arising from this Agreement. HEADLEY acknowledges that
the COMPANY has made no representations regarding the tax consequences of any amount received by
him pursuant to the terms of this Agreement.

     6. NO FUTURE LAWSUITS. HEADLEY promises never to file a lawsuit alleging any of the claims
that are released in Paragraph 3 of this Agreement (other than an action filed solely for the
purpose of challenging the validity of the waiver of claims under the Age Discrimination in
Employment Act).

     7. NON-RELEASE OF FUTURE CLAIMS. This Agreement does not waive or release any rights or
claims HEADLEY may have under the Age Discrimination in Employment Act that arise after the date
HEADLEY signs this Agreement.

     8. NON-ADMISSION. HEADLEY and COMPANY agree that this Agreement and the payment of money to
him by the COMPANY are not an admission by either party of any wrongdoing, nor an admission by
either party of any violation of the other’s rights or of any violation of contract or statutory or
common law.

     9. NO REHIRE. HEADLEY agrees that, subsequent to his execution of this Agreement, he shall
not be eligible for rehire by the COMPANY, or any of its subsidiaries,

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affiliates, parent
companies, or other related entities, and shall not apply for any position with the COMPANY
subsequent to the effective date of the Agreement.

     10. NON-DISPARAGEMENT. HEADLEY specifically covenants and agrees not to, directly or
indirectly, make or cause to be made to anyone any statement, orally or in writing, criticizing or
disparaging the COMPANY with respect to his employment with the COMPANY. HEADLEY specifically
covenants and agrees not to, directly or indirectly, make or cause to be made to anyone any
statement, orally or in writing, criticizing or disparaging the COMPANY, or commenting in a
negative fashion on the operations or business reputation of the COMPANY.

     Likewise, COMPANY covenants and agrees not to, directly or indirectly, criticize or disparage
HEADLEY with respect to his employment. COMPANY agrees that if anyone should inquire concerning
HEADLEY’s prior employment, the only information that will be disclosed will be the last position
held by HEADLEY and the dates of his employment

     11. CONFIDENTIALITY. HEADLEY acknowledges and agrees that this Agreement and its terms and
conditions shall remain confidential. HEADLEY and any representative shall not disclose or discuss
the contents, terms, or conditions of the Agreement, except to HEADLEY’s spouse, lending
institutions, accountants, counsel, financial advisors, tax advisor(s), or the Internal Revenue
Service, or as otherwise required by law This confidentiality provision is contractual and the
terms are material to this Agreement. Breach of the confidentiality provision by HEADLEY shall
entitle the COMPANY to seek legal remedies for breach of contract and, in the event that the
COMPANY is successful in any legal proceeding to enforce this provision, it shall be entitled to
recover from HEADLEY its reasonable expenses, including attorneys’ fees incurred in the prosecution
of any legal proceeding.

     12. CONTINUING OBLIGATIONS. HEADLEY acknowledges that in the course of his employment with
the COMPANY he has obtained confidential and proprietary information including, but not limited to,
financial, business, product, customer and marketing information, plans, forecasts and strategies,
and trade secrets. HEADLEY acknowledges and agrees that he has a continuing obligation to maintain
the confidentiality of all such non-public information even after the termination of his employment
with the COMPANY.

     13. NON-SOLICITATION OF EMPLOYEES. HEADLEY acknowledges and agrees that, during the
Separation Period, he will not, without the express written consent of the COMPANY’s CEO, directly
or indirectly, solicit or assist any other person or entity in soliciting an employee of the
COMPANY, or any person who was an employee of the COMPANY at any time within six (6) months of the
hire or attempted hire.

     14. COVENANT NOT TO COMPETE. HEADLEY agrees that, during the Separation Period, he will not,
at any time, directly or indirectly, engage in, or have any interest on behalf of himself or others
in any person or business other than the COMPANY (whether as an employee, officer, director, agent,
security holder, creditor, partner, joint venturer, beneficiary under a trust, investor, or
consultant ) that engages in similar business activities to the COMPANY in a particular market and
product line, and in the specific geographic areas in which the COMPANY is

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engaged or has been
engaged in the preceding twelve (12) months for that particular market and product line (the
“Business Activities”).

