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<SEC-DOCUMENT>0000910662-05-000368.txt : 20050630
<SEC-HEADER>0000910662-05-000368.hdr.sgml : 20050630
<ACCEPTANCE-DATETIME>20050630161955
ACCESSION NUMBER:		0000910662-05-000368
CONFORMED SUBMISSION TYPE:	20-F
PUBLIC DOCUMENT COUNT:		13
CONFORMED PERIOD OF REPORT:	20041231
FILED AS OF DATE:		20050630
DATE AS OF CHANGE:		20050630

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			TAT TECHNOLOGIES LTD
		CENTRAL INDEX KEY:			0000808439
		STANDARD INDUSTRIAL CLASSIFICATION:	AIRCRAFT ENGINES & ENGINE PARTS [3724]
		IRS NUMBER:				000000000
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		20-F
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-16050
		FILM NUMBER:		05928733

	BUSINESS ADDRESS:	
		STREET 1:		P.O. BOX 80
		CITY:			GEDERA ISRAEL
		STATE:			L3
		ZIP:			70750
		BUSINESS PHONE:		2127025962

	MAIL ADDRESS:	
		STREET 1:		P.O. BOX 80
		STREET 2:		445 PARK AVE SUMMIT ROVINS & FELDESMAN
		CITY:			GEDERA 70750 ISRAEL
		STATE:			L3

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	GALAGRAPH LIMITED
		DATE OF NAME CHANGE:	19920609
</SEC-HEADER>
<DOCUMENT>
<TYPE>20-F
<SEQUENCE>1
<FILENAME>form20ffy2004.txt
<DESCRIPTION>FISCAL YEAR ENDED DECEMBER 31, 2004
<TEXT>



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                               -------------------
                                    FORM 20-F
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2004
                               -------------------
                           Commission File No. 0-17253

                            T.A.T. TECHNOLOGIES LTD.
              (Exact name of Registrant as specified in its charter
               and translation of Registrant's name into English)
                               -------------------
                                     Israel
                 (Jurisdiction of incorporation or organization)

                        P.O. Box 80, Gedera 70750, Israel
                    (Address of principal executive offices)
                               -------------------

 Securities registered or to be registered pursuant to Section 12(b) of the Act:

                                      None

 Securities registered or to be registered pursuant to Section 12(g) of the Act:

                       Ordinary Shares, NIS 0.90 Par Value
                                (Title of Class)


                    Securities for which there is a reporting
                obligation pursuant to Section 15(d) of the Act:

                                      None

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report: 6,042,671 Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
                                                 Yes   X        No ___

Indicate by check mark which financial statement item the Registrant
has elected to follow:
                                                 Item 17. ___ Item  18. X



<PAGE>


                                  INTRODUCTION
                                  ------------

         TAT Technologies Ltd. is engaged in the manufacture and sale of a broad
range of heat transfer equipment used in mechanical and electronic systems on
board commercial and military aircraft and in a variety of other electronic
equipment. We are also engaged in the remanufacture, overhaul and repair of heat
transfer equipment and other aircraft components manufactured by us, and other
companies. In addition, we manufacture, sell and service certain related
products for use in aircraft and electronic systems. We were incorporated under
the laws of the State of Israel in April 1985, to develop the computerized
systems business of our parent company, TAT Industries Ltd., or TAT Industries,
a publicly held Israeli corporation engaged in the manufacture and sale of
aeronautical equipment. In December 1991, we acquired the heat exchanger
operations of TAT Industries and in February 2000, we entered into an agreement
with TAT Industries to purchase its operations, relating to the manufacture of
aviation accessories and the lease of certain real estate and buildings. From
our public offering in March 1987 until July 1998, our ordinary shares were
listed on the NASDAQ National Market (symbol: TATTF). In July 1998, the listing
of our ordinary shares was transferred to the NASDAQ SmallCap Market. As used in
this annual report, the terms "we," "us" and "our" mean TAT Technologies Ltd.
and its subsidiaries, unless otherwise indicated.

         Except for the historical information contained in this annual report,
the statements contained in this annual report are "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995, as amended, with respect to our
business, financial condition and results of operations. Such forward-looking
statements reflect our current view with respect to future events and financial
results.

         Statements which use the terms "anticipate," "believe," "do not
believe," "expect," "plan," "intend," "estimate," "anticipate" and similar
expressions are intended to identify forward-looking statements. We remind
readers that forward-looking statements are merely predictions and therefore
inherently subject to uncertainties and other factors and involve known and
unknown risks that could cause the actual results, performance, levels of
activity, or our achievements, or industry results, to be materially different
from any future results, performance, levels of activity, or our achievements
expressed or implied by such forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. Except as required by applicable law, including the
securities laws of the United States, we undertake no obligation to publicly
release any update or revision to any forward looking statements to reflect new
information, future events or circumstances, or otherwise after the date hereof.
We have attempted to identify significant uncertainties and other factors
affecting forward-looking statements in the Risk Factors section that appears in
Item 3. "Key Information - Risk Factors.

         Our consolidated financial statements appearing in this annual report
are prepared in dollars and in accordance with generally accepted accounting
principles in the United States, or U.S. GAAP. All references in this annual
report to "dollars" or "$" are to dollars and all references in this annual
report to "NIS" are to New Israeli Shekels.

         Statements made in this annual report concerning the contents of any
contract, agreement or other document are summaries of such contracts,
agreements or documents and are not complete descriptions of all of their terms.
If we filed any of these documents as an exhibit to this annual report or to any
registration statement or annual report that we previously filed, you may read
the document itself for a complete description of its terms.


<PAGE>



PART I.........................................................................5
         Item 1.      Identity of Directors, Senior Management and Advisers....5
         Item 2.      Offer Statistics and Expected Timetable..................5
         Item 3.      Key Information..........................................5
               A.    Selected Financial Data...................................5
               B.    Capitalization and Indebtedness...........................6
               C.    Reasons for the Offer and Use of Proceeds.................6
               D.    Risk Factors..............................................6
         Item 4.      Information on the Company..............................15
               A.    History and Development of the Company...................15
               B.    Business Overview........................................16
               C.    Organizational Structure.................................24
               D.    Property, Plants and Equipment...........................24
         Item 5.      Operating and Financial Review and Prospects............24
               A.    Operating Results........................................24
               B.    Liquidity and Capital Resources..........................33
               C.    Research and Development, Patents and Licenses...........34
               D.    Trend Information........................................34
               E.    Off-balance Sheet Arrangements...........................34
               F.    Tabular Disclosure of Contractual Obligations............35
          Item 6.      Directors, Senior Management and Employees.............35
               A.    Directors and Senior Management..........................35
               B.    Compensation.............................................38
               C.    Board Practices..........................................39
               D.    Employees................................................46
               E.    Share Ownership..........................................47
         Item 7.      Major Shareholders and Related Party Transactions.......48
               A.    Major Shareholders.......................................48
               B.    Related Party Transactions...............................50
               C.    Interests of Experts and Counsel.........................51
         Item 8.      Financial Information...................................51
               A.    Consolidated Statements and Other Financial Information..51
               B.    Significant Changes......................................51
         Item 9.      The Offer and Listing...................................52

<PAGE>


               A.    Offer and Listing Details................................52
               B.    Plan of Distribution.....................................53
               C.    Markets..................................................53
               D.    Selling Shareholders.....................................53
               E.    Dilution.................................................53
               F.    Expense of the Issue.....................................53
         Item 10.     Additional Information..................................53
               A.    Share Capital............................................53
               B.    Memorandum and Articles of Association...................53
               C.    Material Contracts.......................................56
               D.    Exchange Controls........................................57
               E.    Taxation.................................................57
               F.    Dividend and Paying Agents...............................66
               G.    Statement by Experts.....................................66
               H.    Documents on Display.....................................66
               I.    Subsidiary Information...................................67
         Item 11.     Quantitative and Qualitative Disclosures about Market
                      Risk....................................................67
         Item 12.     Description of Securities Other than Equity Securities..67
PART II.......................................................................67
         Item 13.     Defaults, Dividend Arrearages and Delinquencies.........67
         Item 14.     Material Modifications to the Rights of Security
                      Holders.................................................67
         Item 15.     Controls and Procedures.................................67
         Item 16.     [Reserved]..............................................68
         Item 16A.    Audit Committee Financial Expert........................68
         Item 16B.    Code of Ethics..........................................68
         Item 16C.    Principal Accounting Fees and Services..................68
         Item 16D.    Exemptions from the Listing Requirements and
                      Standards for Audit Committee...........................69
PART III......................................................................69
         Item 17.     Financial Statements....................................69
         Item 18.     Financial Statements....................................69
         Item 19.     Exhibits................................................69


<PAGE>




                                     PART I



     Item 1. Identity of Directors, Senior Management and Advisers

         Not applicable

     Item 2. Offer Statistics and Expected Timetable

         Not applicable

     Item 3. Key Information

     A. Selected Financial Data

         The following selected consolidated financial data for and as of the
five years ended December 31, 2004 are derived from our audited consolidated
financial statements which have been prepared in accordance with U.S. GAAP. The
selected consolidated financial data as of December 31, 2004 and 2003 and for
the years ended December 31, 2004, 2003 and 2002 have been derived from our
audited consolidated financial statements and notes included elsewhere in this
annual report. The selected consolidated financial data as of December 31, 2002,
2001 and 2000 and for the years ended December 31, 2001 and 2000 have been
derived from audited consolidated financial statements not included in this
annual report. The selected consolidated financial data set forth below should
be read in conjunction with and are qualified by reference to Item 5. "Operating
and Financial Review and Prospects" and our consolidated financial statements
and notes thereto included elsewhere in this annual report.

Statement of Operations Data:

<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                           -----------------------------------------------------------------
                                                             2000           2001          2002          2003          2004
                                                           -------        -------       -------       -------       --------
                                                                   (figures in thousands, except per share data)
<S>                                                        <C>            <C>           <C>           <C>           <C>
Revenues...........................................        $28,424        $25,051       $26,280       $30,682       $33,243
Cost of revenues...................................         18,602         17,237        17,750        20,068        22,166
                                                           -------        -------       -------       -------       -------
Gross profit.......................................          9,822          7,814         8,530        10,614        11,077
                                                           -------        -------       -------       -------       -------
Research and development costs, net................            334            257           204           120           125
Selling and marketing expenses.....................          1,509          1,510         1,483         1,958         1,894
General and administrative expenses................          3,472          3,235         2,994         3,476         3,793
                                                           -------        -------       -------       -------       -------
                                                             5,315          5,002         4,681         5,554         5,812
                                                           -------        -------       -------       -------       -------
Operating income ..................................          4,507          2,812         3,849         5,060         5,265
Financial income (expenses), net...................            211            (78)           99           (25)           87
Other income (loss), net...........................            752             (1)            8            24            54
                                                           -------        -------       -------       -------       -------
Income from continuing  operations before taxes on
   income..........................................          5,470          2,733         3,956         5,059         5,406
Taxes on income....................................             23             75           367         1,225         1,667
Equity in net loss of affiliates...................             --             --            --            --            --
Net income ........................................         $5,447         $2,658        $3,589        $3,834        $3,739
                                                           =======        =======       =======       =======       =======
Basic net earnings per share ......................          $1.22          $0.59         $0.80         $0.85         $0.72
Diluted net income per share.......................          $1.13          $0.57        $$0.77         $0.78         $0.67
</TABLE>


<PAGE>

<TABLE>
<S>                                                          <C>            <C>           <C>           <C>          <C>
Weighted average number of shares used in computing
   basic and diluted net income per  share.........          4,483          4,483         4,483         4,510         5,166
Weighted average number of shares used in computing
   diluted net income per share....................          4,651          4,671         4,483         4,907         5,564
Cash dividend per share............................             --             --            --         $0.70         $1.18
</TABLE>

<TABLE>
<CAPTION>
Balance Sheet Data:                                                        As of December 31,
                                             --------------------------------------------------------------------------------
                                                  2000            2001            2002            2003             2004
                                             ---------------- -------------- --------------- ---------------- ---------------
<S>                                             <C>               <C>            <C>             <C>             <C>
Working capital.............................    $17,256           $18,510        $19,685         $22,336         $26,680
Total assets................................     31,819            30,426         35,318          39,392          41,264
Long-term debt, excluding current
   maturities...............................      5,417             3,316          3,362           3,793           4,111
Shareholder's equity........................    $21,190           $23,848        $25,419         $28,684         $32,526
</TABLE>


     B. Capitalization and Indebtedness

         Not applicable.

     C. Reasons for the Offer and Use of Proceeds

         Not applicable.

     D. Risk Factors

         Investing in our ordinary shares involves a high degree of risk and
uncertainty. You should carefully consider the risks and uncertainties described
below before investing in our ordinary shares. Our business, prospects,
financial condition and results of operations could be adversely affected due to
any of the following risks. In that case, the value of our ordinary shares could
decline, and you could lose all or part of your investment.

Risks Related to Our Business and Our Industry

We rely on the aerospace industry and the continued financial crisis in this
industry may adversely affect our sales in the future.

         We sell our products and services primarily to the commercial and
military aerospace industry. Sales to customers in these markets generally
fluctuate with changes in military expenditure budgets and the rate of new
aircraft construction, levels of which have been declining over the past few
years. Moreover, since 2001, and especially following the tragic events of
September 11, 2001, the commercial airline industry has suffered from economic
decline that caused the bankruptcy of several airlines and imposed financial
constraints on the entire industry. As a result of these conditions, the sales
of our products may decrease in the future. The continuance of the crisis in the
commercial aviation industry will adversely affect our business, financial
condition and results of operations.

We derive a large part of our revenues from several major customers. If we lose
any of these customers or they reduce the amount of business they do with us,
our revenues may be seriously affected.

         One of our non-governmental customers accounted for approximately 15.4%
of our revenues in 2004. Four customers accounted for a total of approximately
43.1% of our revenues in 2004, three customers accounted for approximately 40.3%
of our revenues for the year ended December 31, 2003 and

                                       6

<PAGE>


four customers accounted for a total of approximately 46.1% of our revenues in
2002. We can't be sure that any of these customers will maintain the same volume
of business with us in the future. If we lose any of these customers or they
reduce the amount of business they do with us, our revenues may be seriously
affected.

We derive a large part of our revenues from government business. A loss of all,
or a major portion, of our revenues from government contracts could have a
material adverse effect on our operations.

         A portion of our revenues are from contracts with the U.S. and Israeli
Governments, acting through their various departments and agencies. Sales to the
U.S. and Israeli governments, accounted for approximately 10.6% and 2.6% of our
revenues for 2004, respectively, approximately 15.3% and 3.3% of our revenues
for the year ended December 31, 2003, respectively, and approximately 17.3% and
3.2% of our revenues for 2002, respectively.

         Business with the U.S. and Israeli governments, as well as with the
governments of other countries, is subject to risks which are not as relevant in
business with private parties. For example:

          o    legislative or administrative  requirements may delay payment for
               performance of contracts;

          o    our sales to government  agencies,  authorities and companies are
               directly affected by these customers'  budgetary  constraints and
               the priority  given in their  budgets to the  procurement  of our
               products;

          o    since  these  contracts  are  generally   terminable-at-will,   a
               government may terminate  contracts for its convenience,  because
               of  a  change  in  its   requirements,   policies  or   budgetary
               constraints,  or as a result of a change  in the  administration;
               and

          o    our  costs may be  adjusted  as a result of audits or we may have
               increased or unexpected  costs causing losses or reduced  profits
               under fixed-price contracts.

         While 58.66% of our revenues is derived from the sale of products for
the non-military markets in the United States, Israel and abroad, we believe
that the success and development of our business depends upon our ability to
participate in the defense programs of the United States, Israel and other
governments and the continued commitment by these governments of substantial
resources to such programs. A loss of all, or a major portion, of our revenues
from government contracts could have a material adverse effect on our
operations.

We depend on a limited number of suppliers of components for our products and if
we are unable to obtain these components when needed, we would experience delays
in manufacturing our products and our financial results could be adversely
affected.

         We acquire most of the components for the manufacturing of our products
from a limited number of suppliers, most of whom are located in Israel and the
United States. Certain of these suppliers are currently the sole source of one
or more components upon which we are dependent. Suppliers of some of the
components for manufacturing require us to place orders with significant
lead-time to assure supply in accordance with our manufacturing requirements.
Inadequacy of operating funds may cause us to delay placement of such orders and
may result in delays in supply. Delays in supply may significantly hurt our
ability to fulfill our contractual obligations and may significantly hurt our
business and result of operations. We cannot assure you that we will be able to
continue to obtain such components from these suppliers on satisfactory
commercial terms.

                                       7

<PAGE>


We may face increased costs and reduced supply of raw materials. There can be no
assurance that we will be able to recoup any future increases in the cost of raw
materials or in electric power costs through price increases for our products.

         Since 2003, the cost of raw materials used in our production, has
fluctuated significantly due to market and industry conditions. The cost of
electric power has also increased in the last several years. There can be no
assurance that we will be able to recoup any future increases in the cost of raw
materials or electric power costs through price increases for our products.

Reduction in military budgets worldwide may cause a reduction in our revenues,
which would adversely affect our business, operating results and financial
condition.

         A significant portion of our revenues is derived from the sale of
products for military applications. These revenues, on a consolidated basis,
totaled approximately $13.7 million, or 41.34 % of revenues in 2004, $15.2
million, or 49.7% of revenues, in 2003 and $13.1 million, or 49.7% of revenues,
in 2002. The military budgets of a number of countries have been reduced and may
be further reduced in the future. Declines in military budgets may result in
reduced demand for our products and manufacturing services. This would result in
reduction in our core business' revenues and adversely affect our business,
results of operations and financial condition.

We operate in a highly competitive field. We may not be able to offer our
products as part of integrated systems to the same extent as our competitors or
successfully develop or introduce new products that are more cost effective or
offer better performance than those of our competitors. Failure to do so could
adversely affect our business, financial condition and results of operations.

         The market for heat exchangers and other heat transfer products is
highly competitive, and we may not be able to compete effectively in our market.
Our principal competitors are Honeywell Corporation, or Honeywell, Hamilton
Sunstrand, or Hamilton, and Lori Inc., or Lori. Some of our competitors are far
larger, have substantially greater resources, including technical, financial,
research and development and marketing and distribution capabilities than we
have, and enjoy greater market recognition than we have. These competitors may
be able to achieve greater economies of scale and may be less vulnerable to
price competition than us. We may not be able to offer our products as part of
integrated systems to the same extent as our competitors or successfully develop
or introduce new products that are more cost effective or offer better
performance than those of our competitors. Failure to do so could adversely
affect our business, financial condition and results of operations.

In May 2005, we entered into an agreement for the purchase of Piedmont Aviation
Component Services, LLC, subject to certain closing conditions. No assurance can
be given that we will be able to successfully operate this company in the
future. If this company is unsuccessful, our future results of operations will
be adversely affected.

         On May 24, 2005, our subsidiary, Limco-Airepair, Inc., entered into an
agreement, subject to certain closing conditions, for the purchase of Piedmont
Aviation Component Services, LLC, or Piedmont, a private company based in
Kernersville, North Carolina, engaged in the repair and overhaul of various
aircraft accessories. Under the terms of the acquisition, we agreed to pay $5.5
million for Piedmont and to repay $9.5 million of its outstanding indebtedness.
In 2004, Piedmont had a net lost of $168,000. No assurance can be given that
Piedmont will be profitable in the future. If Piedmont is not profitable in the
future, we may lose our investment in this company and our future results of
operations will be adversely affected.

                                       8

<PAGE>


We may engage in future acquisitions that could dilute our stockholders' equity
and harm our business, results of operations and financial condition.

         We have pursued, and will continue to pursue, growth opportunities
through internal development and acquisition of complementary businesses,
products and technologies. We are unable to predict whether or when any other
prospective acquisition will be completed. The process of integrating an
acquired business may be prolonged due to unforeseen difficulties and may
require a disproportionate amount of our resources and management's attention.
We cannot assure you that we will be able to successfully identify suitable
acquisition candidates, complete acquisitions, integrate acquired businesses
into our operations, or expand into new markets. Further, once integrated,
acquisitions may not achieve comparable levels of revenues, profitability or
productivity as our existing business or otherwise perform as expected. The
occurrence of any of these events could harm our business, financial condition
or results of operations. Future acquisitions may require substantial capital
resources, which may require us to seek additional debt or equity financing.

         Future acquisitions by us could result in the following, any of which
could seriously harm our results of operations or the price of our stock:

          o    issuance  of equity  securities  that would  dilute  our  current
               stockholders' percentages of ownership;

          o    large one-time write-offs;

          o    the incurrence of debt and contingent liabilities;

          o    difficulties in the  assimilation  and integration of operations,
               personnel, technologies,  products and information systems of the
               acquired companies;

          o    diversion of management's attention from other business concerns;

          o    contractual disputes;

          o    risks of entering  geographic  and  business  markets in which we
               have no or only limited prior experience; and

          o    potential loss of key employees of acquired organizations.

Rapid technological changes may adversely affect the market acceptance of our
products.

         The aerospace market in which we compete is subject to technological
changes, introduction of new products, change in customer demands and evolving
industry standards. Our future success will depend upon our ability to keep pace
with technological developments and to timely address the increasingly
sophisticated needs of our customers by supporting existing and new technologies
and by developing and introducing enhancements to our current products and new
products. We cannot assure you that we will be successful in developing and
marketing enhancements to our products that will respond to technological
change, evolving industry standards or customer requirements; that we will not
experience difficulties that could delay or prevent the successful development,
introduction and sale of such enhancements; or that such enhancements will
adequately meet the requirements of the market and achieve any significant
degrees of market acceptance. If release dates of our new products or
enhancements are delayed or, if when released, they fail to achieve market
acceptance, our business, operating results and financial condition would be
materially adversely affected.

                                        9

<PAGE>


We may encounter difficulties with our international operations and sales. We
cannot assure you that we will be able to sustain or increase revenues from
international operations or that we will not encounter significant difficulties
in connection with the sale of our products in international markets or that one
or more of these factors will not have a material adverse effect on our future
revenues and, as a result, our business, operating results and financial
condition.

         While our principal executive offices are located in Israel, 84.7% of
our sales in 2004, 84.4% of our sales in 2003 and 83.7% of our sales in 2002
were exports. This subjects us to many risks inherent in international business,
including:

          o    limitations  and  disruptions  resulting  from the  imposition of
               government controls;

          o    changes in regulatory requirements;

          o    export license requirements;

          o    economic or political instability;

          o    trade restrictions;

          o    changes in tariffs;

          o    currency fluctuations;

          o    longer receivable  collection  periods and greater  difficulty in
               accounts receivable collection;

          o    difficulties in managing overseas  subsidiaries and international
               operations; and

          o    potential adverse tax consequences.

         We cannot assure you that we will be able to sustain or increase
revenues from international operations or that we will not encounter significant
difficulties in connection with the sale of our products in international
markets or that one or more of these factors will not have a material adverse
effect on our future revenues and, as a result, our business, operating results
and financial condition.

We face special risks from international sales and currency exchange
fluctuations. Since our financial statements are stated in dollars, but not all
our expenses are incurred in dollars or incurred in currencies linked to the
dollar, our operations have been, and may continue to be, affected by
fluctuations in currency exchange rates.

         Export sales represented approximately 42.4% of our revenues in 2004,
approximately 43.8% of our revenues in 2003 and 43.3% of our revenues in 2002.
We expect exports will continue to be a significant part of our business. This
business is subject to various risks common to international activities, such as
the need to comply with complex and varied export laws, tariff regulations and
regulatory requirements, and political and economic instability in certain
regions.

         Since our financial statements are stated in dollars, but not all our
expenses are incurred in dollars or incurred in currencies linked to the dollar,
our operations have been, and may continue to be, affected by fluctuations in
currency exchange rates.

                                       10



<PAGE>




If we do not receive the governmental approvals necessary for the export of our
products, our revenues may decrease. Similarly if our suppliers and partners do
not receive their government approvals necessary to export their products or
designs to us, our revenues might decrease and we may fail to implement our
growth strategy.

         Under Israeli law, the export of certain of our products and know-how
is subject to approval by the Israeli Ministry of Defense. To initiate sales
proposals with regard to exports of our products and know-how and to export such
products or know-how, we must obtain permits from the Ministry of Defense. We
cannot assure you that we will receive in a timely manner all the required
permits for which we may apply in the future.

         Similarly, under foreign laws the export of certain military products,
technical designs and spare parts require the prior approval of, or export
license from, such foreign governments. In order to maintain our third party
production, certain co-development activities and procurements required for the
performance of certain contracts, we must receive detailed technical designs,
products or products' parts samples from our strategic partners or suppliers. We
cannot assure you that we will be able to receive all the required permits
and/or licenses in a timely manner. Consequently, our revenues may decrease and
we may fail to implement our growth strategy.

We have not registered our intellectual property rights. There is no way to be
sure that others will not independently develop such trade secrets and know-how
or obtain access thereto, which could adversely affect our business.

         We rely primarily on unpatented proprietary know-how and trade secrets,
and employ various methods including confidentiality agreements with employees,
to protect our trade secrets and intellectual property. However, such methods
may not afford complete protection and there is no way to be sure that others
will not independently develop such trade secrets and know-how or obtain access
thereto, which could adversely affect our business.

Our products may infringe on the intellectual property rights of others.

         Third parties may assert infringement claims against us or claims that
we have violated a patent or infringed on a copyright, trademark or other
proprietary right belonging to them. In addition, any infringement claim, even
one without merit, could result in the expenditure of significant financial and
managerial resources to defend.

We are dependent on our senior management and key personnel, whose loss could
adversely affect our business.

         Our future success depends in large part on the continued services of
our senior management and key personnel. We do not carry key-person life
insurance on our senior management or key personnel. Any loss of the services
members of senior management or other key personnel could negatively and
materially affect our business.

Compliance with the changing corporate governance regulations and public
disclosure requirements may result in additional expenses.

         Changing laws, regulations and standards relating to corporate
governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new
Securities and Exchange Commission regulations and NASDAQ Stock Market rules,
are creating uncertainty for companies such as ours. We are committed to
maintaining high standards of corporate governance and public disclosure. As a
result, we intend to

                                       11



<PAGE>


invest reasonably necessary resources to comply with evolving standards, and
this investment may result in increased general and administrative expenses and
a diversion of management time and attention from revenue-generating activities
to compliance activities, which could harm our operating results and business
prospects.

The results of legal proceedings are difficult to predict and an unfavorable
resolution of a lawsuit or proceeding could have a material adverse effect on
our business.

         We are, and have been in the past, a party to various lawsuits,
including employment claims, and other legal proceedings in the normal course of
our business. See "Item 8 - Financial Information." Legal proceedings can be
expensive, lengthy and disruptive to normal business operations, regardless of
their merit. Moreover, the results of complex legal proceedings are difficult to
predict and an unfavorable resolution of a lawsuit or proceeding could have a
material adverse effect on our business, results of operations or financial
condition.

Risk Factors Related to Our Ordinary Shares

Our share price has been volatile in the past and may decline in the future.

         Our ordinary shares have experienced significant market price and
volume fluctuations in the past and may experience significant market price and
volume fluctuations in the future in response to factors such as the following,
some of which are beyond our control:

          o    quarterly variations in our operating results;

          o    operating  results that vary from the  expectations of securities
               analysts and investors;

          o    changes in expectations as to our future  financial  performance,
               including   financial   estimates  by  securities   analysts  and
               investors;

          o    announcements of technological  innovations or new products by us
               or our competitors;

          o    announcements by us or our competitors of significant  contracts,
               acquisitions,  strategic partnerships,  joint ventures or capital
               commitments;

          o    changes in the status of our intellectual property rights;

          o    announcements   by  third  parties  of   significant   claims  or
               proceedings against us;

          o    additions or departures of key personnel;

          o    future sales of our ordinary shares;

          o    de-listing of our shares from the NASDAQ SmallCap Market; and

          o    stock market price and volume fluctuations.

         Domestic and international stock markets often experience extreme price
and volume fluctuations. Market fluctuations, as well as general political and
economic conditions, such as a recession or interest rate or currency rate
fluctuations or political events or hostilities in or surrounding Israel, could
adversely affect the market price of our ordinary shares.

                                       12



<PAGE>


         In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources both of which could have a material adverse effect on our business
and results of operations.

Substantial future sales of our ordinary shares by our principal shareholders
may depress our share price.

         If our principal shareholders sell substantial amounts of our ordinary
shares, including shares issued upon the exercise of outstanding warrants, or
convertible notes, or if the perception exists that our principal shareholders
may sell a substantial number of our ordinary shares, the market price of our
ordinary shares may fall. Any substantial sales of our shares in the public
market also might make it more difficult for us to sell equity or equity-related
securities in the future at a time, in a place and on terms we deem appropriate.

Risks Relating to Our Location in Israel

Because we have significant operations in Israel, we may be subject to
political, economic and other conditions affecting Israel that could increase
our operating expenses and disrupt our business.

         We are incorporated under the laws of, and our executive offices,
manufacturing plant and research and development facilities are located in, the
State of Israel. Although most of our sales are made to customers outside
Israel, we are nonetheless directly affected by the political, economic and
military conditions affecting Israel. Specifically, we could be adversely
affected by any major hostilities involving Israel, a full or partial
mobilization of the reserve forces of the Israeli army, the interruption or
curtailment of trade between Israel and its present trading partners, or a
significant downturn in the economic or financial condition of Israel.

         Since the establishment of the State of Israel in 1948, a number of
armed conflicts have taken place between Israel and its Arab neighbors, and a
state of hostility, varying from time to time in intensity and degree, has led
to security and economic problems for Israel. Since September 2000, there has
been a marked increase in violence, civil unrest and hostility, including armed
clashes, between the State of Israel and the Palestinians, and acts of terror
have been committed inside Israel and against Israeli targets in the West Bank
and Gaza. There is no indication as to how long the current hostilities will
last or whether there will be any further escalation. Any continuation of, or
further escalation in, these hostilities or any future armed conflict, political
instability or violence in the region may have a negative effect on our business
condition, harm our results of operations and adversely affect our share price.

         Furthermore, there are a number of countries that restrict business
with Israel or Israeli companies. Restrictive laws or policies of those
countries directed towards Israel or Israeli businesses had, and may in the
future continue to have, an adverse impact on our operations, our financial
results or the expansion of our business. No predictions can be made as to
whether or when a final resolution of the area's problems will be achieved or
the nature thereof and to what extent the situation will impact Israel's
economic development or our operations.

Our results of operations may be negatively affected by the obligation of our
personnel to perform military service.

         Many of our executive officers and employees in Israel are obligated to
perform annual military reserve duty and are subject to being called for active
duty under emergency circumstances. If a military conflict or war arises, these
individuals could be required to serve in the military for extended periods of

                                       13



<PAGE>


time. Our operations could be disrupted by the absence for a significant period
of one or more of our executive officers or key employees or a significant
number of other employees due to military service. Any disruption in our
operations could adversely affect our business.

The economic conditions in Israel have not been stable in recent years. Our
operations could be adversely affected if the economic conditions in Israel
deteriorate.

         In recent years Israel has been going through a period of recession in
economic activity, resulting in low growth rates and growing unemployment. Our
operations could be adversely affected if the economic conditions in Israel
deteriorate.

We may be adversely affected by a change in the exchange rate of the NIS against
the dollar. Because exchange rates between the NIS and the dollar fluctuate
continuously, exchange rate fluctuations, particularly larger periodic
devaluations, may have an impact on our profitability and period to period
comparisons of our results.

         Because exchange rates between the NIS and the dollar fluctuate
continuously, exchange rate fluctuations, particularly larger periodic
devaluations, may have an impact on our profitability and period to period
comparisons of our results. In 2001 and 2002, the rate of devaluation of the NIS
against the dollar was 9.3% and 7.3%, respectively, while in 2003 and 2004 the
NIS appreciated in value in relation to the dollar by 7.6% and 1.6%,
respectively. A portion of our expenses, primarily labor expenses, is incurred
in NIS and a part of our revenues are quoted in NIS. Additionally, certain
assets, as well as a portion of our liabilities, are denominated in NIS. Our
results may be adversely affected by the devaluation of the NIS in relation to
the dollar (or if such devaluation is on lagging basis), if our revenues in NIS
are higher than our expenses in NIS and/or the amount of our assets in NIS are
higher than our liabilities in NIS. Alternatively, our results may be adversely
affected by an appreciation of the NIS in relation to the dollar (or if such
appreciation is on a lagging basis), if the amount of our expenses in NIS are
higher than the amount of our revenues in NIS and/or the amount of our
liabilities in NIS are higher than our assets in NIS.

Service and enforcement of legal process on us and our directors and officers
may be difficult to obtain.

         Service of process upon our directors and officers and the Israeli
experts named herein, all of whom reside outside the United States, may be
difficult to obtain within the United States. Furthermore, substantially all of
our assets, all of our directors and officers and the Israeli experts named in
this annual report are located outside the United States, any judgment obtained
in the United States against us or these individuals or entities may not be
collectible within the United States.

         There is doubt as to the enforceability of civil liabilities under the
Securities Act and the Securities Exchange Act in original actions instituted in
Israel. However, subject to certain time limitations and other conditions,
Israeli courts may enforce final judgments of United States courts for
liquidated amounts in civil matters, including judgments based upon the civil
liability provisions of those Acts.

Provisions of Israeli law may delay, prevent or make the acquisition of our
company difficult, which could prevent a change of control and therefore depress
the price of our shares.

         Provisions of Israeli corporate and tax law may have the effect of
delaying, preventing or making more difficult a merger with, or other
acquisition of, us. This could cause our ordinary shares to trade at prices
below the price for which third parties might be willing to pay to gain control
of us. Third parties

                                       14

<PAGE>

who are otherwise willing to pay a premium over prevailing market prices to gain
control of us may be unable or unwilling to do so because of these provisions of
Israeli law.

Your rights and responsibilities as a shareholder will be governed by Israeli
law and differ in some respects from the rights and responsibilities of
shareholders under U.S. law.

         We are incorporated under Israeli law. The rights and responsibilities
of holders of our ordinary shares are governed by our memorandum of association,
articles of association and by Israeli law. These rights and responsibilities
differ in some respects from the rights and responsibilities of shareholders in
typical U.S. corporations. In particular, a shareholder of an Israeli company
has a duty to act in good faith in exercising his or her rights and fulfilling
his or her obligations toward the company and other shareholders and to refrain
from abusing his power in the company, including, among other things, in voting
at the general meeting of shareholders on certain matters. Israeli law provides
that these duties are applicable in shareholder votes on, among other things,
amendments to a company's articles of association, increases in a company's
authorized share capital, mergers and interested party transactions requiring
shareholder approval. In addition, a controlling shareholder of an Israeli
company or a shareholder who knows that it possesses the power to determine the
outcome of a shareholder vote or who has the power to appoint or prevent the
appointment of a director or executive officer in the company has a duty of
fairness toward the company. However, Israeli law does not define the substance
of this duty of fairness. Because Israeli corporate law has undergone extensive
revision in recent years, there is little case law available to assist in
understanding the implications of these provisions that govern shareholder
behavior.

     Item 4. Information on the Company

     A. History and Development of the Company

         We were incorporated under the laws of the State of Israel in April
1985 under the name Galaxy Graphics Ltd., or Cresta Ltd. In August 1986 we
changed our name to Galagraph Ltd. In May 1992 we changed our name to TAT
Technologies Ltd. We are a public limited liability company under the Israeli
Companies Law 1999-5759, or the Israeli Companies Law, and operate under this
law and associated legislation. Our registered offices and principal place of
business are located at Re'em Industrial Park Neta, Boulevard Bnei Ayish,
Gedera, Israel 70750 and our telephone number is 972-8-859-5411. Our mail
address is P.O. Box 80, Gedera, Israel 70750. Our address on the Internet is
www.tat.co.il. The information on our website is not incorporated by reference
into this annual report.

         We are principally engaged in the manufacture and sale of a broad range
of heat transfer equipment used in mechanical and electronic systems on-board
commercial and military aircraft and in a variety of other electronic equipment.
These systems, which include environmental control, avionics cooling and other
mechanical and electronic systems, generate heat during operation that must be
removed and dissipated in order to function properly. We are also engaged in the
remanufacture, overhaul and repair of heat transfer equipment and other aircraft
components manufactured by us, and other companies. In addition, we manufacture,
sell and service certain related products for use in aircraft and electronic
systems.

         We were founded in 1985 to develop the computerized systems business of
our parent company, TAT Industries, a publicly held Israeli corporation engaged
in the manufacture and sale of aeronautical equipment. In December 1991, we
acquired the heat exchanger operations of TAT Industries. In February 2000, we
entered into an agreement with TAT Industries to purchase its operations
relating to the manufacture of aviation accessories and the lease of certain
real estate and buildings.

                                       15

<PAGE>


         We conduct business in the United States through our wholly owned
subsidiary Limco-Airepair International Inc. ("Limco-Airepair"), which is
certified by the Federal Aviation Administration, or FAA, to engage in the
remanufacture, overhaul and repair of heat transfer equipment for the aviation
industry.

         In March 1987, we completed an initial public offering of our
securities in the United States. We were listed on NASDAQ National Market under
the symbol "TATTF" from our initial public offering until July 1998 when the
listing of our ordinary shares was transferred to the NASDAQ SmallCap Market.

         On June 15, 2004, we entered into a share purchase agreement with
T.O.P, Limited Partnership, or T.O.P., a wholly-owned subsidiary of Ta-Tek Ltd.,
an Israeli private company wholly-owned by FIMI Opportunity Fund. Under the
agreement we sold 857,143 of our shares to T.O.P for $6,000,001. T.O.P was given
certain demand and piggy-back registration rights with respect to these shares.
As part of the transaction, our parent company, TAT Indusries, and T.O.P entered
into a shareholders' agreement, which provides among other things that T.O.P
will have the right to designate three members to serve on our Board of
Directors. The shareholders' agreement also provides for: (i) certain standard
bring-along and tag-along rights; (ii) a right of first refusal with respect to
any shares proposed to be sold by any of the parties; (iii) a lock-up whereby
no party may sell more than 150,000 shares prior to June 2006, and (iv) a
standstill restriction, which provides that T.O.P will not purchase (in the open
market or otherwise) such number of shares that would increase its holdings of
our shares to more than 35%.

         As part of the transaction, T.O.P received warrants to purchase an
aggregate of 500,000 of our ordinary shares at $8.50 per share, which price was
adjusted to $7.32 per share because of our 2004 dividend payment. The warrants
are exercisable for 66 months. In addition, we entered into a credit line
agreement with FIMI, which provides for a line of credit in an amount of up to
$2,000,000. Loans made pursuant to the credit line bear interest at 5% per annum
and are repayable on or before December 15, 2009. We will pay an annual
commitment fee equal to 0.5% of the amount of the credit line. We also entered
into a management agreement which provides that we will engage FIMI to provide
certain management services to us in exchange for annual payments equal to 3% of
our operating profit exceeding $500,000; provided, however, that in no event
will the total management fees in any given year exceed $250,000. The agreements
were approved by our shareholders on August 10, 2004.

         On May 24, 2005, our subsidiary, Limco-Airepair, Inc., entered into an
agreement, subject to certain closing conditions, for the purchase of Piedmont,
a private company based in Kernersville, North Carolina, engaged in the repair
and overhaul of various aircraft accessories. Under the terms of the
acquisition, we agreed to pay $5.5 million for Piedmont and to repay $9.5
million of its outstanding indebtedness. Piedmont is a recognized leader in the
overhaul, repair, maintenance, service and supply of propellers, landing gear
and APU/LRU units. In addition, we agreed to pay Piedmont former shareholders
$200,000 per year, for a term of three years, in consideration for their
obligation not to compete with Piedmont during this period.

     B. Business Overview

Industry Overview
- -----------------

         We manufacture a complete line of heat transfer equipment both in the
United States and Israel, including heat exchangers, precoolers, oil coolers and
cold plates, or Heat Transfer Equipment. Heat Transfer Equipment facilitates the
necessary removal and dissipation of heat generated during the operation of
mechanical and electronic systems. Our Heat Transfer Equipment is generally
integrated into a complete cooling system. Using our technological expertise, we
design each of our heat transfer



                                       16



<PAGE>


products to meet the specific space, power, performance and other needs of our
customers. Heat Transfer Equipment is marketed worldwide for applications in
commercial and military aircraft and electronic systems, the primary users of
such equipment. Our customers include Liebherr-Aerospace Toulouse S.A, or
Liebherr, Boeing Mcdonnell Douglas Aerospace, or Boeing, Israel Aircraft
Industries, or IAI, and Cessna Aircraft Company, or Cessna, as well as the
United States Air Force and Navy. Such customers typically enter into supply
contracts with us pursuant to which we manufacture specified Heat Transfer
Equipment in connection with the customers' production or retrofitting of
particular aircraft equipment. Such supply contracts are generally for a period
of between one to four years.

         We are also engaged in the remanufacture, overhaul and repair of heat
transfer and other aviation equipment, or Overhaul Services. Heat transfer
products typically require Overhaul Services or replacement after three to five
years of service. Remanufactured units are generally given the same warranties
as are provided by the original manufacturers of new units of the same type. We
primarily market our Overhaul Services to major commercial airlines, such as,
KLM Royal Dutch Airlines, or KLM, Lufthansa Technic, or Lufthansa, S.R Technic,
Fedex Corp., or Fedex, and Sabena Technic, or Sabena.

         In addition, we design, develop and manufacture aviation accessories.
These accessories include fuel components, such as valves and pumps, secondary
power systems, various instrumentation and electronic assemblies. Customers for
our design, development and manufacture of aviation accessories include
Lockheed-Martin Corp, or Lockheed-Martin, Teledyne Continental Motors, or
Teledyne, Israeli Air Force, IAI, as well as the United States Air Force and
Navy. We currently overhaul secondary and emergency power systems and jet fuel
starters for F-16s, fuel injection governors, power and cooling turbines and
valves. Customers for our systems overhaul services include the Israeli Air
Force, IAI, NATO air forces, as well as the United States Air Force and Navy.

         We also design, develop, manufacture and market military air
conditioning systems, or AC Systems, and market nuclear, biological, and
chemical systems, or NBC Systems, produced by other manufacturers, used in
military shelters, tents and armored vehicles. These systems are marketed
worldwide to government agencies and to shelter manufacturers. We market our
products and services both through our internal marketing staff and through a
worldwide network of independent representatives. These efforts are coordinated
and directed by our internal marketing personnel. We implemented our current
marketing network following the acquisitions of Airepair International Inc., or
Airepair, and Limco Manufacturing Corporation, or Limco, in order to capitalize
on the complementary products and services of those businesses.

Market and Business Strategy

         Our principal growth strategy both in the United States and Israel is
to: (i) expand our heat transfer business in existing and new markets; (ii)
provide overhaul and repair services for additional aircraft components; (iii)
expand our marketing of overhaul and repair services to additional segments of
the aerospace industry; and (iv) use our technological expertise to expand into
related businesses.

         Capitalizing on the continuing trend in the aerospace industry to
reduce costs by prolonging the useful life of existing equipment, we have
initiated a concentrated marketing effort for our Overhaul Services, which was
previously provided only to widebody commercial aircraft. This marketing
strategy has enabled us to penetrate the regional, helicopter, general aviation
and military aircraft markets. In addition, we have targeted the after sale
market for certain of our products other than Heat Transfer Equipment.

                                       17

<PAGE>




         We have identified the electronics industry as a market with
significant growth potential for our Heat Transfer Equipment. For the past
several years we have been engaged in the design, development and manufacture of
electronic heat dissipation equipment such as cold plates, heat sinks, cold
walls and other components which remove and dissipate heat from electronic
systems. Our Heat Transfer Equipment is currently used primarily in airborne
radar systems, electronic warfare packages, avionics, electronic pods and other
airborne electronic systems. Our customers for these products include Elta
Electronics Industries Ltd. (a subsidiary of I.A.I. Ltd.), or Elta, Rafael
Armament Development Authority Ltd, Elisra Electronics Systems Ltd. and El-Op
Electronics Industries Ltd. (a division of Elbit).

         We have also identified the need to use new materials and brazing
technologies to reduce and optimize the volume and weight of the heat transfer
equipment.

         We believe that our technical expertise in the field of heat transfer
will facilitate our entry into related businesses.

         In April 1999, we entered into a license and technical assistance
agreement with a subsidiary of Liebherr, a large international corporation,
Liebherr-Aerospace Toulouse S.A France, or Liebherr France. Pursuant to this
agreement, we have supplied intellectual property, technology and technical
assistance for the development and manufacturing of certain types of advanced
aeronautical equipment for a total of $4,250,000 payable over the next three to
five years. As of June 16, 2005, we have received $4,188,750 in payments. In
addition, pursuant to the agreement, beginning on the date Liebherr France
starts producing any of the products for which we supplied intellectual
property, technology and technical assistance, and for a period of ten years
thereafter, any order that Liebherr France receives for the production of such
products will be divided between them and us 50% each, and in addition, Liebherr
France will pay us royalties of 7.5% on the income from its 50% of portion of
such order.

         In May 1999, we entered into an agreement with ENERCO, an Israeli
company, to acquire the know-how and production rights of its line of military
air conditioning systems which are used in military communication shelters,
mobile shelters and armored vehicles for $274,500 and royalty payments ranging
from 1.5% to 5% of sales from 1999 through 2006.

Products and Services

         The table below sets forth, for the periods indicated, the revenues
derived from sales, and the percentage of total revenues, of our products and
services:

<TABLE>
<CAPTION>
                                                                                 Years Ended
                                                         December 31, 2003                         December 31, 2004
                                               --------------------------------------    --------------------------------------
                                                                           (amounts in thousands)
                                               --------------------------------------------------------------------------------
                                                    Amount             Percent                Amount             Percent
                                                    ------             -------                ------             -------
   <S>                                             <C>                  <C>                   <C>                 <C>
   Revenues derived
    from sale of
    Heat Transfer Equipment and
    aeronautical accessories
    manufacturing.                                  $19,255              62.8%                $20,724              62.3%
   Overhaul services......................           10,589              34.5%                 11,398              34.3%
   Other products.........................              838               2.7%                  1,121               3.4%
                                                    -------             ------                -------             ------
   Total ..................................         $30,682             100.0%                $33,243             100.0%
                                                    =======             ======                =======             ======
</TABLE>



                                       18



<PAGE>


         Heat Transfer Equipment
         -----------------------

         We manufacture wide range of Heat Transfer Equipment both in the United
States and Israel. Heat Transfer Equipment, such as heat exchangers, precoolers,
evaporators, oil coolers and cold plates, are integral components used in a wide
variety of environmental control systems and mechanical and engine systems, as
well as a wide range of electronic systems. These systems generate heat during
operation that must be removed and dissipated. Heat transfer equipment
components facilitate the exchange of the heat created through the operation of
these systems by transmitting the heat from a hot medium (air, oil or other
fluids) to a cold medium for disposal.

         As a component in a larger operating system, heat transfer equipment
must be efficient, compact, lightweight and reliable. In the aerospace industry
in particular, there is a constant need for improvements in performance, weight,
cost and reliability. In addition, as electronic systems become smaller and more
densely packed, the need for sophisticated and efficient heat transfer equipment
to serve the cooling functions becomes more critical. Using our technological
expertise, we believe we are well positioned to respond to these industry
demands through continued new product development and product improvements.

         Our principal Heat Transfer Equipment includes air-to-air heat
exchangers and precoolers and liquid-to-air heat exchangers. Typically, the
air-to-air heat exchangers and precoolers cool a jet engine's hot "bleed air"
which, when cooled, is then used in the aircraft's air conditioning,
pressurization and pneumatic systems. The liquid-to-air heat exchangers cool
liquids such as engine oil, hydraulic oil and other liquid coolants used in
other systems.

         We provide anywhere from one to all of the different types of heat
transfer equipment in certain aircraft. Widebody planes require approximately
seven different types of heat transfer equipment, while regional aircraft and
helicopters contain approximately three types. Our heat exchangers and
precoolers, which are types of heat transfer equipment found in most aircraft,
are generally sold for between $1,000 and $20,000 per unit.

         A substantial portion of our Heat Transfer Equipment is sold to
customers in connection with the original manufacture or retrofitting of
particular aircraft equipment. We generally enter into long-term supply
contracts with our customers, which require us to supply Heat Transfer Equipment
as part of a larger project.

         We also manufacture heat dissipation equipment, such as evaporators,
cold plates, cooling chests, heat sinks and cold walls (which may be air-to-air,
liquid-to-air or liquid-to-liquid), which control and dispose of heat emitted by
the operation of various electronic systems. These heat dissipation products are
currently utilized mainly in radar systems, avionics, electronic warfare systems
and various pods for targeting, navigation and night vision.

         Our Heat Transfer Equipment has been marketed worldwide for
applications in commercial and military aircraft and electronics systems, the
primary users of such equipment. Our customers for Heat Transfer Equipment
include: Liebherr France, Boeing, IAI and Cessna, as well as the United States
Air Force and Navy. As a result of the specialized nature of the systems in
which our parts are included, spare and replacement parts for the original heat
transfer systems are usually provided by us.

         Remanufacture, Overhaul and Repair Services
         -------------------------------------------

         We remanufacture, overhaul and repair heat transfer equipment through
our subsidiary's FAA certified repair station. We primarily market Overhaul
Services to major commercial airlines, such as,

                                       19



<PAGE>


KLM and Lufthansa. We are also engaged with the United States Government and
Navy in overhaul and repair of military heat transfer products.

         Heat transfer products typically require Overhaul Services or
replacement after three to five years of service. We offer our customers repair
services on three levels. If the damage is significant, we will remanufacture
the unit, which generally entails replacing the core matrix of the damaged or
old heat transfer product in lieu of replacing the entire unit with a new one.
We design and develop these customized remanufacture programs as cost effective
alternatives to new part replacement. In cases of less severe damage, we will
either overhaul or repair the unit as necessary. Remanufactured units carry
warranties identical to those provided with new units.

         We currently overhaul secondary and emergency power systems and jet
fuel starters for F-16s, fuel injection governors, power and cooling turbines
and valves. Our customers for our systems overhaul services include the Israeli
Air Force, IAI, NATO air forces, as well as the U.S. Air Force and Navy.

         System Design, Development and Manufacture
         ------------------------------------------

         We are engaged in the design, development and manufacture of aviation
accessories. These accessories include fuel component systems, such as valves
and pumps, secondary power systems, various instrumentation and electronic
assemblies. Our customers for the design, development and manufacture of
aviation accessories include Lockheed-Martin, Boeing, Teledyne, Israeli Air
Force, IAI, as well as the U.S. Air Force and Navy.

         Conventional Air Conditioning Systems
         -------------------------------------

         We offer a wide range of highly reliable and affordable military AC
systems, featuring high performance and simplicity. We manufacture a
comprehensive line of versatile AC systems, which provide a complete solution
for application where heat removal is essential. Simple installation,
maintenance and easy integration make the systems user-friendly. The units meet
the MIL-STD-810 and MIL-STD-461 requirements and are designed for operation in
difficult climatic conditions. Our AC systems have been installed on military
communications shelters, mobile shelters, and armored vehicles and used in many
other military applications. Beside our standard units, we may propose
custom-made systems as per customer specification. The know-how on military AC
Systems has been transferred to our U.S. subsidiary, Limco-Airepair, and they
have initiated partial production on their premises. Our revenues from sales of
AC systems from 2002 through 2004 were not material.