     Notwithstanding the foregoing, HEADLEY may:

          (a) engage, participate or invest in, or be employed by an entity that is engaged in the
Business Activities (a “Competing Entity”) so long as (i) the Annual Revenues derived by the
COMPANY from the Business Activities in which the Competing Entity is engaged do not exceed $50
million in the aggregate; and (ii) the Annual Revenues derived by the Competing Entity from the
Business Activities do not exceed $50 million in the aggregate. For purposes of paragraph 14(a),
the term “Annual Revenues” shall mean annual revenues for the most recently completed fiscal year;
or

          (b) notwithstanding Paragraph 14(a) above, in the event the limitations in Paragraph 14(a) are
exceeded but the Business Activities for which HEADLEY has oversight (i.e. if CFO for the Competing
Entity or CFO of a division or subsidiary of the Competing Entity than in each such specific case)
do not exceed 5% of total Annual Revenues for the Competing Entity, division or subsidiary, as the
case may be, HEADLEY may engage, participate or invest in, or be employed by such Competing Entity,
division or subsidiary as the case may be; or

          (c) acquire solely as an investment not more than 2% of any class of securities of any
Competing Entity if such class of securities is listed on a national securities exchange or on the
Nasdaq system, so long as HEADLEY remains a passive investor in such entity.

     In addition, HEADLEY hereby agrees that, during the Separation Period, he will not directly or
indirectly call on or solicit for the purposes of diverting or taking away from the COMPANY
(including, by divulging any Confidential Information to any competitor or potential competitor of
the COMPANY) any person or entity who is at the Termination Date, or at any time during the twelve
(12) month period prior to the Termination Date had been, a customer of the COMPANY with whom
HEADLEY had direct personal contact as a representative of the COMPANY or a potential customer
whose identity is known to HEADLEY at the Termination Date as one whom the COMPANY was actively
soliciting as a potential customer within six (6) months prior to the Termination Date.

     The parties agree that the restrictions in these covenants are reasonable and necessary to
protect COMPANY’s legitimate interests, are reasonable in time and scope, are designed to eliminate
competition that otherwise would be unfair to COMPANY, and do not operate as a bar to HEADLEY’s
means of support.

     15. COOPERATION. HEADLEY acknowledges and agrees that from and after the effective date of
this Agreement, he will cooperate fully with the COMPANY, its officers, employees, agents,
affiliates and attorneys in the defense or prosecution of, or in preparation for the defense or
prosecution of any lawsuit, dispute, investigation or other legal proceedings (“Proceedings”).
HEADLEY further acknowledges and agrees that he will cooperate fully with the COMPANY, its
officers, employees, agents, affiliates and attorneys on any matter related to COMPANY business
(“Matters”) during the period of HEADLEY’s employment.

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     Such cooperation shall include providing true and accurate information or documents
concerning, or affidavits, declarations or testimony about, all or any matters at issue in any
Proceedings/Matters as shall from time-to-time be requested by the COMPANY, and shall be within the
knowledge of HEADLEY. Such cooperation shall be provided by HEADLEY without
remuneration, but HEADLEY shall be entitled to reimbursement for all reasonable and appropriate
expenses incurred by him in so cooperating including, by way of example, airfare, hotel
accommodations, meal charges and other similar expenses to attend Proceedings/Matters outside of
the city of HEADLEY’s residence. In the event HEADLEY is asked by a third party to provide
information regarding the COMPANY, or is called other than by the COMPANY to testify in any
Proceeding/Matter related to the COMPANY, he will notify the COMPANY as soon as possible in order
to give the COMPANY a reasonable opportunity to respond and/or participate in such
Proceeding/Matter.

     16. FEES AND COSTS. The parties shall bear their own attorneys’ fees and costs associated
with this Agreement.

     17. CONSEQUENCES OF BREACH BY HEADLEY. HEADLEY acknowledges that it would be unfair for
HEADLEY to retain or receive the Separation Payments if HEADLEY breaches the promises given by
HEADLEY herein (excluding a lawsuit filed by HEADLEY solely to challenge the validity of the Age
Discrimination in Employment Act waiver), and therefore, in the event of a breach by HEADLEY of the
promises made by him in this Agreement (excluding a lawsuit filed by HEADLEY solely to challenge
the validity of the Age Discrimination in Employment Act waiver), as determined by the COMPANY
reasonably and in good faith, the COMPANY shall be entitled to cease payment of the Separation
Payments which have not yet been paid to HEADLEY, and shall further be entitled to the return of
any and all Separation Payments that have already been made to HEADLEY. This provision will not
limit HEADLEY’s liability if COMPANY’s actual damages exceed the amount received by HEADLEY under
this Agreement.

Furthermore, HEADLEY agrees that COMPANY would be irreparably damaged in the event that he breaches
his promises in Paragraphs 10, 11, 12, 13, and/or 14 and agrees that COMPANY shall be entitled, in
addition to any other remedy to which it may be entitled at law or in equity, to an injunction to
enforce the terms of this Agreement. HEADLEY hereby waives any requirement that COMPANY post any
bond or other security in connection with such injunction.

     18. CHOICE OF LAW/VENUE. This Agreement shall be governed by, construed, and enforced in
accordance with, and subject to, the laws of the Commonwealth of Pennsylvania or federal law, where
applicable, without regard to the conflict of law principles of any jurisdiction. In the event
there shall be any dispute arising out of the terms and conditions of, or in connection with, this
Agreement, the party seeking relief shall submit such dispute to the United States District Court
for the Eastern District of Pennsylvania, or, if federal jurisdiction is lacking, the Court of
Common Pleas of Montgomery County, Pennsylvania.

     19. TIME LIMITS. Upon receipt of this Agreement, HEADLEY shall have up to twenty-one (21)
calendar days to consider and decide whether or not to sign and return it to COMPANY. If HEADLEY
decides to sign this Agreement at any time prior to end of the twenty-one day period, HEADLEY
agrees to immediately send the signed Agreement to the COMPANY,

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by registered or certified
United States mail, return receipt requested, or by commercial overnight carrier requiring
signature upon delivery, to the attention of Laurence G. Miller at Teleflex Incorporated, 155
South Limerick Road, Limerick, PA 19468, on the date it is signed by HEADLEY. This Agreement
shall be considered to have been delivered to and received by the COMPANY at the address set forth
above on the date it is postmarked.

     20. REVOCATION. HEADLEY may revoke this Agreement within seven (7) days of HEADLEY signing
it. Revocation must be made by delivering a written notice of revocation to Laurence G. Miller at
the address set forth in paragraph 19, above, either by hand delivery, facsimile or by registered
or certified United States mail, return receipt requested, or by commercial overnight carrier
requiring signature upon delivery. If HEADLEY revokes this Agreement it shall not be effective or
enforceable and HEADLEY shall not receive the consideration promised by the COMPANY described in
the Paragraph 2 of this Agreement. If HEADLEY does not revoke this Agreement, it shall become
effective on the eighth (8th) day after he signs it.

     21. ENTIRE AGREEMENT. It is expressly understood and agreed that this Agreement embodies the
entire agreement between the Parties and supersedes any and all prior agreements, arrangements, or
understandings between and among them with respect to the subject matter herein, and shall
specifically supersede the July 2, 2004 offer letter signed by Clark D. Handy and HEADLEY. No oral
understandings, statements, promises, terms, conditions, obligations, or agreements contrary or in
addition to the terms of this Agreement exist. This Agreement may not be changed by oral
representations, and may only be amended by written instrument executed by HEADLEY and the
COMPANY’s CEO. The provisions of this Agreement are severable and if any provision is determined to
be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall continue
in full force and effect.

     22. OTHER REPRESENTATIONS/ADVICE OF COUNSEL. HEADLEY hereby represents and certifies that he:
(a) has carefully read all of this Agreement; (b) has been given a fair opportunity to discuss and
negotiate the terms of this Agreement; (c) understands its provisions; (d) has been advised in
writing to consult with an attorney before signing this Agreement; (e) has determined that it is in
his best interests to enter into this Agreement; (f) has not been influenced to sign this Agreement
by any statement or representation by the COMPANY not contained in this Agreement; and (g) enters
into this Agreement knowingly and voluntarily.

     By my initials set forth below, I agree that I was given a copy of this Agreement to consider for
possible signing on                               .

                                        

[HEADLEY’s Initials]

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READ THIS AGREEMENT CAREFULLY BEFORE SIGNING

SIGNING OF CONFIDENTIAL RELEASE AND SEPARATION AGREEMENT

We the undersigned, do hereby sign and agree to the terms set forth in the Confidential Release and
Settlement Agreement, on the dates set forth below:

	 	 	 	 	 
	/s/ Martin Headley

	 	3/18/2007	 	 
	 

Martin Headley

	 	 

Date signed
	 	 
	 
	 	 	 	 
	/s/ Laurence G. Miller

	 	3/18/2007	 	 
	 

Laurence G. Miller

	 	 

Date signed
	 	 
	Senior Vice President & General Counsel 

Teleflex Incorporated
	 	 	 	 

9Exhibit 4.1

     

     

    
      

    

     

    Exhibit
      4.1

     

    DEFERRAL
      AGREEMENT

     

    DEFERRAL AGREEMENT
      (the
“Agreement”),
      dated
      April 30, 2007, by and between Arotech Corporation, a Delaware corporation
      (the
“Company”),
      and
[NAME
      OF
      INVESTOR]
      (the
“Investor”).