         Nuclear, Biological, and Chemical Systems
         -----------------------------------------

         We market NBC systems manufactured by Bet-El Industries Ltd. as a
complementary solution for our AC systems. These systems are usually offered by
us to customers who ask for complete solution. Our revenues from sales of NBC
systems from 2002 through 2004 were not material.

Sales and Marketing

         We derive our revenues mainly from sales to customers in the United
States, Israel and Europe. The geographic distribution of such sales is as
follows:

                                       20

<PAGE>



<TABLE>
<CAPTION>
Geographic Region
- -----------------                                                   Years Ended
                                  ---------------------------------------------------------------------------------
                                           December 31, 2003                           December 31, 2004
                                  -------------------------------------       -------------------------------------
                                                               (Amounts in thousands)
                                       Amount             Percent                  Amount             Percent
                                       ------             -------                  ------             -------
<S>                                    <C>               <C>                       <C>               <C>
Israel..........................        $4,796            15.63%                    $5,095            15.33%
Other Asian countries...........         1,845             6.02%                     1,430             4.30%
United States...................        15,441            50.32%                    17,569            52.85%
Europe..........................         8,340            27.18%                     8,736            26.28%
Other...........................           260             0.85%                       413             1.24%
                                       -------           -------                   -------            ------
    Total ......................       $30,682           100.00%                   $33,243            100.00%
</TABLE>

         We market our products and services through our internal marketing
staff and a worldwide network which consists of independent representatives.
These efforts are coordinated and directed by our internal marketing personnel.
Our representatives are strategically located near key customer sites in certain
offices throughout the United States, in addition to offices in Europe, Asia,
the Middle East and South America. We implemented our current marketing network
following the acquisitions of Airepair and Limco in order to capitalize on the
complementary products and services of these businesses and the increased
customer base. Representatives are in regular contact with engineering and
procurement personnel and program managers of existing and target customers to
identify new programs and needs for our products, obtain requests for quotations
and identify new product opportunities. Our marketing activities also include
advertising in technical publications which target heat transfer equipment and
related markets, attending exhibitions, trade shows and professional
conferences, organizing seminars and direct mailing of advertisements and
technical brochures to current and potential customers.

Major Customers

         Our products and services are provided worldwide to original equipment
manufacturers, or OEMs, and end-user customers in the commercial, military and
industrial markets. Our major customers include OEMs such as Liebherr,
Lockheed-Martin, Hamilton, Cessna, IAI and Boeing and end-users such as, KLM,
Lufthansa, S.R Technic, Fedex, Sabena and the U.S. Air Force and Navy. During
the fiscal years ended December 31, 2002, 2003 and 2004, Elta accounted for
approximately 11.9%, 15.3% and 10.1%, respectively, of our revenues. For the
fiscal years ended December 31, 2002, 2003 and 2004, Liebherr accounted for
12.8%, 12.9%, and 15.41%, respectively, of our revenues.

         Sales to the U.S. and Israeli governments, acting through their various
departments and agencies, accounted for approximately 17.3%, 3.2% of our
revenues in 2002, respectively, approximately 15.3% and 3.3% of our revenues in
2003, respectively, and approximately 10.6%, 2.6% of our revenues in 2004,
respectively. Government contracts are generally terminable by the government at
will.

Product and Service Warranties

         We provide warranties for our products and services ranging from one to
five years, which vary with respect to each contract and in accordance with the
nature of each specific product. To date, our warranty costs have not been
substantial.

Engineering and Manufacturing

         We maintain a staff of 226 employees in engineering and manufacturing
to design, manufacture, remanufacture, repair and test products. Our engineering
department is responsible for the design and development of all heat exchangers
and other products as well as the methods, tooling, test instructions and test
equipment. Our engineering staff has extensive knowledge and experience related
to our Heat

                                       21



<PAGE>


Transfer Equipment. Most of our product lines have a designated project manager
who is an experienced engineer and is in charge of all the activities in his
area. The product manager interfaces with the customer, engineering department,
manufacturing department and vendors, and is responsible for all aspects of the
program including scheduling, adherence to specifications, customer support and
reporting.

         In general, we have manufacturing capabilities for most of the parts
and accessories of our Heat Transfer Equipment. We also manufacture the
necessary tools, fixtures, test equipment and special jigs required to
manufacture, assemble and test these products. We have developed proprietary
design techniques and computer-aided design software which assists in the
mechanical design and manufacturing of our products. All products are inspected
and tested by trained inspectors using highly sophisticated test equipment in
accordance with customer requirements.

         We are dependent upon single sources of supply for certain components,
and seek to maintain an adequate inventory of all imported components. Our
Israeli operations employ the services of a purchasing agent, a corporation
which is wholly-owned by certain of our officers and directors. See Item 13.
"Interest of Management in Certain Transactions."

Source and Availability of Raw Materials

         We acquire most of the components for the manufacturing of our products
from a limited number of suppliers and subcontractors, most of whom are located
in Israel and the United States. Certain of these suppliers are currently the
sole source of one or more components upon which we are dependent. Since many of
our purchases require long lead-times, a delay in supply of an item can
significantly delay the delivery of a product. To date, we have not experienced
any particular difficulty in obtaining timely deliveries of necessary
components. We depend on a limited number of suppliers of components for our
products and if we are unable to obtain these components when needed, we would
experience delays in manufacturing our products and our financial results could
be adversely affected. See Item 3.D. Risk Factors."

Regulation

         Our operations in the United States are regulated by the FAA and the
U.S. Department of Defense. We are required to comply with FAA regulations,
which generally requires us to obtain FAA approval prior to the sale of new
products for aircraft applications. We currently hold all necessary FAA
authorizations required for the production of our products. In addition, we hold
an FAA repair station certificate which permits us to provide our Overhaul
Services. We are also required to comply with the U.S. Department of Defense
federal acquisition regulations, which governs all of our work for military
applications.

          Our operations in Israel are subject to supervision by the Ministry of
Defense and Civil Aviation Administration. We are certified by the Israeli Air
Force for the Ministry of Defense for both manufacturing and maintenance. We are
also licensed as a repair station for certain components by the Israeli Civil
Aviation Administration. In addition, our export of certain products and/or
know-how is subject to approval by The Foreign Defense Assistance and Defense
Export Organization of the Israeli Ministry of Defense, or SIBAT. Permits from
SIBAT must be obtained for the initiation of sales proposals with regard to such
exports, as well as for the actual exports of such products.

Backlog

         On June 20, 2005, we had a backlog of approximately $19 million for
products to be delivered through December 31, 2007. On June 15, 2004, we had a
backlog of approximately $28.0 million for

                                       22



<PAGE>


products to be delivered through December 31, 2005. We anticipate that
approximately $8 million of our backlog at June 20, 2005 will be delivered by
December 31, 2005, approximately $9, million by December 31, 2006 and
approximately $2 million by December 31, 2007.

Markets

         We sell our products to various air forces and companies. Our main
market is in United States with 52.85% of our sales in 2004, 50.32% in 2003 and
51.48% in 2002. The second largest market is Europe with 26.28% of our sales in
2004, 27.18% in 2003 and 26.18% in 2002. Israel is our third largest market with
15.33% of our sales in 2004, 15.63% in 2003 and 16.27% in 2002. Sales to the
rest of the world accounted for 5.54%, 6.87% and 6.06% of our sales in 2004,
2003 and 2002, respectively.

Competition

         The heat transfer field requires specialized technology, equipment and
facilities, an experienced technical and engineering staff, as well as highly
sophisticated and trained technicians.  Although these factors have tended to
limit the number of manufacturers who enter this field, it nonetheless remains
very competitive.  The major manufacturers in the field are Honeywell and
Hamilton.  Other manufacturers in the United States are Hughes-Treitler
Manufacturing Corp., Stewart Warner South Wind Corp., United Aircraft
Products, Lytron Inc. and Lockhart Industries Inc., and manufacturers based in
Europe include I.M.I. Marston Ltd., Normalair Garrett Ltd. ,or NGL, Secan and
Behr.

         Our major competitor in the Overhaul Services business is Lori, a
subsidiary of Honeywell, a U.S. company. Other competitors include Secan and
NGL, which are based in Europe.

Export Policy

         Exports of military related products are subject to the military export
policy of the State of Israel. Current Israeli Government policy encourages
export to approved customers of military products similar to those manufactured
by us, provided that such export does not run counter to Israeli policy or
national security considerations. We must obtain a permit to initiate a sales
proposal and ultimately an export license for the transaction is required. We
cannot assure you that we will obtain export permits or licenses in the future
or that governmental policy with respect to military exports will not be
altered. However, to date we have not encountered any significant difficulties
in obtaining necessary permits or licenses for sale of our products.

Fixed Price Contracts

         Our contracts with the government of Israel, its agencies and other
foreign governments, are generally fixed price contracts. Under fixed price
contracts, the price is not subject to adjustment by reason of the costs
incurred in the performance of the contracts, as long as the costs incurred and
work performed fall within governmental guidelines. Under our fixed price
contracts, we assume the risk that increased or unexpected costs may reduce our
profits or generate a loss. This risk can be particularly significant under a
fixed price contract for research and development involving a new technology.
Our books and records may be subject to audits by the Israeli Ministry of
Defense and other governmental agencies including the U.S. Department of
Defense. These audits may result in adjustments to contract costs and profits.

                                       23



<PAGE>


Proprietary Rights

         At the present time we do not own any patents. We rely on laws
protecting trade secrets, and consider such items proprietary, but believe that
our success depends less on the ownership of such proprietary rights than on our
innovative skills, technical competence marketing and engineering abilities. We
have no existing material registered trademarks.

     C. Organizational Structure

         We are 51.52% owned by TAT Industries, an Israeli publicly held
corporation, engaged in the manufacture and sale of aeronautical equipment.

         Our wholly-owned subsidiary, Limco-Airepair is incorporated under the
laws of Oklahoma and located in Tulsa, Oklahoma.

     D. Property, Plants and Equipment

         Our executive offices, research and development and manufacturing
facilities in Israel are located in a 31,679 square feet facility located in
Park Re'em near Gedera. The land of this facility is leased from the Israeli
government pursuant to a lease that expires in 2020, which was assigned, but not
registered, to us by TAT Industries in connection with our acquisition of TAT
Industries' heat exchanger operations. See Item 7 "Major Shareholders and
Related Party Transactions."

         In connection with the purchase of the operations of TAT Industries in
February 2000, we and TAT Industries entered into a lease agreement, pursuant to
which we are leasing from TAT Industries an area of approximately 329,000 square
feet, including 90,000 square feet of buildings, for a period of 24 years and 11
months. We pay TAT Industries annual rental fees of approximately $300,000, with
an additional incremental payment of 2% per year. For the year ended December
31, 2004, we paid $324,000. The rental fees are subject to revaluation every
fifth year.

         Our subsidiary, Limco-Airepair Inc. owns its Tulsa, Oklahoma facility,
which consists of approximately 55,000 square feet.

         Management believes that our present facilities are well maintained, in
good condition and are sufficient for us to continue to operate and meet our
production needs. Our utilization of our production capacity varies from time to
time based on fluctuations in our business and other factors.

     Item 5. Operating and Financial Review and Prospects

     A. Operating Results

         The following discussion and analysis should be read in conjunction
with our consolidated audited financial statements and the notes thereto,
included elsewhere in this annual report.

Certain Critical Accounting Policies

         Our consolidated financial statements are prepared in accordance with
U.S. GAAP. These accounting principles require management to make certain
estimates, judgments and assumptions based upon information available at the
time that they are made, historical experience and various other factors that
are believed to be reasonable under the circumstances. These estimates,
judgments and assumptions can affect the reported amounts of assets and
liabilities as of the date of the financial statements, as well as the reported
amounts of revenues and expenses during the periods presented. While all the
accounting

                                       24



<PAGE>


policies impact the financial statements, certain policies may be viewed to be
critical. These policies are those that are both most important to the portrayal
of our financial condition and results of operations and require our
management's most difficult, subjective and complex judgments and estimates.
Actual results could differ from those estimates.

         In many cases, the accounting treatment of a particular transaction is
specifically dictated by generally accepted accounting principles in the United
States and does not require management's judgment in its application. There are
also areas in which management's judgment in selecting among available
alternatives would not produce a materially different result. Our management has
reviewed these critical accounting policies and related disclosures with the
Audit Committee.

         Our management believes the significant accounting policies which
affect management's more significant judgments and estimates used in the
preparation of our consolidated financial statements and which are the most
critical to aid in fully understanding and evaluating the our reported financial
results include revenue recognition and inventory valuation.

Revenue Recognition

         We derive our revenue primarily from two sources: product revenues and
service revenues. Revenue related to sales of our products is generally
recognized when persuasive evidence of an arrangement exists; the product has
been delivered and title and risk of loss have passed to the buyer; the sales
price is fixed and determinable, no further obligations exist, and
collectibility is probable. Revenues from remanufacture repair and overhaul
services are recognized as services are performed.

Inventory Valuation

         Our policy for valuation of inventory and commitments to purchase
inventory, including the determination of obsolete or excess inventory, requires
us to perform a detailed assessment of inventory at each balance sheet date
which includes a review of, among other factors, an estimate of future demand
for products within specific time frames, valuation of existing inventory, as
well as product lifecycle and product development plans. The business
environment in which we operate, the wide range of products that we offer and
the relatively short sales-cycles we experience all contribute to the exercise
of judgment relating to maintaining and writing-off of inventory levels. The
estimates of future demand that we use in the valuation of inventory are the
basis for our revenue forecast, which is also consistent with our short-term
manufacturing plan. Inventory reserves are also provided to cover risks arising
from non-moving items. Inventory management remains an area of management focus
as we balance the need to maintain strategic inventory levels to ensure
competitive lead times against the risk of inventory obsolescence because of
rapidly changing technology and customer requirements.

Finished Good Policy

         We manufacture the majority of our goods based on purchase orders
received in advance. Accordingly, we do not manufacture any goods for stock.
However, we do maintain a small quantity of finished goods for supporting urgent
orders.

Warranty Period Policy

         We provide warranties for our products and services ranging from one to
five years, which vary with respect to each contract and in accordance with the
nature of each specific product. Based on our experience, warranty expenses have
been immaterial and, therefore, we did not record any warranty provision.

                                       25

<PAGE>




Credit Policy

         According to our credit policy, the credit period provided to our local
customers is usually "Net plus 60 Days" and occasionally "Net plus 90 days." The
credit period provided to our foreign customers varies from "Net plus 60 Days"
to "Net plus 180 Days."

         We and our subsidiary's trade receivables are derived mainly from sales
to customers in the United States, Israel and Europe. We and our subsidiary
generally do not require collateral, however, in certain circumstances we may
require letters of credit. Our management believes that credit risks relating to
trade receivables are minimal since our customers are financially sound. We and
our subsidiary perform ongoing credit evaluation of our customers' financial
condition. The allowance for doubtful accounts is determined with respect to
specific debts that are doubtful of collection.


Marketable securities

         Marketable securities consist of available for sale securities, which
are debt securities in which we invested with the intention of holding until the
maturity dates of such securities. If it is determined, based on valuations,
that a decline in the fair value of any of the investments is not temporary, an
impairment loss is recorded and included in the consolidated statements of
income as financial expenses.


Legal contingencies

         We are, and have been in the past, a party to various lawsuits,
including employment claims and other legal proceedings in the normal course of
our business. In determining whether provisions should be recorded for pending
litigation claims, we assess the allegations made and the likelihood that our
company will successfully defend itself. When our management believes that it is
probable that we will not prevail in a particular matter, it then estimates the
amount of the provision based in part on advice of legal counsel.


Income taxes and valuation allowance

         We operate within multiple taxing jurisdictions and are subject to
audits in these jurisdictions. These audits can involve complex issues, which
may require an extended period of time to resolve. In management's opinion,
adequate provisions for income taxes have been made for all years. Although
management believes that its estimates are reasonable, no assurance can be given
that the final tax outcome of these issues will not be different than those that
are reflected in our historical income tax provisions.

         Deferred taxes are determined utilizing the asset and liability method
based on the estimated future tax effects of differences between the financial
accounting and tax bases of assets and liabilities under the applicable tax
laws. Valuation allowances are provided if based upon the weight of available
evidence, it is more likely than not that some or all of the deferred tax assets
will not be realized.

Overview

         Our revenues and cost of revenues may vary significantly from year to
year due to fluctuations in the mix of products ordered by customers and in the
timing of orders and deliveries. As a result, comparisons of one period to
another in any given year are not necessarily an accurate indication of future
trends.

                                       26

<PAGE>




         Sales to the United States and Israeli governments accounted for
approximately for approximately 15.3% and 3.3%, respectively, of our revenues
for 2003 and 10.6% and 3.2%, respectively, of our revenues for 2004. While a
substantial portion of our revenues is derived from the sale of products for the
non-military market in the United States, Israel and abroad, our management
believes that the success and development of our business will continue to
depend in part upon our ability to participate in the defense programs of the
United States, Israel and other governments. While certain of such defense
programs have been reduced or terminated as a result of current political
conditions and budgetary constraints, it is not possible to determine the extent
to which such reductions have affected our revenues. There can be no assurance
that any of these governments will continue to commit the current level of
resources to such programs, that we will be able to continue to participate in
such programs, or that changes thereto will not materially affect our financial
condition. As a result, our historical results of operations and financial
position are not necessarily indicative of any future operating results or
financial position.

         We maintain our accounts and present our financial statements in
dollars, the primary currency of our operations. Transactions and balances
denominated in currencies other than the dollar have been presented in dollars
based on representative rates of exchange of such currencies.

Year Ended December 31, 2004 Compared with Year Ended December 31, 2003

         Revenues. Our revenues increased 8.3% to $33.2 million in 2004 from
$30.7 million in 2003. The increase in our revenues in 2004 is mainly due to an
increase in our sales of products and services to the U.S. market. We expect
that our revenues will increase in 2005 as a result of our purchase of Piedmont

          Cost of Revenues. Cost of revenues increased 10.5% to $22.2 million in
2004 from $20.1 million in 2003, representing, 67% and 65% of revenues,
respectively. The increase in cost of revenues is mainly due to change in our
product mix, and to the worldwide increase in raw material prices. Cost of
revenues consists of labor, materials and royalties. We expect that our cost of
revenues will increase in 2005.

         Research and Development Costs. Our research and development costs were
$0.1 million in both 2004 and 2003. We do not anticipate any material change in
our cost of research and development in 2005.

          Selling and Marketing Expenses. Selling and marketing expenses
decreased by 3.2% to $1.9 million in 2004 from $2.0 million 2003, representing
5.7% and 6.4% of revenues, respectively. Selling and marketing expenses consist
primarily of salaries, commissions, advertising, trade shows, travel and other
related expenses. We expect that our selling and marketing expenses will
increase in 2005 consistent with the expected increase in revenues.

          General and Administrative Expenses. General and administrative
expenses increased 9.1% to $3.8 million in 2004 from $3.5 million in 2003,
representing 11.4% and 10.4% of revenues, respectively. In 2004, we kept
approximately the same ratio of administration expenses against revenue as in
2003. General and administrative expenses consist primarily of salaries, annual
rentals, management services, and other expenses. We expect that our general and
administrative expenses will increase consistent with the expected increase in
revenues.

         Operating income. Operating income in 2004 increased 4.1% to $5.3
million compared to $5.1 million in 2003.

                                       27



<PAGE>


         Financial Income (Expenses). We reported financial income of $87,000 in
2004 compared to financial expenses of $25,000 in 2003, as a result of the
appreciation in value of the exchange rate against the dollar in 2004 and
increase in our cash. We expect that our financial expenses will increase in
2005 as a result of the purchase of Piedmont.

         Other Income.  We had income of $54,000 in 2004 compared to income of
$24,000 in 2003.

         Income Taxes. As a result of the depletion of the tax credits we
accumulated in prior years, our total income tax expenses for 2004 amounted to
$1.7 million, compared to $1.2 million in 2003.

Year Ended December 31, 2003 Compared with Year Ended December 31, 2002

         Revenues. Revenues in 2003 amounted to approximately $30.68 million
compared to approximately $26.28 million in 2002. The increase in revenues in
2003 compared to 2002 was mainly due to new agreements with aircraft
manufacturers and airline companies.

         Cost of Revenues. Cost of revenues increased to approximately $20.1
million in 2003 from approximately $17.8 million in 2002. This increase is a
direct result of the increase in revenues.

         Research and Development Costs. Research and development costs
decreased to $120,000 in 2003 from $204,000 in 2002.

          Selling and Marketing Expenses. Selling and marketing expenses
increased by 32% to $2.0 million in 2003 from $1.5 million 2002, representing
6.4% and 5.6% of revenues, respectively. Selling and marketing expenses consist
primarily of salaries, commissions, advertising, trade shows, travel and other
related expenses. The increase is a direct result of the increase in revenues.

          General and Administrative Expenses. General and administrative
expenses increased 16% to $3.5 million in 2003 from $3.0 million in 2002,
representing, 10.4% and 11.3% of revenues, respectively. General and
administrative expenses consist primarily of salaries, annual rentals,
management services, and other expenses.

         Operating income. Operating income in 2003 increased approximately 31%
to $5 million compared to approximately $3.8 million in 2002, as a direct result
of an increase in sales.

         Financial Expenses. We had financial expenses of $25,000 in 2003
compared to expenses of approximately $99,000 in 2002, as a result of the
devaluation of the NIS against the dollar.

         Other Income. We reported other income of $24,000 in 2003 compared to
$8,000 in 2002.

         Income Taxes. As a result of the depletion of tax credits we
accumulated in prior years, our total income tax expenses for 2003 amounted to
$1.23 million compared to $367,000 in 2002.

Results of Operations

         The following table presents, for the periods indicated, information
concerning our results of operations:



                                       28



<PAGE>



<TABLE>
<CAPTION>
                                                                 Year ended December 31
                                                      ---------------------------------------------
                                                       2004               2003               2002
                                                       ----               ----               ----
                                                                     (in thousands)
<S>                                                   <C>                 <C>               <C>
Revenues
Products...................................           $20,724             $19,255           $15,936
Services and other.........................            12,519              11,427            10,344
                                                       ------              ------            ------
                                                       33,243              30,682            26,280
                                                       ------              ------            ------
Cost of revenues...........................            22,166              20,068            17,750
                                                       ------              ------            ------
Gross profit...............................            11,077              10,614             8,530
                                                       ------              ------             -----
Research and development costs, net........               125                 120               204
Sales and marketing expenses...............             1,894               1,958             1,483
General and administrative expenses........             3,793               3,476             2,994
                                                        -----               -----             -----
                                                        5,812               5,554             4,681
                                                        -----               -----             -----
Operative income...........................             5,265               5,060             3,849
Financial income (expenses), net...........                87                ( 25)               99
Other income...............................                54                  24                 8
                                                           --                  --                --
Income before income taxes.................             5,406               5,059             3,956
Income taxes...............................             1,667               1,225               367
                                                        -----               -----               ---
Net income.................................           $ 3,739             $ 3,834           $ 3,589
                                                      =======             =======           =======
</TABLE>

         The following table presents, for the periods indicated, information
concerning our results of operations as a percentage of our revenues:

<TABLE>
<CAPTION>
                                                                 Year ended December 31,
                                                ---------------------------------------------------------
                                                           2004               2003              2002
                                                           ----               ----              ----
                                                            %                  %                 %
<S>                                                        <C>                <C>               <C>
Revenues
Products...................................                 62                 63                61
Services...................................                 38                 37                39
                                                            --                 --                --
                                                           100                100               100
                                                           ---                ---               ---
Cost of revenues...........................                 67                 65                67
                                                            --                 --                --
Gross profit...............................                 33                 35                33
                                                            --                 --                --
Research and development costs, net........                  0                  0                 1
Sales and marketing expenses...............                  6                  6                 6
General and administrative expenses........                 11                 11                11
                                                            --                 --                --
                                                            17                 17                18
                                                            --                 --                --
Operating income...........................                 16                 17                15
Financial income (expenses) , net                            0                  1                 0
Other income...............................                  0                  0                 0
                                                            --                 --                --
Income before income taxes.................                 16                 16                15
Income taxes...............................                  5                  4                 1
                                                            --                 --                --
Net income.................................                 11                 12                14
                                                            ==                 ==                ==
</TABLE>

                                       29



<PAGE>




Recently Issued Accounting Standards

         On December 16, 2004, the Financial Accounting Standards Board (FASB)
issued Statement No. 123 (revised 2004), Share-Based Payment or SFAS No. 123(R),
which is a revision of FASB Statement No. 123, "Accounting for Stock-Based
Compensation," or SFAS No. 123.  Generally, the approach in SFAS No. 123(R) is
similar to the approach described in SFAS No. 123.  However, SFAS No. 123
permitted, but did not require, share-based payments to employees to be
recognized based on their fair values while Statement 123(R) requires
all share-based payments to employees to be recognized based on their fair
values. SFAS No. 123(R) also revises, clarifies and expands guidance in several
areas, including measuring fair value, classifying an award as equity or as a
liability and attributing compensation cost to reporting periods. The new
standard will be effective for us in the first interim period beginning after
January 1, 2006. We do not expect a significant impact of this standard on our
results of operations and financial position.

Conditions in Israel

         We are incorporated under the laws of, and our principal executive
offices and manufacturing facilities are located in, the State of Israel.
Accordingly, we are directly affected by political, economic and military
conditions in Israel. Specifically, we could be adversely affected by any major
hostilities involving Israel, a full or partial mobilization of the reserve
forces of the Israeli army, the interruption or curtailment of trade between
Israel and its present trading partners, and a significant downturn in the
economic or financial condition of Israel.

         Since the establishment of the State of Israel in 1948, a number of
armed conflicts have taken place between Israel and its Arab neighbors, and a
state of hostility, varying from time to time in intensity and degree, has led
to security and economic problems for Israel. In 1979, Israel signed a peace
agreement with Egypt under which full diplomatic relations were established. In
October 1994, a peace treaty was signed between Israel and Jordan which
provides, among other things, for the commencement of full diplomatic relations
between the two countries. To date, there are no peace treaties between Israel
and Syria or Lebanon.

         Since 1993, several agreements have been signed between Israel and the
Palestinian representatives concerning conditions in the West Bank and Gaza and
outlining several interim Palestinian self-government arrangements. The
implementation of these agreements have been subject to difficulties and delays.

         Since September 2000, relations between Israel and the Palestinian
Authority have deteriorated and there has been a marked increase in violence,
civil unrest and hostility, including armed clashes, between the State of Israel
and the Palestinians, and acts of terror have been committed inside Israel and
against Israeli targets in the West Bank and Gaza. Recently, the Israeli
government has resolved to unilaterally evacuate all the Jewish settlements in
Gaza Strip and a few settlements in the West Bank. In addition, following the
death of Yasser Arafat, the Palestinian Authority has established a new regime
which has declared it will take active actions against terrorism and caused the
Palestinian terror organizations to commit to halt the execution of acts of
terror in Israel. Such commitment has not been observed. There is no indication
as to how long the current hostilities will last or whether there will be any
further escalation. Any further escalation in these hostilities or any future
armed conflict, political instability or violence in the region may have a
negative effect on our business condition, harm our results of operations and
adversely affect our share price.

                                       30



<PAGE>


         Furthermore, there are a number of countries that restrict business
with Israel or Israeli companies. Restrictive laws or policies of those
countries directed towards Israel or Israeli businesses may have an adverse
impact on our operations, our financial results or the expansion of our
business.

         In addition, some of our executive officers and employees in Israel are
obligated to perform up to 36 days, depending on rank and position, of military
reserve duty annually and are subject to being called for active duty under
emergency circumstances. If a military conflict or war arises, these individuals
could be required to serve in the military for extended periods of time. Our
operations could be disrupted by the absence for a significant period of one or
more of our executive officers or key employees or a significant number of other
employees due to military service. Any disruption in our operations could
adversely affect our business.

         To date, no executive officer or key employee has been recruited for
military service for any significant time period. Any further escalation in the
hostilities between Israel and the Palestinian Authority into a full scale
conflict might require more significant military reserve service by some of our
employees, which may have a material adverse effect on our business.

Economic Conditions

         In recent years Israel has been going through a period of recession in
economic activity, resulting in low growth rates and growing unemployment. Our
operations could be adversely affected if the economic conditions in Israel
continue to deteriorate. In addition, due to significant economic measures
proposed by the Israeli Government, there have been several general strikes and
work stoppages in 2003 and 2004, affecting all banks, airports and ports. These
strikes have had an adverse effect on the Israeli economy and on business,
including our ability to deliver products to our customers. Following the
passing by the Israeli Parliament of laws to implement the economic measures,
the Israeli trade unions have threatened further strikes or work-stoppages, and
these may have a material adverse effect on the Israeli economy and on us.

Trade Relations

         Israel is a member of the United Nations, the International Monetary
Fund, the International Bank for Reconstruction and Development and the
International Finance Corporation. Israel is a member of the World Trade
Organization and is a signatory to the General Agreement on Tariffs and Trade.
In addition, Israel has been granted preferences under the Generalized System of
Preferences from the United States, Australia, Canada and Japan. These
preferences allow Israel to export the products covered by such programs either
duty-free or at reduced tariffs.

         Israel and the EEC, known now as the "European Union," concluded a Free
Trade Agreement in July 1975 that confers some advantages with respect to
Israeli exports to most European countries and obligates Israel to lower its
tariffs with respect to imports from these countries over a number of years. In
1985, Israel and the United States entered into an agreement to establish a Free
Trade Area. The Free Trade Area has eliminated all tariff and some non-tariff
barriers on most trade between the two countries. On January 1, 1993, an
agreement between Israel and the European Free Trade Association, known as the
"EFTA," established a free-trade zone between Israel and the EFTA nations. In
November 1995, Israel entered into a new agreement with the European Union,
which includes a redefinition of rules of origin and other improvements, such as
allowing Israel to become a member of the Research and Technology programs of
the European Union. In recent years, Israel has established commercial and trade
relations with a number of other nations, including Russia, China, India, Turkey
and other nations in Eastern Europe and Asia.

                                       31



<PAGE>


         Israel receives significant amounts as economic assistance from the
United States. In the last several years, Israel has received from the U.S.
approximately $3 billion per year. We cannot assure you that U.S. economic
assistance will continue, or that the amounts received will not be reduced. If
U.S. economic assistance is eliminated or reduced significantly, the Israeli
economy could suffer material adverse consequences which may have material
adverse impact on our financial condition and results of operations.

Corporate Tax Rate

         Under the Israeli Income Tax Ordinance [New Version], 1980 we are
subject to corporate tax at the rate of 35% of taxable income for 2004, 34% for
2005, 32% for 2006 and 30% for 2007 onwards.

         In July 2002, Amendment 132 to the Israeli Income Tax Ordinance
("Amendment 132") was approved by the Israeli parliament and is effective as of
January 1, 2003. The principal objectives of Amendment 132 were to broaden the
categories of taxable income and to reduce the tax rates imposed on employment
income. There are no material implications of the Amendment applicable to us.

          On March 29, 2005, the Israeli parliament approved an amendment to the
Law for the Encouragement of Capital Investments, 1959, commonly referred to as
the Investment Law, which provides expanded tax incentives for future industrial
investments and simplifies the bureaucratic process for obtaining approval of
investments qualifying for tax incentives, or the 2005 Amendment. Under the
Investment Law, capital investments in new or expanded production facilities in
Israel, upon approval by the Israeli Government, can be designated as an
approved enterprise. An approved enterprise may receive cash incentives from the
Israeli Government or a company may elect the "alternative benefits track" that
allows it to forego the cash incentives in favor of certain tax exemptions. The
2005 Amendment primarily relates to the "alternative benefits track" tax
incentives which we have elected for our Approved Enterprises. The amendments to
the Investment Law include special tax incentives and expedite the approval
process for companies that make minimum qualifying investments in fixed assets
in production facilities located in Israel. The 2005 Amendment became effective
on April 1, 2005. We are currently evaluating the impact of the 2005 Amendment
on our business operations.

Impact of Currency Fluctuation and of Inflation

         For many years prior to 1986, the Israeli economy was characterized by
high rates of inflation and devaluation of the Israeli currency against the
dollar and other currencies. However, since the institution of the Israeli
Economic Program in 1985, inflation, while continuing, has been significantly
reduced and the rate of devaluation has substantially diminished. Because
governmental policies in Israel linked exchange rates to a weighted basket of
foreign currencies of Israel's major trading partners, the exchange rate between
the NIS and the dollar remained relatively stable during reported periods.

         The following table sets forth, for the periods indicated, information
with respect to the rate of inflation in Israel, the rate of devaluation of the
NIS against the dollar, and the rate of inflation in Israel adjusted for such
devaluation:

                                                               Israeli inflation
        Year ended    Israeli inflation   Israeli devaluation    adjusted for
       December 31,         rate %               rate %          devaluation %
       ------------         ------          ---------------      -------------
           2000              0                   (2.7)                2.7
           2001              1.4                  9.3                (7.9)
           2002              6.5                  7.3                (0.8)
           2003             (1.9)                (7.6)                5.7
           2004              1.2                 (1.6)                2.8


                                    32

<PAGE>




         Since most of our sales are quoted in dollars and in other foreign
currencies, and a significant portion of our expenses are incurred in NIS, our
results are adversely affected by a change in the rate of inflation in Israel
when such change is not offset (or is offset on a lagging basis) by a
corresponding devaluation of the NIS against the dollar and other foreign
currencies. We do not use any hedging instruments in order to protect ourselves
from currency fluctuation or inflation risks.

     B. Liquidity and Capital Resources

         We have principally financed our operations through cash generated from
operations. Cash and cash equivalents and short-term investments were $7.1
million and marketable securities were $1.6 million, totaling $8.7 million as of
December 31, 2004, as compared with cash and cash equivalents and short-term
investments of $5.0 million and marketable securities of $3.3 million, totaling
$8.3 million as of December 31, 2003.

         Net cash provided by operating activities was approximately $1.9
million, $3.8 million and $4.8 million in 2004, 2003 and 2002, respectively. Net
cash provided by operating activities for 2004 consisted primarily of net
income, plus depreciation less changes in other accounts payable and
receivables.

         Net cash provided by investing activities was $1.3 million, $(2.3)
million and $(1.0) million in 2004, 2003 and 2002, respectively. Net cash
provided by investing activities resulted from sale of marketable securities
(available for sale securities). Our capital expenditures consist mainly of the
purchase of property and equipment.

         In November 2004, we paid a $1.18 per share cash dividend to our
shareholders, which amounted to $7.1 million. The dividend was declared by our
Board of Directors after considering alternative means of increasing
shareholders value. Our Board determined that the dividend would be more
beneficial for our company and its shareholders.

         According to the Israeli Companies Law, a company may distribute
dividends out of its profits, so long as the company reasonably believes that
such dividend distribution will not prevent the company from paying all its
current and future debts. Profits, for purposes of the Israeli Companies Law,
means the greater of retained earnings or earnings accumulated during the
preceding two years. In the event cash dividends are declared, such dividends
are declared in dollars.

         Net cash used in financing activities was approximately $(1.2) million,
$(2.5) million and $(0.5) million in 2004, 2003 and 2002, respectively. Net cash
used in financing activities in 2004 was attributable to issuance of shares for
$5.7 million, which was offset by a cash dividend payment of $ (7.1) million.

         Our principal sources of liquidity consist of our current cash flow
from operations, financial income and our $2 million credit line. We believe
that these sources of liquidity will be sufficient to satisfy our operational
requirements for 2005.

         We believe that anticipated cash flow from operations and our current
cash balances will be sufficient to meet our cash requirements through at least
December 31, 2005. Our continued operations thereafter will depend upon cash
flow from operations and the availability of equity or debt financing.

         Pursuant to an agreement with European Air Force dated December 20,
2001, our subsidiary Limco-Airepair has a commitment to purchase non-serviceable
aircraft spare parts assemblies and

                                       33

<PAGE>




complete technical documentation, in the amount of $1,134,000. Pursuant to the
agreement, 10% of this amount was paid on December 20, 2001, and the remaining
$1,020,600 to be paid according to the terms of the agreement. As of March 31,
2005, approximately $1,093,000 of the commitment had been fulfilled. We entered
into an agreement with a third party, to share this purchase commitment and the
sales proceeds. The third party has advanced to us approximately $547,000. This
amount is included in other payables and accrued expenses.

         On June 15, 2004, we entered into a share purchase agreement with
T.O.P., a wholly-owned subsidiary of Ta-Tek Ltd., an Israeli private company
wholly-owned by FIMI Opportunity Fund. Under the agreement we sold 857,143 of
our shares to T.O.P for $6,000,001. We also granted T.O.P warrants to purchase
an aggregate of 500,000 of our ordinary shares at $8.50 per share, which price
was adjusted to $7.32 per share because of our 2004 dividend payment. The
warrants are exercisable for 66 months. In addition, we entered into a credit
line agreement with FIMI, which provides for a line of credit in an amount of up
to $2,000,000. Loans made pursuant to the credit line bear interest at 5% per
annum and are repayable on or before December 15, 2009. We will pay an annual
commitment fee equal to 0.5% of the amount of the credit line. We also entered
into a management agreement which provides that we will engage FIMI to provide
certain management services to us in exchange for annual payments equal to 3% of
our operating profit exceeding $500,000; provided, however, that in no event
will the total management fees in any given year exceed $250,000. The agreements
were approved by our shareholders on August 10, 2004.

         On May 24, 2005, our subsidiary, Limco-Airepair, Inc., entered into an
agreement, subject to certain closing conditions, for the purchase of Piedmont,
a private company based in Kernersville, North Carolina, engaged in the repair
and overhaul of various aircraft accessories. Under the terms of the
acquisition, we agreed to pay $5.5 million for Piedmont and to repay $9.5
million of its outstanding indebtedness. In addition, we agreed to pay former
shareholders $200,000 per year, for a term of three years, in consideration for
their obligation not to compete with Piedmont during this period. We will fund
this acquisition from our working capital and bank loans. In the future we may
issue convertibles notes in order to repay part of the bank loans.

     C. Research and Development, Patents and Licenses

         As of June 1, 2005, we had approximately three employees engaged in
research and development. We continually utilize our engineering and
manufacturing capabilities in the design and development of new products and
services and cost effective management techniques.

     D. Trend Information

         There are no significant recent trends that are material to production,
sales and inventory, the state of the order book and costs and selling prices
since the latest fiscal year.

     E. Off-balance Sheet Arrangements

         We are not a party to any material off-balance sheet arrangements. In
addition, we have no unconsolidated special purpose financing or partnership
entities that are likely to create material contingent obligations.

                                       34

<PAGE>




     F. Tabular Disclosure of Contractual Obligations

         The following table summarizes our minimum contractual obligations and
commercial commitments, as of December 31, 2004 and the effect we expect them to
have on our liquidity and cash flow in future periods.

<TABLE>
<CAPTION>
         Contractual Obligations                                   Payments due by Period
- ----------------------------------------       ------------------------------------------------------------------
                                                                                                            More
                                                              Less than 1                                  than 5
                                                 Total           year         1-3 Years      3-5 Years      years
                                               ----------      ----------   -----------      ---------     ------
<S>                                            <C>             <C>          <C>               <C>             <C>
Long-term debt obligations .............           -               -              -              -            -
Operating lease obligations.............       $1,765,060      $359,260     $691,800          $714,000        -
Purchase obligations....................         $113,400      $113,400           -              -            -
Total...................................       $1,878,460      $472,660     $691,800          $714,000        -
</TABLE>

         Other Obligations

         In addition, pursuant to the terms of the agreement, we entered into a
lease agreement, pursuant to which we leased from TAT Industries, effective as
of January 1, 2000, the real estate and buildings encompassing an area of
approximately 312,000 square feet for a period of 24 years and eleven months. In
consideration for the lease agreement, we agreed to pay TAT Industries annual
rentals of approximately $300,000, with an additional incremental payment of 2%
per year, such rental rates are subject to revaluation every fifth year.

         In addition, we have long-term liabilities for severance pay that is
calculated pursuant to Israeli severance pay law generally based on the most
recent salary of the employees multiplied by the number of years of employment,
as of the balance sheet date. Employees are entitled to one month's salary for
each year of employment or a portion thereof. As of December 31, 2004, our
severance pay liability was $191,000.

         We have attempted to identify additional significant uncertainties and
other factors affecting forward-looking statements in the Risk Factors section
that appears in Item 3. "Key Information."

     Item 6. Directors, Senior Management and Employees

     A. Directors and Senior Management

         Our articles of association provide for a board of directors consisting
of no less than two and no more than eleven members or such other number as may
be determined from time to time at a general meeting of shareholders. Our board
of directors is currently composed of nine directors.

         Our executive officers are responsible for our day-to-day management.
The executive officers have individual responsibilities established by our chief
executive officer and by the board of directors. Executive officers are
appointed by and serve at the discretion of the board of directors, subject to
any applicable employment agreements.

         Set forth below are the name, age, principal position and a
biographical description of each of our directors and executive officers:

                                       35

<PAGE>




<TABLE>
<CAPTION>
    NAME                            AGE     POSITION WITH THE COMPANY
    ----                            ---     -------------------------
    <S>                              <C>    <C>
    Shlomo Ostersetzer..........     77     Chief Executive Officer and Chairman of the Board of Directors
    Dov Zeelim..................     64     President and Vice Chairman of the Board of Directors
    Israel Ofen.................     56     Executive Vice President and Chief Financial Officer
    Shraga Katz.................     60     Vice President Operations
    Avi Kahana..................     61     Secretary and Manager of Import and Export Division
    Jacob Danan.................     64     Chief Engineer and Vice President of Marketing
    Shaul Menachem..............     58     President - Limco-Airepair
    Eran Frenkel (1) ...........     39     V.P.  Business Development - Limco-Airepair
    Yossi Rosenberg (2) ........     39     Vice-President Economics
    Dr. Meir Dvir...............     74     Director
    Yaacov Fish.................     58     Director
    Ishay Davidi................     43     Director
    Gillon Beck ................     43     Director
    Yechiel Gutman..............     59     Director
    Michael Shevi...............     69     Outside Director
    Rami Daniel.................     39     Outside Director
</TABLE>
- -----------------

(1) Mr. Frenkel is the son-in-law of Dov Zeelim.

(2) Mr. Rosenberg is the son-in-law of Shlomo Ostersetzer.

         Each of our directors (except our outside directors) is elected to
serve until the next annual general meeting of shareholders and until his
successor has been elected. Officers serve at the discretion of the Board of
Directors.

         On June 15, 2004, we entered into a share purchase agreement with
T.O.P. Under the agreement we sold 857,143 of our shares to T.O.P. As part of
the transaction, our parent company, TAT Industries, and T.O.P entered into a
shareholders' agreement, which provides among other things that each of TAT
Industries and T.O.P will vote all of the shares held by them for the election
to our Board of Directors of three designees of T.O.P and six designees of TAT
Industries.

         Shlomo Ostersetzer has served as the Chairman of our Board of Directors
since April 1985. Mr. Ostersetzer has also served as our Chief Executive Officer
since 1990. Mr. Ostersetzer is one of the founders of TAT Industries and is a
controlling shareholder, and he has served in various capacities with TAT
Industries since 1970, including President, Managing Director and Chairman of
its Board of Directors. Mr. Ostersetzer holds a M.Sc. in Mechanical Engineering
from ETH-Polytechnical Institute in Zurich, Switzerland.

         Dov Zeelim has served as our Vice Chairman of the Board of Directors
since April 1985 and has served as our President and Chief Operating Officer
since August 2000. In addition, Mr. Zeelim has served in various managerial
capacities at TAT Industries for over 21 years, including Managing Director,


                                       36



<PAGE>

Executive Vice President and Vice Chairman. Mr. Zeelim is a licensed Certified
Public Accountant in Israel.

         Israel Ofen has served as our Executive Vice President and Chief
Financial Officer since August 1993, as Managing Director since March 1991 and
has held other managerial positions since April 1985. In addition, Mr. Ofen
served as Vice President, Finance of TAT Industries from 1983 through August 31,
1993 and as its President since January 2000.  Mr. Ofen also serves as a
director of TAT Industries. Mr. Ofen holds a B.A. in Economics from Bar-llan
University in Ramat-Gan. Mr. Ofen is a licensed Certified Public Accountant in
Israel.

         Shraga Katz has served as our V.P. Operations since March 1998. From
August 1995 to March 1998, he served as General Manger of Limco. From 1986 to
1995, he served as manager of the Israeli heat exchanger operations division of
TAT Industries and has served as manager of our heat exchange operations since
1991. Mr. Katz is a retired Lieutenant Colonel of the Israeli Air Force in which
he served for 20 years. Mr. Katz hold a B.Sc. in Mechanical Engineering from the
Technion, Israel Institute of Technology and an M.Sc. in Aeronautical
Engineering from AFIT Air Force Institute of Technology.

         Avi Kahana has served as our Secretary since January 1998. During the
past five years, Mr. Kahana has been the Manager of our import and export
division. Mr. Kahana has worked for TAT Industries and its subsidiaries since
1984.

         Jacob Danan has served as our Chief Engineer since September 1996, and,
since January 1, 1998 as our Vice President of Marketing. Mr. Danan has been
with us since 1980. Mr. Danan holds a holds a B.Sc. in Aeronautical Engineering
from the Technion, Israel Institute of Technology.

          Eran Frenkel has served as Vice President Business Development of
Limco-Airepair since June 2003. Mr. Frenkel is the son-in-law of Dov Zeelim. Mr.
Frenkel holds an M.A. in Business Administration from Pace University in
New-York.

         Yossi Rosenberg has served as our Vice President of Economics and as a
Director of TAT Industries since June 2003. From February 2001 until March 2003,
Mr. Rosenberg served as an economist and as a financial consultant to our C.E.O.
Mr. Rosenberg is the son-in-law of Shlomo Ostersetzer. Mr. Rosenberg holds a
B.A. in Business Administration from the College of Management in Tel Aviv.

         Shaul Menachem has served as the President of Limco-Airepair since
February 1998. Mr. Menachem holds a M.Sc. in Engineering Management from
Bridgeport University of Connecticut.

         Dr. Meir Dvir has served as our director since December 1994. Mr. Dvir
has served as deputy General Manager of Business Research and Development and
also as General Manager of the Israeli Aircraft Industries Ltd. He is also a
director of T.T.I Telecom Ltd. and Bank Leumi Ltd. Mr. Dvir holds a Ph.D. in
Mathematics and Physics from the Hebrew University in Jerusalem.

         Yaacov Fish has served as our director since January 1994. From 1992 to
1997, Mr. Fish served as Managing Director of Magen Central Pension Fund Ltd.
Mr. Fish served as a financial advisor to Shalev Transportation Cooperative Ltd.
from 1990 to 1994 and served as general comptroller of Egged Ltd. from 1977
to 1990. Mr. Fish holds a B.Sc. in Economics from Bar-llan University in Tel
Aviv.

         Ishay Davidi was elected on December 21, 2004 as one of three designees
of FIMI Opportunity Fund. Mr. Davidi has served as the Chief Executive Officer
and Senior Partner of FIMI Opportunity Fund, an Israeli investment fund, since
1996. Mr. Davidi also serves as the Chairman and Senior Partner
                                       37



<PAGE>

of FITE (First Israel Turnaround  Enterprise), another Israeli investment fund
established by FIMI Group, and as a director of Tadiran Communications,  Lipman
Electronic  Engineering,  Ltd., Tedea  Technological Development and Automation
Ltd., TG Precision Products Ltd. and Medtechnica Ltd. Prior to the foundation of
FIMI, from 1994 to 1996 Mr. Davidi served as Chief Executive Officer of Tikvah
VC Fund, an Israeli VC fund and prior to that he served as Chief Executive
Officer of two Israeli industrial companies.  Mr. Davidi serves as a director of
Medtechnia Ltd., Tedea Technological Development and Automation Ltd. and Formula
Systems Ltd. Mr. Davidi holds a B.Sc. in Industrial Engineering from Tel Aviv
University and an MBA in Finance from Bar Ilan University.

         Gillon Beck was elected on December 21, 2004 as one of three designees
of FIMI  Opportunity Fund. Mr. Beck has served as a partner in FIMI Opportunity
Fund and a director  of several of the fund's  portfolio companies  since 2003.
Prior  thereto,  from  1999 Mr. Beck  served as Chief  Executive Officer  and
President  of Arad Ltd.  Group, a  leading  manufacturer of water  measurement
technologies.  Mr. Beck serves as a director of Medtechnia Ltd., Tedea
Technological Development and Automation Ltd. and Formula Vision Ltd. Mr.  Beck
holds a  B.Sc.  in  Industrial Engineering from  the Technion,  Israel Institute
of Technology and an M.B.A. in Finance from Bar Ilan University.

         Yechiel Gutman was elected on December 21, 2004 as one of three
designees of FIMI Opportunity  Fund. Mr. Gutman serves as a public member of the
Israeli  Security  Authority (ISA). He also serves as a director of many Israeli
companies,  including  Israel  Refinery  Company,  El-Al (the  Israeli national
airline),  and Bank Otzar Hachayal (a subsidiary of Bank Hapoalim).  In the past
Mr.  Gutman served as an advisor to the Israeli  Minster of Justice.  Mr. Gutman
holds L.L.B. and M.A. degrees from The Hebrew University, Jerusalem. Mr. Gutman
serves as an independent director.

         Michael Shevi has served as an outside director since June 10, 2004.
Mr. Shevi has served as Managing  Director of Cham Foods since 1973.  Currently,
Mr. Shevi is a director in Cham Foods  (Israel)  Ltd. Mr. Shevi is licensed as a
Certified Public Accountant in Israel.

         Rami Daniel has served as an outside director since June 10, 2004.  Mr.
Daniel has served as V.P. of Finance of Ganden  Real Estate  since  2001.  Mr.
Daniel is licensed as a Certified  Public  Accountant in Israel and holds B.S.C.
from the College of Management in Tel Aviv.

     B. Compensation

         The following table sets forth all the compensation we paid with
respect to all of our directors and executive officers as a group for the year
ended December 31, 2004.

<TABLE>
<CAPTION>
                                                                         Pension,
                                              Salaries, fees,           retirement       Compensation due
                                              commissions and           and similar        to exercise of
                                                 bonuses                 benefits             options
                                              ---------------           -----------      -----------------
<S>                                             <C>                      <C>                <C>
All directors and executive officers
 as a group, (16) persons                       $ 1,657,000              $318,000           $3,048,000

</TABLE>


         During the year ended December 31, 2004, we paid each of our outside
directors a per meeting attendance fee of NIS 1,000 (approximately $232), plus
an annual fee of NIS 24,524 (approximately $5,700.


                                       38

<PAGE>


         As of December 31, 2004, our directors and executive officers as a
group, consisting of sixteen persons, held options to purchase an aggregate of
260,000 ordinary shares, at exercise prices ranging from $1.625 to $4.50 per
share, all of such option were vested. Of such options, 250,000 options expired
on March 3, 2005 and 10,000 options expire on January 19, 2009. All options were
issued under the 1995 and 1999 Employee Stock Option Plans. See--"Share
Ownership--Stock Option Plans." During 2004 548,435 options were exercised.