     

    WHEREAS:

     

    A.
       The
      Company, the Investor and certain other investors (the “Other
      Investors”
and,
      collectively with the Investor, the “Investors”),
      have
      entered into that certain Securities Purchase Agreement, dated as of September
      29, 2005 (the “Securities
      Purchase Agreement”),
      pursuant to which, among other things, the Investors purchased from the Company
      an aggregate of $17,500,000 principal amount of senior secured convertible
      notes
      of the Company (the “Notes”),
      convertible into shares of the Company’s Common Stock, par value $0.01 per share
      (the “Common
      Stock”),
      at a
      conversion price of $1.00 per share, in accordance with the terms of the
      Notes.

     

    B.
       Contemporaneously
      with the execution and delivery of the Securities Purchase Agreement, the
      Company and the Investors entered into a Registration Rights Agreement, dated
      as
      of September 29, 2005 (the “Registration
      Rights Agreement”),
      pursuant to which the Company agreed to provide certain registration rights
      with
      respect to the Registrable Securities (as defined in the Registration Rights
      Agreement) under the Securities Act of 1933, as amended (the “1933
      Act”),
      and
      the rules and regulations promulgated thereunder, and applicable state
      securities laws.

     

    C.
       The
      Company filed a registration statement in respect of, among other things, the
      Common Stock, with the Securities and Exchange Commission (the “SEC”)
      (No.
      333-129713) that was declared effective by the SEC on December 20,
      2005.

     

    D.
       The
      Company filed an additional registration statement in respect of, among other
      things, the Common Stock, with the SEC (No. 333-133697) that was declared
      effective by the SEC on August 25, 2006 (the “Registration
      Statement”).

     

    E.
       The
      Company filed its 10-K for the year ended December 31, 2006 (the “2006
      10-K”)
      on
      April 17, 2007.

     

    F.
       The
      Company is preparing, but has not yet filed, a post-effective amendment to
      the
      Registration Statement (the “Post-Effective
      Amendment”)
      in
      order to, inter
      alia,
      incorporate by reference the financial statements included in the 2006
      10-K.

     

    G.
       The
      Company and the Investor wish to defer payment of the Installment Payment (as
      defined in the Notes) due on May 31, 2007 (the “May
      Installment Payment”)
      to
      June 29, 2007.

     

    H.
       Capitalized
      terms used herein and not otherwise defined herein shall have the respective
      meanings ascribed to them in the Securities Purchase Agreement dated September
      29, 2005, by and among the Company and certain investors thereto (the
“Securities
      Purchase Agreement”).

     

    

    
      
        
           

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    NOW,
      THEREFORE,
      the
      Company and the Investor hereby agree as follows:

     

    
      	 	
              1.
                

            	
              REPRESENTATIONS
                AND WARRANTIES

            

    

     

    (a)
       Company
      Bring Down.
      The
      Company represents and warrants to the Investor as set forth in Section 3 (other
      than Section 3(z) thereto) of the Securities Purchase Agreement as if such
      representations and warranties were made as of the date hereof and set forth
      in
      their entirety in this Agreement, including without limitation the schedules
      referenced therein.

     

    (b)
       Investor
      Bring Down.
      The
      Investor hereby represents and warrants, as to itself only, as set forth in
      Section 2 (other than Section 2(l) thereto) of the Securities Purchase Agreement
      as if such representations and warranties were made as of the date hereof and
      set forth in their entirety in this Agreement.

     

    
      	 	
              2.
                

            	
              CERTAIN
                COVENANTS AND AGREEMENTS

            

    

     

    (a)
       Deferral
      of Installment Notice.
      The
      Investor agrees to defer the Installment Notice Due Date (as defined in the
      Notes) in respect of the May Installment Payment to May 31, 2007.