         Pursuant to their employment agreements, the chairman of our Board of
Directors, Mr. Shlomo Ostersetzer, and the vice chairman of the Board of
Directors, Mr. Dov Zeelim, are entitled each to a bonus of 2.5% of the annual
consolidated operating income, in excess of $500,000. In the years ended
December 31, 2004, 2003 and 2002, our Board of Directors and shareholders
approved total payments of approximately $246,488, $239,794 and $176,257 to the
chairman and vice chairman of our Board.

     C. Board Practices

Election of Directors

         Pursuant to our articles of association, all of our directors are
elected at our annual general meeting of shareholders by a vote of the holders
of a majority of the voting power represented and voting at such meeting. All
the members of our Board of Directors (except the outside directors) may be
reelected upon completion of their term of office. All of our current directors
(except one of our outside directors) were elected by our shareholders at our
annual general meeting of shareholders of July 2004.

Alternate Directors

         Our Articles of Association provide that any director may, by written
notice to us, appoint another person to serve as an alternate director, subject
to the approval of a majority of the directors, and may cancel such appointment.
Any person, whether or not already a director, may act as an alternate, and the
same person may act as the alternate for several directors and shall have the
corresponding number of votes equivalent to the number of directors who
appointed him. The term of appointment of an alternate director may be for a
specified period, or until notice is given of the termination of the specified
period, or of the appointment. No director currently intends to appoint any
other person as an alternate director, except if the director is unable to
attend a meeting of the Board of Directors. In the event of a tie vote, under
our Articles of Association, the Chairman of the Board shall have a second or
casting vote.

Independent and Outside Directors

         The Israeli Companies Law requires Israeli companies with shares that
have been offered to the public in or outside of Israel to appoint at least two
outside directors. No person may be appointed as an outside director if the
person or the person's relative, partner, employer or any entity under the
person's control has or had, on or within the two years preceding the date of
the person's appointment to serve as outside director, any affiliation with the
company or any entity controlling, controlled by the company. The term
affiliation includes an employment relationship, a business or professional
relationship maintained on a regular basis, control and service as an officer
holder, excluding service as an outside director of a company that is offering
its shares to the public for the first time.

         No person may serve as an outside director if the person's position or
other activities create, or may create, a conflict of interest with the person's
responsibilities as an outside director or may otherwise interfere with the
person's ability to serve as an outside director. If, at the time outside
directors are to be appointed, all current members of the board of directors are
of the same gender, then at least one outside director must be of the other
gender.


                                       39



<PAGE>

         Outside directors are elected by shareholders. The shareholders voting
in favor of their election must include at least one-third of the shares of the
non-controlling shareholders of the company who voted on the matter. This
minority approval requirement need not be met if the total shareholdings of
those non-controlling shareholders who vote against their election represent 1%
or less of all of the voting rights in the company. Outside directors serve for
a three-year term, which may be renewed for only one additional three-year term.
Outside directors can be removed from office only by the same special percentage
of shareholders as can elect them, or by a court, and then only if the outside
directors cease to meet the statutory qualifications with respect to their
appointment or if they violate their duty of loyalty to the company.

         Any committee of the board of directors must include at least one
outside director and the audit committee must include all the outside directors.
An outside director is entitled to compensation as provided in regulations
adopted under the Israeli Companies Law and is otherwise prohibited from
receiving any other compensation, directly or indirectly, in connection with
such service.

         In addition, the NASDAQ Marketplace Rules currently require us to have
at least two independent directors on our board of directors and to establish an
audit committee. As of July 31, 2005, under NASDAQ Marketplace Rules promulgated
pursuant to the Sarbanes-Oxley Act of 2002, our audit committee must have at
least three members and be comprised only of independent directors each of whom
satisfies the "independence" requirements of the Securities and Exchange
Commission and NASDAQ. Our board of directors has determined that Messrs. Rami
Daniel and Michael Shevi qualify both as independent directors under the
Securities and Exchange Commission and NASDAQ requirements and as outside
directors under the Israeli Companies Law requirements. Our board of director
has further determined that Mr. Yaacov Fish and Mr. Meir Dvir qualify as
independent directors under the Securities and Exchange Commission and NASDAQ
requirements.

         As a controlled company within the meaning of NASDAQ Marketplace Rule
4350(c)(5), we are exempted from the NASDAQ Marketplace Rules promulgated
pursuant to the Sarbanes-Oxley Act of 2002, effective as of July 31, 2005,
according to which a majority of our board of directors must qualify as
independent directors within the meaning of the NASDAQ Marketplace Rules see
Item 6.C. "Directors, Senior Management and Employees - Board Practices - NASDAQ
Exemptions for a Controlled Company."

NASDAQ Exemptions for a Controlled Company

         We are a controlled company within the meaning of NASDAQ Marketplace
Rule 4350(c)(5), or Rule 4350(c)(5), since TAT Industries holds more than 50% of
our voting power.

         Under Rule 4350(c)(5), a controlled company is exempt from the
following requirements of NASDAQ Marketplace Rule 4350(c) effective as of July
31, 2005:

          o    the majority of the company's  board of directors must qualify as
               independent directors, as defined under NASDAQ Marketplace Rules.

          o    the  compensation  of the chief  financial  officer and all other
               executive  officers must be  determined,  or  recommended  to the
               board of directors for determination, either by (i) a majority of
               the  independent  directors  or  (ii)  a  compensation  committee
               comprised solely of independent directors.


                                       40



<PAGE>

          o    director  nominees must either be selected or recommended for the
               board of  directors,  either  by (a) a  majority  of  independent
               directors  or (b) a  nominations  committee  comprised  solely of
               independent directors.

         We intend to rely on these exemptions provided under Rule 4350 (C)(5).

NASDAQ Exemptions and Home Country Practices

         NASDAQ Marketplace Rule 4350, or Rule 4350, was recently amended to
permit foreign private issuers to follow certain home country corporate
governance practices without the need to seek an individual exemption from
NASDAQ. Instead, a foreign private issuer must provide NASDAQ with a
letter from outside counsel in its home country certifying that the issuer's
corporate governance practices are not prohibited by home country law.

         On June 22, 2005 we provided NASDAQ with a notice of non-compliance
with Rule 4350. We do not comply with the requirement of Rule 4350 that we
distribute to shareholders, and file with NASDAQ, copies of an annual report
containing audited financial statements of our company and its subsidiaries
within a reasonable period of time prior to our annual meeting of shareholders.
Instead, we will follow Israeli Companies Law by sending our financial
statements to our shareholders. We will also make it available on our website.

Approval of Related Party Transactions under Israeli Law

         The Israeli Companies Law codifies the fiduciary duties that "office
holders," including directors and executive officers, owe to a company. An
"office holder" is defined in the Israeli Companies Law as a director, general
manager, chief business manager, deputy general manager, vice general manager,
other manager directly subordinate to the managing director or any other person
assuming the responsibilities of any of the foregoing positions without regard
to such person's title. An office holder's fiduciary duties consist of a duty of
care and a duty of loyalty. The duty of care requires an office holder to act at
a level of care that a reasonable office holder in the same position would
employ under the same circumstances. This includes the duty to utilize
reasonable means to obtain (i) information regarding the appropriateness of a
given action brought for his approval or performed by him by virtue of his
position and (ii) all other information of importance pertaining to the
foregoing actions. The duty of loyalty requires an office holder to act in good
faith and for the company's interest, including, avoiding any conflict of
interest between the office holder's position in the company and any other
position he holds or his personal affairs, avoiding any competition with the
company's business, avoiding exploiting any business opportunity of the company
in order to receive personal gain for the office holder or others, and
disclosing to the company any information or documents relating to the company's
affairs which the office holder has received by virtue of his position as an
office holder. Each person identified as a director or executive officer in the
table in Item 6.A. "Directors and Senior Management" is an office holder. Under
the Israeli Companies Law, all arrangements as to compensation of office holders
who are not directors require approval of our board of directors, and the
compensation of office holders who are directors must be approved by our audit
committee, board of directors and shareholders.

         The Israeli Companies Law requires that an office holder promptly
disclose any personal interest that he or she may have and all related material
information known to him or her, in connection with any existing or proposed
transaction by us. In addition, if the transaction is an extraordinary
transaction, that is, a transaction other than in the ordinary course of
business, other than on market terms, or likely to have a material impact on the
company's profitability, assets or liabilities, the office holder must also
disclose any personal interest held by the office holder's spouse, siblings,
parents, grandparents, descendants, spouse's descendants and the spouses of any
of the foregoing, or by any corporation in which the office


                                       41



<PAGE>

holder or a relative is a 5% or greater shareholder, director or general
manager or in which he or she has the right to appoint at least one
director or the general manager. Some transactions, actions and arrangements
involving an office holder (or a third party in which an office holder
has an interest) must be approved by the board of directors or as otherwise
provided for in a company's articles of association, as not being adverse
to the company's interest. In some cases, including in the case of an
extraordinary transaction, such a transaction, action and arrangement must
be approved by the audit committee and by the board of directors itself, and
further shareholder approval is required to approve the terms of compensation
of an office holder who is a director. An office holder who has a personal
interest in a matter, which is considered at a meeting of the board of
directors or the audit committee, may not be present during the board
of directors or audit committee discussions and may not vote on this matter,
unless the majority of the members of the board or the audit committee have a
personal interest, as the case may be.

         The Israeli Companies Law also provides that an extraordinary
transaction with a controlling shareholder or in which a controlling shareholder
of the company has a personal interest (including private offerings in which a
controlling shareholder has a personal interest) and a transaction with a
controlling shareholder or his relative regarding terms of service and
employment, must be approved by the audit committee, the board of directors and
shareholders. The shareholder approval for such transactions must include at
least one-third of the shareholders who have no personal interest in the
transaction who voted on the matter. The transaction can be approved by
shareholders without this one-third approval, if the total shareholdings of
those shareholders who have no personal interest and voted against the
transaction do not represent more than one percent of the voting rights in the
company.

         However, under the Companies Regulations (Relief From Related Party
Transactions), 5760-2000, promulgated under the Israeli Companies Law and
amended in January 2002, certain transactions between a company and its
controlling shareholder(s) and certain transaction with its director(s)
regarding terms of compensation do not require shareholder approval.

         In addition, directors' compensation and employment arrangements do not
require the approval of the shareholders if both the audit committee and the
board of directors agree that such arrangements are for the benefit of the
company. If the director or the office holder is a controlling shareholder of
the company then the employment and compensation arrangements of such director
or office holder do not require the approval of the shareholders providing
certain criteria is met.

         The above relief will not apply if one or more shareholder, holding at
least 1% of the issued and outstanding share capital of the company or of the
company's voting rights, objects to the grant of such relief, provided that such
objection is submitted to the company in writing not later than seven (7) days
from the date of the filing of a report regarding the adoption of such
resolution by the company pursuant to the requirements of the Israeli Securities
Law. If such objection is duly and timely submitted, then the compensation
arrangement of the directors will require shareholders' approval as detailed
above.

         The Israeli Companies Law provides that an acquisition of shares in a
public company must be made by means of a tender offer if as a result of the
acquisition the purchaser would become a 25% or greater shareholder of the
company. This rule does not apply if there is already another 25% or greater
shareholder of the company. Similarly, the Israeli Companies Law provides that
an acquisition of shares in a public company must be made by means of a tender
offer if as a result of the acquisition the purchaser would hold greater than a
45% interest in the company, unless there is another shareholder holding more
than a 45% interest in the company. These requirements do not apply if, in
general, the acquisition (1) was made in a private placement that received
shareholder approval, (2) was from a 25% or greater shareholder of the company
which resulted in the acquiror becoming a 25% or greater

                                       42



<PAGE>

shareholder of the company, or (3) was from a shareholder  holding more than a
45% interest in the company which resulted in the acquiror becoming a holder of
more than a 45% interest in the company.

         If, as a result of an acquisition of shares, the acquirer will hold
more than 90% of a company's outstanding shares, the acquisition must be made by
means of a tender offer for all of the outstanding shares. If less than 5% of
the outstanding shares are not tendered in the tender offer, all the shares that
the acquirer offered to purchase will be transferred to the acquirer. The
Israeli Companies Law provides for appraisal rights if any shareholder files a
request in court within three months following the consummation of a full tender
offer. If more than 5% of the outstanding shares are not tendered in the tender
offer, then the acquiror may not acquire shares in the tender offer that will
cause his shareholding to exceed 90% of the outstanding shares.

         Regulations under the Israeli Companies Law provide that the Israeli
Companies Law's tender offer rules do not apply to a company whose shares are
publicly traded outside of Israel, if pursuant to the applicable foreign
securities laws and stock exchange rules there is a restriction on the
acquisition of any level of control of the company, or if the acquisition of any
level of control of the company requires the purchaser to make a tender offer to
the public shareholders.

Exculpation, Indemnification and Insurance of Directors and Officers

         The Israeli Companies Law provides that an Israeli company cannot
exculpate an office holder from liability with respect to a breach of his duty
of loyalty, but may, if permitted by its articles of association, exculpate in
advance an office holder from his liability to the company, in whole or in part,
with respect to a breach of his duty of care. However, a company may not
exculpate in advance a director from his liability to the company with respect
to a breach of his duty of care in the event of distributions. Our articles of
association allow us to exculpate any office holder from his or her liability to
us for breach of duty of care, to the maximum extent permitted by law, before
the occurrence giving rise to such liability.

         Additionally, the Israeli Companies Law provides that a company may, if
permitted by its articles of association, enter into a contract for the
insurance of the liability of any of its office holders with respect to an act
performed by him in his capacity as an office holder, for: a breach of his duty
of care to us or to another person; a breach of his duty of loyalty to us,
provided that the office holder acted in good faith and had reasonable cause to
assume that his act would not prejudice our interests; or a financial liability
imposed upon him in favor of another person. Our articles of association provide
that, subject to any restrictions imposed by the Israeli Companies Law, we may
enter into an insurance contract providing coverage for the liability of any of
our office holders for a breach of his duty of care to us or to another person;
breach of his duty of loyalty to us, provided that the office holder acted in
good faith and had reasonable cause to assume that his act would not prejudice
our interests; or a financial liability imposed upon him in favor of another
person.

         Further, the Israeli Companies Law permits a company, if its articles
of association so provide, to indemnify an office holder for acts or omissions
committed in his or her capacity as an office holder of the company for:

          o    a financial  obligation  imposed on the office holder in favor of
               another  person by any  judgment,  including a  settlement  or an
               arbitrator's award approved by a court;

          o    reasonable   litigation  expenses,   including  attorneys'  fees,
               incurred by the office holder as a result of an  investigation or
               proceeding  instituted  against  him  by a

                                       43



<PAGE>

               competent   authority,   provided  that  such   investigation  or
               proceeding  concluded without the filing of an indictment against
               him or the  imposition  of any  financial  liability  in  lieu of
               criminal  proceedings,  or  concluded  without  the  filing of an
               indictment  against him and a financial  liability was imposed on
               him in lieu of criminal  proceedings  with  respect to a criminal
               offense that does not require proof of criminal intent; and

          o    reasonable   litigation  expenses,   including  attorney's  fees,
               expended  by such  office  holder or  charged  to him or her by a
               court: (a) in a proceeding instituted against him or her by or on
               behalf of the  company  or by another  person,  (b) in a criminal
               charge  from which he or she was  acquitted,  or (c) in  criminal
               proceedings  in which he or she was  convicted  of a crime  which
               does not require proof of criminal intent.

         The Israeli Companies Law provides that a company's articles of
association may permit the company to indemnify an office holder following a
determination to this effect made by the company after the occurrence of the
event in respect of which the office holder will be indemnified. It also
provides that a company's articles of association may permit the company to
undertake in advance to indemnify an office holder, provided that the
undertaking is limited to types of events, which, in the opinion of the
company's board of directors, are, at the time of giving the undertaking,
foreseeable due to our company's activities and to an amount or standard that
the board of directors has determined is reasonable under the circumstances. Our
articles of association provide that we may undertake to indemnify in advance an
office holder, in accordance with the conditions set under applicable law,
against any liabilities he or she may incur in such capacity, provided that such
undertaking is limited with respect to categories of events that can be expected
as determined by our board of directors when authorizing such undertaking, and
with respect to such amounts determined by our board of directors as reasonable
in the circumstances. Furthermore, under our articles of association, we may
indemnify any past or present office holder, in accordance with the conditions
set under any law, with respect to any past occurrence, whether or not we are
obligated under any agreement to indemnify such office holder in respect of such
occurrence.

         These provisions are specifically limited in their scope by the Israeli
Companies Law, which provides that a company may not indemnify an office holder,
nor exculpate an office holder, nor enter into an insurance contract which would
provide coverage for any monetary liability of an office holder, incurred as a
result of certain improper actions.

         Pursuant to the Israeli Companies Law, exculpation of, procurement of
insurance coverage for, and an undertaking to indemnify or indemnification of,
our office holders must be approved by our audit committee and our board of
directors and, if the office holder is a director, also by our shareholders.

         We have agreed to indemnify our office holders to the fullest extent
permitted by law. We currently maintain directors' and officers' liability
insurance with a per claim and aggregate coverage limit of the higher of $5
million or 25% of the Company's equity capital (net worth).

Employment Agreements

         In November 2000, Shlomo Ostersetzer and Dov Zeelim entered into
substantially similar employment agreements with us. These agreements provided
for a base salary and a package of benefits including a bonus of 2.5% of the
annual consolidated operating income, in excess of $500,000, and contained
certain non-competition and confidentiality provisions. According to the
agreements, in the event that the employment of Messrs. Ostersetzer or Zeelim
with us is terminated under circumstances

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<PAGE>

that entitle them to severance pay under Israeli law, they will be
entitled to receive the higher of severance pay due under Israeli
law or the amounts that have accumulated in mangers insurance funds, as
a result of our monthly contribution on their behalf, as well as amounts
accumulated in education funds as a result of our monthly contribution
to these funds. Under the agreements, the terms of Messrs. Ostersetzer's and
Zeelim's employment will continue at least until January 1, 2007. After such
date we may terminate the agreements subject to providing Messrs. Ostersetzer
and Zeelim with twelve-months' prior notice. Messrs. Ostersetzer and Zeelim may
terminate their agreement without notice after January 1, 2008.

Audit Committee

         Our audit committee, established in accordance with Section 114 of the
Israeli Companies Law and Section 3(a)(58)(A) of the Securities Exchange Act of
1934, assists our board of directors in overseeing the accounting and financial
reporting processes of our company and audits of our financial statements,
including the integrity of our financial statements, compliance with legal and
regulatory requirements, our independent public accountants' qualifications and
independence, the performance of our internal audit function and independent
public accountants, finding any defects in the business management of our
company for which purpose the audit committee may consult with our independent
auditors and internal auditor, proposing to the board of directors ways to
correct such defects, approving related-party transactions as required by
Israeli law, and such other duties as may be directed by our board of directors.

         Our audit committee currently consists of four board members who
satisfy the respective "independence" requirements of the Securities and
Exchange Commission, NASDAQ and Israeli Law for audit committee members. Our
audit committee members are Messrs. Michael Shevi, Rami Daniel and Yaacov Fish
and Dr. Meir Dvir. Mr. Yaacov Fish has been elected as the Chairman of the Audit
Committee, and our Board of Directors has determined that he qualifies as a
financial expert. The audit committee meets at least once each quarter. Our
audit committee charter is available on our website at www.tat.co.il.

         The responsibilities of the audit committee also include approving
related-party transactions as required by law. Under Israeli law, an audit
committee may not approve an action or a transaction with a controlling
shareholder, or with an office holder, unless at the time of approval two
outside directors are serving as members of the audit committee and at least one
of the outside directors was present at the meeting in which an approval was
granted.

         Our audit committee is authorized generally to investigate any matter
within the scope of its responsibilities and has the power to obtain from the
internal auditing unit, our independent auditors or any other officer or
employee any information that is relevant to such investigations.

         Our audit committee has adopted and our board of directors has approved
a company-wide Code of Business Conduct and Ethics which appears on our
company's website.

         Our Audit Committee chooses and engages our independent auditors to
audit our financial statements. In December 2004, our Audit Committee adopted a
policy requiring management to obtain the Audit Committee's approval before
engaging our independent auditors to provide any audit or permitted non-audit
services to us or to our subsidiaries. This policy, which is designed to assure
that such engagements do not impair the independence of our auditors, requires
the Audit Committee to pre-approve annually various audit and non-audit services
that may be performed by the our auditors. In addition, the Audit Committee
limited the aggregate amount of fees that our auditors may receive during 2004
for non-audit services in certain categories.



                                       45

<PAGE>

         The Audit Committee is not permitted to approve the engagement of our
auditors for any services that fall into a category of services that is not
permitted by applicable law or if the services would be inconsistent with
maintaining the auditor's independence. See "Item 16. C. Principal Accounting
Fees and Services."

Other Corporate Governance Matters

         Our board of directors has recently passed a resolution which provides
that the independent directors of our company will meet at least twice a year in
executive session. At such sessions the independent directors will recommend the
compensation of all our senior officers and will nominate directors to be
approved by our shareholders at the Annual General Meeting. Our executive
officers do not participate in any discussions or decisions that involve any
aspect of their compensation.

         We have adopted a Code of Business Conduct and Ethics applicable to all
of our principal officers and all employees. The Code of Ethics which is
distributed to all officers and employees may be viewed at our website.

          Our audit committee approves all audit and non-audit services rendered
by our independent registered public accountants. All members of our audit
committee are considered financially literate in accordance with the NASDAQ
definition.

Internal Audit

         The Israeli Companies Law also requires the board of directors of a
public company to appoint an internal auditor nominated by the audit committee.
A person who does not satisfy the Companies Law's independence requirements may
not be appointed as an internal auditor. The role of the internal auditor is to
examine, among other things, the compliance of the company's conduct with
applicable law and orderly business practice. Our internal auditor complies with
the requirements of the Companies Law. Our Internal Auditor is Yair Shilhav.

     D. Employees

         On December 31, 2004, we employed 284 persons, of whom 193 were
employed in manufacturing and quality control, 58 were employed in
administration, sales and marketing, and 33 were employed in engineering and
research and development.

         On December 31, 2003, we employed 270 persons, of whom 193 were
employed in manufacturing and quality control, 48 were employed in
administration, sales and marketing, and 29 were employed in engineering and
research and development.

         On December 31, 2002, we employed 261 persons, of whom 166 were
employed in manufacturing and quality control, 67 were employed in
administration, sales and marketing, and 28 were employed in engineering and
research and development.

         Our U.S. subsidiary employed 116 full-time employees as of December 31,
2004, 100 full-time employees at December 31, 2003 and 85 full-time employees at
December 31, 2002.

         Certain provisions of the collective bargaining agreements between the
Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of
Economic Organizations (including the Industrialists Association) are applicable
to our Israeli employees by order of the Israeli Ministry of Labor. These
provisions concern mainly the length of the workday, minimum daily wages for


                                       46



<PAGE>

professional workers, contributions to a pension fund, insurance for
work-related accidents, procedures for dismissing employees, determination of
severance pay and other conditions of employment. We generally provide our
employees with benefits and working conditions beyond the required minimums.
Furthermore, under the collective bargaining agreements, the wages of most of
our employees are linked to the Consumer Price Index, although the extent of the
linkage is limited.

         In addition, Israeli law generally requires severance pay upon the
retirement or death of an employee or termination of employment without due
cause. Furthermore, Israeli employees and employers are required to pay
predetermined sums to the National Insurance Institute which is similar to the
United States Social Security Administration. The payments thereto amount to
approximately 13% of wages, with the employee contributing approximately 40% and
the employer approximately 60%.

          A general practice followed by us, although not legally required, is
the contribution of monies on behalf of its senior employees to a fund known as
"Management Insurance." This fund provides a combination of savings plan,
insurance and severance pay benefits to the employee, giving the employee a lump
sum payment upon retirement and securing his right to receive severance pay, if
legally entitled, upon termination of employment. The employee contributes an
amount equal to approximately 5% of his wages and the employer contributes an
additional amount of approximately 13-1/3% - 16% of such wages.

     E. Share Ownership

Beneficial Ownership of Executive Officers and Director

         The following table sets forth information as of June 22, 2005
regarding beneficial ownership by each of our directors and executive officers.

                                           Number of Ordinary
                                                 Shares            Percentage of
Name                                     Beneficially Owned (1)    Ownership (2)
- ----                                     ----------------------    -------------

Shlomo Ostersetzer (3)(4) ............          249,412                4.13%
Dov Zeelim (3)(4) ....................          175,000                2.89%
Israel Ofen (3) ......................           81,000                1.34%
Shraga Katz (3) ......................           10,000                  *
Avi Kahana (3) .......................             -                     -
Jacob Danan (3) ......................            2,000                  *
Shaul Menachem (3) ...................             -                     -
Eran Frenkel (3) .....................              400                  *
Yossi Rosenberg (3) ..................             -                     -
Dr. Meir Dvir (3)(5)..................           7,000                   *
Yaacov Fish (3)(5) ...................           5,000                   *
Ishay Davidi (3)......................             -                     -
Gillon Beck (3) ......................             -                     -
Yechiel Gutman (3) ...................             -                     -
Michael Shevi (3) ....................             -                     -
Rami Daniel (3) ......................             -                     -
All directors and executive officers
as a group, (16) persons                          529,812              8.75%

     ------------

     * less than one percent



                                       47



<PAGE>

         (1) Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Ordinary shares relating to options
and warrants currently exercisable or exercisable within 60 days of the date of
this table are deemed outstanding for computing the percentage of the person
holding such securities but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote, and subject
to community property laws where applicable, the persons named in the table
above have sole voting and investment power with respect to all shares shown as
beneficially owned by them.

         (2) The percentages shown are based on 6,042,671 ordinary shares issued
and outstanding as of June 22, 2005.

         (3) The business addresses of Messrs. Ostersetzer, Zeelim, Ofen, Katz,
Kahana, Danan, Frenkel, Rosenberg, Menachem, Fish, Davidi, Beck, Gutman, Shevi
and Daniel and Dr. Dvir is c/o TAT Technologies Ltd. P.O. Box 80, Gedera, Israel
70750.

         (4) Mr. Shlomo Ostersetzer, an officer, director and controlling
shareholder of TAT Industries, and Dov Zeelim, an officer, director and
controlling shareholder of TAT Industries, disclaim beneficial ownership of the
3,113,409 ordinary shares held by TAT Industries, except to the extent of their
proportional interest therein.

         (5) Includes 5,000 ordinary shares subject to currently exercisable
options granted under our 1999 stock option plan, at an exercise price of $1.625
per share. The options expire in January 2009.

Stock Option Plans

         In March 1995, our Board of Directors adopted a share option plan (the
"1995 Plan"), that was approved by our shareholders in August 1995 pursuant to
which 400,000 ordinary shares have been reserved for issuance upon the exercise
of options granted under the 1995 Plan. In June 1995, our Board of Directors
approved the granting of options under the 1995 Plan at an exercise price of
$4.50 per share as follows: Shlomo Ostersetzer-125,000 shares; Dov
Zeelim-125,000 shares; Israel Ofen: 65,000 shares; and an aggregate of 85,000
shares to other employees and services providers of our company. The 1995 Plan
was terminated in March 2005. As of June 20, 2005 there were no options
outstanding pursuant to the 1995 Plan.

         In January 1999, our Board of Directors adopted a share option plan
(the "1999 Plan") for which 500,000 ordinary shares have been reserved and
granted at an exercise price of $1.625 per share as follows: Shlomo
Ostersetzer-125,000 shares; Dov Zeelim-175,000 shares; Israel Ofen-102,500
shares; and an aggregate of 97,500 shares to other employees and directors. As
of June 20, 2005 there were 17,500 options outstanding, at an exercise price of
$1.625 per share, and no options were available for grant pursuant to the 1999
Plan. As of June 20, 2005, our executive officers and directors as a group,
consisting of sixteen persons, held 10,000 options under the 1999 Plan. The 1999
Plan will terminate on January 2009.

         All options are valid for 10 years.

     Item 7. Major Shareholders and Related Party Transactions

     A. Major Shareholders

         TAT Industries is the beneficial holder of 51.52 % of our outstanding
shares. Accordingly, TAT

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<PAGE>

Industries controls our company.

         The following table sets forth certain information as of June 22, 2005,
regarding the beneficial ownership by all shareholders known to us to own
beneficially 5% or more of our ordinary shares:

                                         Number of
                                      Ordinary Shares           Percentage of
              Name                 Beneficially Owned(1)         Ownership(2)
              ----                 ---------------------         ------------
  TAT Industries Ltd. (3)........        3,113,409                  51.52%
  T.O.P(4)(5)....................        1,357,143                  22.46%

  -------------
          (1) Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Ordinary shares relating to options
and warrants currently exercisable or exercisable within 60 days of the date of
this table are deemed outstanding for computing the percentage of the person
holding such securities but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote, and subject to
community property laws where applicable, the persons named in the table above
have sole voting and investment power with respect to all shares shown as
beneficially owned by them.

         (2) The percentages shown are based on 6,042,671 ordinary shares issued
and outstanding as of June 22, 2005.

         (3) The address of TAT Industries is Re'em Industrial Park Neta,
Boulevard Bnei Ayish, Gedera, Israel 70750.

         (4) The address of T.O.P is Mencham Begin 37, Tel Aviv, Israel.

         (5) Includes 500,000 ordinary shares issuable upon the exercise of
currently exercisable warrants, granted under the Share Purchase Agreement with
T.O.P., at an exercise price of $7.32 per share. The warrants expire in January
2010.

Significant Changes in the Ownership of Major Shareholders

         On June 15, 2004, we entered into a share purchase agreement with
T.O.P, a wholly-owned subsidiary of Ta-Tek Ltd., an Israeli private company
wholly-owned by FIMI Opportunity Fund. Under the agreement T.O.P purchased
14.18% of our outstanding shares and was granted warrants for the purchase of
additional 8.27% of our outstanding shares, at an exercise price of $7.32,
subject to certain anti-dilution provisions. Such warrants expire in January
2010.

Major Shareholders Voting Rights

         Our major shareholders do not have different voting rights.

Record Holders

         Based on a review of the information provided to us by our transfer
agent, as of June 10, 2005, there were 52 holders of record of our ordinary
shares, of which 41 record holders holding approximately 50% of our ordinary
shares had registered addresses in the United States. These numbers are not
representative of the number of beneficial holders of our shares nor is it
representative of where such beneficial holders reside since many of these
ordinary shares were held of record by brokers or other

                                       49

<PAGE>


nominees including CEDE & Co., the nominee for the Depositary Company (the
central depositary for the U.S. brokerage community), which held approximately
49.65% of our outstanding ordinary shares as of said date.

     B. Related Party Transactions

         Management and Services Agreement
         ---------------------------------

         In February 2000, we entered into an agreement with TAT Industries, our
controlling shareholder, to purchase operations of TAT Industries relating to
the manufacture of aviation accessories and the lease of certain real estate and
buildings. Pursuant to the terms of this agreement, all of the employees of TAT
Industries were transferred to us effective January 1, 2000, without any change
in the conditions of their employment. TAT Industries pays us $50,000 per year
for administrative and accounting personnel and secretarial staff, who served as
employees of TAT Industries that were transferred to us and who continue to
provide such services.

         In addition, pursuant to the terms of the agreement, we entered into a
lease agreement, pursuant to which we leased from TAT Industries, effective as
of January 1, 2000, an area of approximately 329,000 square feet, including
90,000 square feet of buildings, for a period of 24 years and eleven months. In
consideration for the lease agreement, we agreed to pay TAT Industries annual
rentals of approximately $300,000, with an additional incremental payment of 2%
per year, such rental rates are subject to revaluation every fifth year.

         Other Transactions
         ------------------

         Our Israeli operations employ the services of an agent, Gal Tech Inc.
(a company owned by Messrs. Shlomo Ostersetzer, Dov Zeelim and Israel Ofen, all
of whom are officers and directors of our company). According to an export
agreement, dated April 14, 1992, Gal Tech Inc. receives a handling fee in the
amount of 10% of all purchases by our company in North America per year and a
handling fee in the amount of 3% of all sales by our company to North America
per year (not including sales of heat transfer products). However, pursuant to
this agreement, the total amount to be paid by us to Gal Tech will not exceed
the sum of 5% of our purchases in North America and 5% of our sales to North
America (not including sales of heat transfer products) per year. In the years
ended December 31, 2002, 2003 and 2004, we paid approximately $503,000, $485,000
and $377,000, respectively, to Gal Tech, in accordance with such agreement.
Effective January 1, 2003, Ifat Frenkel (the daughter of Dov Zeelim) became the
President of Gal Tech.

         Pursuant to their employment agreements, the chairman of our Board of
Directors, Mr. Shlomo Ostersetzer, and the vice chairman of our Board of
Directors, Mr. Dov Zeelim, are entitled each to a bonus of 2.5% of the annual
consolidated operating income, in excess of $500,000. In the years ended
December 31, 2004, 2003 and 2002, our Board of Directors and shareholders
approved a total payments of approximately $246,488, $239,794 and $176,257 to
the chairman and vice chairman of our Board.

         T.O.P, one of our major shareholders, provides us with management and
consulting services in consideration for the lower of: (i) 3% of the
consolidated operating income in excess of $500,000, or (ii) $250,000 per year.
In the year ended December 31, 2004, we paid T.O.P $49,564 for such services.



                                       50



<PAGE>

Other Matters

         Mr. Shlomo Ostersetzer also serves as the Chairman of the Board of TAT
Industries. Mr. Dov Zeelim also serves as Vice Chairman of TAT Industries.
Messrs. Zeelim and Ostersetzer are both controlling shareholders of TAT
Industries, our controlling shareholder.

         Mr. Israel Ofen also serves as President of TAT Industries.

     C. Interests of Experts and Counsel

         Not applicable.

     Item 8. Financial Information

     A. Consolidated Statements and Other Financial Information

         See the Index to Consolidated Financial Statements accompanying this
report on Page F-1.

Legal Proceedings

          In August 2004, two former temporary employees filed a claim against
us and against an employment agency, alleging breach of contract and seeking
compensation for salary delays and salary differences in the amount of $250,000.
At this time, we are unable to predict the ultimate outcome of these claims;
however, we believe that such claims are without merit. As such, no provision
was provided.

Dividend Distribution

         In December 2002, we declared a cash dividend of $0.45 per share (an
aggregate of $2,017,582) paid in January 2003. In May 2003, we declared a cash
dividend of $0.25 per share (an aggregate of $1,120,879) payable in July 2003.
In September 2004, we declared a cash dividend of $1.18 per share (an aggregate
of $7,130,352) payable in November 2004. Our intention is to pay up to 40% of
our net profit as a cash dividend annually, depending on cash flow and
profitability and other factors affecting our business. There can be no
assurance that we will declare any further dividends.

         According to the Israeli Companies Law, a company may distribute
dividends out of its profits, so long as the company reasonably believes that
such dividend distribution will not prevent the company from paying all its
current and future debts. Profits, for purposes of the Israeli Companies Law,
means the greater of retained earnings or earnings accumulated during the
preceding two years. In the event cash dividends are declared, such dividends
will be declared in dollars.

     B. Significant Changes

         On May 24, 2005, our subsidiary, Limco-Airepair, Inc., entered into an
agreement, subject to certain closing conditions, for the purchase of Piedmont,
a private company based in Kernersville, North Carolina, engaged in the repair
and overhaul of various aircraft accessories. Under the terms of the
acquisition, we agreed to pay $5.5 million for Piedmont and to repay $9.5
million of its outstanding indebtedness. Piedmont is a recognized leader in the
overhaul, repair, maintenance, service and supply of propellers, landing gear
and APU/LRU units. In addition, we agreed to pay former shareholders of Piedmont
$200,000 per year, for a term of three years, in consideration for their
obligation not to compete with Piedmont in this period.


                                       51

<PAGE>


     Item 9. The Offer and Listing

     A. Offer and Listing Details

Annual Stock Information

         The following table sets forth, for each of the years indicated, the
range of high ask and low bid prices of our ordinary shares on the NASDAQ
SmallCap Market:

                                                        High          Low
                                                        ----          ---
Fiscal Year Ended December 31, 2000                    $7.75         $2.56
Fiscal Year Ended December 31, 2001                     3.25          1.39
Fiscal Year Ended December 31, 2002                     4.10          1.65
Fiscal Year Ended December 31, 2003                     8.00          2.06
Fiscal Year Ended December 31, 2004                     9.80          6.21


Quarterly Stock Information

         The following table sets forth, for each of the full financial quarters
in the years indicated, the range of high ask and low bid prices of our ordinary
shares on the NASDAQ SmallCap Market:



                2003                                       High         Low
                ----                                       ----         ---
                First Quarter........................     $3.86       $2.06
                Second Quarter.......................      6.65        3.15
                Third Quarter........................      6.59        4.79
                Fourth Quarter.......................      8.00        5.85

                2004                                       High         Low
                ----                                       ----         ---
                First Quarter........................     $9.80        $7.15
                Second Quarter.......................      9.29         7.55
                Third Quarter........................      9.00         7.00
                Fourth Quarter.......................      8.94         6.21


Monthly Stock Information

         The following table sets forth, for the most recent six months, the
range of high ask and low bid prices of our ordinary shares on the NASDAQ
SmallCap Market:

          2005                                             High         Low
          ----                                             ----         ---
          January................................         $8.00        $7.41
          February...............................         $8.85        $7.57
          March..................................         $9.35        $7.90
          April..................................         $8.81        $7.19
          May....................................         $8.57        $7.30
          June (through June 21).................         $8.40        $7.70



                                       52



<PAGE>


     B. Plan of Distribution

         Not applicable.

     C. Markets

         Our ordinary shares traded on the NASDAQ National Market under the
symbol "TATTF" from March 1987 until July 1998 when the listing of our ordinary
shares was transferred to the NASDAQ SmallCap Market. There is currently no
trading market for the ordinary shares outside the United States.

     D. Selling Shareholders

         Not applicable.

     E. Dilution

         Not applicable.

     F. Expense of the Issue

          Not applicable.

     Item 10. Additional Information

     A. Share Capital

          Not applicable.

     B. Memorandum and Articles of Association

          We are registered with the Israeli Companies Registry and have been
assigned company number [520035791]. Section 2 of our memorandum of association
provides that we were established for the purpose of engaging in the business of
providing services of planning, development, consultation and instruction in the
electronics field. In addition, the purpose of our company is to perform various
corporate activities permissible under Israeli law.

          On February 1, 2000, the Israeli Companies Law came into effect and
superseded most of the provisions of the Israeli Companies Ordinance (New
Version), 5743-1983, except for certain provisions which relate to liens,
bankruptcy, dissolution and liquidation of companies. Under the Israeli
Companies Law, various provisions, some of which are detailed below, overrule
the current provisions of our articles of association.

The Powers of the Directors

         Under the provisions of the Israeli Companies Law and our Articles of
Association, a director cannot participate in a meeting nor vote on a proposal,
arrangement or contract in which he or she is materially interested. In
addition, our directors cannot vote compensation to themselves or any members of
their body without the approval of our audit committee and our shareholders at a
general meeting. See Item 6.C. "Directors, Senior Management and Employees -
Board Practices - Approval of Related Party Transactions Under
Israeli Law."



                                       53

<PAGE>

         The authority of our directors to enter into borrowing arrangements on
our behalf is not limited, except in the same manner as any other transaction by
us.

         Our articles of association do not impose any mandatory retirement or
age-limit requirements on our directors and our directors are not required to
own shares in our company in order to qualify to serve as directors.

Rights Attached to Shares

         Our authorized share capital consists of 7,000,000 ordinary shares of a
nominal value of NIS 0.90 each. All outstanding ordinary shares are validly
issued, fully paid and non-assessable.

         The rights attached to the ordinary shares are as follows:

         Dividend rights. Holders of our ordinary shares are entitled to the
full amount of any cash or share dividend subsequently declared. The board of
directors may declare interim dividends and propose the final dividend with
respect to any fiscal year only out of the retained earnings, in accordance with
the provisions of the Israeli Companies Law. See Item 8.A. "Financial
Information - Consolidated and Other Financial Information - Dividend
Distribution." If after one year a dividend has been declared and it is still
unclaimed, the board of directors is entitled to invest or utilize the unclaimed
amount of dividend in any manner to our benefit until it is claimed. We are not
obligated to pay interest or linkage differentials on an unclaimed dividend.

         Voting rights. Holders of ordinary shares have one vote for each
ordinary share held on all matters submitted to a vote of shareholders. Such
voting rights may be affected by the grant of any special voting rights to the
holders of a class of shares with preferential rights that may be authorized in
the future.

         The quorum required for an ordinary meeting of shareholders consists of
at least two shareholders present in person or represented by proxy who hold or
represent, in the aggregate, at least one third of the voting rights of the
issued share capital. A meeting adjourned for lack of a quorum generally is
adjourned to the same day in the following week at the same time and place or
any time and place as the directors designate in a notice to the shareholders.
At the reconvened meeting, the required quorum consists of any two members
present in person or by proxy.

         Under our Articles of Association, any resolution, including
resolutions for the declaration of dividends, amending our memorandum of
association or articles of association, approving any change in capitalization,
winding-up, authorization of a class of shares with special rights, or other
changes as specified in our Articles of Association, requires approval of the
holders of a majority of the voting rights represented at the meeting, in
person, by proxy or by written ballot, and voting thereon.

         Pursuant to our articles of association, our directors are elected at
our annual general meeting of shareholders by a vote of the holders of a
majority of the voting power represented and voting at such meeting. See Item
6.C. "Directors, Senior Management and Employees - Board Practices - Election of
Directors."

         Rights to share in our company's profits. Our shareholders have the
right to share in our profits distributed as a dividend and any other permitted
distribution.

         Rights to share in surplus in the event of liquidation. In the event of
our liquidation, after satisfaction of liabilities to creditors, our assets will
be distributed to the holders of ordinary shares in

                                       54

<PAGE>


proportion to the nominal value of their holdings. This right may be affected
by the grant of preferential dividend or distribution rights to the holders of a
class of shares with preferential rights that may be authorized in the future.

         Liability to capital calls by our company. Under our memorandum of
association and the Israeli Companies Law, the liability of our shareholders is
limited to the par value of the shares held by them.

         Limitations on any existing or prospective major shareholder. See Item
6.C. "Directors and Senior Management -Board Practices - Approval of Related
Party Transactions Under Israeli Law."

Changing Rights Attached to Shares

         According to our Articles of Association, in order to change the rights
attached to any class of shares, unless otherwise provided by the terms of the
class, such change must be adopted by a general meeting of the shareholders and
by a separate general meeting of the holders of the affected class with a
majority of the voting rights represented at the meeting, in person, by proxy or
by written ballot, and voting thereon.

Annual and Extraordinary Meetings

         The Board of Directors must convene an annual meeting of shareholders
at least once every calendar year, within fifteen months of the last annual
meeting. Notice of at least twenty-one days prior to the date of the meeting is
required. An extraordinary meeting may be convened by the board of directors, as
it decides or upon a demand of any two directors or 25% of the directors,
whichever is less, or of one or more shareholders holding in the aggregate at
least 5% of our issued capital and at least 1% of the voting rights in our
company. An extraordinary meeting must be held not more than thirty-five days
from the publication date of the announcement of the meeting. See Item 10.B.
"Additional Information -- Memorandum and Articles of Association -- Rights
Attached to Shares--Voting Rights."

Limitations on the Rights to Own Securities in Our Company

         Neither our memorandum of association or our articles of association
nor the laws of the State of Israel restrict in any way the ownership or voting
of shares by non-residents, except with respect to subjects of countries which
are in a state of war with Israel.

Provisions Restricting Change in Control of Our Company

         The Israeli Companies Law requires that mergers between Israeli
companies be approved by the board of directors and general meeting of
shareholders of both parties to the transaction. The approval of the board of
directors of both companies is subject to such boards' confirmations that there
is no reasonable doubt that after the merger the surviving company will be able
to fulfill its obligations towards its creditors. Each company must notify its
creditors about the contemplated merger. Under the Israeli Companies Law, our
Articles of Association are deemed to include a requirement that such merger be
approved by an extraordinary resolution of the shareholders, as explained above.
The approval of the merger by the general meetings of shareholders of the
companies is also subject to additional approval requirements as specified in
the Israeli Companies Law and regulations promulgated thereunder. See also Item
6.C. "Directors, Senior Management and Employees - Board Practices - Approval of
Related Party Transactions Under Israeli Law."



                                       55

<PAGE>

Disclosure of Shareholders Ownership

         The Israeli Securities Law and regulations promulgated thereunder do
not require a company whose shares are publicly traded solely on a stock
exchange outside of Israel, as in the case of our company, to disclose its share
ownership.

Changes in Our Capital

         Changes in our capital are subject to the approval of the shareholders
at a general meeting by a majority of the voting rights represented at the
meeting, in person, by proxy or by written ballot, and voting thereon.

         There are no restrictions on the rights of nonresident or foreign
shareholders to hold or vote the Ordinary Shares.

     C. Material Contracts

         On June 15, 2004, we entered into a share purchase agreement with
T.O.P, a wholly-owned subsidiary of Ta-Tek Ltd., an Israeli private company
wholly-owned by FIMI Opportunity Fund. Under the agreement we sold 857,143 of
our shares to T.O.P for $6,000,001. T.O.P was given certain demand and
piggy-back registration rights with respect to these shares. As part of the
transaction, our parent company, TAT Industries, and T.O.P entered into a
shareholders' agreement, which provides among other things that T.O.P will have
the right to designate three members to serve on our Board of Directors. The
shareholders' agreement also provides for: (i) certain standard bring-along and
tag-along rights; (ii) a right of first refusal with respect to any shares
proposed to be sold by any of the parties; (iii) a lock-up whereby no party may
sell more than 150,000 shares prior to June 2006, and (iv) a standstill
restriction, which provides that T.O.P will not purchase (in the open market or
otherwise) such number of shares that would increase its holdings of our shares
to more than 35%.

         As part of the transaction, T.O.P received warrants to purchase an
aggregate of 500,000 of our ordinary shares at $8.50 per share, which price was
adjusted to $7.32 per share because of our 2004 dividend payment. The warrants
are exercisable for 66 months. In addition, we entered into a credit line
agreement with FIMI, which provides for a line of credit in an amount of up to
$2,000,000. Loans made pursuant to the credit line bear interest at 5% per annum
and are repayable on or before December 15, 2009. We will pay an annual
commitment fee equal to 0.5% of the amount of the credit line. We also entered
into a management agreement which provides that we will engage FIMI to provide
certain management services to us in exchange for annual payments equal to 3% of
our operating profit exceeding $500,000; provided, however, that in no event
will the total management fees in any given year exceed $250,000. The agreements
were approved by our shareholders on August 10, 2004.

         On May 24, 2005, our subsidiary, Limco-Airepair, Inc., entered into an
agreement, subject to certain closing conditions, for the purchase of Piedmont
Aviation Component Services, LLC, or Piedmont, a private company based in
Kernersville, North Carolina, engaged in the repair and overhaul of various
aircraft accessories. Under the terms of the acquisition, we agreed to pay $5.5
million for Piedmont and to repay $9.5 million of its outstanding indebtedness.
In addition, we agreed to pay Piedmont former shareholders $200,000 per year,
for a term of three years, in consideration for their obligation not to compete
with Piedmont in this period. Piedmont is a recognized leader in the overhaul,
repair, maintenance, service and supply of propellers, landing gear and APU/LRU
units.


                                       56



<PAGE>

     D. Exchange Controls

         Israeli law and regulations do not impose any material foreign exchange
restrictions on non-Israeli holders of our ordinary shares. In May 1998, a new
"general permit" was issued under the Israeli Currency Control Law, 1978, which
removed most of the restrictions that previously existed under such law, and
enabled Israeli citizens to freely invest outside of Israel and freely convert
Israeli currency into non-Israeli currencies.

         Non-residents of Israel who purchase our ordinary shares will be able
to convert dividends, if any, thereon, and any amounts payable upon our
dissolution, liquidation or winding up, as well as the proceeds of any sale in
Israel of our ordinary shares to an Israeli resident, into freely repatriable
dollars, at the exchange rate prevailing at the time of conversion, provided
that the Israeli income tax has been withheld (or paid) with respect to such
amounts or an exemption has been obtained.

     E. Taxation

         Israeli Taxation, Foreign Exchange Regulation and Investment Programs
         ---------------------------------------------------------------------

         The following is a summary of the material Israeli tax consequences,
Israeli foreign exchange regulations and certain Israeli government programs
affecting us.

         To the extent that the discussion is based on new tax legislation that
has not been subject to judicial or administrative interpretation, we cannot
assure you that the tax authorities will accept the views expressed in the
discussion in question. The discussion is not intended, and should not be taken,
as legal or professional tax advice and is not exhaustive of all possible tax
considerations.

         Tax Reform
         ----------

         On January 1, 2003, the Law for Amendment of the Income Tax Ordinance
(amendment No.132), 2002, commonly referred to as the Tax Reform, came into
effect, following its enactment by the Israeli Parliament on July 24, 2002. On
December 17, 2002, the Israeli Parliament approved a number of amendments to the
Tax Reform, which came into effect on January 1, 2003. Other regulations and
decrees relating to the Tax Reform were approved as well.


         The Tax Reform, aimed at broadening the categories of taxable income
and reducing the tax rates imposed on employment income, introduced the
following, among other things:

          o    Reduction  of the tax rate  levied on capital  gains  (other than
               gains deriving from the sale of listed securities)  derived after
               January 1, 2003,  to a general  rate of 25% for both  individuals
               and  corporations.  Regarding assets acquired prior to January 1,
               2003, the reduced tax rate will apply to a proportionate  part of
               the gain,  in accordance  with the holding  periods of the asset,
               before or after January 1, 2003, on a linear basis;

          o    Imposition  of Israeli  tax on all  income of Israeli  residents,
               individuals  and  corporations,  regardless  of  the  territorial
               source of income,  including  income derived from passive sources
               such as interest, dividends and royalties;

          o    Introduction of controlled  foreign  corporation (CFC) rules into
               the Israeli tax structure. Generally under such rules, an Israeli
               resident who holds,  directly or  indirectly,  10% or more of the
               rights in a foreign  corporation  whose  shares are not  publicly
               traded,  in which  more than 50% of rights are held  directly  or
               indirectly by Israeli residents,  which has


                                       57




<PAGE>

               undistributed  profits  and a majority  of whose  income in a tax
               year is considered passive income,  will be liable for tax on the
               portion of such income  attributed to his or her holdings in such
               corporation,  as if such income were distributed to him or her as
               a dividend;

          o    Imposition  of capital  gains tax on capital  gains  realized  by
               individuals  as of January  1,  2003,  from the sale of shares of
               publicly  traded  companies  (which was  previously  exempt  from
               capital gains tax in Israel). For information with respect to the
               applicability  of  Israeli  capital  gains  taxes  on the sale of
               ordinary   shares,   see  "Capital   Gains  Tax   Applicable   to
               Shareholders" below;

          o    Introduction  of a new  regime  for the  taxation  of shares  and
               options issued to employees and officers (including directors).

          Statutory Corporate Tax Rate
          ----------------------------

         Israeli companies are subject to corporate tax on their taxable income.
The applicable rate is 35% in 2004, 34% in 2005, 32% in 2006 and 30% in 2007 and
thereafter. However, the effective tax rate payable by a company that derives
income from an approved enterprise, discussed further below, may be considerably
less. See "-Law for the Encouragement of Capital Investments, 1959."

          Tax Benefits under the Law for the Encouragement of Capital
          ------------------------------------------------------------
          Investments, 1959
          ------------------

         The Investment Law provides expanded tax incentives for future
industrial investments and simplified the bureaucratic process for obtaining
approval of investments qualifying for tax incentives. Under the Investment Law,
capital investments in new or expanded production facilities in Israel, upon
approval by the Israeli Government, can be designated as an approved enterprise.
An approved enterprise may receive cash incentives from the Israeli Government
or a company may elect the "alternative benefits track" that allows it to forego
the cash incentives in favor of certain tax exemption.

         A certain expansion plan of our company has been granted an "Approved
Enterprise" status, under the Investment Law. We have elected to receive our
benefits through the "alternative benefits track", waiving grants in return for
tax exemptions. Pursuant thereto, the increase in income from the date of
commencement of the program, which is derived from our approved enterprise
expansion program, is tax-exempt for the periods stated below and will be
eligible for reduced tax rates thereafter. Such reduced tax rates are dependent
on the level of non-Israeli investments in us, as described below.

         Income from sources other than the "Approved Enterprise" are subject to
tax at the regular corporate tax rate of 35%.

         Income derived from the approved enterprise, which commenced in 2003,
and will expire in 2014, will entitle us to a tax exemption for the two-year
period ending December 31, 2005, and to a reduced tax rate of 10%-25% for an
additional five to eight years ending December 31, 2014, depending on the level
of non-Israel investments in our company.

         The entitlement to the above benefits is conditioned upon the
fulfilling by us of the conditions stipulated by the Investment Law, regulations
published thereunder and the letters of approval for the specific investments in
the approved enterprises. In the event of failure to comply with these
conditions, the benefits may be canceled and we may be required to refund the
amount of the benefits, in whole or in part, including interest. As of December
31, 2004, our management believes that we are meeting all of the aforementioned
conditions.



                                       58

<PAGE>

         The tax-exempt income attributable to the approved enterprise can not
be distributed to shareholders without imposing tax liability on the company. As
of December 31, 2004, there was no tax-exempt income earned by our approved
enterprise.

         If the retained tax-exempt income is distributed to shareholders, it
would be taxed at the corporate tax rate applicable to such profits as if the
company had not elected the alternative tax benefits track which is currently
25%.

         By virtue of this law, we are entitled to claim accelerated
depreciation on equipment used by the approved enterprise during five tax years.

         On March 29, 2005, the Israeli parliament passed an amendment to the
Investment Law. The 2005 Amendment primarily relates to the "alternative
benefits track" tax incentives which we have elected for our approved
enterprise. The amendment include special tax incentives and expedited the
approval process for companies that make minimum qualifying investments in fixed
assets in production facilities located in Israel. The 2005 Amendment became
effective on April 1, 2005. We are currently evaluating the impact of the 2005
Amendment on its business operations.

          Tax Benefits under the Law for the Encouragement of Industry
          -------------------------------------------------------------
          (Taxation), 1969
          -----------------

         According to the Law for the Encouragement of Industry (Taxation),
1969, commonly referred to as the Industry Encouragement Law, an industrial
company is a company resident in Israel, that at least 90% of its income in any
tax year (determined in Israeli currency, exclusive of income from certain
government loans, capital gains, interest and dividends), is derived from an
industrial enterprise owned by it. An industrial enterprise is defined as an
enterprise whose major activity in a given tax year is industrial production
activity. We believe that we currently qualify as an industrial company within
the definition of the Industry Encouragement Law. Under the Industry
Encouragement Law, industrial companies are entitled to the following preferred
corporate tax benefits:

          o    deduction of purchases of know-how and patents over an eight-year
               period for tax purposes;

          o    right  to  elect,   under   specified   conditions,   to  file  a
               consolidated   tax  return  with   related   Israeli   Industrial
               Companies; and

          o    accelerated depreciation rates on equipment and buildings.

         Eligibility for the benefits under the Industry Encouragement Law is
not subject to receipt of prior approval from any governmental authority. The
Israeli tax authorities may determine that we do not qualify as an industrial
company, which would entail the loss of the benefits that relate to this status.
In addition, no assurance can be given that we will continue to qualify as an
industrial company, in which case the benefits described above will not be
available in the future.

         Special Provisions Relating to Measurement of Taxable Income
         ------------------------------------------------------------

         Pursuant to the Measurement of taxable income under the Income Tax
(Inflationary Adjustments) Law, 1985, results for tax purposes are measured and
reflected in real terms in accordance with the changes in the Israeli Consumer
Price Index (CPI).



                                       59




<PAGE>

          Stamp Tax
          ---------

         Under Israel's Stamp Tax on Documents Law, certain documents are
subject to stamp tax. Recently promulgated regulations provide for a gradual
phase-out of the stamp tax by 2008. In 2004, however, the tax authorities began
an enforcement campaign involving extensive audits of companies' compliance with
the stamp tax obligation with respect to all agreements which had been signed
since June 2003.

          Capital Gains Tax Applicable to Shareholders
          --------------------------------------------

         Israeli law generally imposes a capital gains tax on the sale of
capital assets located in Israel, including shares in Israeli resident
companies, by both residents and non-residents of Israel, unless a specific
exemption is available or unless a treaty between Israel and the country of the
non-resident provides otherwise. Regulations promulgated under the Israeli
Income Tax Ordinance provided for an exemption from Israeli capital gains tax
for gains accrued before January 1, 2003 and derived from the sale of shares of
an industrial company, as defined by the Industry Encouragement Law, that are
traded on specified non-Israeli markets, including The NASDAQ National Market,
provided that the sellers purchased their shares either in the company's initial
public offering or in public market transactions thereafter. This partial
exemption does not apply to shareholders who are in the business of trading
securities, or to shareholders that are Israeli resident companies subject to
the Inflationary Adjustments Law. The Company believes that it is currently an
Industrial Company, as defined by the Industry Encouragement Law. The status of
a company as an Industrial Company may be reviewed by the tax authorities from
time to time. There can be no assurance that the Israeli tax authorities will
not deny the Company's status as an Industrial Company, possibly with
retroactive effect.

         On January 1, 2003, the Tax Reform came into effect thus imposing
capital gains tax at a rate of 15% on gains derived on or after January 1, 2003
from the sale of shares in Israeli companies publicly traded on a recognized
stock exchange outside of Israel. This tax rate does not apply to:

          o    dealers in securities;

          o    shareholders  that  report in  accordance  with the  Inflationary
               Adjustments Law; or

          o    shareholders who acquired their shares prior to an initial public
               offering.

         The tax basis of shares acquired prior to January 1, 2003 will be
determined as the higher between the original price paid for the share and the
average closing share price in the three trading days preceding January 1, 2003.
Non-Israeli residents are exempt from Israeli capital gains tax on any gains
derived from the sale of shares publicly traded on the NASDAQ Stock Market,
provided such shareholders did not acquire their shares prior to an initial
public offering and do not have a permanent establishment in Israel. In any
event, the provisions of the Tax Reform shall not affect the exemption from
capital gains tax for gains accrued before January 1, 2003, as described in the
previous paragraph.

         In addition, pursuant to the Convention Between the Government of the
United States of America and the Government of Israel with respect to Taxes on
Income, as amended, commonly referred to as the United States-Israel Tax Treaty,
the sale, exchange or disposition of ordinary shares by a person who qualifies
as a resident of the United States within the meaning of the United
States-Israel Tax Treaty and who is entitled to claim the benefits afforded to
such person by the United States-Israel Tax Treaty (a "Treaty United States
Resident") generally will not be subject to the Israeli capital gains tax unless
such Treaty United States Resident holds, directly or indirectly, shares
representing 10% or more of the company's voting power during any part of the
twelve-month period preceding such sale, exchange or


                                       60




<PAGE>

disposition, subject to certain conditions.  A sale, exchange or disposition of
ordinary  shares by a Treaty  United States Resident who holds, directly or
indirectly, shares representing 10% or more of the company's voting power at any
time during such preceding  twelve-month period would be subject to such Israeli
tax,  to the extent  applicable;  however,  under the United  States-Israel  Tax
Treaty, such Treaty United States Resident would be permitted to claim a credit
for such taxes against the United States federal income tax imposed with respect
to such sale, exchange or disposition, subject to the limitations in United
States laws  applicable  to foreign tax credits.  The United States-Israel Tax
Treaty does not relate to United States state or local taxes.


          Taxation of Non-Resident Shareholders
          -------------------------------------

         Non-residents of Israel are subject to Israeli income tax on income
accrued or derived from sources in Israel, including passive income such as
dividends, royalties and interest. On distributions of dividends, other than
bonus shares and stock dividends, income tax at the rate of 25% is withheld at
the source, unless a different rate is provided in a treaty between Israel and
the shareholder's country of residence. If the dividends are distributed out of
approved enterprise earnings, the applicable tax rate would be 15%. Under the
United States - Israel Tax Treaty, the maximum tax on dividends paid to a holder
of ordinary shares who is a Treaty United States Resident will be 25%, however
the tax rate is reduced to 12.5% for dividends not generated by an approved
enterprise to a corporation which holds 10% or more of the company's voting
power during a certain period preceding the distribution of the dividend.
Dividends derived from an Approved Enterprise will still be subject to 15% tax
withholding.

          Foreign Exchange Regulations
          ----------------------------

         Dividends, if any, paid to the holders of the ordinary shares, and any
amounts payable upon dissolution, liquidation or winding up, as well as the
proceeds of any sale in Israel of the ordinary shares to an Israeli resident,
may be paid in non-Israeli currency or, if paid in Israeli currency, may be
converted into freely repatriable U.S. dollars at the rate of exchange
prevailing at the time of conversion, however, Israeli income tax is required to
have been paid or withheld on these amounts. In addition, the statutory
framework for the potential imposition of exchange controls has not been
eliminated, and may be restored at any time by administrative action.

         Withholding and Capital Gains Taxes Applicable to non-Israeli are
         ------------------------------------------------------------------
         holders.
         --------

          Nonresidents of Israel are subject to income tax on income accrued or
derived from sources in Israel. These sources of income include passive income
such as dividends, royalties and interest, as well as non-passive income from
services rendered in Israel. We are generally required to withhold income tax at
the rate of 25% on all distributions of dividends, although if the dividend
recipient holds 10% of our voting stock for a certain period prior to the
declaration and payment of the dividend, we are only required to withhold at a
12.5% rate. Notwithstanding the foregoing, with regard to dividends generated by
an approved enterprise, we are required to withhold income tax at the rate of
15%.

         Israeli law generally imposes a capital gains tax on the sale of
publicly traded securities. Pursuant to changes made to the Israeli Income Tax
Ordinance in January 2003, capital gains on the sale of our ordinary shares will
be subject to Israeli capital gains tax, generally at a rate of 15%. However, as
of January 1, 2003, nonresidents of Israel will be exempt from capital gains tax
in relation to the sale of our ordinary shares for so long as (a) our ordinary
shares are listed for trading on a stock exchange outside of Israel, (b) the
capital gains are not accrued or derived by the nonresident shareholder's
permanent enterprise in Israel, (c) the ordinary shares in relation to which the
capital gains are accrued or derived were acquired by the nonresident
shareholder after the initial listing of the ordinary shares on a stock exchange
outside of Israel, and (d) neither the shareholder nor the particular capital
gain is
                                       61


<PAGE>

otherwise subject to certain sections of the Israeli Income Tax Ordinance.
As of January 1, 2003, nonresidents of Israel are also exempt from
Israeli capital gains tax resulting from the sale of securities on the Tel Aviv
Stock Exchange; provided that the capital gains are not accrued or derived by
the nonresident shareholder's permanent enterprise in Israel.

           In addition, under the income tax treaty between the United States
and Israel, a holder of ordinary shares who is a United States resident will be
exempt from Israeli capital gains tax on the sale, exchange or other disposition
of such ordinary shares unless the holder owns, directly or indirectly,
10% or more of our voting power during the 12 months preceding such sale,
exchange or other disposition.

          A nonresident of Israel who receives interest, dividend or royalty
income derived from or accrued in Israel, from which tax was withheld at the
source, is generally exempt from the duty to file tax returns in Israel with
respect to such income, provided such income was not derived from a business
conducted in Israel by the taxpayer.

         Israel presently has no estate or gift tax.

         United States Federal Income Tax Consequences
         ---------------------------------------------

         The following is a summary of certain material U.S. federal income tax
consequences that apply to U.S. Holders who hold ordinary shares as capital
assets. This summary is based on the United States Internal Revenue Code of
1986, as amended (the "Code"), Treasury regulations promulgated thereunder,
judicial and administrative interpretations thereof, and the U.S.-Israel Tax
Treaty, all as in effect on the date hereof and all of which are subject to
change either prospectively or retroactively. This summary does not address all
tax considerations that may be relevant with respect to an investment in
ordinary shares. This summary does not discuss all the tax consequences that may
be relevant to a U.S. Holder in light of such holder's particular circumstances
or to U.S. Holders subject to special rules, including persons that are non-U.S.
Holders, broker dealers, financial institutions, certain insurance companies,
investors liable for alternative minimum tax, tax exempt organizations,
regulated investment companies, non-resident aliens of the U.S. or taxpayers
whose functional currency is not the dollar, persons who hold the ordinary
shares through partnerships or other pass-through entities, persons who acquired
their ordinary shares through the exercise or cancellation of employee stock
options or otherwise as compensation for services, investors that actually or
constructively own 10 percent or more of our voting shares, and investors
holding ordinary shares as part of a straddle or appreciated financial position
or as part of a hedging or conversion transaction.

         This summary does not address the effect of any U.S. federal taxation
other than U.S. federal income taxation. In addition, this summary does not
include any discussion of state, local or foreign taxation.

         You are urged to consult your tax advisors regarding the foreign and
United States federal, state and local tax considerations of an investment in
ordinary shares.

         For purposes of this summary, the term "U.S. Holder" means an
individual who is a citizen or, for U.S. federal income tax purposes, a resident
of the United States, a corporation or other entity taxable as a corporation
created or organized in or under the laws of the United States or any political
subdivision thereof, an estate whose income is subject to U.S. federal income
tax regardless of its source, or a trust that (a) is subject to the primary
supervision of a court within the United States and the control of one or more
U.S. persons or (b) has a valid election in effect under applicable U.S.
Treasury regulations to be treated as a U.S. person.



                                       62



<PAGE>

         Taxation of Dividends
         ---------------------

         Subject to the discussion below under the heading "Passive Foreign
Investment Companies, the gross amount of any distributions received with
respect to ordinary shares, including the amount of any Israeli taxes withheld
therefrom, will constitute dividends for U.S. federal income tax purposes, to
the extent of our current and accumulated earnings and profits as determined for
U.S. federal income tax purposes. You will be required to include this amount of
dividends in gross income as ordinary income.

         Distributions in excess of our current and accumulated earnings and
profits will be treated as a non taxable return of capital to the extent of your
tax basis in the ordinary shares and any amount in excess of your tax basis will
be treated as gain from the sale of ordinary shares. See " Disposition of
Ordinary Shares" below for the discussion on the taxation of capital gains.
Dividends will not qualify for the dividends received deduction generally
available to corporations under Section 243 of the Code.

         Dividends that we pay in NIS, including the amount of any Israeli taxes
withheld therefrom, will be included in your income in a dollar amount
calculated by reference to the exchange rate in effect on the day such dividends
are received. A U.S. Holder who receives payment in NIS and converts NIS into
dollars at an exchange rate other than the rate in effect on such day may have a
foreign currency exchange gain or loss that would be treated as ordinary income
or loss. U.S. Holders should consult their own tax advisors concerning the U.S.
tax consequences of acquiring, holding and disposing of NIS.

         Subject to complex limitations, any Israeli withholding tax imposed on
such dividends will be a foreign income tax eligible for credit against a U.S.
Holder's U.S. federal income tax liability (or, alternatively, for deduction
against income in determining such tax liability). The limitations set out in
the Code include computational rules under which foreign tax credits allowable
with respect to specific classes of income cannot exceed the U.S. federal income
taxes otherwise payable with respect to each such class of income. Dividends
generally will be treated as foreign source passive income or, in the case of
certain U.S. Holders, financial services income for United States foreign tax
credit purposes. U.S. Holders should note that recently enacted legislation
eliminates the "financial services income" category with respect to taxable
years beginning after December 31, 2006. Under this legislation, the foreign tax
credit limitation categories will be limited to "passive category income" and
"general category income." Further, there are special rules for computing the
foreign tax credit limitation of a taxpayer who receives dividends subject to a
reduced tax, see discussion below. A U.S. Holder will be denied a foreign tax
credit with respect to Israeli income tax withheld from dividends received on
the ordinary shares to the extent such U.S. Holder has not held the ordinary
shares for at least 16 days of the 30-day period beginning on the date which is
15 days before the ex dividend date or to the extent such U.S. Holder is under
an obligation to make related payments with respect to substantially similar or
related property. Any days during which a U.S. Holder has substantially
diminished its risk of loss on the ordinary shares are not counted toward
meeting the 16-day holding period required by the statute. The rules relating to
the determination of the foreign tax credit are complex, and you should consult
with your personal tax advisors to determine whether and to what extent you
would be entitled to this credit.

         Subject to certain limitations, "qualified dividend income" received by
a noncorporate U.S. Holder in tax years beginning on or before December 31, 2008
will be subject to tax at a reduced maximum tax rate of 15 percent.
Distributions taxable as dividends paid on the ordinary shares should qualify
for the 15 percent rate provided that either: (i) we are entitled to benefits
under the income tax treaty between the United States and Israel (the "Treaty")
or (ii) the ordinary shares are readily tradable on an established securities
market in the United States and certain other requirements are met. We believe
that we are entitled to benefits under the Treaty and that the ordinary shares
currently are readily tradable on an established securities market in the United
States. However, no assurance can be given that the ordinary shares will remain
readily tradable. The rate reduction does not apply unless certain holding
period requirements are satisfied. With respect to the ordinary shares, the U.S.
Holder must have

                                       63

<PAGE>

held such shares for at least 61 days during the 121-day period beginning
60 days before the ex-dividend date. The rate reduction also does not
apply to dividends received from passive foreign investment companies, see
discussion below, or in respect of certain hedged positions or in certain other
situations. The legislation enacting the reduced tax rate contains special rules
for computing the foreign tax credit limitation of a taxpayer who receives
dividends subject to the reduced tax rate. U.S. Holders of ordinary shares
should consult their own tax advisors regarding the effect of these rules in
their particular circumstances.

          Disposition of Ordinary Shares
          ------------------------------

         If you sell or otherwise dispose of ordinary shares, you will recognize
gain or loss for U.S. federal income tax purposes in an amount equal to the
difference between the amount realized on the sale or other disposition and your
adjusted tax basis in the ordinary shares. Subject to the discussion below under
the heading "Passive Foreign Investment Companies," such gain or loss generally
will be capital gain or loss and will be long term capital gain or loss if you
have held the ordinary shares for more than one year at the time of the sale or
other disposition. In general, any gain that you recognize on the sale or other
disposition of ordinary shares will be U.S. source for purposes of the foreign
tax credit limitation; losses, will generally be allocated against U.S. source
income. Deduction of capital losses is subject to certain limitations under the
Code.

         In the case of a cash basis U.S. Holder who receives NIS in connection
with the sale or disposition of ordinary shares, the amount realized will be
based on the dollar value of the NIS received with respect to the ordinary
shares as determined on the settlement date of such exchange. A U.S. Holder who
receives payment in NIS and converts NIS into United States dollars at a
conversion rate other than the rate in effect on the settlement date may have a
foreign currency exchange gain or loss that would be treated as ordinary income
or loss.

         An accrual basis U.S. Holder may elect the same treatment required of
cash basis taxpayers with respect to a sale or disposition of ordinary shares,
provided that the election is applied consistently from year to year. Such
election may not be changed without the consent of the Internal Revenue Service
(the "IRS"). In the event that an accrual basis U.S. Holder does not elect to be
treated as a cash basis taxpayer (pursuant to the Treasury regulations
applicable to foreign currency transactions), such U.S. Holder may have a
foreign currency gain or loss for U.S. federal income tax purposes because of
differences between the dollar value of the currency received prevailing on the
trade date and the settlement date. Any such currency gain or loss would be
treated as ordinary income or loss and would be in addition to gain or loss, if
any, recognized by such U.S. Holder on the sale or disposition of such ordinary
shares.

         Passive Foreign Investment Companies
         ------------------------------------

         For U.S. federal income tax purposes, we will be considered a passive
foreign investment company ("PFIC") for any taxable year in which either (i) 75%
or more of our gross income is passive income, or (ii) at least 50% of the
average value of all of our assets for the taxable year produce or are held for
the production of passive income. For this purpose, passive income includes
dividends, interest, royalties, rents, annuities and the excess of gains over
losses from the disposition of assets which produce passive income. If we were
determined to be a PFIC for U.S. federal income tax purposes, highly complex
rules would apply to U.S. Holders owning ordinary shares. Accordingly, you are
urged to consult your tax advisors regarding the application of such rules.

         Based on our current and projected income, assets and activities, we
believe that we are not currently a PFIC nor do we expect to become a PFIC in
the foreseeable future. However, because the

                                       64



<PAGE>

determination of whether we are a PFIC is based upon the composition of our
income and assets from time to time, there can be no assurances that we will
not become a PFIC for any future taxable year.

         If we are treated as a PFIC for any taxable year, dividends would not
qualify for the reduced maximum tax rate, discussed above, and, unless you elect
either to treat your investment in ordinary shares as an investment in a
"qualified electing fund" (a "QEF election") or to "mark to market" your
ordinary shares, as described below:

          o    you  would  be  required  to  allocate  income   recognized  upon
               receiving   certain   dividends  or  gain   recognized  upon  the
               disposition  of ordinary  shares  ratably over the holding period
               for such ordinary shares,

          o    the amount  allocated to each year during which we are considered
               a PFIC other than the year of the dividend payment or disposition
               would be subject to tax at the highest  individual  or  corporate
               tax  rate,  as the case may be,  in  effect  for that year and an
               interest  charge would be imposed  with respect to the  resulting
               tax liability allocated to each such year,

          o    the amount  allocated to the current taxable year and any taxable
               year before we became a PFIC would be taxable as ordinary  income
               in the current year, and,

          o    you would be required  to make an annual  return on IRS Form 8621
               regarding  distributions received with respect to ordinary shares
               and any gain realized on your ordinary shares.

         If you make either a timely QEF election or a timely mark to market
election in respect of your ordinary shares, you would not be subject to the
rules described above. If you make a timely QEF election, you would be required
to include in your income for each taxable year your pro rata share of our
ordinary earnings as ordinary income and your pro rata share of our net capital
gain as long term capital gain, whether or not such amounts are actually
distributed to you. You would not be eligible to make a QEF election unless we
comply with certain applicable information reporting requirements.

         Alternatively, if the ordinary shares are considered "marketable stock"
and if you elect to "mark to market" your ordinary shares, you will generally
include in income any excess of the fair market value of the ordinary shares at
the close of each tax year over your adjusted basis in the ordinary shares. If
the fair market value of the ordinary shares had depreciated below your adjusted
basis at the close of the tax year, you may generally deduct the excess of the
adjusted basis of the ordinary shares over its fair market value at that time.
However, such deductions generally would be limited to the net mark to market
gains, if any, that you included in income with respect to such ordinary shares
in prior years. Income recognized and deductions allowed under the mark to
market provisions, as well as any gain or loss on the disposition of ordinary
shares with respect to which the mark to market election is made, is treated as
ordinary income or loss.

          Backup Withholding and Information Reporting
          --------------------------------------------

         Payments in respect of ordinary shares may be subject to information
reporting to the U.S. Internal Revenue Service and to U.S. backup withholding
tax at a rate equal to the third highest income tax rate applicable to
individuals (which, under current law, is 28%). Backup withholding will not
apply, however, if you (i) are a corporation or come within certain exempt
categories, and demonstrate the fact when so required, or (ii) furnish a correct
taxpayer identification number and make any other required certification.



                                       65

<PAGE>

         Backup withholding is not an additional tax. Amounts withheld under the
backup withholding rules may be credited against a U.S. Holder's U.S. tax
liability, and a U.S. Holder may obtain a refund of any excess amounts withheld
under the backup withholding rules by filing the appropriate claim for refund
with the IRS.

         Any U.S. holder who holds 10% or more in vote or value of our ordinary
shares will be subject to certain additional United States information reporting
requirements.

          U.S. Gift and Estate Tax
          ------------------------

         An individual U.S. Holder of ordinary shares will be subject to U.S.
gift and estate taxes with respect to ordinary shares in the same manner and to
the same extent as with respect to other types of personal property.

     F. Dividend and Paying Agents

         Not applicable.

     G. Statement by Experts

         Not applicable.

     H. Documents on Display

          We are subject to the reporting requirements of the United States
Securities Exchange Act of 1934, as amended, as applicable to "foreign private
issuers" as defined in Rule 3b-4 under the Exchange Act, and in accordance
therewith, we file annual and interim reports and other information with the
Securities and Exchange Commission.

          As a foreign private issuer, we are exempt from certain provisions of
the Exchange Act. Accordingly, our proxy solicitations are not subject to the
disclosure and procedural requirements of Regulation 14A under the Exchange Act
and transactions in our equity securities by our officers and directors are
exempt from reporting and the "short-swing" profit recovery provisions contained
in Section 16 of the Exchange Act. In addition, we are not required under the
Exchange Act to file periodic reports and financial statements as frequently or
as promptly as United States companies whose securities are registered under the
Exchange Act. However, we distribute annually to our shareholders, and make
available on our website www.tat.co.il, our financial statements, which have
been examined and reported on, with an opinion expressed by, an independent
public accounting firm, and we intend to file reports with the Securities and
Exchange Commission on Form 6-K containing unaudited financial information for
the first three quarters of each fiscal year.

          This annual report on Form 20-F and the exhibits thereto and any other
document we file pursuant to the Exchange Act may be inspected without charge
and copied at prescribed rates at the following Securities and Exchange
Commission public reference rooms: 450 Fifth Street, N.W., Judiciary Plaza, Room
1024, Washington, D.C. 20549; and on the Securities and Exchange Commission
Internet site (http://www.sec.gov) and on our website www.tat.co.il. You may
obtain information on the operation of the Securities and Exchange Commission's
public reference room in Washington, D.C. by calling the Securities and Exchange
Commission at 1-800-SEC-0330. The Exchange Act file number for our Securities
and Exchange Commission filings is 0-30198.



                                       66

<PAGE>


         The documents concerning our company which are referred to in this
annual report may also be inspected at our offices located at 7 Giborei Israel
Street, Netanya 42504, Israel.

     I. Subsidiary Information

          Not applicable.

     Item 11. Quantitative and Qualitative Disclosures about Market Risk

         We do not own and have not issued any market risk sensitive instruments
about which disclosure is required to be provided pursuant to this Item.

     Item 12. Description of Securities Other than Equity Securities

         Not Applicable.


                                     PART II

     Item 13. Defaults, Dividend Arrearages and Delinquencies

         None.

     Item 14. Material Modifications to the Rights of Security Holders

         None.

     Item 15. Controls and Procedures

         Our management, including our chief executive officer and chief
financial officer, evaluated the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the
period covered by this annual report on Form 20-F. Based upon that evaluation,
our chief executive officer and chief financial officer have concluded that, as
of such date, our disclosure controls and procedures were effective to ensure
that information required to be disclosed by our company in reports that we file
or submit under the U.S. Securities Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms and that such
information was made known to them by others within the company, as appropriate
to allow timely decisions regarding required disclosure.

         There were no changes to our internal control over financial reporting
that occurred during the period covered by this annual report on Form 20-F that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting

         All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be effective
may not prevent or detect misstatements and can provide only reasonable
assurance with respect to financial statement preparation and presentation.
Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may
deteriorate.



                                       67



<PAGE>

     Item 16. [Reserved]

     Item 16A. Audit Committee Financial Expert

         Our board of directors has determined that Mr. Yakov Fish, one of our
outside directors, who qualifies a an independent director as this term is
defined in NASDAQ's Market Rule 4200, meets the definition of an audit committee
financial expert, as defined in Item 401 of Regulation S-K.

     Item 16B. Code of Ethics

         We have adopted a code of ethics that applies to our chief executive
officer and all senior financial officers of our company, including the chief
financial officer, chief accounting officer or controller, or persons performing
similar functions. The code of ethics is publicly available on our website at
www.tat.co.il. Written copies are available upon request. If we make any
substantive amendment to the code of ethics or grant any waivers, including any
implicit waiver, from a provision of the codes of ethics, we will disclose the
nature of such amendment or waiver on our website.

     Item 16C. Principal Accounting Fees and Services

Fees Paid to Independent Public Accountants

         The table below summarizes the audit fees paid by us and our
consolidated subsidiaries during each of 2003 and 2004.

<TABLE>
<CAPTION>
                                 Year Ended December 31, 2004           Year Ended December 31, 2003
                                 ----------------------------           ----------------------------
                                  Amount           Percentage           Amount            Percentage
                                  ------           ----------           ------            ----------
                                                     (in thousands, except percentages)
<S>                                 <C>                <C>                <C>                <C>
Audit Fees (1)..............        $57                 80%                $57                56%
Tax Fees   (2)..............         14                 20%                 44                44
Total ......................        $71                100%               $101               100%
</TABLE>

(1) "Audit-related fees" are fees related to due diligence investigations and to
other assignments relating to internal control and procedures over financial
reporting.


(2) "Tax fees" are fees for professional services rendered by the Company's
auditors for tax compliance, tax advice on actual or contemplated transactions,
tax consulting associated with international transfer prices and employee
benefits.

 Pre-Approval Policies and Procedures

         Our Audit Committee has adopted a policy and procedures for the
pre-approval of audit and non-audit services rendered by our independent public
accountants, Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global.
Pre-approval of an audit or non-audit service may be given as a general
pre-approval, as part of the audit committee's approval of the scope of the
engagement of our independent auditor, or on an individual basis. The policy
prohibits retention of the independent public accountants to perform the
prohibited non-audit functions defined in Section 201 of the Sarbanes-Oxley Act
or the rules of the SEC, and also requires the Audit Committee to consider
whether proposed services are compatible with the independence of the public
accountants.


                                       68


<PAGE>

     Item 16D. Exemptions from the Listing  Requirements and Standards for Audit
               Committee

         Not Applicable.


                                    PART III



     Item 17. Financial Statements

        Consolidated Financial Statements

         Index to Financial Statements......................................F-1

         Report of Independent Registered Public Accounting Firm............F-2

         Consolidated Balance Sheets........................................F-3

         Consolidated Statements of Income..................................F-5

         Statements of Changes in Shareholders' Equity .....................F-6

         Consolidated Statements of Cash Flows..............................F-7

         Notes to Consolidated Financial Statements.........................F-9

         Appendix to Consolidated Financial Statements.....................F-31

     Item 18. Financial Statements

         Not applicable.

     Item 19. Exhibits

         The following exhibits are filed as a part of this Report:

1.1  Memorandum of Association of the Company (1)
1.2  Articles of Association of the Company (1)
2.1  Specimen Certificate for Ordinary Shares (1)
4.1  The Company's 1999 Stock Purchase Plan (2)
4.2  Agreement  dated  February 10, 2000 between the Company and TAT  Industries
     Ltd. (English summary translation) (2)
4.3  Export  Agreement dated April 14. 1992,  between the Company and E.T Export
     Services Inc. (Gal Tech Inc.)
4.4  Share Purchase Agreement dated June 15, 2004 between the Company and T.O.P,
     Limited Partnership
4.5  Shareholders  Agreement  dated June 15,  2004  between TAT  Industries  and
     T.O.P, Limited Partnership
4.6  Registration  Rights  Agreement  dated June 15,  2004 with  T.O.P,  Limited
     Partnership, TAT Industries Ltd. and certain shareholders of our company
4.7  Credit Line  Agreement  dated June 15, 2004  between the Company and T.O.P,
     Limited Partnership
4.8  Warrant  Agreement  dated June 15,  2004  between  the  Company  and T.O.P,
     Limited Partnership
4.9  Membership   Interest  Purchase   Agreement  dated  May  24,  2005  between
     Limco-Airepair,  Inc.,  certain  Members  of  Piedmont  Aviation  Component
     Services, LLC, and Piedmont Aviation Component Services, LLC
8    List of Subsidiaries of the Registrant
12.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and
     Rule 15d-14(a) of the Securities Exchange Act, as amended

                                       69

<PAGE>

12.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and
     Rule 15d-14(a) of the Securities Exchange Act, as amended
13.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as
     adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, as
     adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

- ----------------------
(1)  Incorporated  by reference to the Company's  Annual Report on Form 20-F for
     the year ended December 31, 1992.

(2)  Incorporated  by reference to the Company's  Annual Report on Form 20-F for
     the year ended December 31, 1999.




                                       70

<PAGE>









                    TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY


                        CONSOLIDATED FINANCIAL STATEMENTS


                             AS OF DECEMBER 31, 2004


                                 IN U.S. DOLLARS




                                      INDEX


                                                                       Page
                                                                  --------------

 Report of Independent Registered Public Accounting Firm               F-2

 Consolidated Balance Sheets                                        F-3 - F-4

 Consolidated Statements of Income                                     F-5

 Statements of Changes in Shareholders' Equity                         F-6

 Consolidated Statements of Cash Flows                              F-7 - F-8

 Notes to Consolidated Financial Statements                        F-9 - F-30

 Appendix to Consolidated Financial Statements                        F-31


                              - - - - - - - - - - -


                                      F-1


<PAGE>









ERNST & YOUNG
                             Kost Forer Gabbay & Kasierer   Phone: 972-3-6232525
                             3 Aminadav St.                 Fax:   972-3-5622555
                             Tel-Aviv 67067, Israel






             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

                             To the Shareholders of

                              TAT TECHNOLOGIES LTD.


     We  have  audited  the  accompanying  consolidated  balance  sheets  of TAT
Technologies Ltd. ("the Company") and its subsidiary as of December 31, 2004 and
2003,   and  the  related   consolidated   statements  of  income,   changes  in
shareholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 2004. These financial  statements are the  responsibility  of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

     We did not  audit  the  financial  statements  of  Limco-Airepair  Inc.,  a
wholly-owned subsidiary,  which statements reflect total assets constituting 33%
in 2004 and 34% in 2003 and total revenues constituting 42% in 2004, 40% in 2003
and  40% in 2002 of the  related  consolidated  totals.  Those  statements  were
audited by other  auditors  whose  reports  have been  furnished  to us, and our
opinion,  insofar as it relates to amounts included for Limco-Airepair  Inc., is
based solely on the reports of the other auditors.

     We  conducted  our audits in  accordance  with the  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial statements are free of material  misstatement.  We were not engaged to
preform an audit of the company's internal control over financial reporting. Our
audit included  consideration of internal control over financial  reporting as a
basis for designing audit  procedures that are appropiate in the  circumstances,
but not for the purpose of  expressing  an opinion on the  effectiveness  of the
Company's internal control over financial  reporting.  Accordingly we express no
such  opinion.  An audit also  includes  examining,  on a test  basis,  evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion,  based on our audits and the reports of other auditors, the
consolidated  financial  statements  referred to above  present  fairly,  in all
material  respects,  the consolidated  financial position of the Company and its
subsidiary at December 31, 2004 and 2003, and the consolidated  results of their
operations  and their cash flows for each of the three years in the period ended
December  31,  2004,  in  conformity  with U.S.  generally  accepted  accounting
principles.


                                              /s/Kost Forer Gabbay and Kasierer
 Tel-Aviv, Israel                                KOST FORER GABBAY & KASIERER
   March 29, 2005                             A Member of Ernst & Young Global
   (Except as to Note 16 which
   the date is June 27, 2005)

                                       F-2



<PAGE>




                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
U.S. dollars in thousands


                                                               December 31,
                                                           --------------------
                                                              2004       2003
                                                            --------    -------
    ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                                  $ 7,078     $ 5,067
  Restricted short-term bank deposit (Note 10b)                 --           396
  Marketable securities (Note 3)                               1,566       2,841
  Trade receivables (net of allowance for doubtful
    accounts of $ 237 and $ 167
    as of December 31, 2004 and 2003, respectively)            7,936       6,329
  Other accounts receivable and prepaid expenses               1,545       1,269
  Inventories (Note 4)                                        13,182      13,349
                                                             -------     -------
Total current assets                                          31,307      29,251
- -----                                                        -------     -------

LONG-TERM INVESTMENTS:
  Severance pay fund                                           3,304       3,077
  Long-term marketable securities (Note 3)                      --           491
                                                             -------     -------
Total long-term investments                                    3,304       3,568
- -----                                                        -------     -------
PROPERTY, PLANT AND EQUIPMENT, NET (Note 5)                    5,852       5,961
                                                             -------     -------
INTANGIBLE ASSETS, NET AND DEFERRED CHARGES

  Goodwill                                                       599         599
  Other intangible assets, net and deferred charges              202          13
                                                             -------     -------
                                                                 801         612
                                                             -------     -------
Total assets                                                 $41,264     $39,392
- -----                                                        =======     =======




The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                      F-3


<PAGE>


                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)

<TABLE>
<CAPTION>
                                                                  December 31,
                                                               --------------------
                                                                  2004       2003
                                                                --------    -------
<C>                                                            <C>          <C>
    LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Short-term bank credit                                       $   --      $    290
  Current maturities of long-term loans (Note 8)                   --           248
  Trade payables                                                  1,810       1,922
  TAT (the parent company) - current account (Note 7)                73         525
  Other accounts payable and accrued expenses (Note 6)            2,744       3,930
                                                               --------    --------
Total current liabilities                                         4,627       6,915
- -----                                                          --------    --------
LONG-TERM LIABILITIES:
  Long-term loans, net of current maturities (Note 8)              --            46
  Accrued severance pay                                           3,495       3,300
  Long-term deferred tax liability (Note 13)                        616         447
                                                               --------    --------
Total long-term liabilities                                       4,111       3,793
- -----                                                          --------    --------

COMMITMENTS AND CONTINGENT LIABILITIES (Note 9)
SHAREHOLDERS' EQUITY:
  Share capital (Note 11) -
    Ordinary shares of NIS 0.9 par value -
      Authorized: 7,000,000 shares as of
      December 31, 2004 and 2003; Issued and
      outstanding: 6,042,671 and 4,637,093
      shares as of December 31, 2004 and 2003, respectively       2,094       1,813
  Additional paid-in capital                                     35,704      28,763
  Accumulated other comprehensive income                            106          95
  Accumulated deficit                                            (5,378)     (1,987)
                                                               --------    --------
Total shareholders' equity                                       32,526      28,684
- -----                                                          --------    --------
Total liabilities and shareholders' equity                     $ 41,264    $ 39,392
- -----                                                          ========    ========
</TABLE>
The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

<TABLE>
<CAPTION>
<S>                       <C>                        <C>                     <C>
     June 27, 2005          /s/Shlomo Ostersetzer          /s/Dov Zeelim          /s/P.P. Mazal
- -----------------------   -----------------------   ----------------------  ------------------------
Date of approval of the     Shlomo Ostersetzer            Dov Zeelim              Israel Ofen
 financial statements         Chairman of the        Vice Chairman of the   Executive Vice President
                          Board of Directors and    Board of Directors and    and Chief Financial
                          Chief Executive Officer          President                Officer
</TABLE>

                                      F-4

<PAGE>





                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
U.S dollars in thousands (except per share data)


                                               Year ended December 31,
                                           -------------------------------
                                             2004       2003        2002
                                           --------   --------    ---------
Revenues:
  Products (Note 14)                       $ 20,724   $ 19,255    $ 15,936
  Services and other                         12,519     11,427      10,344
                                           --------   --------    --------
                                             33,243     30,682      26,280
Cost of revenues                             22,166     20,068      17,750
                                           --------   --------    --------
Gross profit                                 11,077     10,614       8,530
                                           --------   --------    --------
 Research and development costs, net            125        120         204
Selling and marketing expenses                1,894      1,958       1,483
General and administrative expenses           3,793      3,476       2,994
                                           --------   --------    --------
                                              5,812      5,554       4,681
                                           --------   --------    --------
Operating income                              5,265      5,060       3,849
Financial income (expenses) (Note 15a)           87        (25)         99
Other income, net (Note 15b)                     54         24           8
                                           --------   --------    --------

Income before income taxes                    5,406      5,059       3,956
Income taxes (Note 13)                        1,667      1,225         367
                                           --------   --------    --------
Net income                                 $  3,739   $  3,834    $  3,589
                                           ========   ========    ========
Basic net earnings per share (Note 12)     $   0.72   $   0.85    $   0.80
                                           ========   ========    ========
Diluted net earnings per share (Note 12)   $   0.67   $   0.78    $   0.77
                                           ========   ========    ========




The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                      F-5

<PAGE>





                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
U.S. dollars in thousands (except share data)
<TABLE>
<CAPTION>
                                                                         Accumulated
                                             Share capital Additional      other                          Total           Total
                                          ----------------  paid-in    comprehensive   Accumulated     comprehensive   shareholders'
                                           Number   Amount  capital        income        deficit          income          equity
                                          --------- ------ ---------- ---------------- -------------  --------------- --------------

<S>                                       <C>       <C>    <C>          <C>               <C>             <C>           <C>
Balance as of January 1, 2002             4,483,528 $1,781 $  28,311    $       26        $ (6,270)                     $   23,848
  Comprehensive income:
    Net income                                    -      -         -           -             3,589        $   3,589          3,589
Dividend                                          -      -         -           -            (2,018)               -         (2,018)
                                          --------- ------ ---------    ----------        --------        ---------      ---------
Total comprehensive income                                                                                $   3,589
                                                                                                          =========
Balance as of December 31, 2002           4,483,528  1,781    28,311            26          (4,699)                         25,419
  Exercise of options into shares           153,565     32       452             -               -                             484
  Comprehensive income:
    Net income                                    -      -         -             -           3,834        $   3,834          3,834
    Unrealized gain on available-for-sale
     securities, net                              -      -         -            69               -               69              69
Dividend                                          -      -         -             -          (1,122)               -         (1,122)
                                          --------- ------ ---------    ----------        --------        ---------      ---------
Total comprehensive income                                                                                $   3,903
                                                                                                          =========
Balance as of December 31, 2003           4,637,093  1,813    28,763            95          (1,987)                         28,684

  Exercise of options into shares           548,435    111     1,119             -               -                           1,230
  Issuance of shares and warrants,
    net in a private placement              857,143    170     5,822             -               -                -          5,992
  Comprehensive income:
    Net income                                    -      -         -             -           3,739        $   3,739          3,739
    Unrealized gain on available-for-sale
     securities, net                              -      -        11             -              11               11
Dividend                                          -      -         -             -          (7,130)               -          (7,130)
                                          --------- ------ ---------    ----------        --------        ---------      ---------
Total comprehensive income                                                                                $   3,750
                                                                                                          =========
Balance as of December 31, 2004           6,042,671 $2,094 $  35,704    $      106        $ (5,378)                     $    32,526
                                          ========= ====== =========    ==========        ========                      ===========
</TABLE>


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                      F-6

<PAGE>




                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
U.S. dollars in thousands

<TABLE>
<CAPTION>
                                                         Year ended December 31,
                                                     ------------------------------
                                                        2004       2003       2002
                                                      -------    -------    -------
<S>                                                   <C>        <C>        <C>
Cash flows from operating activities:
- -------------------------------------
Net income                                            $ 3,739    $ 3,834    $ 3,589
Adjustments to reconcile net income to
  net cash provided by
  operating activities:
  Depreciation and amortization                         1,031      1,004        994
  Gain on sale of property and equipment                  (17)       (63)       (11)
  Loss (gain) on sale of marketable securities            (35)        39          3
  Deferred income taxes, net                              168         63        131
  Trading securities, net                                --         --           50
  Increase in trade receivables                        (1,607)    (1,401)      (136)
  Decrease (increase) in other accounts
    receivable, prepaid expenses
    and deferred charges                                 (208)        27       (342)
  Decrease (increase) in inventories                      167     (1,281)      (409)
  Increase (decrease) in trade payables                  (112)       505        380
  Increase (decrease) in other accounts payable
    and accrued expenses                               (1,186)     1,109        588
  Accrued severance pay, net                              (32)       (59)       (14)
                                                      -------    -------    -------
Net cash provided by operating activities               1,908      3,777      4,823
                                                      -------    -------    -------
Cash flows from investing activities:
- -------------------------------------
  Proceeds from restricted short-term bank
    deposits                                              396         44        449
  Proceeds from sale and redemption of
    available-for-sale securities                       2,973      1,650      1,089
  Proceeds from sale of property and equipment             30         89         14
  Purchase of property and equipment                     (926)    (1,451)      (899)
  Purchase of available-for-sale securities            (1,161)    (2,680)    (1,626)
                                                      -------    -------    -------
Net cash provided by (used in) investing activities     1,312     (2,348)      (973)
                                                      -------    -------    -------
</TABLE>





The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                      F-7


<PAGE>




                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
U.S. dollars in thousands


<TABLE>
<CAPTION>
                                                             Year ended December 31,
                                                          -----------------------------
                                                            2004       2003      2002
                                                          --------   -------    -------
<S>                                                       <C>        <C>        <C>
Cash flows from financing activities:
- -------------------------------------
  Short-term bank credit, net                             $  (290)   $   290    $  --
  Repayments of long-term loans                              (294)      (249)      (414)
  Cash dividend                                            (7,130)    (3,140)      --
  Proceeds from exercise of options                         1,230        484       --
  TAT (the parent company) - current account                 (452)        95       (119)
  Issuance of shares and warrants, net                      5,727       --         --
                                                          -------    -------    -------
Net cash used in financing activities                      (1,209)    (2,520)      (533)
                                                          -------    -------    -------
Increase (decrease) in cash and cash
   equivalents                                              2,011     (1,091)     3,317
Cash and cash equivalents at the beginning
   of the year                                              5,067      6,158      2,841
                                                          -------    -------    -------
Cash and cash equivalents at the
   end of the year                                        $ 7,078    $ 5,067    $ 6,158
                                                          =======    =======    =======

(1)  Supplemental disclosure of non-cash
       investing and financing activities:
       -----------------------------------

        Declared dividend                                 $  --      $  --      $ 2,018
                                                          =======    =======    =======

      Issuance of share and warrants in
      consideration for providing
      credit line and cash                                $   265    $  --      $  --
                                                          =======    =======    =======

      Supplemental disclosure of cash flows activities:
      -------------------------------------------------
      Cash paid during the year for:

        Interest                                          $    16    $    12    $    32
                                                          =======    =======    =======
         Income taxes                                     $ 2,491    $   105    $    99
                                                          =======    =======    =======
</TABLE>



The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                      F-8


<PAGE>




                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 1:- GENERAL

          a.   TAT Technologies  Ltd. ("the Company") is an Israeli  corporation
               which  is 52%  held by TAT  Industries  Ltd.  ("TAT"  or  "parent
               company").     The     Company    and     Limco-Airepair     Inc.
               ("Limco-Airepair"),   a  wholly   owned  U.S.   subsidiary,   are
               principally  engaged in the manufacture and sale of a broad range
               of heat  transfer  equipment  used in mechanical  and  electronic
               systems  on-board  commercial  and  military  aircraft  and  in a
               variety  of  other  electronic  equipment.  The  Company  is also
               engaged  in  the  remanufacture,  overhaul  and  repair  of  heat
               transfer equipment and other aircraft components  manufactured by
               the  Company.  In  addition,  the Company  designs,  develops and
               manufactures aviation accessories. These accessories include fuel
               components,  such as valves and pumps,  secondary  power systems,
               various instrumentation and electronic assemblies.  The principal
               markets of the Company and its subsidiary are Israel,  Europe and
               the United  States.  The  Company and its  subsidiary  sell their
               products mainly to the aircraft industry.

          b.   As for major customers see note 14 b.

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

          The consolidated financial statements have been prepared in accordance
          with  generally  accepted  accounting  principles in the United States
          ("U.S. GAAP").

          a.   Use of estimates:

               The  preparation  of  financial  statements  in  conformity  with
               generally accepted  accounting  principles requires management to
               make estimates and assumptions  that affect the amounts  reported
               in  the  financial  statements  and  accompanying  notes.  Actual
               results could differ from those estimates.

          b.   Financial statements in U.S. dollars:

               The  majority  of the Company  and its  subsidiary's  revenues is
               generated in U.S. dollars ("dollar") and a substantial portion of
               the Company and its subsidiary's costs is incurred in dollars. In
               addition,   the  Company's  financing  is  obtained  in  dollars.
               Accordingly,  the dollar is the currency of the primary  economic
               environment in which the Company and its  subsidiary  operate and
               the  functional  and  reporting  currency  of the Company and its
               subsidiary is the dollar.

               Transactions and balances  originally  denominated in dollars are
               Presented at their original  amounts  Presented at their original
               amounts.  Transactions and balances in other currencies have been
               remeasured  into dollars in accordance  with the  principles  set
               forth in Statement of Financial Accounting Standards ("SFAS") No.
               52 "Foreign Currency Translation: ("SFAS No. 52").

                                       F-9


<PAGE>

                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

               Accordingly,  items have been  translated  as  follows:  Monetary
               items - at the exchange rate in effect on the balance sheet date.
               Nonmonetary  items - at historical  exchange  rates.  Revenue and
               expense items - at the exchange rates in effect as of the date of
               recognition  of those  items  (excluding  depreciation  and other
               items deriving from non-monetary items).

               All  transaction  gains  and  losses  from the  remeasurement  of
               mentioned  above  are  reflected  in the  statement  of income as
               financial income (expenses), net.

          c.   Principles of consolidation:

               The consolidated financial statements include the accounts of the
               Company   and  its   wholly-owned   subsidiary   ("the   Group").
               Intercompany  balances and  transactions,  including profits from
               intercompany  sales not yet realized outside the Group, have been
               eliminated upon consolidation.

          d.   Cash equivalents:

               Cash  equivalents are short-term  highly liquid  investments that
               are readily convertible to cash with original maturities of three
               months or less.

          e.   Short-term bank deposit:

               The  restricted  short-term  bank  deposit  was a deposit  with a
               maturity  of more than three  months but less than one year.  The
               deposit  was in NIS  bearing  interest at an annual rate of 4.4%.
               The  short-term  deposit  was  presented  at its  cost  including
               accrued  interest.  The  short-term  bank deposit  secured a bank
               credit received by the Company.

          f.   Marketable securities:

               Management  determines the  classification of investments in debt
               securities  with fixed  maturities  at the time of  purchase  and
               reevaluates  such  designations as of each balance sheet date. At
               December 31, 2004 and 2003, all marketable  securities covered by
               Statement of Financial  Accounting Standard No. 115,  "Accounting
               for Certain Investments in Debt and Equity Securities" ("SFAS No.
               115") were designated as available-for-sale.  Accordingly,  these
               securities are stated at fair value,  with  unrealized  gains and
               losses reported in accumulated  other  comprehensive  income,  as
               separate component of shareholders' equity. The amortized cost of
               available-for-sale  securities  is adjusted for  amortization  of
               premiums to maturity. Such amortization and interest are included
               in financial income, net.