     

    (b)
       Deferral
      of Installment Amount.
      The
      Investor agrees to defer the May Installment Payment to June 29, 2007. Such
      deferral of the May Installment Payment to June 29, 2007 shall not constitute
      a
      deferral of the Installment Amount (as defined in the Notes) due on July 31,
      2007, and the Investor agrees that the deferral of the May Installment Payment
      under this Section 3(a) shall not be deemed an Event of Default. In respect
      of
      the deferred May Installment Payment, the Company Conversion Measuring Period
      (as defined in the Notes) shall run from and including May 30, 2007 to and
      including June 26, 2007, and the date by which the Investor must specify to
      the
      Company in writing the dates of the seventeen (17) Trading Days that shall
      be
      used to calculate the Company Conversion Price (as defined in the Notes) shall
      be June 28, 2007.

     

    (c)
       Disclosure
      of Transactions and Other Material Information.
      Between
      6:00 a.m. and 9:30 a.m., New York Time, on the
      date
      following the date hereof, the Company shall file a Current Report on Form
      8-K
      describing this Agreement 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”,
      and
      the description and attachments, the “8-K
      Materials”).
      From
      and after the filing of the 8-K Filing with the SEC, the Investors shall not
      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 the 8-K Filing. 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 the Investor with
      any
      material nonpublic information regarding the Company or any of its Subsidiaries
      from and after the filing of the 8-K Filing with the SEC without the express
      written consent of such Investor. Subject to the foregoing, neither the Company
      nor the Investor 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, with-

     

    

    
      
        
          -
            2
-

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    out
      the
      prior approval of the Investor, 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 Trading Market (provided that in the case of clause (i) the Investor
      shall be consulted by the Company in connection with any such press release
      or
      other public disclosure prior to its release).

     

    (d)
       Fees
      and Expenses.
      Except
      as otherwise set forth in this Agreement, each party shall pay the fees and
      expenses of its advisers, counsel, accountants and other experts, if any, and
      all other expenses incurred by such party incident to the negotiation,
      preparation, execution, delivery and performance of this Agreement.

     

    
      	 	
              3.
                

            	
              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 non-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 one 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

     

    

    
      
        
          -
            3
-

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    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; Effect on Prior Agreements; Amendments.
      This
      Agreement, the documents referenced herein and any agreements entered into
      on
      the date hereof in connection with the transactions contemplated by this
      Agreement supersede all other prior oral or written agreements between the
      Investors, 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 Investor makes any
      representation, warranty, covenant or undertaking with respect to such matters.
      No provision of this Agreement may be amended or waived other than by an
      instrument in writing signed by the party against whom enforcement is sought.
      The Company has not, directly or indirectly, made any agreements with any of
      the
      Investors relating to the terms or conditions of the transactions contemplated
      hereby except as set forth or referenced herein as amended or cancelled by
      this
      Agreement.

     

    (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

    1229
      Oak
      Valley Drive

    Ann
      Arbor, Michigan 48108

    Facsimile: (734)
      761-5368

    Telephone: (800)
      281-0356

    Attention: 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

          
      Telephone:  011-972-2-990-6623

          
      Facsimile:   011-972-2-990-6688

          
      Attention:   
General
      Counsel

     

     

    

     

    

    
      
        
          -
            4 -

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    

    
      If
        to the
        Investor:

       

    

    
      [ADDRESS
        OF INVESTOR]

      [                ]

    

    
      [                ]

      Attention:

      Facsimile:

      Telephone:

       

    

    With
      a
      copy to:

     

    Schulte
      Roth & Zabel LLP

    919
      Third
      Avenue

    New
      York,
      New York 10022

    Attention: Eleazer
      Klein, Esq.

    Facsimile: (212)
      593-5955

    Telephone: (212)
      756-2376

     

    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 at least 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.

     

    (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.
      The
      representations and warranties of the Company and the Investors contained
      herein, and the agreements and covenants set forth herein, shall survive the
      Closing.

     

    (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 the 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)
       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.

     

    

    
      
        
          -
            5 -

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    (l)
       Remedies.
      The
      Investors shall have 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 this Agreement, any remedy at law may prove to be inadequate
      relief to the Investor. The Company therefore agrees that the Investor 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. 

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
      executed by their respective authorized signatories as of the date first
      indicated above.

     

    AROTECH
      CORPORATION

     

    By:                       

    Name: Robert
      S.
      Ehrlich

    Title: Chairman
      and CEO

     

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE OF INVESTOR FOLLOWS]

    

    
      
        
          -
            6 -

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
      executed by their respective authorized signatories as of the date first
      indicated above.

     

    [NAME
      OF INVESTOR]

     

    By:                      

    Name:

    Title:

    

      
        
          - 7 -

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