               Realized gains and losses on sales of investments,  as determined
               on  a  specific   identification   basis,  are  included  in  the
               consolidated statement of income, among "Other income, net".

                                      F-10


<PAGE>

                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

               According to Staff  Accounting  Bulletin No. 59,  "Accounting for
               Non-current   Marketable   Equity   Securities"  ("SAB  No.  59")
               management  is  required  to  evaluate  each  period   whether  a
               security's  decline  in  value is other  than  temporary.  In all
               reported  periods , the  Company  did not  record  an other  than
               temporary  decline  in  the  carrying  value  of  its  marketable
               securities.

          g.   Inventories:

               Inventories  are  stated at the  lower of cost or  market  value.
               Inventory  write-offs  are  provided to cover risks  arising from
               slow-moving items.

               Inventories  write-offs  are provided to cover risks arising from
               dead and  slow-moving  items,  discontinued  products  and excess
               inventories according to revenue forecasts.

               Cost is determined as follows:

               Raw materials and components - using the average cost method.

               Work  in  progress  -  represents  the  cost  of  raw  materials,
               components  and  manufacturing  costs  which  include  direct and
               indirect  allocable costs. Cost of raw material and components is
               determined as described above. Manufacturing costs are determined
               on an average basis.

          h.   Property, plant and equipment:

               Property,  plant  and  equipment  are  stated  at  cost,  net  of
               accumulated  depreciation.  Depreciation is calculated  using the
               straight-line  method  over  the  estimated  useful  lives of the
               assets. The annual rates of depreciation are as follows:

                                                                    %
                                                          ---------------------

               Buildings                                            4
               Machinery and equipment                           10 - 25
               Motor vehicles                                      15
               Office furniture and equipment                    6 - 33

          i.   Intangible assets:

               Intangible  assets subject to  amortization  are being  amortized
               over their  useful  lives,  using a method of  amortization  that
               reflects  the  pattern  in which  the  economic  benefits  of the
               intangible   assets  are  consumed  or  otherwise   used  up,  in
               accordance with SFAS No. 142. Technology and deferred charges are
               amortized over 6-10 years.

               Amortization  expenses  amounted  to $ 9, $ 33  and $ 39 for  the
               years ended December 31, 2004, 2003 and 2002, respectively.

                                      F-11


<PAGE>

                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

          j.   Impairment of long-lived assets

               The Company's  long-lived  assets (except goodwill - see k below)
               are  reviewed  for  impairment  in  accordance  with SFAS No. 144
               whenever  events or changes in  circumstances  indicate  that the
               carrying   amount   of  an   asset   may   not  be   recoverable.
               Recoverability  of  assets to be held and used is  measured  by a
               comparison  of the  carrying  amount  of an asset  to the  future
               undiscounted cash flows expected to be generated by the asset. If
               such assets are  considered to be impaired,  the impairment to be
               recognized is measured by the amount by which the carrying amount
               of the assets exceeds their fair value.  As of December 31, 2004,
               no impairment losses have been identified.

          k.   Goodwill:

               Goodwill  represents  the excess of  purchase  cost over the fair
               value of identifiable net assets of acquired companies.  Prior to
               January 1, 2002,  goodwill was amortized on a straight-line basis
               over a weighted  average period of 12 years.  On January 1, 2002,
               the Company adopted,  Statement of Financial  Accounting Standard
               No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142").
               As a result,  goodwill is no longer  amortized  but is subject to
               annual  impairment  tests (or more  frequent  tests if impairment
               indicators  arise).  SFAS No. 142  prescribes a two phase process
               for impairment  testing of goodwill.  The first phase screens for
               impairment;  while  the  second  phase  (if  necessary)  measures
               impairment.  The Company performed its first phase impairment and
               found no instances of impairment of its recorded goodwill.

               In the first phase of impairment testing,  goodwill is tested for
               impairment by comparing  the fair value of the reporting  unit to
               which the goodwill was attributed,  to its carrying  value.  Fair
               value of the reporting  unit was  determined by the Company using
               market capitalization.

          l.   Revenue recognition:

               The Company and its  subsidiary  generate their revenues from the
               sale of products and from providing services.

               Revenues  from the sale of products are  recognized in accordance
               with Staff Accounting  Bulletin No. 104, "Revenue  Recognition in
               Financial Statements" ("SAB No. 104") when persuasive evidence of
               an  arrangement  exists,  delivery of the  product has  occurred,
               collection of the resulting receivable is probable,  the price is
               fixed or determinable and no significant  obligation  exists. The
               Company does not grant its customers a right of return.

               Revenues  from  remanufacture,  repair and overhaul  services are
               recognized as services are performed.


                                      F-12


<PAGE>

                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

          m.   Research and development:

               Research and development  costs, net of grants and participations
               received are charged to expenses as incurred.

          n.   Grants:

               Royalty-bearing and non royalty-bearing grants and participations
               from the Government of Israel and royalty-bearing grants from the
               BIRD  Foundation  for  funding  certain  approved   research  and
               development  projects  are  recognized  at the time in which  the
               Company is  entitled  to such  grants,  on the basis of the costs
               incurred.  Such  grants  and  participations  are  included  as a
               deduction  of  research  and  development  costs.   Research  and
               development  grants  amounted to $ 0, $ 0 and $ 42 in 2004,  2003
               and 2002, respectively.

          o.   Warranty costs:

               The Company  provides  warranties  for its  products and services
               ranging  from one to five years,  which vary with respect to each
               contract  and in  accordance  with the  nature  of each  specific
               product.  Based on the Company's  experience,  warranty  expenses
               have been immaterial and,  therefore,  the Company did not record
               any warranty provision.

          p.   Income taxes:

               Income taxes are accounted for in  accordance  with  Statement of
               Financial  Accounting  Standards No. 109,  "Accounting for Income
               Taxes" ("SFAS No. 109"). This statement prescribes the use of the
               liability  method,  whereby  deferred  tax assets  and  liability
               account  balances are determined  based on temporary  differences
               between   financial   reporting  and  tax  bases  of  assets  and
               liabilities  and for tax loss  carryforwards.  Deferred taxes are
               measured  using the  enacted  laws and tax rates  that will be in
               effect when the differences are expected to reverse.  The Company
               and its subsidiary provide a valuation  allowance,  if necessary,
               to  reduce  deferred  tax  assets to their  estimated  realizable
               value.

               Results for tax purposes are measured and reflected in real terms
               in  accordance  with the  changes in the Israeli  Consumer  Price
               Index  ("CPI").   As  explained  in  b  above,  the  consolidated
               financial statements are presented in U.S. dollars. In accordance
               with paragraph 9(f) of SFAS No. 109, the Company has not provided
               deferred income taxes on the  differences  resulting from changes
               in exchange rate and indexing for tax purposes.


                                      F-13


<PAGE>

                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

          q.   Concentrations of credit risk:

               Financial  instruments that  potentially  subject the Company and
               its   subsidiary  to   concentrations   of  credit  risk  consist
               principally of cash and cash equivalents,  marketable  securities
               and trade receivables.

               Cash and cash  equivalents  are  deposited  with  major  banks in
               Israel and the United States.  Such deposits in the United States
               may be in excess of insured  limits and are not  insured in other
               jurisdictions.    Management    believes   that   the   financial
               institutions  that hold the Company and its subsidiary's cash and
               cash  equivalents,   are  financially  sound,  and,  accordingly,
               minimal  credit  risk  exists  with  respect  to these  financial
               instruments.

               The  Company's   marketable   securities  include  investment  in
               debentures and in shares.  Management believes that the companies
               that issued the debentures and the shares are financially  sound,
               the  portfolio  is well  diversified,  and  accordingly,  minimal
               credit risk exists with respect to the marketable securities.

               The Company's and its subsidiary's  trade receivables are derived
               mainly from sales to customers in the United  States,  Israel and
               Europe.  The Company and its subsidiary  generally do not require
               collateral,  however,  in certain  circumstances  the Company may
               require letters of credit.  Management believes that credit risks
               relating to trade  receivables  are minimal  since the  Company's
               customers are financially  sound.  The Company and its subsidiary
               perform ongoing credit  evaluation of their customers'  financial
               condition. The allowance for doubtful accounts is determined with
               respect to specific debts that are doubtful of collection.

               The Company has no off-balance-sheet concentration of credit risk
               such as foreign  exchange  contracts,  option  contracts or other
               foreign hedging arrangements.

          r.   Severance pay:

               The Company's  liability for severance pay is calculated pursuant
               to Israeli  Severance  Pay Law based on the most recent salary of
               the employees  multiplied by the number of years of employment as
               of the balance  sheet date.  The  liability  is  presented  on an
               undiscounted  basis.  The  Company  records as an expense the net
               increase in its severance liability.  The Company's liability for
               all of its  employees is fully  covered by monthly  deposits with
               severance  pay  funds,   insurance   policies,   Mivtahim  Social
               Insurance Institution Ltd. ("Mivtahim") and by an accrual.

               The liability  covered by deposits  with Mivtahim is  irrevocably
               transferred  to  Mivtahim.   Accordingly,   neither  the  amounts
               accumulated with Mivtahim, nor the corresponding  liabilities for
               severance pay are reflected in the balance sheet.

               The  value of the  policies,  other  than the  value of  Mivtahim
               policies, is included as an asset in the Company's balance sheet.


                                      F-14

<PAGE>




                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands (except share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

               The deposited funds include profits accumulated up to the balance
               sheet date.  The deposited  funds may be withdrawn  only upon the
               fulfillment of the obligation  pursuant to Israeli  Severance Pay
               Law or labor  agreements.  The  value of the  deposited  funds is
               based  on the cash  surrendered  value  of  these  policies,  and
               includes immaterial profits.

               Severance  expense was $ 274, $ 284 and $ 297 for the years ended
               December 31, 2004, 2003 and 2002, respectively.

          s.   Fair value of financial instruments:

               The  carrying  amounts  of  cash  and  cash  equivalents,   trade
               receivables,  other accounts receivable, trade payables and other
               accounts  payable  approximate  their  fair  values,  due  to the
               short-term maturities of such instruments.

               The  fair  value  for   marketable   securities   classified   as
               available-for-sale is based on quoted market prices.

          t.   Basic and diluted net earnings per share:

               Basic net earnings  per share are computed  based on the weighted
               average number of Ordinary shares  outstanding  during each year.
               Diluted  net  earnings  per share  further  include the effect of
               dilutive  stock  options  outstanding  during  the  year,  all in
               accordance  with  Statement  of  Financial   Accounting  Standard
               Statement No. 128, "Earnings Per Share".

               The weighted average number of outstanding  options excluded from
               the  calculations of diluted net earnings per share, due to their
               anti dilutive effect, was 500,000,  0 and 713,500,  for the years
               ended December 31, 2004, 2003 and 2002, respectively.

          u.   Accounting for stock-based compensation:

               The Company applies the provisions of Accounting Principles Board
               Opinion No. 25,  "Accounting for Stock Issued to Employees" ("APB
               No. 25") and FASB  interpretation No. 44, "Accounting for Certain
               Transactions  Involving  Stock  Compensation"  ("FIN No.  44") in
               accounting for its employee  stock options.  According to APB NO.
               25,  compensation  expense is measured under the intrinsic  value
               method,  whereby  compensation expense is equal to the excess, if
               any, of the quoted  market  price of the stock over the  exercise
               price at the grant date of the award.


                                      F-15

<PAGE>




                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

               Pro forma information  regarding the Company's net income and net
               earnings  per share is required by SFAS 123 as if the company had
               accounted  for its employee  stock  options  under the fair value
               based method.  Since all shares options were vested  preceding to
               all reported  periods,  the  Company's  net income would not have
               changed for all  reported  periods if the Company had applied the
               fair value recognition provisions according to SFAS 123.

          v.   Reclassification

               Certain  amounts  from  prior  years  have been  reclassified  to
               conform to current classification.

          w.   Impact of recently issued accounting standards

               1.   In March 2004,  the  Financial  Accounting  Standards  Board
                    approved the consensus  reached on the Emerging  Issues Task
                    Force   (EITF)    Issue   No.   03-1,    "The   Meaning   of
                    Other-Than-Temporary   Impairment  and  Its  Application  to
                    Certain  Investments"  ("EITF 03-1").  The objective of this
                    Issue  is  to  provide  guidance  for  identifying  impaired
                    investments.   EITF  03-1  also   provides  new   disclosure
                    requirements   for   investments   that  are  deemed  to  be
                    temporarily   impaired.   The  impairment   measurement  and
                    recognition guidance prescribe in EITF 03-1 is delayed until
                    the  final  issuance  of FSP EITF  03-01-a.  The  disclosure
                    requirements for available for sale investment are effective
                    for annual reporting  periods ending after June 15, 2003.The
                    Company  has  evaluated  the impact of the  adoption of EITF
                    03-1 and does not believe the impact will be  significant to
                    the  Company's  overall  results of  operations or financial
                    position.

               2.   On December 16, 2004,  the  Financial  Accounting  Standards
                    Board  (FASB)   issued   Statement  No.  123  (revised  2004
                    Share-Based Payment ("Statement 123R"),  which is a revision
                    of FASB  Statement  No.  123,  "Accounting  for  Stock-Based
                    Compensation"  ("Statement 123"). Generally, the approach in
                    Statement  123(R) is similar to the  approach  described  in
                    Statement 123. However, Statement 123 permitted, but did not
                    require,  share-based payments to employees to be recognized
                    based on their fair values while  Statement  123(R) requires
                    all share-based payments to employees to be recognized based
                    on their fair values. Statement 123R also revises, clarifies
                    and expands guidance in several areas,  including  measuring
                    fair value, classifying an award as equity or as a liability
                    and attributing  compensation cost to reporting periods. The
                    new standard  will be effective for the Company in the first
                    interim period  beginning  after January 1, 2006.  Currently
                    the  company  has no  unvested  stock  options.  However the
                    impact  of  this  standard  on  the  company's   results  of
                    operations  will depend on the level of share based payments
                    granted in the future.


                                      F-16

<PAGE>

                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

               3.   In November  2004,  the FASB issued  Statement  of Financial
                    Accounting  Standard No. 151, "Inventory Costs, an Amendment
                    of ARB No.  43,  Chapter  4" ("SAFS  151").  SFAS 151 amends
                    Accounting  Research  Bulletin ("ARB") No. 43, Chapter 4, to
                    clarify  that  abnormal  amounts of idle  facility  expense,
                    freight  handling  costs  and  wasted  materials  (spoilage)
                    should be recognized as current-period charges. In addition,
                    SFAS  151  requires  that  allocation  of  fixed  production
                    overheads  to the  costs of  conversion  be based on  normal
                    capacity of the production facilities. SAFS 151 is effective
                    for inventory  costs incurred  during fiscal years beginning
                    after June 15,  2005.  The Company  does not expect that the
                    adoption  of SFAS 151 will  have a  material  effect  on its
                    financial position or results of operations.


NOTE 3:- MARKETABLE SECURITIES AND LONG TERM MARKETABLE SECURITIES

          The   following   is  a  summary  of   available-for-sale   marketable
          securities:
<TABLE>
<CAPTION>
                                                                               December 31,
                                               -----------------------------------------------------------------------------
                                                               2004                                   2003
                                               ------------------------------------- ---------------------------------------
                                                                         Estimated                               Estimated
                                                               Gross       fair                       Gross        fair
                                                Amortized   unrealized    market      Amortized     unrealized    market
                                                  cost         gains       value         cost         gains        value
                                               ------------ ------------------------ ------------- -------------------------
                 <S>                            <C>          <C>         <C>           <C>            <C>           <C>
                 Available-for-sale:
                 -------------------
                 Government and agency bonds    $     -      $   -       $     -       $   491        $  -          $  491
                 Shares                             758         94           852           652          84             736
                 Debentures and convertible
                  debentures                        702         12           714         2,093          11            2,104
                                                -------      -----       -------       -------        ----          -------
                                                $ 1,460      $ 106       $ 1,566       $ 3,236        $ 95          $ 3,331
                                                =======      =====       =======       =======        ====          =======
</TABLE>

          Unrealized losses amounted to $1 and $3 on December 31, 2004 and 2003,
          respectively.

          During  2004,  2003 and  2002,  the  Company  recorded  proceeds  from
          redemption and sales of these  securities in the amounts of $ 2,973, $
          1,650 and $ 1,089, respectively.  The related gains (losses) amounting
          to $ 35, $ (39) and $ (3),  in 2004 and 2003 and  2002,  respectively,
          were recorded in other income, net.

NOTE 4:- INVENTORIES

                                                      December 31,
                                            -------------------------------
                                                 2004            2003
                                            --------------   --------------
          Raw materials and components      $      4,736     $     4,375
          Work in process                          8,446           8,974
                                            --------------   --------------
                                            $     13,182     $    13,349
                                            ==============   ==============

          As for charges, see Note 10.


                                      F-17

<PAGE>
                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)

NOTE 5:- PROPERTY, PLANT AND EQUIPMENT, NET

                                                          December 31,
                                             -----------------------------------
                                                   2004               2003
                                             ---------------   -----------------
          Cost:
            Land and buildings (1)            $    2,294         $    2,216
            Machinery and equipment               19,157             18,580
            Motor vehicles                         1,187              1,065
            Office furniture and equipment           333                316
                                             ---------------   -----------------
                                                  22,971             22,177
          Accumulated depreciation                17,119             16,216
                                             ---------------   -----------------
          Depreciated cost                     $   5,852         $    5,961
                                             ===============   =================

          Depreciation  expenses  amounted  to $ 1,022,  $ 974 and $ 955 for the
          years ended December 31, 2004, 2003 and 2002, respectively.

          (1)  Including  lease  rights  to  land in the  amount  of $ 1 under a
               sub-lease  agreement  with TAT. The lease period ends in 2020 and
               includes a renewal  option if TAT exercises the option granted by
               the Israel Land Administration.

               Registration with the Land Registrar of the transfer of sub-lease
               rights from TAT to the Company has not yet been  finalized due to
               technical reasons.

          As for charges, see Note 10.


NOTE 6:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES

                                                       December 31,
                                           -------------------------------------
                                                 2004                 2003
                                           -----------------   -----------------
          Employees and payroll accruals    $      1,422         $      1,462
          Government authorities                       -                  645
          Accrued expenses                           677                  585
          Deferred revenue                             -                  217
          Advances from customers                     86                  350
          Other                                      559                  671
                                           -----------------   -----------------
                                            $      2,744         $      3,930
                                           =================   =================

                                      F-18

<PAGE>
                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)

NOTE 7:- TRANSACTIONS WITH RELATED PARTIES

          a.   The Company entered into an agreement with TAT,  whereby in April
               1994 the Company exercised the option and purchased the prototype
               and rights to  manufacture  and  distribute  an air  conditioning
               system  without freon gas (EFACS) for aircraft and trains,  which
               was developed by TAT.

               The following are the terms of the agreement:

               1.   TAT  has  a  right  of  first   refusal  for  regarding  the
                    manufacture of components of the air  conditioning  systems,
                    which are included  among the  technologies  and  components
                    which TAT deals with or will deal with from time to time.

               2.   The Company is committed to pay TAT the following:

                    a)   Royalties  amounting  to 17% on the  first $ 10,000  in
                         revenues  from  sales  of  the  systems,   directly  or
                         indirectly,  and 7% on all such revenues in excess of $
                         10,000.

                    b)   Reimbursement   of  the  royalties  due  to  the  Chief
                         Scientist in connection with the sales of the systems.

                    c)   25% of the proceeds in connection  with the transfer or
                         sale of  know-how  and/or  any  rights  related  to the
                         system.

               As of  December  31,  2004,  the  Company has not sold EFACS and,
               therefore, the Company has not paid or accrued royalties for this
               commitment.

          b.   Transactions with TAT:

<TABLE>
<CAPTION>
                                                                   Year ended December 31,
                                                     ----------------------------------------------------
                                                           2004              2003              2002
                                                     ----------------  ----------------  ----------------
                <S>                                    <C>               <C>               <C>
                Revenues from management fees          $         50      $         50      $         50
                                                     ================  ================  ================
                Other manufacturing costs              $         59      $        134      $        210
                                                     ================  ================  ================
                Lease expenses (1)                     $        324      $        318      $        312
                                                     ================  ================  ================
</TABLE>

               (1)  During 2000, the Company entered into a lease agreement with
                    TAT for a period of 25 years.  According  to the  agreement,
                    the  Company  leases from TAT the  factory  premises  for an
                    annual  amount  of  approximately  $  300,  increased  by 2%
                    annually,  subject to a  revaluation  based on market  value
                    every five  years.  The  Company is  entitled  to a one-time
                    right of termination of the agreement after 10 years.


                                      F-19

<PAGE>

                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)

NOTE 7:- TRANSACTIONS WITH RELATED PARTIES (Cont.)

          c.   Balances with related parties:

                                                         December 31,
                                             ----------------------------------
                                                   2004               2003
                                             ---------------   ----------------
               TAT - current account (1)      $         73       $        525
                                             ===============   ================

               (1)  The  current  account  is  denominated  in NIS linked to the
                    Israeli Consumer Price Index and bears no interest.

<TABLE>
<CAPTION>
                                                                                 Year ended December 31,
                                                                  -----------------------------------------------------
                                                                         2004              2003              2002
                                                                  ----------------- ----------------- -----------------
          <S>                                                       <C>               <C>               <C>
          d.     Commissions   to  a  company  owned  by
                   certain  shareholders (see Note 9b)              $        377      $        487      $        503
                                                                  ================= ================= =================
                 Management fee (see f below)                       $         54      $          -      $          -
                                                                  ================= ================= =================
</TABLE>

          e.   The Chairman of the Board of Directors  and the Vice  Chairman of
               the Board of Directors  are  entitled  each to a bonus of 2.5% of
               the annual  consolidated  operating  income,  in excess of $ 500.
               Bonus  expenses were $ 246, $ 240,  $176 in 2004,  2003 and 2002,
               respectively,  and  were  recorded  as  part of the  general  and
               administrative expenses.

          f.   A shareholder of the Company provides the Company with management
               and consulting services in consideration for the lower of: (i) 3%
               of the consolidated  operating income in excess of $ 500, or (ii)
               $ 250.  Consulting  expenses were $50, $ 0, $0 in 2004,  2003 and
               2002, respectively,  and were recorded as part of the general and
               administrative expenses. See also Note 11b.

NOTE 8:- LONG-TERM LOANS

          a.   Terms of the loans:

<TABLE>
<CAPTION>
                                                                     Weighted average
                                                       Currency       interest rate                December 31
                                                    -------------- --------------------  --------------------------------
                                                                      2004      2003          2004             2003
                                                                   ---------- ---------  ---------------  ---------------
                                                                            %
                                                                   --------------------
                       <S>                           <C>              <C>       <C>        <C>              <C>
                       Banks                         U.S. dollar      -         3.4        $         -      $       294
                       Less - current maturities                                                     -              248
                                                                                         ---------------  ---------------
                                                                                           $         -      $        46
                                                                                         ===============  ===============
</TABLE>

          b.   As for collateral, see Note 10.

                                      F-20

<PAGE>

                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)

NOTE 9:- COMMITMENTS AND CONTINGENT LIABILITIES

          a.   The Company and Limco-Airepair  obtained from the BIRD Foundation
               grants  for the  support of  research  and  development  projects
               aggregating  to $ 551. The Company is obligated to pay  royalties
               of between 2.5% to 5% of the sales of the products generated from
               such  projects,  up to an  amount  equal  to  100%  of the  grant
               received.   The   contingent   liability   in   respect   of  the
               aforementioned  grants  amounted to $551.  The  Company  does not
               expect any sales generated from these projects in the future.

          b.   The Company is committed to pay commissions to a company owned by
               certain of its  shareholders for representing the heat exchangers
               division in North  America  (see Note 7d). The  commissions  were
               recorded as part of the Selling and marketing expenses.

               According to the agreement,  the  commissions are to be paid at a
               rate of 10% of the  amount  of  inventories  purchased  in  North
               America  and  3%  of  the  sales  made  in  North  America.   The
               commissions  were  recorded as part of the Cost of  revenues  and
               Selling and marketing expenses, respectively.

          c.   The Company is committed  to pay  royalties to a third party at a
               range of 5% to 6% of  sales of  products  developed  through  the
               intellectual property and goodwill which were purchased from that
               third party.  Royalties expenses were $ 31, $ 51 and $ 39 for the
               years ended December 31, 2004, 2003 and 2002,  respectively.  The
               royalties were recorded as part of the Cost of revenues.

          d.   The Company is committed to pay marketing commissions to salesmen
               at a range 1% to 12% of the  total  sales  contracts  which  were
               received through promotion and distribution  carried out by them.
               Commission  expenses were $ 346, $ 500, $ 241 for the years ended
               December 31, 2004, 2003 and 2002,  respectively.  The commissions
               were recorded as part of the Selling and marketing expenses.

          e.   The Company is  committed  to pay  royalties  to a third party of
               between 9% to 12% of sales of the products developed by the third
               party.  Royalties expenses amounted to $ 214, $ 448 and $ 321 for
               the years ended December 31, 2004,  2003 and 2002,  respectively.
               The royalties were recorded as part of the Cost of revenues.

          f.   As for commitments to TAT, see Note 7a.

          g.   Lease commitments:
               Limco-Airepair  entered into  operating  lease  agreements  which
               expire in 2006. As of December 31, 2004,  future  minimum  rental
               payments under non-cancelable operating leases are as follows:

                        2005              $  29
                        2006                 14
                                         --------
                                          $  43
                                         ========

                                      F-21


<PAGE>


                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)

NOTE 9:- COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)

               Total rent expenses for the years ended  December 31, 2004,  2003
               and 2002 were approximately $ 30, $ 30 and $ 29, respectively. As
               for the lease of the factory  premises by the  Company,  see Note
               7b.

          h.   The Company's subsidiary  previously had a commitment to purchase
               non-serviceable  aircraft spare parts assemblies and the relating
               complete technical documentation, as identified in the agreement,
               in  the  amount  of $  1,134.  According  to the  agreement,  the
               subsidiary  had to pay a 10% down payment  while the  remaining $
               1,021 was to be paid in several  separate  payments  according to
               the  terms  of  the   agreement.   As  of  December   31,   2004,
               approximately $ 1,015 of the commitment had been  fulfilled.  The
               Company  has a  proposed  agreement  with a third  party to share
               equally in this  purchase  commitments  and sales  proceeds.  The
               third party has advanced  approximately $474 to the Company which
               is included in other payables and accrued expenses.

          i.   During  2004,  two former  employees  filed a claim  against  the
               Company  and against an  employment  agency,  alleging  breach of
               contract,  and seeking  compensation for salary delays and salary
               differences in the amount of $250.  The Company,  with the advice
               of its legal counsel,  is unable to predict the ultimate  outcome
               of these claims, yet believes that such claims are without merit.
               As such, no provision was provided.

NOTE 10:- CHARGES AND GUARANTEES

          The  Company  provided a bank  guarantee  in the  amount of $ 201,  to
          secure customer advances and performance to customers.

NOTE 11:- SHAREHOLDERS' EQUITY

          a.   The  Company's  shares are  registered  with the  Securities  and
               Exchange  Commission  in the United  States and are traded on the
               NASDAQ (Small Cap Market).  The Company's  Ordinary shares confer
               upon their holders voting rights, the right to receive dividends,
               if  declared,  and any  amounts  payable  upon  the  dissolution,
               liquidation or winding up of the affairs of the Company.

          b.   On August  10,  2004,  the  Company  entered  into an  investment
               agreement,  according  to which  an  investor  purchased  857,143
               Ordinary  shares  of NIS 0.90 par  value of the  Company  and was
               granted 500,000  warrants to purchase  500,000 Ordinary shares of
               NIS 0.90 par value at an exercise price of $ 8.50 per share.  The
               warrants  are  exercisable  for 66 months from the date of grant.
               The total cash received was $ 6,000.

               In addition,  the investor and the Company  entered into a credit
               line  agreement,  under which the investor  made a line of credit
               available to the Company in the amount of up to $ 2,000.

               The amount of the credit withdrawn from the investor shall not be
               less than $ 1,000.  The  withdrawn  credit  bears  interest at an
               annual rate of 5%, in addition to an annual  handling fee of 0.5%
               of the credit line amount.  The withdrawn  credit will be settled
               in four equal payments,  no later than 66 months from the date of
               the  agreement.  As of  December  31,  2004,  the Company has not
               withdrawn any amounts from the credit line.


                                      F-22

<PAGE>

                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)

NOTE 11:- SHAREHOLDERS' EQUITY (Cont.)

               The Company  recorded  the fair value of the credit  line,  which
               amounted to $ 265, as deferred  charges,  which will be amortized
               throughout the term of the credit line agreement.

               As such, the total  proceeds  received for the issuance of shares
               and  warrants,  consisting  of cash and a  provision  of a credit
               line,  amounted to $ 6,265,  from which issuance  expenses in the
               amount of $ 273 were deducted.  Regarding a consulting  agreement
               entered with the investors, see also Note 7f.

          c.   Stock option plans:

               1.   In June 1994,  the Company  adopted a stock  option plan for
                    its employees,  directors and service providers,  whereby up
                    to 125,000  options to purchase  Ordinary  shares were to be
                    granted,  at an exercise  price of $ 4 per share (the market
                    price at the date of the  grant).  Out of this plan  116,000
                    options (out of which  87,500 stock  options were granted to
                    executives)  were granted.  Under the terms of the plan, the
                    options   vested   ratably  over  a  period  of  five  years
                    commencing  with the date of grant.  This stock  option plan
                    together with options  issued and not  exercised  expired in
                    June 2004.

               2.   In March 1995,  the Company  adopted a stock option plan for
                    its employees,  employees of the parent  company,  directors
                    and  service  providers,  whereby up to  400,000  options to
                    purchase Ordinary shares were to be granted,  at an exercise
                    price of $ 4.5 per share  (the  market  price at the date of
                    grant).  Out of this  plan  372,500  options  (out of  which
                    315,000  stock  options  were  granted to  executives)  were
                    granted.  Under the terms of the plan,  the  options  vested
                    after a period  of five  years  commencing  with the date of
                    grant.  In March 2005, the remaining  267,500 options out of
                    the plan expired.

               3.   In January 1999, the Company adopted a stock option plan for
                    its  employees,  directors  and  officers  of  the  Company,
                    whereby up to 500,000  options to purchase  Ordinary  shares
                    (out  of  which   402,500  stock  options  were  granted  to
                    executives)  were to be granted,  at an exercise  price of $
                    1.625 per share (which  equaled the market price on the date
                    of grant).  All options  have been  granted  under the above
                    plan.  Under the terms of the plan,  the options  were fully
                    vested  as of the  grant  date.  These  options  expired  in
                    January 2009.

                                      F-23

<PAGE>
                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)

NOTE 11:- SHAREHOLDERS' EQUITY (Cont.)

               The following table is a summary of the activity of the Company's
               stock Option plans:

<TABLE>
                                                    Year ended December 31,
                                ----------------------------------------------------------------
                                        2004                 2003                  2002
                                -------------------- -------------------- ----------------------
                                            Weighted             Weighted              Weighted
                                 Number     average    Number    average     Number     average
                                   of       exercise     of      exercise      of      exercise
                                 options     price     options    price     Options      price
                                ---------- ---------  --------- ---------- ---------- -----------
  <S>                             <C>      <C>        <C>        <C>        <C>         <C>
  Outstanding at the              834,935  $   2.95   988,500    $   2.99   988,500     $  2.99
    beginning of the year

  Exercised                      (548,435) $   2.25  (153,565)   $   2.36         -     $     -
  Expired                          (1,500) $   4.00         -    $      -         -     $     -
                                ---------            --------               -------
  Outstanding at the end of
    the year                      285,000  $   4.323  834,935    $   2.95   988,500     $  2.99
                                  =======  =========  =======    ========   =======     =======
  Exercisable options             285,000  $   4.323  834,395    $   2.95   988,500     $  2.99
                                  =======  =========  =======    ========   =======     =======
</TABLE>

               The  options  outstanding  as of  December  31,  2004,  have been
               separated into ranges of exercise prices, as follows:

<TABLE>
<CAPTION>
                                             Options          Weighted           Options
                                           outstanding         average         exercisable        Exercise
                                              as of           remaining           as of           price of
                      Exercise            December 31,       contractual      December 31,         options
                        price                 2004          life (years)          2004           exercisable
              -------------------------  ---------------   ---------------   ---------------   ---------------
                      <S>                    <C>             <C>                 <C>                <C>
                      $  1.625                17,500           4.08               17,500            $    1.625
                      $  4.5                 267,500*          0.25              267,500*           $    4.50
                                            ----------                        -------------
                                             285,000         $ 4.323             285,000            $   4.323
                                            ==========     ============       =============      =============
</TABLE>

               * In March 2005, these options were expired.

          d.   Dividends:

               Dividends on the Ordinary  shares,  if any,  will be declared and
               paid in U.S dollars.  The Company's  intentions  are to pay up to
               40% of the  Company's  net  profit as a cash  dividend  annually,
               depending  on cash  flow  and  profitability  and  other  factors
               affecting the Company's business.

               On  September  8, 2004,  the  Company  declared a dividend in the
               amount of $ 7,130.  The ex-date was set for October 18, 2004, and
               the dividend was fully paid on November 8, 2004.


                                      F-24

<PAGE>

                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)

NOTE 12:- NET EARNINGS PER SHARE

               The  following  table sets forth the  computation  of  historical
               basic and diluted net earnings per share:

<TABLE>
                                                           Year ended December 31,
                                                    ------------------------------------
                                                       2004          2003        2002
                                                    ----------   ----------   ----------
<S>                                                 <C>          <C>          <C>
Numerator: Net income                               $    3,739   $    3,834   $    3,589
                                                    ==========   ==========   ==========
Denominator:
  Weighted average number of Ordinary shares
  outstanding during the year                        5,166,218    4,509,891    4,483,516
                                                    ==========   ==========   ==========
  Basic net earnings per share - weighted average    5,166,218    4,509,891    4,483,516
    number of shares
  Effect of dilutive securities:
  Stock options and warrants                           397,842      397,529      167,497
                                                    ----------   ----------   ----------
Denominator for diluted net earnings per share       5,564,060    4,907,420    4,651,013
                                                    ==========   ==========   ==========
</TABLE>

NOTE 13:- INCOME TAXES

          a.   Measurement of taxable income under the Income Tax  (Inflationary
               Adjustments) Law, 1985:

               In  accordance  with the above law results for tax  purposes  are
               measured  and  reflected  in real  terms in  accordance  with the
               changes in the Israeli Consumer Price Index (CPI).

          b.   Tax benefits under Israel's Law for the Encouragement of Industry
               (Taxation), 1969:

               The Company is an "industrial company", as defined by the law for
               the  Encouragement  of Industry  (Taxes),  1969,  and as such, is
               entitled  to  certain  tax  benefits,  which  mainly  consist  of
               amortization of costs relating to know-how and patents over eight
               years,  the  right  to  claim  public  issuance   expenses,   and
               accelerated depreciation.

          c.   Tax  benefits  under  the Law for the  Encouragement  of  Capital
               Investments, 1959 ("the Law"):

               A certain  expansion  plan of the  Company  has been  granted  an
               "Approved  Enterprise"  status,  under the Law.  The  Company has
               elected to receive its benefits through the "alternative benefits
               track",  waiving  grants in return for tax  exemptions.  Pursuant
               thereto,  the increase in income from the date of commencement of
               the program  which is the income of the Company  derived from the
               following "Approved  Enterprise"  expansion program is tax-exempt
               for the periods stated below and will be eligible for reduced tax
               rates  thereafter  (such  reduced tax rates are  dependent on the
               level of foreign investments in the Company), as described below.

               Income from  sources  other than the  "Approved  Enterprise"  are
               subject to tax at the regular corporate tax rate of 35%.


                                      F-25

<PAGE>

                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 13:- INCOME TAXES (Cont.)

               Income derived from the program,  which  commenced in 2003,  will
               entitle the Company to a tax  exemption  for the two-year  period
               ending  December 31,  2004,  and to a reduced tax rate of 10%-25%
               for an additional five to eight years ending December 31, 2009 to
               2012  (depending  on the level of  foreign  investments  into the
               Company).

               The  entitlement to the above  benefits is  conditional  upon the
               Company    fulfilling   the   conditions    stipulated   by   the
               abovementioned  law,  regulations  published  thereunder  and the
               letters of approval  for the  specific  investments  in "approved
               enterprises".  In the  event of  failure  to  comply  with  these
               conditions,  the  benefits may be canceled and the Company may be
               required  to refund  the amount of the  benefits,  in whole or in
               part,  including  interest.  As of December 31, 2004,  management
               believes  that the Company is meeting  all of the  aforementioned
               conditions.

               The tax-exempt income  attributable to the "Approved  Enterprise"
               can not be  distributed  to  shareholders  without  imposing  tax
               liability on the Company other than in complete  liquidation.  As
               of December 31, 2004,  there is  approximately  $ 170  tax-exempt
               income earned by the Company's "Approved  Enterprise" included in
               retained earnings.

               If the retained tax-exempt income is distributed to shareholders,
               it would be taxed at the  corporate  tax rate  applicable to such
               profits as if the Company had not  elected  the  alternative  tax
               benefits track (currently - 25%).

               By  virtue  of  this  law,  the  Company  is  entitled  to  claim
               accelerated  depreciation  on  equipment  used  by the  "Approved
               Enterprise" during five tax years.

               See also note 13(f).

          d.   Amendment 132 to the Israeli Income Tax Ordinance:

               In July 2002,  Amendment 132 to the Israeli  Income Tax Ordinance
               ("Amendment  132") was approved by the Israeli  parliament and is
               effective  as of January 1, 2003.  The  principal  objectives  of
               Amendment 132 were to broaden the  categories  of taxable  income
               and to reduce the tax rates  imposed on  employment  income.  The
               Amendment had no material impact on the Company.

          e.   Reduction in corporate tax rate:

               In June 2004, the Israeli parliament approved an amendment to the
               Income Tax  Ordinance  (No. 140 and  Temporary  Provision)  ("the
               Amendment"),  which progressively  reduces the corporate tax rate
               from  36% to 35% in  2004,  34% in  2005,  32% in 2006 and 30% in
               2007.


                                      F-26

<PAGE>

                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 13:- INCOME TAXES (Cont.)

          f.   On March 29, 2005, the Israeli  parliament passed an amendment to
               the Law for the Encouragement of Capital Investments,  1959 ("the
               Law"),   which  provides   expanded  tax  incentives  for  future
               industrial  investments and simplified the  bureaucratic  process
               for  obtaining   approval  of  investments   qualifying  for  tax
               incentives ("the 2005 Amendment").  The 2005 Amendment  primarily
               relates to the "alternative  benefits track" tax incentives which
               the Company has elected  for its  Approved  Enterprises.  Changes
               include special tax incentives and an expedited  approval process
               for companies that make minimum  qualifying  investments in fixed
               assets in  production  facilities  located  in  Israel.  The 2005
               Amendment  became  effective  on April 1,  2005.  The  Company is
               currently  evaluating  the  impact of the 2005  Amendment  on its
               business operations.

          g.   Non-Israeli subsidiary

               A  non-Israeli  subsidiary  is taxed based on the tax laws in its
               country of residence - the U.S. The tax rate in the U.S. is 40%.

          h.   Tax assessments

               The Company received tax assessments  considered as final through
               2001.

          i.   Income tax reconciliation:

               A  reconciliation  of the  theoretical  tax expense  assuming all
               income  is taxed at the  statutory  tax rate and the  actual  tax
               expense is as follows:
<TABLE>
<CAPTION>
                                                                                     Year ended December 31,
                                                                       ---------------------------------------------------
                                                                            2004              2003              2002
                                                                       ---------------   ---------------   ---------------
                      <C>                                                <C>               <C>               <C>
                      Income before income taxes as reported in the      $      5,408      $      5,059      $      3,956
                        statements of income
                                                                       ===============   ===============   ===============
                       Statutory tax rate in Israel                               35%               36%               36%
                                                                       ===============   ===============   ===============
                      Theoretical tax expenses                           $      1,893      $      1,821      $      1,424
                      Increase (decrease) in income taxes resulting
                        from:
                      Tax adjustment in respect of foreign
                        subsidiary subject to a different tax rate                 76                67                36
                      Reversal of valuation allowance in respect of
                        carryforward losses                                                           -            (1,019)
                      Difference in basis of measurement for
                        financial reporting and income tax  purposes              (94)             (519)             (158)
                      Tax in respect of prior years                              (310)             (258)                -
                      Non-deductible expenses                                     102               114                84
                                                                       ---------------   ---------------   ---------------
                      Income taxes as reported in the statements of
                        income                                           $      1,667      $      1,225      $        367
                                                                       ===============   ===============   ===============
</TABLE>



                                      F-27

<PAGE>

                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 13:- INCOME TAXES (Cont.)

<TABLE>
<CAPTION>
          j.   Income before income taxes is comprised as follows:

                                                                                     Year ended December 31,
                                                                       ---------------------------------------------------
                                                                            2004              2003              2002
                                                                       ---------------   ---------------   ---------------
          <S>                                                           <C>               <C>                <C>
                      Domestic (Israel)                                 $       3,880     $       3,387      $      2,961
                      Foreign (United States)                                   1,526             1,672               995
                                                                       ---------------   ---------------   ---------------
                                                                        $       5,406     $       5,059      $      3,956
                                                                       ===============   ===============   ===============

          k.   Income taxes included in the statements of income:

                      Current:
                        Domestic (Israel)                               $         999      $        627      $          -
                        Foreign (United States)                                   500               535               236
                                                                       ---------------   ---------------   ---------------
                                                                                1,499             1,162               236
                                                                       ---------------   ---------------   ---------------
                       Deferred:
                        Domestic (Israel)                                        112                27                  -
                        Foreign (United States)                                   56                36                131
                                                                       ---------------   ---------------   ---------------
                                                                                 168                63                131
                                                                       ---------------   ---------------   ---------------
                                                                        $      1,667       $     1,225       $       367
                                                                       ===============   ===============   ===============
</TABLE>

          l.   Deferred income taxes:

               Deferred  income  taxes  reflect the net tax effects of temporary
               differences   between   the   carrying   amounts  of  assets  and
               liabilities for financial reporting purposes and the amounts used
               for income tax purposes.  Significant components of the Company's
               deferred tax liabilities and assets are as follows:

<TABLE>
<CAPTION>
                                                                                                    December 31
                                                                                         ----------------------------
                                                                                             2004             2003
                                                                                         -------------   ------------
                      <S>                                                                  <C>             <C>
                      Deferred tax assets (liabilities):
                        Provisions for employee benefits and other temporary
                          differences                                                      $     559       $     449
                        Tax loss carryforwards                                                   100             209
                                                                                         -------------   ------------
                      Deferred tax assets                                                        659             658
                      Deferred tax liabilities                                                  (616)           (447)
                                                                                         -------------   ------------
                      Net deferred tax assets (liabilities)                                $      43       $     211
                                                                                         =============   ============
</TABLE>


               As of December 31, 2004,  the Company and its  subsidiary did not
               provide a valuation  allowance in respect of deferred tax assets,
               since management  currently  believes that it is more likely than
               not that the deferred tax asset will be realized in the future.

               The Company has no present  intention of remitting  undistributed
               earnings  of a  foreign  subsidiary  aggregating  $  3,288  as of
               December 31, 2004, and accordingly, no deferred tax liability has
               been  established  relative to these  earnings.  If these amounts
               were  not  considered  permanently  reinvested,  a  deferred  tax
               liability would have been required.

                                      F-28

<PAGE>

                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 14:- MAJOR CUSTOMER AND GEOGRAPHICAL INFORMATION

          a.   Summary information about geographic areas:

               The Company and its subsidiary  operate in one industry  segment.
               Total  revenues are  attributed to geographic  areas based on the
               location of the  customers.  This data is presented in accordance
               with  Statement  of  Financial   Accounting   Standard  No.  131,
               "Disclosures   About   Segments  of  an  Enterprise  and  Related
               Information" ("SFAS No. 131").

               The following  presents total revenues,  based on the location of
               the end customers,  for the years ended  December 31, 2004,  2003
               and 2002 and long-lived assets as of December 31, 2004 and 2003:
<TABLE>
<CAPTION>
                                                           2004                        2003             2002
                                            --------------------------- --------------------------  -------------
                                                Total      Long-lived      Total       Long-lived      Total
                                              revenues       assets       revenues       assets       revenues
                                            ------------- ------------- ------------  ------------  ------------
                      <S>                     <C>           <C>           <C>           <C>           <C>
                      Israel                  $   5,095     $   4,037     $   4,796     $   4,332     $   4,277
                      Asia                        1,430             -         1,845             -         1,382
                      United States              17,569         2,418        15,441         2,241        13,531
                      Europe                      8,736             -         8,340             -         6,879
                      Other                         413             -           260             -           211
                                            ------------- ------------- ------------  ------------  ------------
                                              $  33,243     $   6,455     $  30,682     $   6,573     $  26,280
                                            ============= ============= ============  ============  ============
</TABLE>

          b.   Major customer data as a percentage of total revenues:

                                            Year ended December 31,
                              --------------------------------------------------
                                   2004              2003              2002
                              ---------------   ---------------   --------------
                                                       %
                              --------------------------------------------------

               Customer A           10.1              15.3              11.9
               Customer B           15.4              12.9              12.8
               Customer C            9.8              12.1               4.9
               Customer D            7.8               5.6              17.3


                                      F-29

<PAGE>

                                        TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 15:- SELECTED STATEMENTS OF INCOME DATA

<TABLE>
<CAPTION>
                                                                                  Year ended December 31,
                                                                          ------------------------------------
                                                                             2004          2003        2002
                                                                          ---------   -----------   ----------
               <S>                                                         <C>         <C>          <C>
               a. Financial income (expenses), net:

                       Financial income:
                         Foreign currency translation adjustments          $    86     $     49     $       -
                         Interest on cash equivalents, short-term bank
                           deposits and others                                 147           46           203
                                                                          ---------   -----------   ----------
                                                                               233           95           203
                                                                          ---------   -----------   ----------
                       Financial expenses:
                         Bank charges                                          (68)         (47)           -
                         Interest on short-term loans                           (6)         (12)         (56)
                         Interest on long-term loans                           (28)         (13)         (30)
                         Foreign currency translation adjustments              (42)         (20)         (18)
                         Others                                                 (2)         (28)           -
                                                                          ---------   -----------   ----------
                                                                              (146)        (120)        (104)
                                                                          ---------   -----------   ----------
                                                                           $    87     $    (25)    $     99
                                                                          =========   ===========   ==========

               b. Other income (expenses), net:

                         Gain on sale of property and equipment            $    18      $    63      $    11
                         Gain (loss) on sale of marketable securities
                          classified as available-for-sale                      36          (39)          (3)
                                                                          ---------   -----------   ----------
                                                                           $    54      $    24      $     8
                                                                          =========   ===========   ==========
</TABLE>

NOTE 16:- SUBSEQUENT EVENTS

     On May 16,  2005,  the Company  entered  into an  agreement  with  Piedmont
     Component Services,  LLC ("Piedmont"),  according to which the Company will
     purchase 100% of Piedmont's  shares for the aggregate amount of $ 5,500. In
     addition,  at the  closing,  the Company  will repay $ 9,500 of  Piedmont's
     outstanding indebtedness.



                       - - - - - - - - - - - - - - - - - -


                                      F-30


<PAGE>

                                 [LETTERHEAD OF
                      TULLIUS TAYLOR SARTAIN & SARTAIN LLP]


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




Board of Directors of
LIMCO-Airepair, Inc.


We have audited the  accompanying  balance  sheets of  LIMCO-Airepair,  Inc. (an
Oklahoma  corporation)  as of  December  31,  2004  and  2003,  and the  related
statements  of income,  retained  earnings  and cash flows for each of the three
years in the period ended Deember 31, 2004.  These financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  We were not engaged to preform an
audit of the company's  internal  control over  financial  reporting.  Our audit
included  consideration of internal control over financial  reporting as a basis
for designing audit procedures that are appropiate in the circumstances, but not
for the purpose of expressing an opinion on the  effectiveness  of the Company's
internal  control  over  financial  reporting.  Accordingly  we  express no such
opinion. An audit includes examining,  on a test basis,  evidence supporting the
amounts and  disclosures  in the  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of  LIMCO-Airepair,  Inc. as of
December 31, 2004 and 2003, and the results of its operations and its cash flows
for each of the three years in the period ended  December 31, 2004 in conformity
with the U.S. generally accepted accounting principles.



/s/Tullius Taylor Sartain & Sartain LLP

June 27, 2005




                                       F-31
<PAGE>





                                   SIGNATURES

         Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this annual report on Form 20-F to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                      TAT TECHNOLOGIES LTD.-



                                      By: /s/ Israel Ofen
                                         ----------------
                                           Israel Ofen, Executive Vice President
                                           and Chief Financial Officer

Date:  June 30, 2005

                                       71

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.3
<SEQUENCE>2
<FILENAME>ex4_3.txt
<DESCRIPTION>AGREEMENT
<TEXT>
                                                                     EXHIBIT 4.3


                                                                  April 14, 1992
                                                                 Our Ref: C/1193

To:
Galagraph Ltd.
P.O. Box 30,
Gedera
- ------


Dear Sirs,


                  Re: Assignment of TAT - E.T Export Agreement
                      For Heat Exchanger Production Line at Galagraph
                      -----------------------------------------------


Following the transfer of the Heat Exchanger production line from TAT to
Galagraph, we hereby express our consent to act for the department at Galagraph,
based on the conditions in place at TAT, in accordance with the Supplement to
the Agreement dated September 1, 1990.

The conditions are as follows:
Galagraph shall pay IT Export a 10% handling fee for purchases, provided that
the sum of such fee shall under no circumstances be greater than the sum of the
fee had it been calculated on the basis of 5% of purchases and 5% of sales.




                                                        Yours sincerely,


                                                               (Sgd)
                                                        E.T Export Services Inc.


Y.A. / Y.N.


<PAGE>







                   Supplement to Agreement dated July 1, 1992

                                     Between


                             E.T Export Services Inc
                              (hereinafter: "E.T")

                                                               Of the First Part
                                                               -----------------


                                       And


                            TAT - Aero Equipment Ltd.
                              (hereinafter: "TAT")

                                                              Of the Second Part
                                                              ------------------


Whereas:     there is an Agreement between the Parties, which contains various
             supplements which have been made from time to time (to be known
             hereinafter as the "Agreement");  and

Whereas:     the Parties are desirous of updating and amending the fees owing to
             IT from TAT under the Agreement, all as set out below.


Therefore, it is agreed between the Parties as follows:
- -------------------------------------------------------


1.       The preamble to this Supplement to the Agreement constitutes an
         integral part of it.

2.       TAT shall pay E.T a handing fee in the sum of 10% for purchases and 3%
         for sales, provided that the sum of such fee is in no event greater
         than the sum of the fee had it been calculated in accordance with a
         rate of 5% on purchases and 5% on sales under the Agreement.

3.       This Supplement to the Agreement shall commence on July 1, 1992.

4.       Subject to the aforesaid, all the rest of the conditions and
         definitions of the Agreement shall apply to this Supplement to the
         Agreement.

In witness whereof, the Parties have hereunto set their hands:
- --------------------------------------------------------------



- ------------------------                               -------------------------
E.T Export Services Inc.                               TAT - Aero Equipment Ltd.


<PAGE>









                                    Agreement
                                    ---------


Made and executed at Tel Aviv on October 1, 1981


Between:     TAT - Aero Equipment Ltd.
             (hereinafter: "TAT")


                                                              Of the First Part;
                                                              ------------------

And:         E.T Express Services Inc. [sic]
             (hereinafter: "E.T")


                                                             Of the Second Part;
                                                             -------------------


Whereas:     TAT manufactures various products to be sold in  North America, and
             is desirous of developing and promoting the marketing of its
             products there, via a separate company, and not as part of TAT
             itself;  and

Whereas:     TAT purchases the materials and components that it requires in
             order to manufacture its products, in North America; and

Whereas:     E.T has provided marketing promotion services for TAT in North
             America in respect of TAT's products, and has handled purchasing
             operations for TAT in North America, and the Parties wish to set
             out the conditions of the contract between them;


Therefore, it is agreed and stipulated between the Parties as follows:


1. The preamble to this Agreement constitutes an integral part of it.

2. IT hereby declares that:

         (a)      It has knowledge of TAT's products, and their nature, quality
                  and utility.

         (b)      It has knowledge of the potential markets in North America for
                  sale of TAT's products.

         (c)      It has knowledge of the various kinds of components and
                  materials required by TAT to manufacture its products.



                                        1

<PAGE>



         (d)      It has knowledge of the manufacturers and resellers in North
                  America from whom it is possible to purchase the materials and
                  components required by TAT to manufacture its products.

         (e)      It is capable and prepared to handle the purchase of such
                  materials and components in North America.

3.       (a)      It is agreed between the Parties that TAT reserves the
                  right to act alone or as it may see fit in promoting the sale
                  of its products in North America, and in purchasing materials
                  or components for the manufacture of its products in North
                  America, provided that it shall not harm E.T's right to a
                  handling fee as set out below.

         (b)      It is hereby clarified that E.T shall not be liable nor
                  responsible in any way whatsoever for actual payments made by
                  customers, although E.T shall provide TAT with collection
                  services (not including expenses and legal services), and in
                  any event, E.T shall be entitled to the handling fee even if
                  the sums are not in fact collected, and even if TAT has
                  allegations against the customers and/or the suppliers.

4.       TAT undertakes:

         (a)      To provide E.T and its employees with all of the information
                  required in order to market its products, including products
                  being developed or in progress.

         (b)      To provide E.T with one or more of its products, as required,
                  at E.T's demand, for the purpose of fulfillment of its
                  undertakings under this Agreement, in order to display such
                  products to potential customers or to advertise same or to
                  promote the marketing of same.

         (c)      To provide E.T and its employees with all of the information
                  required for purchasing the components and materials that it
                  needs to manufacture its products, and that it intends to
                  purchase in North America with the assistance of E.T.

         (d)      In general, to cooperate with E.T and to do any act required
                  for the development and promotion of marketing of TAT's
                  products in North America, and to handle the purchase of
                  materials or components for TAT in North America.

5.       TAT Industries agrees that E.T shall present itself as a company
         operating for the promotion and development of the marketing of TAT's
         products, and as a company handling the purchase of materials and
         components for TAT.

6.       E.T undertakes:

         (a)      To retain a skilled team for the performance of its
                  undertakings under this Agreement.




                                        2

<PAGE>



         (b)      To invest all time and effort required for the purpose of
                  fulfilling its undertakings under this Agreement.

         (c)      To respond to TAT's demands and to adjust its operations to
                  comply with the marketing and purchasing policy set down by
                  TAT.

         (d)      To report to TAT from time to time, at TAT's demand, of all of
                  its operations regarding promotion and development of
                  marketing, and of all of its operations regarding the purchase
                  of materials and components.

         (e)      Not to represent manufacturers or companies or any legal or
                  private entity, whose products compete with the products of
                  TAT and not to do any act which might constitute competition
                  to and/or harm and/or damage the marketing of TAT's products,
                  or to the purchase of materials for TAT, without the prior
                  written consent of TAT.

7.       (a)      In consideration for the fulfillment of all of E.T's
                  undertakings regarding the marketing of TAT's products under
                  this Agreement, TAT undertakes to pay E.T a handling fee in
                  the rate of 5% (five percent) of the value of the equipment
                  exported by TAT to North America FOB, except in the case of
                  payment of commissions to agents or other representatives of
                  more than 5%.
                  In the event of such payment (to an agent or other
                  representative) which is less than 5%, E.T shall be entitled
                  to the difference between such payment and the aforesaid 5%.

         (b)      In consideration for the fulfillment of all of E.T's
                  undertakings relating to the handling of purchase of materials
                  or components under this Agreement, TAT undertakes to pay E.T
                  a handling fee in the rate of 5% (five percent) of the value
                  of the materials and components purchased in North America FOB
                  at port of export.

         (c)      The handling fee for purchases and sales as set out in
                  paragraphs (a) and (b) above (hereinafter: the "Handling Fee")
                  shall not include expenses for transportation, insurance,
                  taxes, customs duties, or any other expense whether in Israel
                  or in North America relating to the dispatch and handling of
                  goods, but shall include office expenses (including telephone
                  and telex) and the overheads of E.T (except for special or
                  one-time or exceptional expenses).

8.       The Handling Fee shall be paid as follows:

         (a)      In the event of purchase by TAT as aforesaid, TAT shall pay
                  the Handling Fee to E.T no later than the date of payment of
                  the price to the supplier.

         (b)      E.T shall be entitled to set off of the Handling Fee for
                  purchases or sales made up to the date of set-off, against any
                  amount owing to TAT.



                                        3

<PAGE>



         (c)      Accounts shall be settled between the Parties with respect to
                  the Handling Fee owing to E.T for purchases and sales effected
                  during the previous three months, and sums not set off or paid
                  as set out in paragraphs (a) and (b) above shall be paid by
                  TAT to IT within 15 days of the end of such three-month
                  period.

         (d)      It is hereby declared that E.T shall be entitled to demand
                  advance payments from TAT for the Handling Fee, provided that
                  E.T sets out its demands regarding the anticipated scope of
                  operations and results.

         (e)      30 days after the end of TAT's financial year, the Parties
                  shall effect adjustments and the Party owing, as the case may
                  be, shall pay the Party owed, the sums owing to it in respect
                  of the previous year.

9.       This Agreement shall be in force from October 1, 1981 and any Handling
         Fee in respect of purchases or sales effected (FOB at port) prior to
         such date shall be in accordance with previous arrangements.


                  In witness whereof, the Parties have hereunto set their hands:



- ------------------------                                    -------------------
TAT- Aero Equipment Ltd.                                    E.T Export Services

                                       4

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.4
<SEQUENCE>3
<FILENAME>ex4_4.txt
<DESCRIPTION>SHARE PURCHASE AGREEMENT DATED 6/15/04
<TEXT>






                                                                     EXHIBIT 4.4
                                    TAT PIPE


                            SHARE PURCHASE AGREEMENT
                            ------------------------

         THIS AGREEMENT (the "Agreement") is made as of June 15, 2004 (the
"Effective Date"), by and between (i) TAT Technologies Ltd. ("TAT"), an Israeli
company whose shares are traded on Nasdaq, and (ii) TA-TOP, Limited Partnership
(the "Investor"), a limited partnership wholly owned by (x) TA-TEK Ltd., an
Israeli private company, wholly owned by FIMI Opportunity Fund, L.P., a limited
partnership formed under the laws of the State of Delaware, and by (y) FIMI
Israel Opportunity Fund, Limited Partnership, a limited partnership, registered
in Israel. TAT and the Investor each, a "Party" and, collectively, the
"Parties".

WITNESSETH:

                   WHEREAS, the Investor desires to invest in the share capital
of TAT, by purchasing 857,143 Ordinary Shares of TAT, nominal value NIS 0.90
each (the "Shares"), upon the terms and subject to the conditions set forth in
this Agreement; and

                    WHEREAS, the Board of Directors of TAT has resolved to enter
into this Agreement for the issue and sale of the Shares to the Investor, all
upon the terms and subject to the conditions set forth in this Agreement.

         NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto hereby agree as follows:

1.1    Definitions
       -----------

In this Agreement, each of the following terms shall have the respective meaning
appearing next to it, if not inconsistent with the subject or context:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
<S>                         <C>
"Agreement"-                has the meaning ascribed to such term in the preamble.
- ----------------------------------------------------------------------------------------

"Applicable Law"-           has the meaning ascribed to such term in Section 3.9.
- ----------------------------------------------------------------------------------------

"Closing" and
"Closing Date-              have the meaning ascribed to such terms in Section 2.1.
- ----------------------------------------------------------------------------------------

"Condition Precedent"-      has the meaning ascribed to such term in Section 6.1.
- ----------------------------------------------------------------------------------------

"Confidential
Information"-               has the meaning ascribed to such term in Section 5.2.
- ----------------------------------------------------------------------------------------

Compliance Certificate"-    has the meaning ascribed to such term in Section 2.2.(1)(d).
- ----------------------------------------------------------------------------------------

"Credit Line Agreement"-    has the meaning ascribed to such term in Section 6.1(d).
- ----------------------------------------------------------------------------------------

"Damages"-                  has the meaning ascribed to such term in Section 7.2.
- --------------------------- --------------------------------------------------------------------------------
</TABLE>



<PAGE>

                              TAT Technologies PIPE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
<S>                         <C>
"Effective Date"-           has the meaning ascribed to such term in the preamble.
- ----------------------------------------------------------------------------------------

"Encumbrance"-              has the meaning ascribed to such term in Section 3.3.(c)(3).
- ----------------------------------------------------------------------------------------

"Engagement Agreements"-    has the meaning ascribed to such term in Section 2.2.(1)(b).
- ----------------------------------------------------------------------------------------

"Environmental Law"-        has the meaning ascribed to such term in Section 3.14.
- ----------------------------------------------------------------------------------------

"Exchange Act"-             has the meaning ascribed to such term in Section 3.6(a).
- ----------------------------------------------------------------------------------------

"2000 20-F"-                has the meaning ascribed to such term in Section 3.1.
- ----------------------------------------------------------------------------------------

"2002-2003 Financial        has the meaning ascribed to such term in Section 3.6(b).
Statements"-
- ----------------------------------------------------------------------------------------

"Governmental Entity"-      has the meaning ascribed to such term in Section 3.5.
- ----------------------------------------------------------------------------------------

"Investor"-                 has the meaning ascribed to such term in the preamble.
- ----------------------------------------------------------------------------------------

"Investor Conditions"-      has the meaning ascribed to such term in Section 6.1.
- ----------------------------------------------------------------------------------------

"Knowledge"-                has the meaning ascribed to such term in Section 3.10(a).
- ----------------------------------------------------------------------------------------

"Management Fee"-           has the meaning ascribed to such term in Section 5A.
- ----------------------------------------------------------------------------------------

Material Adverse Effect"-   has the meaning ascribed to such term in Section 3.1.
- ----------------------------------------------------------------------------------------

"Material and "Material     have the meaning ascribed to such terms in Section 3.11(a).
Agreements"-
- ----------------------------------------------------------------------------------------

"Ordinary Shares"-          has the meaning ascribed to such term in Section 3.3.
- ----------------------------------------------------------------------------------------

"Outstanding Options"-      has the meaning ascribed to such term in Section 3.3.
- ----------------------------------------------------------------------------------------

"Party" or "Parties"-       have the meaning ascribed to such terms in the preamble.
- ----------------------------------------------------------------------------------------

"Purchase Price"-           has the meaning ascribed to such term in Section 1.2.
- ----------------------------------------------------------------------------------------

"SEC"-                      has the meaning ascribed to such term in Section 3.6(a).
- ----------------------------------------------------------------------------------------

"Securities Act"-           has the meaning ascribed to such term in Section 3.6.(a).
- ----------------------------------------------------------------------------------------

"Services"-                 has the meaning ascribed to such term in Section 5A.
- ----------------------------------------------------------------------------------------

"Shares"-                   has the meaning ascribed to such term in the preamble.
- ----------------------------------------------------------------------------------------

"Shareholders Agreement"-   has the meaning ascribed to such term in Section 6.1(d).
- ----------------------------------------------------------------------------------------
</TABLE>

                                       2

<PAGE>

                              TAT Technologies PIPE

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
<S>                         <C>
"Subsidiary" or             has the meaning ascribed to such term in Section 3.1.
"Subsidiaries"-
- ----------------------------------------------------------------------------------------

"Registration Rights        has the meaning ascribed to such term in Section 6.1(d).
Agreement"-
- ----------------------------------------------------------------------------------------

"Representations and        has the meaning ascribed to such term in Section 7.1.
Warranties Period"-
- ----------------------------------------------------------------------------------------

"Required Approvals and     has the meaning ascribed to it in Section 3.5.
Notices"-
- ----------------------------------------------------------------------------------------

"TAT"-                      means TAT Technologies Ltd.
- ----------------------------------------------------------------------------------------

"TAT Conditions"-           has the meaning ascribed to such term in Section 6.2.
- ----------------------------------------------------------------------------------------

"TAT Industries"-           means TAT Industries Ltd.
- ----------------------------------------------------------------------------------------

"TAT SEC Reports"-          has the meaning ascribed to such term in Section 3.6(a).
- ----------------------------------------------------------------------------------------

"Trade Secrets"-            has the meaning ascribed to such term in Section 3.10(a).
- ----------------------------------------------------------------------------------------

"Transaction Documents"-    has the meaning ascribed to such term in Section 2.2.(1)(a).
- ----------------------------------------------------------------------------------------

"Warrant Agreement"-        has the meaning ascribed to such term in Section 6.1(d).
- ----------------------------------------------------------------------------------------
</TABLE>

1.2. Issue of Shares
     ---------------

 Upon the terms and subject to the conditions set forth in this Agreement, at
 the Closing (as defined in Section 2.1 below) the Investor agrees to purchase,
 and TAT agrees to issue to the Investor, the Shares, at a price per Share of
 $7.00, and an aggregate purchase price of $6,000,001 (Six Million and One US
 Dollars) (the "Purchase Price").

2.   Closing
     -------

 2.1 The Closing. The Parties shall hold the closing (the "Closing") at the
 offices of _______________, on the 12th business day following the date on
 which the last of the Conditions Precedent under Section 6.3 below is fulfilled
 (provided that all other Closing conditions have been either met or waived, in
 accordance with the provisions contained herein) or at such other place and
 later date as the Parties shall agree (the "Closing Date").

 2.2. Actions at the Closing. At the Closing, the following actions shall be
 carried out, which actions shall be deemed to take place simultaneously and no
 actions shall be deemed to have been completed or any required document
 delivered until all such actions have been completed and all required documents
 delivered:

 (1) The Investor shall have received from TAT the following documents:

             (a) True and correct copies of the resolutions of TAT's Board of
Directors

                                        3

<PAGE>

                              TAT Technologies PIPE


 approving (i) the execution of this Agreement and the performance of the
 transactions contemplated herein, including the issuance, at the Closing, of
 the Shares to the Investor subject to the provisions contained herein, (ii) the
 execution of the Warrant Agreement (as defined below) and the grant of the
 non-assignable Warrant (as such term is defined in the Warrant Agreement) to
 the Investor, pursuant to the provisions contained therein, which shall become
 effective upon the Closing, (iii) the execution of the Credit Line Agreement
 (as defined below), which shall become effective as of the Closing, (iv) the
 Management Fee arrangement (as more fully set forth below) which shall become
 effective as of the Closing, and (v) the execution of the Registration Rights
 Agreement (as defined below) which shall become effective as of the Closing.
 This Agreement, the Warrant Agreement, the Credit Line Agreement and the
 Registration Rights Agreement shall be referred to herein, collectively, as the
 "Transaction Documents".

           (b) True and correct copies of the resolutions of TAT's shareholders
 approving (i) the transactions contemplated in the Transaction Documents, (ii)
 the amendment of the Articles of Association of TAT, in the manner more fully
 set forth in the amended Articles of Association , (ii) the approval of the
 Engagement Agreements (the "Engagement Agreements") between TAT and each of Mr.
 Shlomo Ostersetzer and Mr. Dov Zeelim, and (iv) the election to TAT's Board of
 Directors of three members designated by the Investor, of which one shall meet
 the definition of an independent director for the purposes of Nasdaq. The forms
 of the resolution of TAT's shareholders, the amended Articles of Association
 and the Engagement Agreements are attached hereto as Exhibit 2.2.1(b); and

            (c) An opinion of the counsel to TAT, substantially in the form of
Exhibit 2.2.1(c) to this Agreement; and

            (d) A certificate duly executed by an officer of TAT dated as of the
 Closing Date (the "Compliance Certificate") in the form attached hereto as
 Schedule 2.2.1(d).

 (2) TAT shall have obtained, and delivered to the Investor copies of, the
Required Approvals and Notices (as defined below).

 (3) The Investor shall have received a letter from Gal-Tek Ltd., in the form
 attached hereto as Exhibit 2.2(3), which shall be effective as of the Closing.

 (4) The Investor shall have provided TAT with an opinion of the counsel to the
 Investor, substantially in the form of Exhibit 2.2.4 to this Agreement.

 (5) The Investor shall pay the Purchase Price to TAT by wire transfer of
 immediately available funds to the following bank account at Union Bank of
 Israel Ltd. (branch no.: 062 (Diamond Exchange Branch, Ramat-Gan)): Account no.
 407000/54 and will obtain confirmation from its bank that the Purchase Price
 has been transferred in accordance with the wire transfer instructions provided
 to it (a copy of which will be delivered to TAT at the Closing), against the
 receipt of the Shares and the Warrant.

 3. Representations and Warranties of TAT
    -------------------------------------

 TAT hereby represents and warrants to the Investor, and acknowledges that the
Investor



                                        4

<PAGE>

                              TAT Technologies PIPE

 is entering into the Investment Agreements, in reliance thereon, as follows:

 3.1 Organization. TAT is a company duly organized and validly existing under
 the laws of the State of Israel. TAT is duly qualified to conduct its business,
 and (with respect to those jurisdictions in which the concept of good standing
 is relevant) is in good standing, in each jurisdiction where the character of
 its properties owned, operated or leased or the nature of its activities makes
 such qualification necessary, except for such failures which would not
 reasonably be likely to have a Material Adverse Effect (as defined below). TAT
 has the requisite corporate power and authority and any necessary governmental
 authority, franchise, license or permit to own, operate, lease and otherwise to
 hold and operate its assets and properties and to carry on its businesses as
 now being conducted, except for such failures which would not reasonably be
 likely to have a Material Adverse Effect. The Annual Report of TAT filed on
 Form 20-F for the Year 2002 (the "2002 20-F"), a copy of which has been
 provided to the Investor, accurately sets forth each entity in which TAT owns
 at least 50% of either the voting shares and/or the equity (each of the
 aforesaid, a "Subsidiary" and, collectively, the "Subsidiaries") and all other
 equity or similar interests, or any interest convertible or exchangeable or
 exercisable for any such equity or similar interest, in any other entities held
 by TAT or any Subsidiary, excluding any immaterial marketable securities held
 by TAT or any of its Subsidiaries as part of the investment portfolio in their
 ordinary course of business.

 As used herein, the term "Material Adverse Effect" means any material adverse
 effect on the business, as conducted by, the assets, financial condition,
 liabilities or operations of TAT and its Subsidiaries taken as a whole.

 3.2 Organizational Documents. Set forth in Schedule 3.2 attached hereto is a
 complete and correct copy of the Memorandum and the Articles of Association of
 TAT, as amended to date. All of such organizational documents are in full force
 and effect.

 3.3 Capitalization.

 (a) The registered share capital of TAT as of the date of this Agreement is NIS
 6,300,000, divided into 7,000,000 Ordinary Shares, nominal value NIS 0.90 each
 (the "Ordinary Shares"), of which 4,663,381 Ordinary Shares are issued and
 outstanding. In addition, TAT has issued options and warrants (including
 employee and consultant options) to purchase up to 798,635 Ordinary Shares (the
 "Outstanding Options"). Except for the foregoing and for the transactions
 contemplated by this Agreement, there are no other shares, convertible
 securities, outstanding warrants, options, or other rights to subscribe for,
 purchase, or acquire from TAT any securities of TAT, and there are no contracts
 or binding commitments providing for the issuance of, or the granting of rights
 to acquire from TAT, any securities of TAT or under which TAT is, or may
 become, obligated to issue any of its securities.

 (b) There are no bonds, debentures, notes or other indebtedness having the
 right to vote on any matters on which TAT's shareholders may vote issued or
 outstanding. There are no outstanding contractual obligations of TAT or any of
 its Subsidiaries to repurchase, redeem or otherwise acquire any of TAT's share
 capital. All of the issued and outstanding share capital of TAT has been duly
 authorized and validly issued and is



                                        5

<PAGE>

                              TAT Technologies PIPE

 fully paid and nonassessable.

 (c)(1) All of the Shares issuable in accordance with of this Agreement will be,
 when fully paid up as provided in this Agreement, and so issued, duly
 authorized, validly issued, fully paid and nonassessable, shall not be subject
 to call, forfeiture or preemptive rights, shall be delivered free and clear of
 all Encumbrances (as defined below).

     (2) The non-assignable Warrant granted in accordance with the provisions of
 this Agreement and the Warrant Agreement, when granted at the Closing, shall be
 duly authorized, validly granted, shall not be subject to call, forfeiture or
 preemptive rights, and shall be delivered free and clear of all Encumbrances.

     (3) All of the Ordinary Shares, issuable upon the exercise of the Warrant
 in accordance with the provisions of the Warrant Agreement will be, upon
 payment of the Exercise Price (as defined in the Warrant Agreement), duly
 authorized, validly issued, fully paid and nonassessable, shall not be subject
 to call, forfeiture or preemptive rights and shall be delivered free and clear
 of all Encumbrances.

 The term "Encumbrance" means and includes any interest or equity of any person
 (including any right to acquire, option, or right of preemption) or any
 mortgage, charge, pledge, lien, or assignment, or any other encumbrance or
 security interest or arrangement of whatsoever nature over or in the relevant
 property.

 3.4 Authority. Subject to the Conditions Precedent under Section 6 below, TAT
 has the necessary corporate power and authority to enter into the TAT
 Transaction Documents and each of the other agreements, certificates or other
 instruments required to be delivered hereunder at or prior to Closing and to
 perform its obligations hereunder and thereunder and to consummate the
 transactions contemplated hereby and thereby. The execution and delivery of
 this Agreement and each of the other Transaction Documents by TAT and the
 consummation by TAT of the transactions contemplated hereby and thereby shall
 have been, at the Closing (assuming the satisfaction of the Condition
 Precedent), duly and validly authorized by all necessary corporate action, and
 no other corporate proceedings on the part of TAT shall be necessary to
 authorize this Agreement and each of the other Transaction Documents or to
 consummate the transactions contemplated hereby and thereby. The Transaction
 Documents shall be deemed as of the Closing to be duly executed and delivered
 by TAT and, (assuming the satisfaction of the Condition Precedent) and the due
 authorization, execution and delivery by the Investor, constitute legal, valid
 and binding obligations of TAT, enforceable in accordance with their terms,
 except as such enforceability may be limited by liquidation, insolvency,
 reorganization, moratorium and other similar laws of general applicability
 relating to or affecting creditors' rights generally and by the application of
 general principles of equity.



 3.5 No Conflict; Required Filings and Consents.

                                        6

<PAGE>

                              TAT Technologies PIPE

 Subject to satisfaction of all the Conditions Precedent under Section 6 below:

 (a) The execution and delivery by TAT of this Agreement and each of the other
 Transaction Documents and the performance by TAT of its obligations under this
 Agreement and each of the other Transaction Documents, will not, with or
 without the giving of notice or the lapse of time or both, (i) conflict with or
 violate the organizational documents of TAT or any of its Subsidiaries, (ii)
 subject to obtaining the Required Approvals and Notices (as defined below),
 conflict with or violate any law, statute, ordinance, rule, regulation, order,
 judgment or decree applicable to TAT or any Subsidiary or by which any of their
 respective properties or assets is bound or affected, or (iii) result in any
 breach of or constitute a default under, or give to others any rights of
 termination, amendment, acceleration or cancellation of any Material Agreement
 (as defined below), or result in the creation of any Encumbrance on the
 properties or assets of TAT pursuant to, any note, bond, mortgage, indenture,
 contract, agreement, lease, license, permit, franchise or other instrument or
 obligation to which TAT is a party or by which TAT is bound or affected.

 (b) The execution and delivery by TAT of this Agreement and the other
 Transaction Documents does not, and the performance by TAT of its obligations
 under this Agreement and the other Transaction Documents, will not, require any
 consent, approval, authorization or permit of or filing with or notification
 to, any Governmental Entity (as defined below), by or with respect to TAT,
 except (i) for applicable requirements, if any, of the consents, approvals,
 authorizations, permits or notification described in Schedule 3.5 (the
 "Required Approvals and Notices"), and (ii) where failure to obtain the
 required consents, approvals, authorizations or permits, or to make such
 filings or notifications, (A) would not prevent or delay consummation of any of
 the transactions contemplated by this Agreement or any other Transaction
 Document in any material respect, or otherwise prevent TAT from performing its
 obligations under this Agreement or any other Transaction Document in any
 material respect, and (B) would not reasonably be likely to have a Material
 Adverse Effect. As used herein the term "Governmental Entity" means any Israeli
 or U.S. entity exercising executive, legislative, judicial, regulatory or
 administrative function of or pertaining to government.

 3.6 SEC Filings; Financial Statements.

(a) To TAT's knowledge, based on the advise of its U.S. securities counsel, it
has filed all forms, reports, statements and other documents required to be
filed with the Securities and Exchange Commission ("SEC") during the three year
period immediately prior to the Closing Date, and has heretofore delivered to
counsel for the Investor, in the form filed with the SEC since such date,
together with any amendments thereto, all (i) Annual Reports on Form 20-F, and
(ii) all proxy statements relating to meetings of shareholders (whether annual
or special) (collectively, the "TAT SEC Reports"). To TAT's knowledge, based on
the advise of its U.S. securities counsel, as of their respective filing or
publication dates, the TAT SEC Reports complied as to form in all material
respects with the requirements of the United States Securities Exchange Act of
1934 (the "Exchange Act") and the United States Securities Act of 1933, as
amended (the "Securities Act"). To TAT's knowledge, based on the advise of its
U.S. securities



                                       7

<PAGE>

                              TAT Technologies PIPE

counsel, the TAT SEC Reports did not at the time they were filed or published,
respectively, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

 (b) The audited consolidated financial statements of TAT for the years ended on
 December 31, 2002 and December 31, 2003 (collectively, the "2002-2003 Financial
 Statements") comply as to form in all material respects with applicable
 accounting requirements. The Financial Statements, including all related notes
 and schedules, present fairly in all material respects the financial position
 of TAT as at the respective dates thereof and the results of operations and
 cash flows of TAT for the periods indicated, in accordance with United States
 GAAP, with respect to TAT's audited consolidated financial statements for the
 year ended on December 31, 2002 and in accordance with Israeli GAAP, with
 respect to TAT's audited consolidated financial statements for the year ended
 on December 31, 2003.

 3.7 Operations in the Ordinary Course. Except as set forth in Schedule 3.7
 attached hereto, between January 1, 2004 and the date of this Agreement, TAT
 has operated its business in the ordinary course consistent with past practices
 and has not suffered any Material Adverse Effect.

 3.8 Litigation. Except as set forth in Schedule 3.8 attached hereto, there are
 no claims, actions or proceedings pending or, to TAT's knowledge, threatened
 against TAT or any of its Subsidiaries, any of their respective properties or
 to TAT's knowledge, any of their respective officers or directors before any
 court, arbitration or mediation or regulatory authority or body, domestic or
 foreign, that individually or in the aggregate (i) would reasonably be likely
 to, or if adversely decided may be expected to, have a Material Adverse Effect,
 or (ii) challenge or seek to prevent, enjoin, alter or materially delay the
 transactions contemplated by this Agreement.

 3.9 Licenses and Permits; Compliance with Laws. To TAT's knowledge, it does not
 lack permits, licenses, authorizations or approvals, and is not in material
 violation of Applicable Law or any permits, licenses, authorizations and
 approvals that have been obtained by it, which the failure to obtain or such
 violation, as applicable, would reasonably be likely to have a Material Adverse
 Effect. As used herein, the term "Applicable Law" means any provision of any
 statute, law, ordinance, rule, regulation, decree, order, grant, permit or
 license or other governmental authorization or approval applicable to TAT.

 3.10 Trade Secrets.

 (a) To TAT's Knowledge (as defined below), TAT and its Subsidiaries have the
 right to use all its trade secrets, including know-how, material computer
 programs, documentation, processes, and technology which can reasonably be
 anticipated to be material to the conduct of the businesses of TAT and its
 Subsidiaries, taken as a whole, as conducted by TAT as of the date hereof (all
 of the foregoing items collectively referred to as the "Trade Secrets").



                                       8

<PAGE>

                              TAT Technologies PIPE

For purposes of this Section 3.10 and Section 3.14 below, "Knowledge" shall be
deemed to refer to the knowledge of reasonable managerial staff (which term
shall refer to any person who, either formally or in substance, serves as a
director, chief executive officer (CEO) or chief operating officer (COO), or any
other senior executive who reports directly to the chief executive officer). For
these purposes, if such managerial staff has not received any claims with
respect to manufacturing processes and know-how that have been utilized
consistently, or to products that have been sold, over a reasonably long period
of time, such managerial staff shall be deemed to have acted reasonably when
making the representations set forth in this Section 3.10 and Section 3.14
below, without conducting any special searches or investigation.

 (b) (i) no proceedings are pending or, to TAT's Knowledge, threatened, which
 challenge the use by TAT or any of the Subsidiaries of TAT of the Trade Secrets
 could have, if resolved unfavorably to TAT, a Material Adverse Effect; (ii) to
 TAT's Knowledge, no material infringement by TAT of any intellectual property
 right or other proprietary right of any third party has occurred, or will
 result in any way from the signing and execution of this Agreement or any of
 the other Transaction Documents or the consummation of any or all of the
 transactions contemplated hereby and thereby, and, no claim has been made by
 any third party based upon an allegation of any such infringement; and (iii) to
 TAT's Knowledge, there are no restrictions on the direct or indirect transfer
 of any license, or any interest therein, held by TAT or any Subsidiary in
 respect of the Trade Secrets.

 (c) No claim has been made in the last seven years prior to the date hereof by
 any third party that the use, disclosure or appropriation of Confidential
 Information not owned by TAT or any Subsidiary has been in material violation
 of the terms of a written agreement between TAT or such Subsidiary and the
 owner of such Confidential Information, or is otherwise materially unlawful.
 3.11  Material Agreements and Claims

 TAT has delivered to the Investor a true and full copy of each of the material
 agreements, in effect on the date hereof, to which TAT or any of its
 Subsidiaries is a party (including all agreements with TAT Industries and the
 agreements referred to in TAT's filings) (the "Material Agreements").

 For purposes of this Agreement, "Material" shall be determined based on the
 criteria for inclusion in TAT's 20-F filings.

 Except as set forth in Schedule 3.11(a) attached hereto, such Material
 Agreements are valid and in full force and effect on the date hereof, and
 neither TAT nor, to TAT's knowledge, any other party, has violated any material
 provision thereof, or committed or failed to perform any material act which
 with or without notice, lapse of time or both would constitute a fundamental
 beach under the provisions of, any Material Agreement except for violations or
 defaults which would not reasonably be likely to have a Material Adverse
 Effect. The enforceability of any Material Agreement will not be affected in
 any manner by, the existence of this Agreement and the Transaction Documents,
 or the consummation of the transactions contemplated hereunder or thereunder.



                                        9

<PAGE>

                              TAT Technologies PIPE

 3.12 Employees

 TAT has delivered to the Investor complete copies of the material
 employment/engagement agreements currently in force for each of the five most
 highly paid individuals employed by TAT or any of its Subsidiaries, including
 TAT's CEO and Chairman of the Board of Directors and the President, both of
 which shall be amended by the Engagement Agreements, as of the Closing.

 3.13 Labor Relations. There is not now or has been threatened any material
 labor dispute, strike, slow-down, picketing, work-stoppage, or other similar
 labor activity with respect to the employees of TAT.

 3.14 Environmental Matters. Except as set forth in Exhibit 3.14 attached
 hereto, to TAT's Knowledge, TAT and each of its Subsidiaries, is in material
 compliance with applicable material environmental laws and regulations
 ("Environmental Laws") in effect on the date hereof.

 3.15 Taxation. To TAT's knowledge and based on the advice of experts (employed
 by TAT's C.P.A), the Financial Statements as of December 31, 2003 make adequate
 provisions for taxation for which TAT is liable which has accrued, on or before
 December 31, 2003; provided, however, that based on prior experience, there may
 be deficiencies of not more than an aggregate of $100,000 with respect to
 withholding tax.

 3.16 Insurance. To TAT's knowledge, and due to advice of its insurance agent,
 TAT has the benefit of adequate insurance against such risks as are usually and
 reasonably insured against by companies carrying on similar business.

 3.17 Brokers. Except as set forth in Schedule 3.17, no person or firm has, or
 will have, as a result of any act or omission by TAT or anyone acting on behalf
 of TAT, any right, interest or valid claim against TAT or the Investor for any
 commission, fee or other compensation as a finder or broker or in any similar
 capacity with respect to the transactions contemplated under this Agreement.

 3.18 Representations Complete. None of the representations or warranties made
 by TAT herein or in any Schedule or Exhibit hereto contain or will contain at
 the Closing Date (subject to the Compliance Certificate) any untrue statement
 of a material fact, or omit or will omit at the Closing Date to state any
 material fact necessary in order to make the statements contained herein or
 therein, in the light of the circumstances under which they were made, not
 misleading.

 4.   Representations and Warranties of the Investor
      ----------------------------------------------

 The Investor hereby represents and warrants to TAT and acknowledges that TAT is
 entering into the TAT Transaction Documents in reliance thereon, as follows:

 4.1 This Agreement and the other Transaction Documents, constitute  valid,
 binding, and enforceable obligations of the Investor.

 4.2 The Investor is an entity duly organized and validly existing under the
 laws of



                                       10

<PAGE>

                              TAT Technologies PIPE

 the State of Israel, and has all requisite power and authority to carry out the
 transactions contemplated hereby and under the Transaction Documents, and the
 execution, delivery and performance of the obligations of the Investor
 hereunder have been duly authorized by all necessary corporate action.

 4.3 The Investor acknowledges that the offering and sale of the Shares is
 intended to be exempt from registration under the Securities Act by virtue of
 Section 4(2) of the United States Securities Act and the provisions of
 Regulation D there under. The Investor is a special purpose vehicle formed for
 the purpose of effecting the transactions contemplated herein. Each of the
 entities beneficially owning the Investor (whether directly or indirectly) is
 an "Accredited Investor", as such term is defined under Regulation D, and that
 such entity is a sophisticated investor that has experience in business and
 financial matters and is capable of evaluating the merits and risks relevant to
 TAT, its business, the markets in which TAT and Limco operate and to the
 transactions contemplated by this Agreement and the other Transaction
 Documents. For the purpose of clarity, it is hereby clarified that the Investor
 is aware of the fact that TAT is engaged in product manufacturing and sales in
 the aviation field of business and is, therefore, exposed to certain risks
 which are inherent to companies involved in product manufacturing and sales in
 such field of business.

 4.4 Without derogating from the representations and warranties set forth in
 Section 3 above, the Investor and its auditors, legal counsels and other
 representatives have been given access to information regarding TAT and Limco
 and have utilized that access to their satisfaction in order to receive all
 such information as they considered necessary, required and advisable for
 deciding whether to enter into the investment contemplated by this Agreement
 and the other Transaction Documents, including but not limited to, the
 subscription for the Shares hereunder.

 4.5 The execution and delivery of this Agreement and the other Transaction
 Documents, and the consummation of the transactions and the Investor's
 performance of its obligations herein and therein contemplated will not,
 whether with or without giving notice or the lapse of time or both (i) result
 in any conflict with, breach of, or default (or give rise to any right of
 termination, cancellation or acceleration or the loss of any benefit) under any
 of the terms, conditions or provisions of the Investor's organizational
 documents or of any material agreement, permit or other instrument or
 obligation to which the Investor is a party or is bound, or (ii) violate any
 law or regulation, or any order, injunction, or judgment of any court or any
 governmental bureau or agency, domestic or foreign applicable to the Investor.
 No consent or approval by any governmental authority is required in connection
 with the execution by the Investor of this Agreement and the other Transaction
 Documents, or the consummation by the Investor of the transactions contemplated
 hereby and thereby except for such actions, consents or approvals as have been
 obtained or will be obtained as of the Closing.

 4.6 No Finders Fee. Except as set forth in Exhibit 4.6, no person or firm has,
 or will have, as a result of any act or omission by the Investor or anyone
 acting on its behalf, any right, interest or valid claim against TAT for any
 commission, fee or other compensation as a finder or broker or in any similar
 capacity, with respect to any of the transactions contemplated under this
 Agreement.



                                       11

<PAGE>

                              TAT Technologies PIPE

 5.   Confidentiality.
      ---------------

 5.1 Without derogating from the non-disclosure undertaking executed by the
 Investor on January 19, 2004, the Investor undertakes that any Confidential
 Information (defined below) obtained or which shall be obtained in connection
 with the transactions contemplated herein and in the Transaction Documents,
 including information to be provided to the Investor prior to or following the
 Closing, will not be disclosed without the prior written consent of TAT.

 5.2 For the purposes of this Agreement, "Confidential Information" shall mean
 all information, including, but not limited to, financial information, business
 plans, budgets, customer lists, computer software, source codes, plans,
 drawings, technical specifications, patents, copyrights, and other intellectual
 property rights, in any form (paper, disk, or other), relating to the business
 of TAT and its Subsidiaries. However, Confidential Information shall not
 include information which (a) was in the Investor's possession prior to its
 disclosure; (b) is or becomes available to the public through no fault of the
 Investor; (c) is required by law to be disclosed by the Investor, provided that
 the Investor gives TAT immediate written notice of such requirement prior to
 such disclosure; or (d) is rightfully received by the Investor from a third
 party without a duty of confidentiality.

 5.A Management Fee.
     --------------

 During the Term (as defined in the Shareholders Agreement), the Investor shall
 provide the Company with various management and consulting services (the
 "Services"), as shall be mutually determined by the Company and the Investor
 from time to time. Without derogating from the generality of the foregoing, the
 Services shall include service on the Company's Board of Directors of the two
 directors designated by the Investor, strategic guidance and consulting
 services to the Company (which, for illustration purposes only, may include
 introduction to potential customers and investors, consulting services with
 respect to the business and strategic alliances) as well as guidance and
 consulting services in connection with the management of the Company's
 Subsidiaries. The Services shall be provided on an as needed basis, as shall be
 mutually determined by the Company and the Investor from time to time.

 For such Services, TAT shall pay the Investor annual management fees (the
 "Management Fee") in accordance with the provisions contained in this Section
 5A. The Management Fees shall be payable immediately following TAT's approval
 of its quarterly audited or reviewed consolidated financial statements for each
 of the first three fiscal quarters of the year and shall be equal to 3% of the
 excess of (w) TAT's operating income ("Revach Tifuli") for the applicable
 quarter, over (x) US$125,000, supplemented by applicable Value Added Tax
 ("VAT"); provided, however, that

                   (A) immediately following TAT's approval of the annual
 consolidated financial statements of TAT for the calendar year (excluding 2004
 and the last year of the Term, provided that it is not a full calendar year)
 then ended (prepared in accordance with U.S. GAAP), the Investor shall promptly
 receive (a) 3% of the excess of (y) TAT's operating income for the applicable
 year, over (z) US$500,000, less (b) the aggregate



                                       12

<PAGE>

                              TAT Technologies PIPE

 amount paid to the Investor in the three preceding fiscal quarters as set forth
 above (or, in the event that (b) exceeds (a) promptly return the excess amount
 to TAT); and

                  (B) in any event, the Management Fee shall not exceed an
 aggregate of US$250,000 per annum (pro rated for parts of a calendar year).

 6.   Conditions to Closing
      ---------------------

 6.1 Conditions to the Obligation of the Investor to Close. The obligation
 hereunder of the Investor to purchase the Shares and pay the Purchase Price is
 subject to the satisfaction of the Conditions Precedent set forth in Section
 6.3 below (the "Conditions Precedent") and to the fulfillment at or before the
 Closing of the following Closing conditions (the "Investor Conditions"), any
 one or more of the Investor Conditions may be waived in writing, in whole or in
 part, by the Investor, which waiver shall be at the sole discretion of the
 Investor.

             (a) Accuracy of TAT's Representations and Warranties. Each of the
 representations and warranties of TAT shall be true and correct in all material
 respects as of the date when made and as of the Closing as though made on that
 time.

             (b) Performance by TAT. TAT shall have performed, satisfied and
 complied in all material respects with all conditions required by this
 Agreement to be performed

             (c) All Deliverables Ready. All documents and other items to be
 delivered to the Investor at the Closing as specified in Section 2.2 above,
 shall be duly executed, ready for delivery to the Investor, and in form and
 substance reasonably satisfactory to counsel for Investor

             (d) The following documents, executed on the Effective Date, shall
 have come into effect as of the Closing: (i) the Registration Rights Agreement
 (the "Registration Rights Agreement") attached hereto as Exhibit 6.1(d)(i),
 (ii) the Warrant Agreement (the "Warrant Agreement"), attached hereto as
 Exhibit 6.1(d)(ii), (iii) the Credit Line Agreement (the "Credit Line
 Agreement") attached hereto as Exhibit 6.1(d)(iii), and (iv) the shareholders'
 agreement (the "Shareholders Agreement") between the Investor and TAT
 Industries Ltd.

             (e) Capitalization. Except for any exercise of Outstanding Options,
 the share capital of TAT at the Closing shall be as described in Section 3.3(a)
 above.

 6.2. Conditions to the Obligation of TAT to Close. The obligations hereunder of
 TAT to issue and sell the Shares and to grant the Warrant to the Investor are
 subject to the satisfaction of the Conditions Precedent and the fulfillment at
 or before the Closing of the following Closing conditions (the "TAT
 Conditions"), any one or more of the TAT Conditions may be waived in writing,
 in whole or in part, by TAT, which waiver shall be at the sole discretion of
 TAT.


 (a) Accuracy of the Investor Representations and Warranties. Each of the
 representations and warranties of the Investor shall be true and correct in all
 material



                                       13

<PAGE>

                              TAT Technologies PIPE

 respects as of the date when made and as of the Closing, as though made at that
 time.

 (b) Performance by the Investor. The Investor shall have performed, satisfied
 and complied in all material respects with all conditions required by this
 Agreement to be performed.

 (c) The Engagement Agreements shall have been executed and duly adopted by TAT
 and the agreements listed in Section 6(1)(d)(i)-(iv) shall have come into
 effect.

 6.3. The transactions contemplated herein and in the Transaction Documents are
 subject to the satisfaction and fulfillment of the following Conditions
 Precedent, which may not be waived in whole or in part by the Parties, unless
 permitted by applicable law, in which case, such waiver shall require the
 mutual consent of both Parties, at their sole discretion:

 (a) The General Meeting of TAT's shareholders shall have approved the
 resolutions more fully set forth in Section 2.2.1(b) above.

 (b) The General Meeting of Shareholders of TAT Industries shall have approved
 (i) the Shareholders Agreement, and (ii) the participation in the General
 Meeting of Shareholders of TAT and the voting in favor of the resolutions
 referred to in sub-section (a) above.

 6.4. It is hereby underlined that if, for any reason the Conditions Precedent
 (including the approval of the General Meetings of both TAT and TAT Industries)
 and the other Closing conditions set forth above (unless expressly waived in
 accordance with the provisions contained herein) are not met within 60 days
 from the date hereof, the Conditions Precedent shall be deemed to have not been
 fulfilled and this Agreement and the Transaction Documents will become null and
 void and neither Party shall have any claim or demand against the other Party
 with respect to such termination.

 6.5. Notwithstanding anything to the contrary contained herein, in the event
 that compliance with the Conditions Precedent or any other Required Approval is
 contingent upon TAT's taking any action of which TAT is unaware on the date
 hereof and which is likely to adversely affect the commercial terms or the
 feasibility of the transactions contemplated in the TAT Transaction Documents,
 then TAT shall not be required to take such action(s), and will not be liable
 to the Investor, provided that it had promptly provided the Investor with
 written notice regarding its resolution not to obtain any Required Approval.

 7.   Survival of Representations and Warranties.
      ------------------------------------------

 7.1 All representations and warranties made by any Party in this Agreement
 shall survive the Closing and be in effect until the termination of two (2)
 years following the Closing Date (the "Representations and Warranties Period"),
 on which date they shall expire and be of no further force or effect, except
 that if a claim has been made during such two year period, the subject matter
 of the claim shall survive until the claim is finally resolved or settled.



                                       14

<PAGE>

                              TAT Technologies PIPE

 7.2 Excluding in the case of fraud or intentional misrepresentation, if a claim
 is brought against TAT by the Investor during the Representations and
 Warranties Period and results in TAT being obligated to pay the Investor
 damages (the "Damages") in an aggregate amount -

            (i) higher than US$200,000 but less than US$1,000,000 - TAT shall
 promptly reimburse the Investor for such Damages in excess of US$200,000
 (unless the court ruling had already taken into account the US$200,000
 threshold in the damages it awarded, in which case the entire amount of Damages
 will become due and payable to the Investor) and such payment will be the sole
 and exclusive right and remedy available to the Investor with respect to such
 breach of representations and warranties; and

            (ii) equal to or higher than US$1,000,000, then TAT shall be
 entitled, at its sole discretion, (i) to promptly pay to the Investor the
 entire amount of Damages, or (ii) to cancel this Agreement and all other
 Transaction Documents by providing the Investor with prompt written notice,
 upon the receipt of which the Investor shall deliver the Shares and the Warrant
 (and any Warrant Shares, if the Warrant was exercised prior to such
 cancellation) to TAT in return for a full refund of the Purchase Price paid for
 such Shares and Warrant Shares (if applicable), in US dollars (reduced by any
 dividend distributions received by the Investor from TAT prior to the
 cancellation of this Agreement). For the avoidance of doubt and without
 derogating from the above, if the Loan (as defined in the Credit Line
 Agreement), had already been provided to the Company, then upon the termination
 of this Agreement and the Credit Line Agreement, all amounts due on account of
 the Loan shall immediately become due and payable. 7.3 For avoidance of doubt
 it is hereby clarified that, excluding in the case of fraud or intentional
 misrepresentation and other than, the above remedies, no adjustment of the
 Purchase Price or any other change of the terms hereunder or any other relief
 may be available to the Investor in a court of law as a result of a breach of
 representations or warranties under this Agreement or under applicable law.

 7.4 Claims made hereunder may not be initiated by or on behalf of the
 Investor in respect of consequential damages or losses.

 8.   Miscellaneous.
      -------------

 8.1 Further Assurances. Each of the parties hereto shall perform such further
 acts and execute such further documents as may reasonably be necessary to carry
 out and give full effect to the provisions of this Agreement and the intentions
 of the parties as reflected hereby.

 8.2 Governing Law; Dispute Resolution. This Agreement shall be governed by and
 construed according to the laws of the State of Israel, without regard to the
 conflict of laws provision thereof. Any claim arising under or in connection
 with this Agreement shall be resolved exclusively in the appropriate court in
 Tel-Aviv, Israel. Each of the parties hereby irrevocably consents to the
 exclusive jurisdiction of such courts and waives and agrees not to assert any
 objection to the jurisdiction or convenience thereof.



                                       15

<PAGE>

                              TAT Technologies PIPE

 8.3 Assignment. Neither TAT nor the Investor may sell, assign, transfer, or
 otherwise convey any of its rights or delegate any of its duties or obligations
 under this Agreement. Except as otherwise expressly stated to the contrary
 herein, the provisions hereof shall inure to the benefit of, and be binding
 upon, the successors, assigns under law ("Ha'avara Al Pi Din").

 8.4 Entire Agreement; Amendment and Waiver.

 This Agreement and the Exhibits and Schedules hereto (including all of the TAT
 Transaction Documents) constitute the full and entire understanding and
 agreement between the parties with regard to the subject matters hereof. All
 prior understandings and agreements among the parties are void and of no
 further effect. Any term of this Agreement may be amended, waived, or
 discharged (either prospectively or retroactively, and either generally or in a
 particular instance), by a written instrument signed by all the parties to this
 Agreement.

 8.5 Notices, etc. All notices and other communications required or permitted
 hereunder to be given to a party to this Agreement shall be in writing and
 shall be telecopied or mailed by registered or certified mail, postage prepaid,
 or otherwise delivered by hand or by messenger, addressed to such party's
 address as set forth below or at such other address as the party shall have
 furnished to each other party in writing in accordance with this provision:

 If to the Investor:

 TA-TOP, Limited Partnership
 c/o TA-TEK Ltd., its general partner
 c/o FIMI 2001 Ltd.
 "Rubinstein House"
 37 Petach Tikva Road
 Tel: 03-5652244
 Fax: 03-5652245

 With a copy to:
 Sharon Amir, Adv.
 Naschitz, Brandes & Co.
 5 Tuval Street
 Tel-Aviv 67897
 Israel
 Facsimile:  +972-3-623-5021

 If to TAT: TAT Technologies Ltd.
 Industrial Zone, Yasur, Gedera, 70700
 PO Box. 80 (70750)

 With a copy to: J. Zaltzman,
 J. Zaltzman & Co.
 6 Hahilazon Street, Ramat-Gan 52522



                                       16

<PAGE>

                              TAT Technologies PIPE

 Facsimile: 03-6111801
 Attn: Adv. Yossi Zaltzman

 or such other address with respect to a party as such party shall notify each
 other party in writing as above provided.

 8.6 Delays or Omissions. No delay or omission to exercise any right, power, or
 remedy accruing to any party upon any breach or default under this Agreement,
 shall be deemed a waiver of any other breach or default theretofore or
 thereafter occurring. Any waiver, permit, consent, or approval of any kind or
 character on the part of any party of any breach or default under this
 Agreement, or any waiver on the part of any party of any provisions or
 conditions of this Agreement, must be in writing and shall be effective only to
 the extent specifically set forth in such writing. All remedies, either under
 this Agreement or by law, or otherwise afforded to any of the parties, shall be
 cumulative and not alternative.

 8.7 Severability. If any provision of this Agreement is held by a court of
 competent jurisdiction to be unenforceable under applicable law, then such
 provision shall be excluded from this Agreement and the remainder of this
 Agreement shall be interpreted as if such provision were so excluded and shall
 be enforceable in accordance with its terms; provided, however, that in such
 event this Agreement shall be interpreted so as to give effect, to the greatest
 extent consistent with and permitted by applicable law, to the meaning and
 intention of the excluded provision as determined by such court of competent
 jurisdiction.

 8.8 Counterparts. This Agreement may be executed in any number of counterparts,
 each of which shall be deemed an original and enforceable against the parties
 actually executing such counterpart, and all of which together shall constitute
 one and the same instrument.

 8.9 Heading, Preamble, and Exhibits. The titles and subtitles used in this
 Agreement are used for convenience only and are not to be considered in
 construing or interpreting this Agreement. The Preamble and Exhibits are an
 integral and inseparable part of this Agreement.

 8.10 Expenses. Each party hereto shall pay its own expenses in connection with
 the negotiation and preparation of this Agreement and the related agreements
 and the consummation of the transactions contemplated hereby and thereby,
 except that if the Closing is effected TAT shall pay the Investors' fees of
 professional advisors for performing accounting and legal due diligence and
 preparing this Agreement and all other TAT Transaction Documents, in an amount
 not to exceed $50,000 plus applicable Value Added Tax.






                                       17



<PAGE>


                              TAT Technologies PIPE


 IN WITNESS WHEREOF the parties have signed this Agreement as of the date first
hereinabove set forth.

 TAT Technologies Ltd.                       TA-TOP, Limited Partnership
                                             c/o TA-TEK Ltd. its general partner
 By: __________________________
                                             By:________________
 Name:
                                             Name______________
 Title:
                                             Title_______________

                                       18

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.5
<SEQUENCE>4
<FILENAME>ex4_5.txt
<DESCRIPTION>SHAREHOLDERS AGREEMENT DATED 6/15/04
<TEXT>
                                                                     EXHIBIT 4.5

Shareholders Agreement



                             SHAREHOLDERS AGREEMENT



THIS SHAREHOLDERS AGREEMENT (the "Agreement") is made and entered into as of
this 15th day of June, 2004 (the "Effective Date") by and among (a) TAT
Industries Ltd., a public Israeli company whose shares are traded on the
Tel-Aviv Stock Exchange ("TAT Industries"), and (b) TA-TOP, Limited Partnership,
a limited partnership registered under the laws of the State of Israel
("TATOP"). (Each of TAT Industries and TATOP shall be referred to herein as a
"Shareholder" or a "Party" and collectively the "Shareholders" or the
"Parties").


WHEREAS,      TAT Technologies Ltd. (the "Company"),  is an Israeli public
              company,  whose shares are traded on Nasdaq; and

WHEREAS,      as of the Effective Date, TAT Industries holds [3,113,409]
              Ordinary Shares nominal value NIS 0.90 each of the Company,
              which represent [66.7%] of the Company's issued and
              outstanding share capital as of the date hereof; and

WHEREAS,      TATOP is a limited partnership wholly owned by (x) TA-TEK
              Ltd., an Israeli private company ("TA-TEK"), wholly owned by
              FIMI Opportunity Fund, L.P., a limited partnership formed
              under the laws of the State of Delaware (the "Delaware Fund"),
              and by (y) FIMI Israel Opportunity Fund, Limited Partnership,
              a limited partnership, registered in Israel (the "Israeli
              Fund" and, collectively with the Delaware Fund, the "Fund");
              and

WHEREAS,      on the date hereof,  (a) TATOP and the Company are entering
              into (i) a Share Purchase Agreement (the "SPA") pursuant to
              which TATOP will purchase from the Company, at the Closing,
              857,143 Ordinary Shares of the Company;  (ii) a Credit Line
              Agreement (the "Credit Line Agreement"), in the form
              attached to the SPA; and (iii) a Warrant Agreement (the
              "Warrant Agreement") in the form attached to the SPA; and
              (b) two Engagement Agreements (the "Engagement Agreements")
              have been signed between the Company and each of Shlomo
              Ostersetzer ("Ostersetzer") and Dov Zeelim ("Zeelim"). This
              Agreement, together with the Credit Line Agreement, the
              Warrant Agreement and the Engagement Agreements shall be
              referred to herein as the "Investment Agreements".


WHEREAS,      the Parties wish to set forth the terms and conditions
              relating to their relationship as shareholders of the
              Company, which terms and conditions shall automatically come
              into effect as of the Closing; and

WHEREAS,      the Investment  Agreements will become effective upon the
              consummation of the Closing as such term is defined in the
              SPA.

NOW, THEREFORE, in consideration of the mutual promises contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Parties hereto agree that during the Term
(as defined in Section 12 hereunder)

<PAGE>

Shareholders Agreement

the following provisions will apply:

1.   Board of Directors of the Company
     ---------------------------------

      The Shareholders shall vote all of the Ordinary Shares of the Company,
      nominal value NIS 0.90 each (the "Ordinary Shares") now or hereafter owned
      or controlled by them (including without limitation, Ordinary Shares owned
      by them upon exercise of any options or warrants to purchase Ordinary
      Shares or upon conversion of any other convertible securities of the
      Company), whether beneficially or otherwise held by them, for the election
      to the Company's Board of Directors (the "Board") of: (i) three members
      (of whom at least one shall qualify as an "Independent Director" as such
      term is defined under the rules applicable to companies listed on the
      Nasdaq) who shall be designated by TATOP and (ii) six members (including
      the two External Directors, as such term is defined in the Companies
      Law-1999 (the "Companies Law"), that shall be designated by TAT
      Industries.

      The designating Party shall consult the other Party regarding the
      nomination of any new Director; provided, however, that the final decision
      with respect to the designation shall be made by the designating party and
      the other party shall vote for such designee.

      Subject to applicable law and the Company's Articles of Association, the
      Party designating a Director shall also be entitled, from time to time, to
      designate another person to replace such director; provided, however, that
      TATOP may not replace the Independent Director more frequently than once a
      year (unless such replacement is due to death or incapacity of the
      Independent Director).

      For the avoidance of doubt, no Shareholder, or any officer, director,
      shareholder or employee of such Shareholder, makes any representation or
      warranty as to the fitness or competence of the designee to the Board by
      virtue of its execution of this Agreement or by voting in accordance with
      the provisions of this Agreement. Each Shareholder (and the directors
      designated by it) shall be solely responsible for the compliance of its
      designee(s) with the requirements of applicable law relating to director's
      competency (including, without limitations, the provisions of Sections
      226, 227 and 228 of the Companies Law).

      It is hereby clarified that the Management Fee payable to TATOP in
      accordance with the provisions of the SPA shall cover any and all
      remuneration (excluding out-of-pocket expenses) due to the Directors
      designated by TATOP to the Board and the boards of directors of the
      Company's subsidiaries but does not include reimbursement of expenses or
      remuneration due to the Independent Director appointed by TATOP, who shall
      be entitled to the same reimbursement of expenses or remuneration as shall
      be payable to the Company's External Directors.

2.   Board of Directors of TAT's Subsidiaries.
     -----------------------------------------

      The Shareholders shall direct the Directors designated by them (to the
      extent permitted by applicable law) to cause the Board to appoint at least
      one (1) director designated by TATOP to the board of directors of the
      Company's US subsidiary, LIMCO Airepair, Inc., and of any other
      subsidiaries controlled or which shall be controlled by the Company.

                                       2


<PAGE>

Shareholders Agreement

3.   Chief Executive Officer of the Company ("CEO"); Chairman of the Board.
     ----------------------------------------------------------------------

      The Parties acknowledge that Ostersetzer is currently the Company's
      Chairman of the Board and CEO and Zeelim is Vice Chairman of the Board and
      the Company's President and Chief Operating Officer.

      TATOP's prior written consent (which consent shall not be unreasonably
      withheld) shall have to be obtained prior to the replacement of any of the
      above-mentioned positions, provided, however, that such consent shall not
      be required for the appointment of Zeelim as Chairman of the Board; and,
      provided, further, that (i) Zeelim may not serve both as the CEO and
      Chairman of the Board, and (ii) in the event that TATOP rejects the third
      consecutive CEO candidate proposed by TAT Industries Isaac Forrer of
      Ernst&Young shall be appointed to determine whether or not TATOP's consent
      to such candidates and any subsequent candidates was unreasonably
      withheld.

4.   Executive Committee
     -------------------

      The Shareholders shall direct the Directors designated by them (to the
      extent permitted by applicable law) to cause the Board to form an
      Executive Committee (the "Executive Committee"), which shall be comprised
      of four members (of which one member shall be one of the directors
      designated by TATOP). The Executive Committee shall convene at least twice
      a month. For the avoidance of doubt it is hereby clarified that the
      Executive Committee may not bind the Company in any way.

5.   Voting Undertaking; Amendment of Interested Party Transactions; Restriction
     on Sale of Company's Shares; Technology Transfer Agreement.
     -----------------------------------------------------------


     5.1
         5.1.1    To the extent required, TAT Industries hereby irrevocably
                  undertakes to vote in favor of the approval of the SPA and all
                  ancillary agreements attached thereto (including, but not
                  limited to, the Warrant Agreement, the Credit Line Agreement
                  and the Registration Rights Agreement (as such terms are
                  defied therein)) in the General Meeting of Shareholders of the
                  Company.

          5.1.2.  No amendment to the terms or conditions of the engagement of,
                  or other compensation to, Ostersetzer or Zeelim or any
                  affiliates thereof other than immaterial amendments which are
                  applied "across the board" to all other senior employees of
                  the Company, shall be effected without TATOP's prior written
                  consent.

           5.1.3  TAT Industries hereby irrevocably waives, during the Term of
                  this Agreement, any and all rights which it may have to
                  receive payments from the Company in connection with the
                  Know-How arrangement described in footnote 18(9)(3) of TAT
                  Industries' financial statements for the fiscal year 2002.

                  Furthermore, TAT Industries hereby irrevocably undertakes that
                  the amounts due to the Company under the service arrangement
                  between TAT Industries and the Company set forth in the
                  Transfer Agreement between TAT Industries and the

                                        3

<PAGE>

Shareholders Agreement

                  Company dated February 10, 2000, and all other terms and
                  conditions of such services arrangement shall remain
                  unchanged. For the avoidance of doubt, TAT Industries hereby
                  irrevocably undertakes not to exercise its right under Section
                  11.7 of the Transfer Agreement to terminate such services
                  arrangement and TATOP undertakes not to cause the Company to
                  terminate such services arrangement. The foregoing
                  undertakings shall remain in effect until the earlier to occur
                  of (i) the termination of the Term of this Agreement, (ii) the
                  date on which TAT Industries ceases to be a public company
                  (as such term is defined in the Companies Law), or (iii)
                  TAT Industries ceases to be in Control (as such term is
                  defined in the Companies Law) of the Company.

 5.2. (i) TATOP shall be prohibited from selling or otherwise transferring
      (except to its Permitted Transferees (as defined herein)) more than an
      aggregate of 150,000 Ordinary Shares of the Company during the first two
      years following the Closing (the "Lock-Up Period").

      (ii) TAT Industries shall be prohibited from selling or otherwise
      transferring (except to its Permitted Transferees (as defined herein)) any
      Ordinary Shares of the Company during the Lock-Up Period; provided,
      however, that should Ostersetzer and/or Zeelim transfer to TAT Industries
      their right to sell shares of the Company (pursuant to that certain letter
      delivered by them to TATOP on the Effective Date and attached hereto as
      Exhibit 5.2), then TAT Industries shall be permitted to sell such number
      of Company shares covered by the transferred right, all upon the terms and
      conditions more fully set forth in said letter.


      It is hereby clarified that any permitted sale of Company's Shares
      according to this section 5.2 shall not be subject to the other Party's
      rights of First Offer and/or Tag Along under section 7 below.

6.   Discussions Prior to Meetings.
     ------------------------------

     Subject to the provisions of applicable law, the Shareholders shall meet
     regularly and in any event prior to each meeting of the Board of Directors
     of the Company and General Meeting of Shareholders of the Company and will
     review, discuss and attempt to reach a unified position with respect to
     principal issues on the agenda of each such meeting such as approval of
     TAT's annual budget, any merger or acquisition, sale of all or
     substantially all of the Company's assets, granting of stock options,
     creation of any debt (other than in the ordinary course of business),
     distribution of dividends, etc.

7.   Right of First Offer; Tag-Along
     -------------------------------

      (a) Following the termination of the Lock-Up Period under Section 5.2
      above, if a Party (the "Selling Party") wishes to sell or otherwise
      transfer Ordinary Shares of the Company (the "Offered Shares"), it shall
      be required to first make an offer to the other Party (the "Offeree"), as
      set forth below.

      (b) The Selling Party shall send the Offeree a written offer (the "Offer")
      in which the Selling Party shall specify the following information: (i)
      the number of Offered Shares that the Selling Party proposes to sell or
      transfer; (ii) a representation and warranty that the Offered Shares shall
      be, at the time of their transfer, free and clear of Encumbrances; (iii)
      the minimum price in United States dollars (the "Minimum Price") that the
      Selling Party is

                                       4

<PAGE>

Shareholders Agreement

      prepared to receive for the Offered Shares in an immediate cash payment
      transaction; and (iv) whether the Selling Party intends to sell the
      Offered Shares by means of a "market trade". The Offer shall constitute an
      irrevocable offer made by the Selling Party to sell to the Offeree the
      Offered Shares all upon the terms specified in the Offer (including the
      Minimum Price and the Payment Term Threshold) or, in the case TATOP is the
      Offeree, to have such Offeree participate in such sale, all upon the terms
      applicable to the Selling Party pursuant to the provisions of sub-section
      (e) below.

      (c) The Offeree may notify the Selling Party in writing (the "Response")
      within 14 days of receipt of the Offer that it wishes to purchase all (but
      not less than all) of the Offered Shares upon the terms specified in the
      Offer. If the Offeree does not deliver the Response the Offeree shall be
      deemed to have notified the Selling Party that it does not wish to buy the
      Offered Shares.

      (d) If the Offeree delivers a Response in accordance with the above
      provisions, the Offered Shares shall become the property of the Offeree
      and shall be delivered to the Offeree against payment of the consideration
      as specified in the Offer. . The closing of such sale shall take place by
      no later than 10 business days following the delivery of the Response. If
      the Offeree does not deliver such Response, then the Selling Party may
      sell the Offered Shares to any third party, provided that such sale is
      consummated (i) within a 45 day period, (ii) at a price that is not lower
      than that the Minimum Price, and (iii) if the Offer provides that the sale
      shall have to be effected by means of "market trade", the Offered Shares
      will be sold only via market trade.

      (e) If TATOP is the Offeree, and it does not deliver a Response, but
      wishes to sell its Ordinary Shares together with the Offered Shares
      intended to be sold by T.A.T. Industries, TATOP shall, during such 14 day
      period, have the right to notify T.A.T. Industries that it is exercising
      its Tag Along Right pursuant to this sub-section (e) (the "Tag Along
      Notice"). Following the Tag Along Notice, TATOP shall add to the Ordinary
      Shares to be sold by T.A.T. Industries to a purchaser (the "Proposed
      Purchaser") that number of Ordinary Shares which bears the same ratio to
      the total number of Ordinary Shares held by TATOP, as the ratio that the
      number of Offered Shares bears to T.A.T. Industries' total number of
      Ordinary Shares on the date that the Offer Notice is delivered, and upon
      the same terms and conditions under which T.A.T. Industries' Ordinary
      Shares shall be sold. In the event that TATOP exercises its rights
      hereunder, T.A.T. Industries must either (i) add such Ordinary Shares to
      the Offered Shares being sold by it or (ii) at its sole discretion, reduce
      the number of Ordinary Shares that it proposes to sell, in which case,
      T.A.T. Industries and TATOP will contribute the identical portion of
      Ordinary Shares relative to their total shareholdings in the Company on
      the date the Offer Notice was delivered.

      Notwithstanding the foregoing, without derogating from TAT Industries'
      Right of First Offer, during the first five years following the Closing,
      TATOP shall give TAT Industries the Tag-Along right described above in the
      event that TATOP sells the Offered Shares, at a price per share that is
      greater than US$23.00 (which price shall be subject to adjustment for
      share splits, issuance of bonus shares or combinations of shares).

      (f) Notwithstanding the foregoing, the provisions of this Section 7 shall
      not apply (i) to any transfer of Ordinary Shares by a Shareholder to its
      Permitted Transferees (as defined below),

                                       5
<PAGE>

Shareholders Agreement

      provided that any such Permitted Transferee shall acknowledge in writing
      that it agrees to be bound by the provisions of this Agreement, as if it
      were an original party to this part of the Agreement and, provided,
      further, that FIMI 2001 Ltd. shall remain the exclusive representative
      with respect to any Permitted Transferee of TATOP or (ii) to the transfer
      of Ordinary Shares by a banking institution or holders of debentures that
      have been issued by a Shareholder to the public or to "institutional
      bodies" following the realization of a pledge, if any, over Ordinary
      Shares held by the Shareholder.

      For purposes of this Agreement, the term "Permitted Transferee" shall
      mean:

               (a) with respect to TATOP, (i) its partners, (ii) the
      shareholders or partners (as applicable) of such partners, (iii) any
      entity controlled by, controlling, or under common control with TATOP or
      FIMI 2001 Ltd., or (iv) a banking institution for the benefit of which a
      pledge was created over the Ordinary Shares of the Company held by TATOP;
      provided, that in the case of (i), (ii) and (iii) above, such transferees
      are solely and irrevocably represented by FIMI 2001 Ltd. pursuant to an
      irrevocable power of attorney for all purposes of this Agreement; and

                (b) with respect to TAT Industries, (i) to any of Ostersetzer or
      Zeelim, their holding companies or their immediate family members (i.e.
      spouses, children and the children's spouses), or (ii) an entity
      controlled by, or under common control with or controlling TAT Industries;
      or (iii) to TAT Industries' shareholders, if TAT Industries resolves to
      distribute its entire holdings in the Company to its shareholders,
      provided that the controlling holders of TAT Industries' shares shall
      acknowledge in writing that they agree to be bound by the provisions of
      this Agreement; or (iv) a banking institution or TAT Industries' security
      holders (including as a result of a public offering) for the benefit of
      which a pledge was created over the Ordinary Shares of the Company held by
      TAT Industries.

                (c) Notwithstanding the foregoing, except in connection with a
      transfer to a Permitted Transferee, a transaction or a series of
      transactions involving the sale of interests in TATOP and/or shares in
      TA-TEK following which the Fund beneficially holds less than 50% of the
      aggregate interests in both TATOP and TA-TEK, will be deemed as an offer
      of all the Ordinary Shares held by TATOP at a Minimum Price equal to the
      average closing price in NASDAQ during the last 30 trading days prior to
      the above change of holding.

                (d) Except with respect to the transfer of Ordinary Shares to
      Permitted Transferees, and without derogating from the provisions and
      rights contained herein, the Shareholders' rights under this Agreement may
      not be assigned to transferees without the consent of the other
      Shareholder.

8.   Drag Along.
     ----------

      Notwithstanding anything to the contrary set forth in this Agreement, in
      the event that a Shareholder (the "Selling Shareholder") secures a bona
      fide offer (the "Acquisition Offer") from any third party (the "Drag-Along
      Acquirer ") to purchase all of the Ordinary Shares held by such Selling
      Shareholder (and it is hereby clarified that for purposes of this Section
      8 it shall also include the holdings of its Permitted Transferees) for
      immediately available funds, at a price per Ordinary Share of at least US$
      23.00 (the "Drag Along PPS"), and the Drag-Along Acquirer conditions the
      Acquisition Offer on the acquisition of

                                       6

<PAGE>

Shareholders Agreement

      all the Ordinary Shares held at such time by the other Shareholder (the
      "Drag-Along Party" which, for purposes of this Section 8 shall include
      also the holdings of its Permitted Transferees), the Selling Shareholder
      shall provide the Drag Along Party with written notice together with a
      copy of the Acquisition Offer (the "Drag Along Notice") and the Drag Along
      Party will be required to either (i) sell all of the Ordinary Shares then
      held by it to the Drag-Along Acquirer, at the same price and upon the same
      terms and conditions as those to which the sale by the Selling Shareholder
      is subject under the Acquisition Offer, provided that the sale of all the
      Ordinary Shares of the Selling Shareholder and the Drag Along Party shall
      be consummated by no later than 90 days following the receipt of the Drag
      Along Notice and, provided, further, that the Drag Along Party shall not
      be required to make any representations or warranties, except for
      customary representations regarding authorization and good and marketable
      title to the shares being sold; or (ii) provide the Selling Shareholder
      with written notice (the "Notice Extension") informing the Selling
      Shareholder that it wishes to receive an Extension (the "Extension"). In
      the event that an Extension Notice is delivered to the Selling
      Shareholder, the Drag Along Shareholder shall be required, by no later
      than three months following the receipt of the Drag Along Notice, to
      arrange for the sale of all of the Ordinary Shares held by the Selling
      Shareholder at a price per share that is not lower than the Drag Along
      PPS, and under terms and conditions that are no less favorable to the
      Selling Shareholder than those set forth in the Acquisition Offer or (b)
      acquire, upon the termination of such three month period, the Ordinary
      Shares then held by the Selling Shareholder, at a price per share equal to
      the Drag Along PPS and upon terms and conditions no less favorable than
      those set forth in the Acquisition Offer.

      The Drag-Along PPS shall be adjusted for share splits, issuance of bonus
      shares, or combinations of shares. No other adjustments (for dividend
      distributions, market conditions or for any other reason) shall be made to
      the Drag Along PPS.


9.   Purchase of Additional Company Shares by TATOP
     ----------------------------------------------

    TATOP hereby undertakes that without obtaining TAT Industries' prior
    written consent, it and the Affiliated Entities (as defined below) shall
    not, at any time during the term of this Agreement, purchase additional
    shares of the Company (including by exercise of the Warrant under the
    Warrant Agreement) such that its total holdings by TATOP and the Affiliated
    Entities would exceed 35% of TAT's issued and outstanding share capital.
    This undertaking refers to holdings by the following entities (the
    "Affiliated Entities"): TA-TEK, the Fund (including, for the purpose of
    clarity, the Delaware Fund and the Israeli Fund), FIMI 2001 Ltd., the
    Managing General Partner of the Fund and any non public entity controlled by
    each of them. For purposes of this Agreement, the terms "holding" and
    "control" shall have the meaning ascribed to such term in Section 1 of the
    Companies Law (which refers to the definition set forth in the Israeli
    Securities Law - 1968).


10.  Dividend Distribution.
     ----------------------

      Subject to applicable law, during the term of this Agreement, the
      Shareholders agree to direct the Directors designated by them (to the
      extent permitted by applicable law) to cause the Company to distribute
      annual dividends in an aggregate amount of at least 40% of the Company's
      profits (as determined under Section 302(b) of the Companies Law) for each

                                        7
<PAGE>

Shareholders Agreement

      relevant year. The Shareholders' internal agreement under this Section 10
      shall not be deemed to constitute a dividend policy of the Company.
      Furthermore, the Shareholders may, by mutual consent, modify the foregoing
      agreement between the Parties regarding dividend distributions without
      being obligated to substantiate or explain any such modification to any
      third party.

11.  The Investment Agreements.
     --------------------------

      TAT Industries hereby agrees to vote all of the Ordinary Shares owned or
      controlled by it, whether beneficially or otherwise held by it, in order
      to cause the Company to adopt the Investment Agreements (excluding this
      Agreement, which requires the approval of the General Meeting of TAT
      Industries' Shareholders under the Israeli law). The Shareholders hereby
      agree to vote all of the Ordinary Shares owned or controlled by them,
      whether beneficially or otherwise held by them, in order to comply or, to
      the extent applicable, to cause the Company to comply, with the provisions
      and undertakings more fully set forth in the Investment Agreements.

12.  Term.
     ----

      This Agreement shall remain in effect until the seventh anniversary of the
      Closing ("the Term"); provided, however, that during the Term, TAT
      Industries may terminate this Agreement without liability, by providing
      TATOP with written notice, at any time following the date on which TATOP
      (together with its Permitted Transferees) holds less than 500,000 Ordinary
      Shares and TATOP may terminate this Agreement without liability by
      providing TAT Industries with written notice, as of the date on which TAT
      Industries (together with its Permitted Transferees) holds less than
      1,500,000 Ordinary Shares. The number of Ordinary Shares set forth in this
      Section 12 shall be adjusted for any share splits, issuance of bonus
      shares and combinations of shares.

      It is hereby clarified that following the expiry of the Term or upon the
      prior termination of this Agreement, neither Party shall be bound by any
      of the provisions herein.


13   Miscellaneous.
     -------------

     13.1. Notices. All notices required or permitted hereunder to be given
           to a party pursuant to this Agreement shall be in writing and
           shall be deemed to have been duly given to the addressee thereof
           (i) if hand delivered, on the day of delivery, (ii) if given by
           facsimile transmission, on the business day on which such
           transmission is sent and confirmed, (iii) if given by air
           courier, five business days following the date it was sent or
           (iv) if mailed by registered mail, return receipt requested, two
           business days following the date it was mailed, to such party's
           address as set forth below or at such other address as such party
           shall have furnished to each other party in writing in accordance
           with this provision:

           If to TAT Industries:  TAT Industries Ltd. Industrial Zone, Yasur,
           Gedera, 70700

                                       8
<PAGE>

Shareholders Agreement

           PO Box. 80 (70750)

           With a copy to:   J. Zaltzman & Co.
                             6 Hahilazon Street, Ramat-Gan 52522
                             Facsimile: 03-6111801
                             Attn: Adv. J. Zaltzman

            If to TATOP:     c/oTA-TEK, its general partner
                             c/o FIMI 2001 Ltd.
                             "Rubinstein House"
                             37 Petach Tikva Road
                             Tel: 03-5652244
                             Fax: 03-5652245

           With a copy to:   Sharon A. Amir
                             Nascitz, Brandes & Co.
                             5 Tuval Street, Tel-Aviv 67897
                             Israel
                             Tel:03-6235073/76
                             Fax:03-6235021

or to such other address as the parties may from time to time designate in
writing.

     13.2.        Waiver. Any waiver hereunder must be in writing, duly
                  authorized and signed by the party to be bound, and shall be
                  effective only in the specific instance and for the purpose
                  for which it was given. No failure or delay on the part of any
                  Shareholder in exercising any right, power or privilege under
                  this Agreement shall operate as a waiver thereof, 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.

     13.3.        Entire Agreement. This Agreement, together with the Investment
                  Agreements (as defined in the TAT Purchase Agreement) and the
                  exhibits and the documents furnished by the parties hereto in
                  connection with the transactions contemplated herein
                  constitute the entire agreement among the parties hereto and
                  supersede any other agreement that may have been made or
                  entered into by any person relating to the transactions
                  contemplated by this Agreement.

     13.4.        Amendments This Agreement may be amended or modified in whole
                  or in part only by a duly authorized written agreement that
                  refers to this Agreement and is signed by the parties hereto.

     13.5.        Limitations on Rights of Third Parties. Nothing expressed or
                  implied in this Agreement is intended or shall be construed to
                  confer upon or give any person or entity (including the
                  Company and its other shareholders) other than the
                  Shareholders and their Permitted Transferees, any rights or
                  remedies under this Agreement.


                                       9
<PAGE>


Shareholders Agreement


                  This Agreement shall not inure to the benefit of, and shall
                  not be enforceable by, any person or entity (including but not
                  limited to the Company) that is not a Party hereto.

     13.6.        Captions The captions in this Agreement are inserted for
                  convenience of reference only and shall not be considered a
                  part of or affect the construction or interpretation of any
                  provision of this Agreement.

     13.7.        Counterparts. This Agreement may be executed in counterparts
                  and by facsimile signature, each of which shall be deemed an
                  original, but all of which together shall constitute one and
                  the same instrument.

     13.8.        Governing Law This Agreement shall be governed by, and
                  construed and enforced in accordance with, the laws of the
                  State of Israel. Any dispute arising under or with respect to
                  this Agreement shall be resolved exclusively in the
                  appropriate court in Tel Aviv, Israel.

     13.9.        Further Assurances The parties hereto shall execute and
                  deliver such additional documents and shall take such
                  additional actions (including without limitation procuring
                  such resolutions or regulatory approvals) as may be reasonably
                  necessary or appropriate to effect the provisions and purposes
                  of this Agreement and the consummation of the transactions
                  contemplated hereby.

     13.10.       Severability . If any provision of this Agreement is held by a
                  court of competent jurisdiction to be invalid, illegal or
                  unenforceable, the validity, legality and enforceability of
                  the remaining provisions shall not in any way be affected,
                  impaired or invalidated thereby.

     13.11.       Assignment. Except to the extent expressly permitted herein,
                  each Party may not assign any portion of its respective
                  rights, duties or obligations under this Agreement to any
                  other person, without the prior written consent of the other
                  Party.


IN WITNESS WHEREOF, the Shareholders shall have each caused this Agreement to be
duly executed as of the date first above written.



TAT Industries Ltd.
By________________________
Name______________________
Title_______________________


TATOP, Limited Partnership

By: TA-TEK Ltd., its general partner
By:_______________________
Name_____________________

Title______________________



                                       10
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.6
<SEQUENCE>5
<FILENAME>ex4_6.txt
<DESCRIPTION>REGISTRATION RIGHTS AGREEMENT DATED 4/15/04
<TEXT>

                                                                     EXHIBIT 4.6





                         REGISTRATION RIGHTS AGREEMENT


                                  by and among

                              TAT Technologies Ltd.

                                       and

                           TA-TOP, Limited Partnership





                                  JUNE 15, 2004




                                        1

<PAGE>



                          REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this "Agreement") is made as of the 15th day
of June,  2004, by and among:  (i) TAT  Technologies  Ltd. (the  "Company"),  an
Israeli  company  whose shares are traded on Nasdaq,  and (ii)  TA-TOP,  Limited
Partnership  (including its Permitted  Traansferees and Assignees (as such terms
are defined below), the "Investor"),  a limited  partnership wholly owned by (x)
TA-TEK Ltd., an Israeli private company,  wholly owned by FIMI Opportunity Fund,
L.P., a limited partnership formed under the laws of the State of Delaware,  and
by (y) FIMI Israel Opportunity Fund, Limited Partnership, a limited partnership,
registered in Israel ("FIMI").


                                   WITNESSETH:

WHEREAS,  the Investor is the holder of 857,143  Ordinary Shares of the Company,
nominal value NIS 0.90 and certain  warrants to purchase  Ordinary Shares of the
Company,  nominal  value NIS 0.90,  constituting  an aggregate of  approximately
15.5% of the Company's issued share capital.

WHEREAS,  the  Investor  and the  Company  desire to set forth  certain  matters
regarding  the  registration  rights of the  shares of the  Company  held by the
Investor.

NOW, THEREFORE,  in consideration of the mutual promises and covenants set forth
herein, the parties hereby agree as follows:

1.   DEFINITIONS; EFFECT OF AGREEMENT.

     Definitions.  As used  herein,  the  following  terms  have  the  following
     meanings:

     "Commission" means the United States Securities and Exchange Commission, or
     any other federal agency at the time administering the Securities Act.

     "Control" means direct or indirect ownership of more than 50% of the equity
     or voting  capital of an entity,  or  possession  of the right and power to
     direct the policy and management of such entity.

     "Form  F-3" means Form F-3 under the  Securities  Act,  as in effect on the
     date hereof or any registration  form under the Securities Act subsequently
     adopted by the Securities and Exchange Commission (the "SEC") which permits
     inclusion or incorporation of substantial information by reference to other
     documents filed by the Company with the SEC.

     "Holder" means any holder of Registrable Shares.


                                        2

<PAGE>






     "Ordinary  Shares" means the Ordinary Shares of the Company,  par value NIS
     0.90, subject to a Reclassification Event.

     "Permitted  Transferee" shall mean a person or entity which receives shares
     pursuant  to the  transfer  of all or any of the  shares  held  by  TA-TOP,
     Limited  Partnership  (the  "Transferor")  to: (i) its  partners,  (ii) the
     shareholders or partners (as applicable) of such partners, (iii) any entity
     controlled  by,  controlling,  or under  common  control  with  either such
     Transferor or FIMI 2001 Ltd., or (iv) a banking institution for the benefit
     of which a pledge was created over the Ordinary  Shares of the Company held
     by TA-TOP, Limited Partnership; provided, that in the case of (i), (ii) and
     (iii) above,  such  transferees  are solely  represented  by FIMI 2001 Ltd.
     pursuant  to an  irrevocable  power of  attorney  for all  purposes of this
     Agreement.

     "Person" means an individual,  fund, company,  unincorporated  association,
     trust,  joint  venture,  governmental  agency,  or  other  entity,  whether
     domestic or foreign.

     "Reclassification   Event"  means  any  share  combination  or  subdivision
     (split),  bonus  shares  or any  other  recapitalization  of the  Company's
     shares.

     "Register",   "registered"  and  "registration"  refer  to  a  registration
     effected  by  filing  a  registration  statement  in  compliance  with  the
     Securities Act and the declaration or ordering by the SEC of  effectiveness
     of such registration statement.

     "Registrable  Shares"  means  Ordinary  Shares held by the Investor and its
     Permitted  Transferees,  any bonus shares and share dividends  payable with
     respect to such shares,  and Ordinary Shares of the Company which hereafter
     may  be  purchased  or  acquired  by  the  Investor.   Notwithstanding  the
     foregoing,  Registrable  Shares  shall not  include  otherwise  Registrable
     Shares (i) sold to or through a broker or dealer or underwriter in a public
     distribution  or a public  securities  transaction,  or (ii) which could be
     disposed  of,  under  applicable  law,  within  three  (3)  months  without
     registration, pursuant to Rule 144.

     "Rule 144" shall mean Rule 144 under the Securities Act or any successor or
     similar rule as may be enacted by the Commission from time to time.


     "Securities  Act"  means  the  United  States  Securities  Act of 1933,  as
     amended.

2.   INCIDENTAL REGISTRATION.

     2.1. If, at any time the Company proposes to register any of its securities
          for itself (the "Company's Securities") or for any other person, other
          than (a) in a registration  under Section 3 of this Agreement or (b) a
          registration on Form S-8 or Form F-4, the Company shall give notice to
          the Investor of such  intention,  at least 20 days prior to the filing
          of the  registration  statement in connection with such  registration.
          Upon the written request of the Investor given within ten (10)


                                        3

<PAGE>






          days after  receipt of any such notice,  the Company  shall include in
          such   registration   (subject  to  Section  2.2  below)  all  of  the
          Registrable Shares indicated in such request of the Investor, so as to
          permit the disposition of the shares so requested.

     2.2. Notwithstanding any other provision of this Section 2, if the managing
          underwriter  selected by the Company or the initiating person, if any,
          advises  the  Company in  writing  that in its  opinion  the number of
          securities  requested to be included in such registration  exceeds the
          number that can be sold in such offering without  adversely  affecting
          such underwriter's  ability to effect an orderly  distribution of such
          securities or  materially  affecting  the  contemplated  price of such
          securities, the Company will include in such registration:  (i) first,
          the  Company's  Securities;  (ii)  second,  the number of  Registrable
          Shares requested to be included by the Investor,  which in the opinion
          of such underwriter, can be sold.

3.   DEMAND REGISTRATION.

     3.1. At any time the  Investor  may request in writing  that all or part of
          its Registrable  Shares shall be registered  under the Securities Act.
          Thereafter, the Company shall, as promptly as practicable,  and in any
          event within 3 (three) months of the written  request of the Investor,
          make  best  reasonable  efforts  to  effect  the  registration  of all
          Registrable  Shares  indicated in the written request by the Investor,
          and any related  qualification or compliance,  on the form customarily
          used for such purposes (a "Demand").

     3.2. Following  the date  hereof,  the  Investor  shall be  entitled  to an
          aggregate of two (2) Demands.

     3.3. Notwithstanding any other provision of this Section 3, no Demand shall
          be  binding  on  the  Company  if:  (i)  the  Company  has  filed  any
          registration  statement for the registration of its equity  securities
          (other than on a form S-8 or similar registration for employee shares)
          within the  previous  one hundred and twenty  (120) days,  or (ii) the
          anticipated proceeds from the sale of the shares to be included in the
          Registration   is  less  than  Five  Million   United  States  Dollars
          ($5,000,000).  In  addition,  if  the  Company  shall  furnish  to the
          Investor a certificate  signed by the Chief  Executive  Officer of the
          Company  stating  that,  in the good  faith  judgment  of the Board of
          Directors,   it  would  be   detrimental   to  the  Company  for  such
          registration  statement to be filed and it is  therefore  essential to
          defer the filing of such  registration  statement,  the Company  shall
          have the right to defer such  filing for a period of not more than one
          hundred  and eighty  (180) days  after  receipt of the  request of the
          Investor (the "Delay  Period").  The Company  agrees that it shall not
          file any other registration statement on behalf of itself or any other
          party during such Delay Period.


                                        4




<PAGE>


     3.4. Any  registration  proceeding  begun  pursuant  to Section 3.1 that is
          subsequently  withdrawn at the request of the Investor shall not count
          toward the quota of Demands  set forth in Section  3.2 above,  if such
          withdrawal is based upon material adverse information  relating to the
          Company or its  condition,  business and prospects  which is different
          from that generally known to the Investor at the time of its request.

     3.5. Notwithstanding any other provision of this Section 3, if the Investor
          advises the Company , in writing,  that in the managing  underwriter's
          opinion  the number of  securities  requested  to be  included in such
          registration  exceeds  the  number  that can be sold in such  offering
          without adversely  affecting such  underwriter's  ability to effect an
          orderly  distribution of such  securities or materially  affecting the
          contemplated  price of such  securities,  the Company  will include in
          such  registration  the number of Registrable  Shares requested by the
          Investor to be included that, in the opinion of such underwriters, can
          be sold, in the registration.

     3.6. F-3 Registration.  In any case that the Company shall receive from the
          Investor  a written  request or  requests  that the  Company  effect a
          registration on Form F-3 and any related  qualification  or compliance
          with respect to  Registrable  Shares where the  aggregate net proceeds
          from the sale of  Registrable  Shares equal to at least three  million
          United States Dollars  ($3,000,000)  and the Company shall be entitled
          to effect such  registration  under  applicable law, the Company shall
          effect such registration and all such  qualifications  and compliances
          as may be so requested and as would permit or facilitate  the sale and
          distribution  of all such  Registrable  Shares as are specified in the
          request; provided, however, that the Company shall not be obligated to
          effect any such registration,  qualification,  or compliance, pursuant
          to this Section 3.6 if the Company has, within the eighteen (18) month
          period  preceding the date of such request,  already  effected one (1)
          registration for the Investor pursuant to this Section 3.6.

          The  Company  undertakes  that it  will,  once  having  qualified  for
          registration  on Form F-3,  use its best  efforts  to comply  with all
          necessary  filings  and  other  requirements  so as to  maintain  such
          qualification for a period of two (2) years.

     3.7. Black Out Periods. At any time when a registration  statement effected
          hereunder  relating to Registrable  Shares is effective,  upon written
          notice from the Company to the Investor that either:  (i) the Board of
          Directors of the Company,  in its reasonable  judgment,  resolves that
          the Investor's sale of Registrable Shares pursuant to the registration
          statement  would  adversely  interfere  with  any  major  acquisition,
          corporate  reorganization or other similar  transaction  involving the
          Company (a "Transaction Blackout"); or (ii) the Company determines, in
          the good faith  judgment of the general  counsel of the Company,  that
          the Investor's sale of Registrable Shares pursuant to the


                                        5

<PAGE>



          registration   statement   would   require   disclosure   of  material
          information  that the  Company  has a bona fide  business  purpose for
          preserving  as  confidential  or the  Company is unable to comply with
          Commission  requirements  and that such disclosure will be detrimental
          to the Company (an  "Information  Blackout");  then the Investor shall
          suspend  sales of  Registrable  Shares  pursuant to such  registration
          statement  until the earlier of: (A) (1) in the case of a  Transaction
          Blackout,  the earliest of (a) one month after the  completion of such
          acquisition,  corporate  reorganization or other similar  transaction;
          (b)  promptly  after  abandonment  of  such   acquisition,   corporate
          reorganization  or other similar  transaction;  and (c) 120 days after
          the date of the Company's written notice of Transaction  Blackout;  or
          (2) in the case of an  Information  Blackout,  the  earlier of (a) the
          date upon which such material  information  is disclosed to the public
          or ceases to be  material;  and (b) 120 days after the  Company  makes
          such  good  faith  determination,  and (B)  such  time as the  Company
          notifies  the  Investor  that  sale  pursuant  to  such   registration
          statement may be resumed.

4.   DESIGNATION OF UNDERWRITER.

     4.1. In the case of any registration effected pursuant to Section 3, should
          the  offering be  underwritten,  the Company  and the  Investor  shall
          confer as to the selection of a managing underwriter. Should they fail
          to reach agreement, the selection shall be made by the Investor.

     4.2. In the case of any registration initiated by the Company under Section
          2,  the  Company  shall  have  the  right to  designate  the  managing
          underwriter in any underwritten offering.

5.   EXPENSES.

     All expenses incurred in connection with any registration  under Sections 2
     or 3 shall be borne by the Company;  provided,  however,  that the Investor
     shall pay its pro rata portion of the discounts or  commissions  payable to
     any underwriter and shall bear its own attorney's fees and disbursements.

6.   INDEMNIFICATION AND CONTRIBUTION.

     In the event of any registered offering of Ordinary Shares pursuant to this
     Agreement:

     6.1. The Company will  indemnify and hold  harmless,  to the fullest extent
          permitted by law, the Investor participating in a registration and any
          underwriter  who  participates  as an underwriter  in such  registered
          offering,  and each person,  if any, who controls the Investor or such
          underwriter,  from and against any and all  losses,  damages,  claims,
          liabilities,  joint or  several,  costs and  expenses  (including  any
          amounts paid in any settlement effected with the Company's


                                        6

<PAGE>



          prior written  consent) to which the Investor or any such  underwriter
          or  controlling  person may become  subject  under  applicable  law or
          otherwise,  insofar as such losses, damages,  claims,  liabilities (or
          actions or  proceedings in respect  thereof),  costs or expenses arise
          out of or are based upon (i) any untrue  statement  or alleged  untrue
          statement of any material fact contained in the registration statement
          or included in the prospectus, as amended or supplemented, or (ii) the
          omission or alleged omission to state therein a material fact required
          to be stated therein or necessary to make the statements  therein,  in
          the light of the circumstances in which they are made, not misleading,
          and the Company will reimburse the Investor,  any underwriter and each
          such controlling  person of the Investor or the underwriter,  promptly
          upon demand,  for any reasonable legal or any other expenses  incurred
          by them in  connection  with  investigating,  preparing  to  defend or
          defending against or appearing as a third-party  witness in connection
          with such  loss,  claim,  damage,  liability,  action  or  proceeding;
          provided,  however,  that the Company  will not be liable  towards the
          Investor, the underwriter or controlling person to the extent that any
          such loss,  damage,  liability,  cost or  expense  arises out of or is
          based  upon an  untrue  statement  or  omission  in such  registration
          statement  or  prospectus  so  made  in  conformity  with  information
          furnished to the Company in writing by the Investor,  such underwriter
          or such controlling persons  specifically for use in such registration
          statement;  provided, further, that this indemnity shall not be deemed
          to relieve any  underwriter  of any of its due diligence  obligations;
          provided,  further,  that the  indemnity  agreement  contained in this
          Section 6.1 shall not apply to amounts paid in  settlement of any such
          claim,  loss,  damage,  liability  or  action  if such  settlement  is
          effected  without the consent of the Company,  which consent shall not
          be  unreasonably  withheld.  Such indemnity shall remain in full force
          and effect regardless of any investigation made by or on behalf of the
          Investor,   the   underwriter  or  any   controlling   person  of  the
          underwriter,  and  regardless  of any  sale in  connection  with  such
          offering by the Investor. Such indemnity shall survive the transfer of
          securities by a Holder but in no event shall the Company pay more than
          once in  respect of any loss,  damage,  claim or  liability;  or (iii)
          indemnification  of the  Investor  against  any  violation  or alleged
          violation  by the Company of the  Securities  Act of 1933,  Securities
          Exchange Act of 1934 or the state  securities  laws of individual U.S.
          states.

     6.2. The Investor  participating in a registration  will indemnify and hold
          harmless  the  Company,  any  underwriter  for the  Company,  and each
          person, if any, who controls the Company or such underwriter, from and
          against any and all losses,  damages,  claims,  liabilities,  costs or
          expenses  (including any amounts paid in any settlement  effected with
          the Investor's  consent) to which the Company or any such  controlling
          person and/or any such underwriter may become subject under applicable
          law or otherwise, insofar as such losses, damages, claims,


                                        7

<PAGE>



          liabilities (or actions or proceedings in respect  thereof),  costs or
          expenses  arise out of or are  based on (i) any  untrue  statement  or
          alleged  untrue  statement  of  any  material  fact  contained  in the
          registration  statement or included in the  prospectus,  as amended or
          supplemented,  or (ii)  the  omission  or  alleged  omission  to state
          therein a material fact required to be stated  therein or necessary to
          make the  statements  therein,  in the light of the  circumstances  in
          which they were made, not misleading,  and the Investor will reimburse
          the Company,  any underwriter and each such controlling  person of the
          Company or any underwriter,  promptly upon demand,  for any reasonable
          legal  or  other  expenses   incurred  by  them  in  connection   with
          investigating,  preparing to defend or defending  against or appearing
          as a third-party witness in connection with such loss, claim,  damage,
          liability, action or proceeding; in each case to the extent; provided,
          however,  that the  Investor  shall be liable in any such case only to
          the extent  that any such  loss,  damage,  liability,  cost or expense
          arises out of or is based upon an untrue statement or omission in such
          registration  or  prospectus  made in strict  conformity  with written
          information  furnished to the Company by the Investor specifically for
          use in such registration statement;  and provided,  further, that this
          indemnity shall not be deemed to relieve any underwriter of any of its
          due diligence obligations;  and provided,  further, that the indemnity
          agreement  contained  in this  Section  6.2 shall not apply to amounts
          paid in  settlement  of any such claim,  loss,  damage,  liability  or
          action if such  settlement  is  effected  without  the  consent of the
          Investor,  as the case may be, which consent shall not be unreasonably
          withheld.  In any event, the  indemnification  obligations  under this
          Section 6.2 shall not exceed the net proceeds received by the Investor
          pursuant to the public offering.

     6.3. Promptly  after  receipt  by an  indemnified  party  pursuant  to  the
          provisions of Sections 6.1 or 6.2 of notice of the commencement of any
          action  involving  the  subject  matter  of  the  foregoing  indemnity
          provisions,  but in any event no fewer  than ten (10) days  before the
          date  designated in such notice as the date by which an answer must be
          served (or such  extension  thereof,  provided  that the extension has
          been  granted in writing by the  plaintiff  and that no  admission  or
          consent to jurisdiction or other waiver has been granted or implied by
          the request for such an extension),  such indemnified party will, if a
          claim thereof is to be made against the indemnifying party pursuant to
          the  provisions  of said  Sections  6.1 or 6.2,  promptly  notify  the
          indemnifying party of the commencement thereof. In case such action is
          brought against any indemnified party and it notifies the indemnifying
          party of the commencement  thereof,  the indemnifying party shall have
          the right to  participate  in,  and,  to the extent  that it may wish,
          jointly  with any other  indemnifying  party  similarly  notified,  to
          assume the defense  thereof with counsel  reasonably  satisfactory  to
          such indemnified party;  provided,  however, that if the defendants in
          any action  include both the  indemnified  party and the  indemnifying
          party and there is a conflict of interests which would


                                        8




<PAGE>



          prevent counsel for the indemnifying  party from also representing the
          indemnified  party,  the  indemnified  party or parties shall have the
          right to select one separate  counsel to participate in the defense of
          such  action on behalf of such  indemnified  party or  parties.  After
          notice from the indemnifying  party to such  indemnified  party of its
          election so to assume the defense thereof, the indemnifying party will
          not be liable to such indemnified  party pursuant to the provisions of
          said Sections 6.1 or 6.2 for any legal or other  expense  subsequently
          incurred  by such  indemnified  party in  connection  with the defense
          thereof,  unless (i) the indemnified party shall have employed counsel
          in accordance with the provision of the preceding  sentence,  (ii) the
          indemnifying   party  shall  not  have  employed  counsel   reasonably
          satisfactory  to the  indemnified  party to represent the  indemnified
          party within a reasonable time after the notice of the commencement of
          the action and within 15 days after written notice of the  indemnified
          party's  intention to employ separate counsel pursuant to the previous
          sentence,   or  (iii)  the  indemnifying   party  has  authorized  the
          employment of counsel for the indemnified  party at the expense of the
          indemnifying party. No indemnifying party will consent to entry of any
          judgment  or enter into any  settlement  which does not  include as an
          unconditional  term thereof the giving by the claimant or plaintiff to
          such  indemnified  party of a release from all liability in respect to
          such claim or litigation.

     6.4. Contribution.   If  for  any  reason  the   foregoing   indemnity   is
          unavailable, or is insufficient to hold harmless an indemnified party,
          then the  indemnifying  party shall  contribute  to the amount paid or
          payable by the indemnified  party as a result of such losses,  claims,
          damages,  liabilities  or  expenses  (i)  in  such  proportion  as  is
          appropriate  to  reflect  the  relative   benefits   received  by  the
          indemnifying  party on the one hand and the  indemnified  party on the
          other from the  registration  or (ii) if the  allocation  provided  by
          clause (i) above is not  permitted  by  applicable  law, or provides a
          lesser  sum to the  indemnified  party  than  the  amount  hereinafter
          calculated,  in such  proportion as is appropriate to reflect not only
          the relative  benefits  received by the indemnifying  party on the one
          hand and the  indemnified  party on the  other  but also the  relative
          fault of the indemnifying  party and the indemnified  party as well as
          any other  relevant  equitable  considerations.  No  person  guilty of
          fraudulent  misrepresentation  (within the meaning of Section 11(f) of
          the Securities Act) shall be entitled to contribution  from any person
          who was not guilty of such fraudulent misrepresentation.

7.   OBLIGATIONS OF THE COMPANY.

     Whenever  required under this Agreement to effect the  registration  of any
     Registrable Shares, the Company shall, as expeditiously as possible:


                                        9

<PAGE>





     7.1. (i)  prepare  and file  with  the SEC a  registration  statement  with
          respect to such  Registrable  Shares and use its best efforts to cause
          such registration statement to become effective, (ii) upon the request
          of the Investor , keep a registration  statement  effective  until the
          earlier  of (i)  the  distribution  contemplated  in the  Registration
          Statement has been completed, and (ii) the termination of 24 months.

     7.2. prepare and file with the SEC such  amendments and supplements to such
          registration statement and the prospectus used in connection with such
          registration  statement as may be reasonably  necessary to comply with
          the provisions of the  Securities Act with respect to the  disposition
          of all Registrable Shares covered by such registration statement.

     7.3. furnish  to  the  Investor  a  copy  of the  prospectus,  including  a
          preliminary  prospectus,  in conformity  with the  requirements of the
          Securities Act, and such other documents as it may reasonably  request
          in order to facilitate the disposition of Registrable  Shares owned by
          it.

     7.4. in the  event of any  underwritten  public  offering,  enter  into and
          perform its obligations under an underwriting  agreement, in usual and
          customary  form, with the managing  underwriter of such offering.  The
          Investor shall also enter into and perform its obligations  under such
          an agreement.

     7.5. notify  the  Investor  holding  Registrable  Shares  covered  by  such
          registration  statement at any time when a prospectus relating thereto
          is required to be delivered  under the Securities Act of the happening
          of any  event as a result  of which the  prospectus  included  in such
          registration   statement,  as  then  in  effect,  includes  an  untrue
          statement  of a  material  fact or  omits  to  state a  material  fact
          required  to be stated  therein or  necessary  to make the  statements
          therein  not  misleading  in  the  light  of  the  circumstances  then
          existing.

     7.6. cause all  Registrable  Shares  registered  pursuant  hereunder  to be
          listed on the securities  exchange on which similar  securities issued
          by the Company are then listed.

     7.7. provide a transfer  agent and  registrar  for all  Registrable  Shares
          registered  pursuant  hereunder  and  a  CUSIP  number  for  all  such
          Registrable  Shares, in each case not later than the effective date of
          such registration.

     7.8. take such  action as is  required  under the  securities  laws of such
          states of the United States as the Investor shall reasonably  request;
          provided,  however,  that the Company shall not be required to qualify
          to do  business  as a  foreign  corporation,  or to file  any  general
          consent to service of process, in any state.


                                       10



<PAGE>



     7.9. furnish to the Investor,  should the Investor request  registration of
          Registrable  Shares pursuant to this Agreement,  on the date that such
          Registrable  Shares  are  delivered  to the  underwriters  for sale in
          connection  with a registration  pursuant to this  Agreement,  if such
          securities are being sold through underwriters, or, if such securities
          are  not  being  sold  through  underwriters,  on the  date  that  the
          registration   statement  with  respect  to  such  securities  becomes
          effective,   (i)  an  opinion,   dated  such  date,   of  the  counsel
          representing  the Company for the  purposes of such  registration,  in
          form and  substance  as is  customarily  given to  underwriters  in an
          underwritten public offering,  addressed to the underwriters,  if any,
          and to the  Investor  and  (ii) a letter  dated  such  date,  from the
          independent  certified public accountants of the Company,  in form and
          substance as is  customarily  given by  independent  certified  public
          accountants  to  underwriters  in  an  underwritten  public  offering,
          addressed to the underwriters, if any, and to the Investor.

8.   CONDITIONS TO REGISTRATION OBLIGATIONS.

     The  Company  shall  not  be  obligated  to  effect  the   registration  of
     Registrable  Shares pursuant to this Agreement unless the Investor consents
     to the following conditions:

     8.1. conditions  requiring the Investor to comply with all applicable  laws
          (including  Israeli law, to the extent  applicable,  the provisions of
          the Securities Act and the Securities and Exchange Act (including, but
          not limited to, the prospectus delivery requirements of the Securities
          Act),  and to furnish to the Company  information  about sales made in
          such public offering;

     8.2. conditions  prohibiting  the Investor upon receipt of  telegraphic  or
          written  notice from the Company that it is required by law to correct
          or update the  registration  statement or  prospectus  from  effecting
          sales of the  Registrable  Shares until the Company has  completed the
          necessary correction or updating; and

     8.3. conditions  prohibiting the sale of Registrable Shares by the Investor
          during  the  process  of  the  registration   until  the  Registration
          Statement is effective.

9.   ASSIGNMENT OF REGISTRATION RIGHTS.

     The  Investor  may  assign  its  rights to cause the  Company  to  register
     pursuant  to this  Agreement  all or part of its  Registrable  Shares  to a
     purchaser of at least 20% of the Ordinary Shares (each, an "Assignee") held
     by the  Investor  (i.e.  no more than  five  Assignees)  or to a  Permitted
     Transferee if such person would hold such shares as  restricted  securities
     and would not be able to dispose of such shares under Rule 144 within three
     months from the date of such sale. The transferor shall, within twenty (20)
     days after such  transfer,  furnish the Company with written  notice of the
     name and address


                                       11




<PAGE>



     of  such   transferee  and  the  securities  with  respect  to  which  such
     registration  rights  are  being  assigned,  and the  transferee's  written
     agreement to be bound by this Agreement.

10.  LOCK-UP AND OTHER REQUIREMENTS OF THE INVESTOR.

     In any  registration  of the Company's  shares  pursuant to Sections 2 or 3
     above,  the  Investor  agrees that any sales of  Registrable  Shares may be
     subject to a "lock-up" period  restricting such sales for up to one hundred
     and  eighty  (180)  days,  and the  Investor  will  agree  to abide by such
     customary "lock-up" period of up to one hundred and eighty (180) days as is
     required by the  underwriter  in such a  registration  and further agree to
     execute such further  documents as may be required by the  underwriters  to
     effectuate such "lock-up". In addition, the Investor may not participate in
     any  underwritten  registration  hereunder unless such person (i) agrees to
     sell such  person's  securities  on the  basis  provided  in any  customary
     underwriting  arrangements  and (ii) provides any relevant  information and
     completes and executes all questionnaires, powers of attorney, indemnities,
     underwriting  agreements,  and other documents  required under the terms of
     such underwriting arrangements.

11.  RULE 144.

     The Company shall:

     11.1. Make and keep  available  adequate  current public  information  with
          respect to the Company  within the  meaning of Rule  144(c)  under the
          Securities Act (or similar rule then in effect);

     11.2. Furnish to the Investor  forthwith upon request one of the following,
          at the  discretion  of the  Company  (i) a  written  statement  by the
          Company as to its compliance  with the  informational  requirements of
          Rule  144(c)  (or  similar  rule then in effect) or (ii) a copy of the
          most recent annual or quarterly report of the Company; and

     11.3. Use its best efforts to comply with all other  necessary  filings and
          other  requirements  so as to enable the Investor  and any  transferee
          thereof to sell Registrable Shares under Rule 144 under the Securities
          Act (or similar rule then in effect).





                                       12

<PAGE>



12.  OTHER REGISTRATION RIGHTS

     The  Company  shall not  grant  registration  rights  with  respect  to any
     securities  of the Company to any Person  that are equalor  superior to the
     registration  rights  granted to the Investor  pursuant to this  Agreement,
     except with the written consent of the Investor.

13.  MISCELLANEOUS

     13.1. Further  Assurances.  Each of the parties  hereto shall  perform such
          further acts and execute such further  documents as may  reasonably be
          necessary to carry out and give full effect to the  provisions of this
          Agreement and the intentions of the parties as reflected thereby.

     13.2. Governing Law; Jurisdiction. This Agreement shall be governed by, and
          construed  in  accordance  with,  the  laws of the  State  of  Israel;
          provided, however, that with respect to maters specifically related to
          the  federal  securities  laws pf the United  States,  such laws shall
          govern.  All disputes  arising  under this  Agreement or in connection
          with the transactions  hereunder shall be resolved between the parties
          in good faith.  If the parties hereto fail to agree within twenty (20)
          days after a party shall have requested such Arbitration,  the parties
          shall select an arbitrator,  by mutual agreement. The proceedings will
          take place in Tel-Aviv,  Israel.  The arbitrator shall not be bound by
          any judicial  rules of evidence or procedure but shall be bound by the
          substantive  law of the State of Israel and will have to elaborate the
          grounds of his/her  decision.  The  arbitral  award shall be final and
          binding upon the parties,  and judgment  upon the award may be entered
          in any court having  jurisdiction,  or application may be made to such
          Court  for a  judicial  acceptance  of the  award  or for an  order of
          enforcement, as the case may be.

     13.3. Successors and Assigns;  Subject to the provisions  contained in this
          Agreement, the provisions hereof shall inure to the benefit of, and be
          binding  upon,  the  successors,   assigns,  heirs,   executors,   and
          administrators of the parties hereto. None of the rights,  privileges,
          or  obligations  set forth  in,  arising  under,  or  created  by this
          Agreement  may be assigned or  transferred,  except as  expressly  set
          forth in this Agreement.

          Without derogating from the provisions of the previous  paragraph,  no
          assignment  or transfer  under this  Section 13.3 shall be made unless
          the transferee  agrees to be bound by all agreements  binding upon the
          transferor immediately prior to such transfer.

     13.4. Entire  Agreement.  This  Agreement  constitutes  the full and entire
          understanding  and  agreement  between the parties  with regard to the
          subject matter hereof.


                                       13



<PAGE>



     13.5. Amendments.  Any  term of this  Agreement  may be  amended  with  the
          written consent of the Investor and the Company.

     13.6. Section  Headings;  Preamble.  All article and section  headings  are
          inserted  for  convenience  only and  shall not  modify or affect  the
          construction or interpretation of any provision of this Agreement. The
          preamble  to this  Agreement  is  incorporated  herein  and  forms  an
          integral part of this Agreement.

     13.7. Communications.  All notices or other communications  hereunder shall
          be in writing and shall either be given in person,  sent by registered
          mail (registered  international  air mail if mailed  internationally),
          sent by an  overnight  courier  service  which  obtains a  receipt  to
          evidence delivery, or transmitted by facsimile  transmission (provided
          that written  confirmation of receipt is provided),  to the last known
          address of the  addressee or to such other address as such party shall
          notify the others in writing.  All  notices  and other  communications
          delivered in person or by courier service shall be deemed to have been
          given as of three business days after sending thereof,  those given by
          facsimile   transmission  shall  be  deemed  given  twenty-four  hours
          following transmission,  and all notices and other communications sent
          by registered mail (or air mail if the posting is international) shall
          be deemed given ten (10) days after posting.

     13.8. Delays or  Omissions.  No delay or omission  to  exercise  any right,
          power,  or remedy  accruing  to any party  upon any  breach or default
          under this  Agreement,  shall be deemed a waiver of any such breach or
          default.  Any  waiver,  permit,  consent,  or  approval of any kind or
          character on the part of any party of any breach or default under this
          Agreement, or any waiver on the part of any party of any provisions or
          conditions  of  this  Agreement,  must  be in  writing  and  shall  be
          effective only to the extent  specifically  set forth in such writing.
          All  remedies,  either  under this  Agreement  or by law or  otherwise
          afforded  to  any  of  the  parties,   shall  be  cumulative  and  not
          alternative.

     13.9. Severability.  If any provision of this  Agreement is held by a court
          of competent  jurisdiction to be  unenforceable  under applicable law,
          then such  provision  shall be excluded  from this  Agreement  and the
          remainder of this Agreement  shall be interpreted as if such provision
          were so  excluded  and shall be  enforceable  in  accordance  with its
          terms;  provided,  however, that in such event this Agreement shall be
          interpreted so as to give effect,  to the greatest  extent  consistent
          with and permitted by applicable  law, to the meaning and intention of
          the excluded provision as determined by arbitration.

     13.10.  Counterparts.  This  Agreement  may be  executed  in any  number of
          counterparts,   each  of  which  shall  be  deemed  an  original   and
          enforceable  against the parties actually  executing such counterpart,
          and  all  of  which  together  shall   constitute  one  and  the  same
          instrument.

                                       14

<PAGE>



IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first
hereinabove set forth.



TAT TECHNOLOGIES LTD.
By____________________
Name
Title

TA-TOP, Limited Partnership
By____________________
Name:
Title



                                       15

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.7
<SEQUENCE>6
<FILENAME>ex4_7.txt
<DESCRIPTION>CREDIT LINE AGREEMENT DATED 6/15/04
<TEXT>


                                                                     EXHIBIT 4.7


TAT Credit Line Agreement


                              CREDIT LINE AGREEMENT
                              ---------------------

This Credit Line Agreement (the "Agreement") is made as of the 15th day of June,
2004 BY AND BETWEEN

(1) TAT  Technologies  Ltd. (the  "Company"),  an Israeli public company,  whose
shares are traded on Nasdaq, having its registered office at the Industrial Zone
Yasur, Gedera, Israel; and

(2) TA-TOP, Limited Partnership ("TATOP")  (Registration Number:  550216964),  a
limited  partnership  wholly  owned by (x) TA-TEK Ltd.,  the General  Partner of
TATOP, an Israeli private company,  wholly owned by FIMI Opportunity Fund, L.P.,
a limited partnership formed under the laws of the State of Delaware, and by (y)
FIMI  Israel  Opportunity  Fund,  Limited  Partnership,  a limited  partnership,
registered in Israel (the "Opportunity Fund").

                                     RECITAL
                                     -------

WHEREAS, the Company has requested that TATOP make available to the Company, and
TATOP has agreed to make available to the Company, a line of credit (the "Credit
Line"),  all upon the terms and  conditions  more fully set forth herein,  which
Credit Line shall come into effect as of the Closing (as such term is defined in
that certain Share Purchase  Agreement (the "SPA"))  entered into by the Company
and TATOP on the date hereof).

     THEREFORE, in consideration of the foregoing, the parties,  intending to be
legally bound, agree as follows:

1.   CREDIT LINE
     -----------

Upon the terms and subject to the  conditions set forth in this Agreement and on
the basis of the  representations  and  warranties  set forth in the SPA  (which
representations  and  warranties  shall  survive the Closing and shall remain in
effect  until the  second  anniversary  of the  Closing on which date they shall
expire and be of no force and effect for all intents and purposes, including for
the purpose of this  Agreement.  TATOP agrees to make  available to the Company,
effective  as of the  Closing  Date (as such term us  defined  in the SPA),  the
Credit Line, all upon the following terms and conditions:

     (i)  General.  The  aggregate  amount of Credit Line  provided by TATOP and
available  to be drawn upon by the Company  shall be US$2  million  (the "Credit
Amount").

     (ii) Single  Installment.  The Company shall be entitled to draw any amount
up to the Credit Amount in a one-time single installment. The amount to be drawn
(the "Loan"),  shall be in the amount set forth in the Disbursement  Request (as
defined  below)  and shall be  delivered  to TATOP,  against  the  receipt  of a
non-assignable  note (the "Note")  executed by the Company to the order of TATOP
only, in the form attached hereto as Exhibit A.




<PAGE>


                                        2


TAT Credit Line Agreement


Notwithstanding  anything to the  contrary  contained  herein,  no amount may be
drawn on the Credit Line if: (a) one or more of the Events of Default  described
in Section  3(a) below has  occurred;  or (b) the average  closing  price of the
Company's  Ordinary  Shares as recorded  on the Nasdaq  over the 90  consecutive
trading days prior to the Request Date (as defined below) is lower than US$5.00,
or (c) the closing  price of the  Company's  Ordinary  Shares as recorded on the
NASDAQ at any time during the 30  consecutive  trading days prior to the Request
Date is lower than US$2.06.

For the  avoidance  of  doubt,  it is  hereby  underlined  that  this  Agreement
constitutes a binding and,  except as expressly  set forth  herein,  independent
obligation (including, but not limited to, the obligation to provide the Loan at
the request of the Company in  accordance  with the terms  contained  herein) of
TATOP enforceable against TATOP, and shall not be affected by whether or not, at
any time, TATOP holds any shares of the Company or the circumstances  (including
in the financial markets) will be changed for any reason. TATOP. may not set off
or hold the Credit Amount for any reason.

     (iii) Disbursement Request. The Loan shall be made available to the Company
by no later than 14 business days  following the date on which TATOP  receives a
written  disbursement  request (the  "Disbursement  Request")  from the Company,
which  request  shall state the amount  which the Company  elects to borrow from
TATOP,  provided that such amount shall not be less than  US$1,000,000 and shall
not exceed the Credit  Amount.  The date on which such  Disbursement  Request is
delivered to TATOP shall be referred to herein as the "Request Date".

The Disbursement Request may be delivered to TATOP by no later than 14 business
days prior to the termination of the Availability Period (as defined below).

     (iv)  Credit  Line Term.  The  Credit  Line will be made  available  to the
Company as of the  Closing and for a period of 54 months  following  the Closing
(the "Availability Period"); provided, however, that upon the making of the Loan
in  accordance  with the  Disbursement  Request,  any balance of the Credit Line
remaining and not drawn upon shall be terminated and,  provided,  further,  that
the Company may, at any time during the Availability  Period, by providing TATOP
with a 30-day prior written notice, (a) terminate the Credit Line, or (b) reduce
the Credit Line (provided that, unless terminated,  the Credit Line shall remain
in an amount of at least US$1  million),  in which  cases,  the Credit  Line Fee
(described  below) shall be reduced,  effective as of the actual  termination of
the 30 day period set forth above.

     (v) Loan Term. The term of the Loan shall commence on the date on which the
Loan is actually granted to the Company (the "Loan Date") and shall terminate at
the end of the sixty six (66) month period following the date of the Closing.

     (vi)  Interest.  The annual rate of interest shall be fixed at 5% and shall
be compounded  annually on the outstanding  principal of the Loan as of the Loan
Date and until payment in full of the outstanding principal of the Loan pursuant
to the provisions  contained  herein.  Interest on the Loan shall be computed on
the basis of a 365-day year.

     (vii) Payment of Interest.  Interest  shall be paid on the last day of each
quarter, commencing as of the Loan Date, with each payment being supplemented by
applicable value added tax against delivery of a tax invoice.





<PAGE>


                                        3


TAT Credit Line Agreement


     (viii)  Payment of  Principal.  Subject to the Event of Default  provisions
described  below, the principal amount of the Loan shall be repaid in four equal
installments  in equal  intervals  (subject to the following  provisos) over the
period  commencing on the Loan Date and  terminating at the end of the sixty six
month  period  following  the date of the  Closing;  provided  that no return of
principal  shall be due  before  the  termination  of 30  months  following  the
Closing; and provided,  further, that the first installment shall not become due
and payable  prior to the first  anniversary  of the Loan Date and the remaining
three  installments  shall be paid in equal intervals with the last  installment
being payable upon the termination of the aforementioned sixty six month period.

     (ix)  Prepayment.  On each interest  payment date,  the Company may prepay,
without  incurring  any  penalty or charge  amounts  due on account of the Loan;
provided, however, that each prepayment amount shall be in an amount of at least
US$100,000,  and  provided  further  that the Company has given TATOP an advance
written  notice of each such  prepayment  by no later than 30 days prior to such
interest payment date.

     (x) Currency; Manner of Payment. The delivery of the Loan to the Company by
TATOP and all payments that are to be paid to TATOP by the Company,  pursuant to
this Agreement,  shall be paid in US Dollars.  Payment to be made to TATOP shall
be  transferred  to TATOP's bank  account,  as shall be designated by TATOP from
time to time in a written notice delivered by TATOP to the Company.  The Company
shall make such payments to such bank account by  initiating  such payments on a
banking  day,  before  11.00  a.m.,  Israel  time,  by  bank  wire  transfer  in
immediately available funds, marked for attention as indicated.

     (xi)  Credit Line Fee. As of the Closing and for so long as the Credit Line
is  outstanding,  the  Company  shall  pay  TATOP  a fee  equal  to  0.5% of the
outstanding  Credit  Amount per annum  (subject to reduction  during the year in
accordance with the provisions of sub-Section (iv) above). The first Credit Line
Fee  shall be paid at the  Closing  and  shall  apply  to the  first  full  year
following the Closing.  Thereafter,  upon each  anniversary of the Closing,  the
Credit Line Fee shall be paid in advance  with respect to the annual (or, on the
fifth   anniversary,   the   semi-annual)   period   commencing  on  such  date.
Notwithstanding  the above,  should the Company elect to reduce the Credit Line,
in accordance  with the provisions of sub-Section  (iv) above,  then TATOP shall
promptly  reimburse  the Company  for the surplus  Credit Line Fee that had been
paid for the period after the reduction becomes effective.


2.   FINANCIAL COVENANT OF THE COMPANY FOLLOWING THE CLOSING
     -------------------------------------------------------

2.1. Financial Covenant.  As of the Closing and for so long as either the Credit
     Line or the Loan (if provided) is outstanding,  the shareholders' equity of
     the Company (the  "Equity")  shall not be less than US$25 million and shall
     not  represent  less than 50% of the  "total  assets" of the  Company  (the
     "Financial  Covenants");  provided,  however,  that (i) any decrease in the
     Equity  resulting from a one-time  deduction or the deduction over a period
     of time of goodwill (or any different accounting term which may at the time
     apply  to  what is  currently  referred  to as  "goodwill")  following  the
     consummation  by the Company or any of its  subsidiaries  of any investment
     transaction  (involving  the  acquisition of securities or assets) or other
     similar transaction approved by



<PAGE>


                                       4


TAT Credit Line Agreement


     one of the  directors  designated by TATOP to the Board of Directors of the
     Company (excluding,  for the avoidance of doubt, the Independent Director),
     and (ii) any deduction for accounting  purposes resulting from the issuance
     of the  Warrant  under the  Warrant  Agreement  (as  defined in the SPA) to
     TATOP, shall correspondingly reduce the number and the percentage set forth
     in this financial covenant.

2.2. Non-Compliance  with  Financial  Covenant.   If,  based  on  the  Company's
     financial  statements for the respective  year or quarter,  as the case may
     be, the Company does not comply with the Financial  Covenants,  then unless
     the  Company,  within  60 days  following  the  release  of the  applicable
     financial  statements  (and, in the event the Loan is  outstanding,  during
     which period, a Default Notice (as defined below) shall have been delivered
     to the Company in accordance with the provisions of Section 3(c) below) (i)
     raises  sufficient  funds from its  shareholders  or from third  parties or
     takes such other reasonable actions to cure such  non-compliance,  and (ii)
     provides TATOP with a letter from the Company's  auditors  confirming  that
     the actions taken by the Company have cured such  non-compliance,  the Loan
     (if previously  granted) and all amounts accrued thereon may be declared by
     a 10 day written notice  immediately  due and payable and, if not yet cured
     during such 10 days, will be callable by the Company.

2.3  For the  purpose  of  clarity  it is hereby  clarified  that the  Company's
     non-compliance with the Financial  Covenants,  which is not be cured by the
     Company in accordance  with the  provisions  set forth in Section 2.2 above
     shall  not  grant  TATOP.  any  right or  relief  under  applicable  law or
     agreement  other  than the  right of  acceleration  of all  amounts  due on
     account of the Loan, as more fully set forth in Section 2.2 above.

2.4. For purposes of this Section 2, the Company's Equity and total assets shall
     be determined  based on the  Company's  consolidated  financial  statements
     which  (i)  with  respect  to  the  Company's  annual,   audited  financial
     statement, will be prepared in accordance with United States GAAP, and (ii)
     with respect to the Company's  quarterly  unaudited but reviewed  financial
     statements, will be prepared in accordance with Israeli GAAP.

3.   EVENTS OF DEFAULT AND REMEDIES THEREFOR
     ---------------------------------------

     (a)  Events of Default.  Any one or more of the following shall  constitute
          an "Event of Default" as the term is used herein:

          (1)  Any default in the payment of  principal  or interest on the Loan
               when  due,  which  default  shall  continue  for more than 5 days
               following the delivery of written notice by TATOP to the Company.

          (2)  The Company is generally not paying its debts as they become due,
               or makes an assignment of its substantial  assets for the benefit
               of creditors,  or applies for or consents to the appointment of a
               trustee or receiver for or over all the assets of the Company



<PAGE>


                                        5


TAT Credit Line Agreement


               or a substantial part thereof.

          (3)  Any  representation  or warranty made or furnished by the Company
               in the SPA,  including in all Exhibits and schedules  thereto and
               documents referred to in the Exhibits and schedules  thereto,  is
               found to be untrue in any material  respect (which,  for purposes
               of this Agreement shall be deemed to refer to claims of aggregate
               damages to TATOP of at least US$500,000) as of the date set forth
               above and the date of the Closing; provided,  however, that as of
               the second anniversary of the Closing, this Section 3(a)(3) shall
               be terminated and shall no longer have any force and effect;

          (4)  A Liquidator, trustee or receiver is appointed for or over all of
               the assets of the Company or a  substantial  part  thereof and is
               not discharged within 90 days after such appointment; or

          (5)  Liquidation,  reorganization,  arrangement,  insolvency  or other
               similar  proceeding  under the  Companies  Law for the  relief of
               debtors,  is  instituted  by  or  against  the  Company  and,  if
               instituted  against  the  Company,  is  consented  to or  is  not
               dismissed within 90 days of such institution.

     (b)  Notice  to TATOP.  When any  Event of  Default  described  in  Section
          3(a)(other than an Event of Default  described in Section 3(a)(1)) has
          occurred,  the Company  shall give TATOP a written  notice within five
          business days of its becoming aware such event.

     (c)  Acceleration  of  Maturities.  When any Event of Default  described in
          Sections  3(a)(1)  through  3(a)(3),  inclusive,  of Section  3(a) has
          happened and is continuing,  TATOP may, by notice in writing (which in
          the case of an Event of Default described in Section 3(a)(3) shall not
          be less than 14 days)  (the  "Default  Notice")  sent to the  Company,
          declare the Loan due and payable,  without any additional presentment,
          demand,  protest or other notice of any kind,  all of which are hereby
          expressly waived.

          When any  Event  of  Default  described  in  3(a)(4)  or  3(a)(5)  has
          occurred,  then the Loan  shall  immediately  become  due and  payable
          without  presentment,  demand or notice of any kind,  all of which are
          hereby expressly  waived.  Upon the Loan becoming due and payable as a
          result  of any  Event  of  Default  as  aforesaid,  the  Company  will
          forthwith  pay to TATOP all  principal of and interest  accrued on the
          Loan,  together  with  applicable  value  added tax,  if any,  against
          delivery of a tax invoice.

          Such amounts  shall be  supplemented  by additional  interest  accrued
          thereon  at an  annual  rate of 3% from  the date  when  the  Event of
          Default has occurred and until the payment date. Neither any course of
          dealing  on the part of TATOP nor any delay or  failure on the part of
          TATOP to exercise any right shall operate as a waiver of such right or
          otherwise  prejudice TATOP' rights,  powers and remedies.  The Company
          further



<PAGE>


                                        6


TAT Credit Line Agreement


          agrees,  to the extent  permitted by law, to pay TATOP all  reasonable
          expenses incurred by it in the  implementation  of its rights,  powers
          and remedies under this Section 3.

4.   MISCELLANEOUS
     -------------

     (a)  Exhibits. The Exhibits attached to this Agreement constitute a part of
          this Agreement.  They are  incorporated  herein by reference and shall
          have the same  force  and  effect  as if set forth in full in the main
          body of this Agreement.

     (b)  Governing Law; Forum for Dispute  Resolution.  This Agreement shall be
          governed by the laws of the State of Israel. Any dispute arising under
          or with respect to this Agreement shall be resolved exclusively in the
          appropriate court in Tel Aviv, Israel.

     (c)  Notices.

          All notices  required or  permitted  hereunder  to be given to a party
          pursuant to this Agreement  shall be in writing and shall be deemed to
          have been duly given to the addressee  thereof (i) if hand  delivered,
          on the day of delivery,  (ii) if given by facsimile  transmission,  on
          the business  day on which such  transmission  is sent and  confirmed,
          (iii) if given by air courier, two business days following the date it
          was  sent  or  (iv) if  mailed  by  registered  mail,  return  receipt
          requested,  five  business days  following the date it was mailed,  to
          such  party's  address as set forth below or at such other  address as
          such party  shall  have  furnished  to each other  party in writing in
          accordance with this provision:

          if to the Company:  TAT Technologies Ltd.
                              Yasur Industries Zone , Gedera
                              PO. Box 80 70750
                              Tel: ____________________
                              Fax: ____________________

          With a copy to:     Adv. J. Zaltzman
                              J. Zaltzman & Co. 6 Hahilazon
                              Street, Ramat-Gan 52522 Facsimile:
                              03-6111801

          if to TATOP:        c/o Ta-Tek Ltd., as general partner of TATOP
                              c/o FIMI 2001 Ltd.
                              "Rubinstein House"
                              37 Petach Tikva Road
                              Tel: 03-5652244
                              Fax: 03-5652245

          With a copy to:     Sharon Amir, Adv.
                              Naschitz, Brandes & Co.


<PAGE>


                                        7


TAT Credit Line Agreement


                              5 Tuval Street
                              Tel-Aviv 67897
                              Israel
                              Facsimile: +972-3-623-5021

     Each party may from time to time  change the address or fax number to which
notices to it are to be  delivered or mailed  hereunder  by notice  delivered or
sent to the other party in  accordance  herewith;  provided,  however,  that any
notice of change of address shall be deemed effective only upon its receipt.

     (d)  Entire  Agreement.   This  Agreement   together  with  all  other  TAT
Transaction  Documents (as defined in the SPA)  constitute the entire  agreement
among the parties regarding the transactions contemplated herein, and may not be
amended except by written instrument, executed by both parties.

     (e)  Headings.  The  headings  contained in this  Agreement  are solely for
convenience  of  reference  and  shall not  affect  the  interpretation  of this
Agreement.

     (f)   Counterparts.   This  Agreement  may  be  executed  in  one  or  more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

     (g)  Assignment.  Except as set forth  below,  the parties  hereto will not
sell, assign,  transfer, or otherwise convey any of their rights or delegate any
of their duties under this Agreement. TATOP may not assign or otherwise transfer
the Note  (other  than  upon the  liquidation  or  dissolution  of TATOP) to its
Permitted  Transferee,  provided,  however that FIMI 2001 Ltd. shall continue to
represent the Permitted Transferees pursuant to an irrevocable power of attorney
until all amounts due on account of the Loan are repaid in full. For purposes of
this Agreement, and subject to the foregoing provisions, "Permitted Transferees"
shall  mean  (i)  TATOP's  partners,  (ii)  the  shareholders  or  partners  (as
applicable) of such partners, or (ii) any entity controlled by, controlling,  or
under common  control with TA-TEK Ltd.,  FIMI 2001 Ltd. or Mr. Ishay Davidi (for
so long as Mr. Davidi remains the CEO or equivalent position in Opportunity Fund
or any successor fund).

     (h) Delays or  Omissions;  Waiver.  No delay or omission  to  exercise  any
right,  power, or remedy accruing to either the Company or TATOP upon any breach
or default by the other party under this  Agreement  shall impair any such right
or  remedy  nor  shall it be  construed  to be a waiver  of any such  breach  or
default,  or any  acquiescence  therein  or in any  similar  breach  or  default
thereafter occurring.

     (i) Further Actions.  At any time and from time to time, each party agrees,
without further  consideration,  to take such actions and to execute and deliver
such documents as may be reasonably necessary to effectuate the purposes of this
Agreement.






<PAGE>



                                        8


TAT Credit Line Agreement


     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

TAT Technologies Ltd.
By:    _______________________
Name:  _______________________
Title: _______________________

TA-TOP, Limited Partnership
By:__________________________
Name:




<PAGE>



                                        9

TAT Credit Line Agreement
- -------------------------


To:  TAT Technologies Ltd.

Re:  Irrevocable Undertaking:

We, the undersigned,  FIMI Israel Opportunity Fund, Limited Partnership and FIMI
Opportunity Fund, L.P., hereby undertake, guarantee agree and be responsible for
the fulfillment by TATOP of its obligations under this Agreement,  including but
not limited to, its  obligation to make the Credit Line available and to provide
the Company with the Loan, if requested by the Company,  all in accordance  with
and subject to the terms and provisions of this Agreement.

For avoidance of any doubt it is hereby  clarified  that this  undertaking  will
survive the  liquidation or  dissolution  of TATOP.  for any reason or under any
circumstances.

FIMI Opportunity Fund, L.P
and
FIMI Israel Opportunity Fund, Limited Partnership

By: FIMI 2001 Ltd.
By:_______________________________
Ishay Davidi, CEO

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.8
<SEQUENCE>7
<FILENAME>ex4_8.txt
<DESCRIPTION>WARRANT AGREEMENT DATED JUNE 15, 2004
<TEXT>


                                                                     EXHIBIT 4.8

TAT Warrant Agreement


                                WARRANT AGREEMENT

THIS WARRANT  AGREEMENT (the  "Agreement"),  is made as of the 15th day of June,
2004 BY AND BETWEEN

(1)  TAT Technologies Ltd. ("TAT"), an Israeli public company,  whose shares are
     traded on Nasdaq; and

(2)  TA-TOP,  Limited Partnership  ("TATOP"), a limited partnership wholly owned
     by (x)  TA-TEK  Ltd.,  an Israeli  private  company,  wholly  owned by FIMI
     Opportunity Fund, L.P., a limited  partnership formed under the laws of the
     State  of  Delaware,  and by  (y)  FIMI  Israel  Opportunity  Fund  Limited
     Partnership, a limited partnership,  registered in Israel (the "Opportunity
     Fund").

WHEREAS

(a)  On the date hereof,  TAT and TATOP are entering  into (i) a Share  Purchase
     Agreement (the "SPA"),  pursuant to which TATOP shall purchase from TAT, at
     the Closing (as defined in the SPA) 857,143 Ordinary Shares of TAT, nominal
     value NIS 0.90 each,  and (ii) a Credit Line  Agreement  (the  "Credit Line
     Agreement"),  pursuant to which TATOP shall make  available to TAT a Credit
     Line (as defined  therein),  all subject to the terms and  conditions  more
     fully set forth therein.

(b)  In  connection  with the  foregoing,  TAT  agrees  to grant  TATOP,  at the
     Closing, a non-assignable Warrant (the "Warrant") to purchase up to 500,000
     Ordinary  Shares of TAT,  nominal  value NIS 0.90 per share  (the  "Warrant
     Shares"),  for an aggregate amount of US$ 4,250,000 (the "Warrant Amount"),
     all subject to the terms and conditions hereof.

Therefore,  in  consideration  of the  foregoing,  TAT and the TATOP,  for value
received, hereby agree as follows:

1.   Issue of Warrant.

1.1 General.  At the Closing (as defined in the SPA), TAT will authorize,  issue
and deliver to TATOP the Warrant to purchase the Warrant  Shares for the Warrant
Amount.

1.2 No Rights as  Shareholder.  Nothing  contained  in this  Agreement or in the
Warrant  shall,  prior to an  exercise  thereof,  as  stipulated  hereunder,  be
construed as  conferring  upon TATOP or its  Permitted  Transferees  (as defined
below) any rights as a shareholder of TAT,  including  (without  limitation) the
right to vote, receive  dividends,  consent or receive notices in respect of any
meeting  of  shareholders  for the  election  of  directors  of TAT or any other
matter.  For purposes of this  Agreement,  "Permitted  Transferees"  shall mean:
TATOP's  partners  or the  shareholders  or  partners  (as  applicable)  of such
partners, or any entity solely and irrevocably



<PAGE>

TAT Warrant Agreement

controlled by TA-TEK Ltd., FIMI 2001 Ltd. or by Mr. Ishay Davidi (for so long as
Mr. Davidi  remains the CEO or equivalent  position in  Opportunity  Fund or any
successor fund).

2.   Exercise; Exercise Price.

     (a) The  Exercise  Price  per  each  Warrant  Share  shall be  US$8.5  (the
"Exercise Price"), subject to the adjustments set forth below.

     (b) TATOP may exercise the Warrant, in whole or in part (provided that each
exercise shall be of at least 25,000  Warrant Shares (the "Minimum  Quantity")),
at any time and from time to time  (each,  an  "Exercise")  during the  Exercise
Period  (as  defined  in  Section 3 below)  by  delivering  a written  Notice of
Exercise  (the "Notice of Exercise")  to TAT,  specifying  the number of Warrant
Shares underlying the exercised  portion of the Warrant,  together with the full
payment in cash (to a bank  account  to be  designated  by TAT) of the  Exercise
Price  due  to  TAT  with  respect  to  such  Warrant   Shares  (the   "Exercise
Consideration"),  and the  Warrant  Certificate,  which in the case of a partial
exercise, will be replaced by a new Warrant Certificate, as more fully set forth
below. For purposes of this Agreement,  the date on which the Notice of Exercise
is delivered to TAT shall be referred to as the "Exercise Date".

     (c) Exercise on a Net-Issuance Basis.

In  lieu  of  payment  to TAT of the  Exercise  Consideration  as set  forth  in
subsection  (a) above,  TATOP may inform TAT in the Notice of  Exercise  that it
elects to  exercise  the Warrant on a  net-issuance  basis,  in which case,  the
Warrant shall be exercisable, in whole or in part (provided that "Y" below shall
not be less than the Minimum Quantity), at any time and from time to time during
the Exercise Period,  into the number of Warrant Shares  calculated  pursuant to
the formula set forth below.  In such notice,  TATOP will specify the amount for
which TATOP desires to exercise the Warrant.

Formula:

                     X =   Y x (A - B)
                           -----------
                                A

                     Where:

                     X =     the number of Warrant Shares to be issued to TATOP;
                     Y =     the number of Warrant Shares obtainable upon
                             exercise of the relevant
                             portion of the Warrant;
                     A       = the average closing price of an Ordinary
                             Share of TAT on Nasdaq over a thirty (30)
                             trading days preceding the exercise date;
                             and
                     B       = the Exercise Price of the Warrant Shares,
                             as adjusted pursuant to the provisions
                             contained herein.


                                        2

<PAGE>

TAT Warrant Agreement


3.  Exercise  Period.  TATOP may  exercise  part (but not less than the  Minimum
Quantity as set forth above) or all of the Warrant,  at any time,  and from time
to time, until the termination of the 66 month period commencing at the Closing.

4.   Warrant Shares.

     4.1 Reservation of Warrant Shares.  TAT represents that it will reserve and
at all times  keep  reserved,  so long as any  portion  of the  Warrant  remains
outstanding, out of its authorized share capital, such number of Ordinary Shares
as may be subject to purchase under the outstanding Warrant.

     4.2 Issue.  By no later than seven (7) business days following the Exercise
Date and (unless TATOP elects to exercise the Warrant on a  Net-Issuance  Basis)
payment of the Exercise Consideration as set forth in Section 2 above, TAT shall
issue and cause to be delivered to TATOP or, upon the written order of TATOP, to
any third party as TATOP may  designate,  a  certificate  or  certificates  (the
"Warrant Share  Certificate") of the number of full Warrant Shares so purchased,
together  with  cash,  as  provided  in  Section  5.6  hereof in  respect of any
fractional Warrant Shares otherwise  issuable upon such surrender.  Such Warrant
Shares, delivered upon Exercise, shall be duly authorized, validly issued, fully
paid and nonassessable,  shall not be subject to call,  forfeiture or preemptive
rights and shall be  delivered  free and clear of all  Encumbrances  (as defined
below).

The term  "Encumbrance"  means and includes any interest or equity of any person
(including  any  right  to  acquire,  option,  or right  of  preemption)  or any
mortgage,  charge,  pledge,  lien, or  assignment,  or any other  encumbrance or
security  interest or arrangement  of whatsoever  nature over or in the relevant
property.

Such Warrant Share Certificates shall be deemed to have been issued and any
person so designated to be named therein shall be deemed to have become a holder
of record of such securities as of the Exercise Date and payment of the Exercise
Consideration, to the extent applicable, notwithstanding that the Warrant Share
Certificates representing such securities shall not actually have been delivered
or that the stock transfer books of TAT shall then be closed. In the event of a
partial exercise of the Warrant at any time prior to the expiry of the Exercise
Period, a new certificate evidencing the remaining amount applicable to the
Warrant will be issued by TAT.

     4.3 Payment of Taxes. TAT will pay all stamp duty, if any,  attributable to
the issuance of the Warrant Shares.

5. Adjustment of Exercise Price and Number of Warrant Shares. The Exercise Price
and/or the number and type of  securities  purchasable  upon the exercise of the
Warrant shall be subject to  adjustment  from time to time upon the happening of
certain events, as follows:

     5.1. Adjustments.

          5.1.1 If TAT subdivides or combines its Ordinary Shares,  the Exercise
               Price shall be proportionately reduced or increased, as


                                        3

<PAGE>


TAT Warrant Agreement


               applicable,  as at the  effective  date  of such  subdivision  or
               combination,  or if TAT fixes a record date for the purpose of so
               subdividing or combination,  as at such record date, whichever is
               earlier.

          5.1.2 If TAT at any time (i) makes a  distribution  of bonus shares or
               (ii) issues by  reclassification  of its  Ordinary  Shares  other
               securities of TAT, then the number of Warrant Shares  purchasable
               upon exercise of the Warrant  immediately  prior thereto shall be
               adjusted  so that TATOP shall be entitled to receive the kind and
               number  of  Warrant  Shares or other  securities  of TAT which it
               would  have  owned  or  would  have  been   entitled  to  receive
               immediately  after the occurrence of any of the events  described
               above,  had the Warrant been exercised  immediately  prior to the
               occurrence of such event or any record date with respect thereto.
               Any  adjustment  made  pursuant  to this  subsection  5.1.2 shall
               become  effective  immediately  after the effective  date of such
               event retroactive to the record date, if any, for such event. For
               the avoidance of doubt, if the  distribution or  reclassification
               is eventually  called-off,  the adjustment  made pursuant to this
               Section  shall  be  cancelled  as  of  the  announcement  of  the
               cancellation of such distribution or  reclassification.  Whenever
               the number of Warrant Shares purchasable upon the exercise of the
               Warrant is  adjusted,  as herein  provided,  the  Exercise  Price
               payable upon the  exercise of such  Warrant  shall be adjusted by
               multiplying  such  Exercise  Price   immediately  prior  to  such
               adjustment  by a fraction,  the  numerator  of which shall be the
               number of Warrant  Shares  purchasable  upon the  exercise of the
               Warrant immediately prior to such adjustment, and the denominator
               of which  shall be the  number of Warrant  Shares so  purchasable
               immediately thereafter.

          5.1.3 If at any time TAT shall distribute a dividend in liquidation or
               partial liquidation or by way of return of capital, or a dividend
               payable  out  of  earnings  or  surplus  legally   available  for
               dividends (each, a  "Distribution"),  the Exercise Price shall be
               reduced by an amount equal to the per-share distribution actually
               paid  by TAT  as of the  date  fixed  for  the  purpose  of  such
               Distribution;  provided,  however,  that if the  Distribution  is
               eventually  called  off,  the  adjustment  made  pursuant to this
               section shall be cancelled as of such announcement.

     5.2.  Merger;  Consolidation.  In the event that TAT  consolidates  with or
merge with or into another corporation or convey all or substantially all of its
assets to another  corporation or other entity,  then, in each such case, TATOP,
upon any exercise of this Warrant,  at any time after the  consummation  of such
consolidation,  merger, or conveyance,  shall be entitled to receive, in lieu of
the Warrant  Shares  receivable  upon the exercise of the Warrant  prior to such
consummation, the shares or


                                       4



<PAGE>


TAT Warrant Agreement


other  securities  or  property  to which it would have been  entitled  upon the
consummation of such consolidation, merger or conveyance if it had exercised the
Warrant immediately prior thereto, all subject to further adjustment as provided
in this Section, and the successor or purchasing  corporation or other entity in
such  consolidation,  merger or  conveyance  (if not TAT) shall duly execute and
deliver  to  TATOP a  supplement  hereto  acknowledging  such  corporation's  or
entity's  obligations under the Warrant; and in each such case, the terms of the
Warrant (including the exercisability and adjustment  provisions of the Warrant)
shall be  applicable to the shares or other  securities  or property  receivable
upon the exercise of the Warrant after the  consummation of such  consolidation,
merger or conveyance.

     5.3  No   Impairment.   TAT   will   not,   through   any   reorganization,
recapitalization,  transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action,  avoid or seek to avoid the
observance  or  performance  of any of the  terms to be  observed  or  performed
hereunder by TAT, but both parties will at all times in good faith assist in the
carrying out of all the  provisions  of this  Agreement and in the taking of all
such action as may be  necessary or  appropriate  in order to protect the rights
hereunder against impairment.

     5.4 No  Fractional  Shares.  No  fractional  shares  shall be  issued  upon
exercise of all or any portion of a Warrant, and the number of Warrant Shares to
be issued  shall be rounded to the nearest  whole share (with cash being paid by
TAT for any unissued fractional shares).

     5.5  Notice  of  Adjustment.  Upon the  occurrence  of each  adjustment  or
readjustment  of the Exercise Price or the number of Warrant Shares  pursuant to
this Section 5, TAT, at its expense,  shall promptly  compute such adjustment or
readjustment  in  accordance  with the terms  hereof and  prepare and furnish to
TATOP a certificate setting forth each adjustment or readjustment and showing in
detail the facts  upon  which such  adjustment  or  readjustment  is based.  The
certificate  shall also set forth (i) the Exercise  Price at the time in effect,
and (ii)  the  amount,  if any,  of other  property  which at the time  would be
received upon the conversion of the outstanding Warrant.

     5.6 Notices of Record Date or Payment  Date.  In the event of any taking by
TAT of a record of the  holders of any class of  securities  for the  purpose of
determining  the  holders  thereof  who are  entitled  to receive  any  dividend
(including a cash dividend) or other  distribution,  any right to subscribe for,
purchase or otherwise acquire any shares of any class or any other securities or
property, or to receive any other right, TAT shall mail to TATOP a notice, which
shall be sent  simultaneously with the notice sent to other shareholders of TAT,
specifying  the date on which any such record  and/or  scheduled  date of actual
payment,  if  determined,  is to be  taken  for the  purpose  of such  dividend,
distribution  or  right,   and  the  amount  and  character  of  such  dividend,
distribution or right.

6.   Miscellaneous.

     6.1.  Notices.  Any notice  pursuant to this  Agreement  by TAT or by TATOP
shall be in writing and shall be deemed to have been duly given (i) if given by


                                       5


<PAGE>


TAT Warrant Agreement


facsimile transmission (to the fax numbers set forth herein) on the business day
on which such  transmission is sent and confirmed,  or (ii) if given by mail (to
the addresses  set forth  herein),  two business days  following the date it was
sent.

Each  party may from time to time  change  the  address  or fax  number to which
notices to it are to be  delivered or mailed  hereunder by notice in  accordance
herewith to the other party.


Addresses and Facsimile Numbers:
- --------------------------------

TA-TOP, Limited Partnership
c/o TA-TEK Ltd., its general partner
c/o FIMI 2001 Ltd.
"Rubinstein House"
37 Petach Tikva Road
Tel: 03-5652244
Fax: 03-5652245

With a copy to:
Sharon Amir, Adv.
Naschitz, Brandes & Co.
5 Tuval Street
Tel-Aviv 67897
Israel
Facsimile:  +972-3-623-5021

TAT: TAT Technologies Ltd.
Industrial Zone, Yasur, Gedera, 70700
PO Box. 80 (70750)
Facsimile Number: [                 ]

With a copy to: J. Zaltzman,
J. Zaltzman & Co.
6 Hahilazon Street, Ramat-Gan 52522
Facsimile: 03-6111801
Attn: Adv. Yossi Zaltzman

     6.2 Assignment;  Successors. Except as set forth below, TATOP may not sell,
assign  or  transfer  the  Warrant  or any  portion  or right  thereof.  Nothing
contained herein shall be construed as limiting,  in any way, the right of TATOP
to sell,  assign or  otherwise  transfer  the  Warrant  Shares,  subject  to the
provisions of applicable law.

Notwithstanding  the above, upon the liquidation or dissolution of TATOP,  TATOP
may transfer the Warrant to its Permitted  Transferees;  provided,  however that
FIMI 2001 Ltd. shall at all time continue to represent the Permitted Transferees
(as defined in Section 1.2 above), pursuant to an irrevocable power of attorney,
for all purposes of this



                                       6

<PAGE>


TAT Warrant Agreement


Agreement and the Warrant.

     6.3.  Governing Law. This  Agreement  shall be governed by and construed in
accordance with the laws of the State of Israel.  The parties hereto irrevocably
submit to the  exclusive  jurisdiction  of the courts of  Tel-Aviv in any action
connected with this Agreement.

     6.4.  Benefits  of this  Agreement.  Nothing  in this  Agreement  shall  be
construed  to give to any  person or  corporation  other  than TAT and TATOP any
legal or equitable right,  remedy or claim under this Agreement.  This Agreement
shall be for the sole and exclusive benefit of TAT and TATOP.

     6.5. Form of Warrant.  The text of the Non-Assignable  Warrant  Certificate
evidencing the Warrant (the "Warrant  Certificate")  and of the form of election
to purchase  Warrant  Shares  shall be  substantially  as set forth in Exhibit 1
attached hereto. The Exercise Price and,  accordingly,  number of Warrant Shares
issuable  upon  exercise  of the  Warrant  is  subject  to  adjustment  upon the
occurrence of certain events, all as herein provided.

     6.6. Warrant Certificate.

          6.6.1 Mutilated or Missing  Warrant.  In case the Warrant  Certificate
     shall be mutilated, lost, stolen or destroyed, TAT shall, at the request of
     the affected TATOP,  issue and deliver in exchange and substitution for and
     upon  cancellation  of  the  mutilated   certificate  or  in  lieu  of  and
     substitution  for  the  certificate  lost,  stolen  or  destroyed,   a  new
     non-assignable  Warrant  Certificate  representing  an equivalent  right or
     interest, but only upon receipt of evidence reasonably  satisfactory to TAT
     of such loss, theft or destruction of such Warrant Certificate.

          6.6.2 Entire Agreement; Amendment and Waiver.

     This Agreement and the Exhibits and Schedules hereto and thereto constitute
     the full and entire  understanding  and agreement  between the parties with
     regard  to  the  subject  matters  hereof.  All  prior  understandings  and
     agreements among the parties are void and of no further effect. Any term of
     this Agreement may be amended,  waived, or discharged (either prospectively
     or retroactively,  and either generally or in a particular instance),  by a
     written instrument signed by all the parties to this Agreement.









                                       7


<PAGE>


TAT Warrant Agreement


IN WITNESS  WHEREOF,  the parties have  executed  this  Agreement as of the date
first above written.



TAT Technologies Ltd.
By:    _______________________
Name:  _______________________
Title: _______________________



TA-TOP, Limited Partnership.


By: TA-TEK Ltd., its general partner
Name and Title:





                                       8



<PAGE>


TAT Warrant Agreement


EXHIBIT 1

Non-Assignable Warrant Certificate No. ________

WARRANT TO PURCHASE ORDINARY SHARES

VOID AFTER 5:00 p.m. ISRAEL TIME, ON [                ].


                              TAT Technologies Ltd.


INCORPORATED UNDER THE LAWS OF THE STATE OF ISRAEL

This  certifies  that,  for  value  received,  TATOP,  Limited  Partnership  the
registered   holder  hereof   ("TATOP"),   is  entitled  to  purchase  from  TAT
Technologies Ltd. ("TAT"), at any time during the Exercise Period (as defined in
the Warrant Agreement (the  "Agreement"))  commencing at 9.00 a.m., Israel Time,
on the first day of the  Exercise  Period and ending  before  5.00 p.m.,  Israel
Time, on the last day of the Exercise  Period,  500,000  Ordinary  Shares of TAT
(the "Warrant  Shares"),  at a purchase price per share of US$8.5 (the "Exercise
Price").  The number and type of  securities  purchasable  upon exercise of each
Warrant  evidenced  hereby and the Exercise Price shall be subject to adjustment
from time to time as set forth in the Agreement.

The terms of this Warrant are subject to the terms and  provisions  contained in
the Agreement.

The  Warrant  evidenced  hereby  may  be  exercised  in  whole  or  in  part  by
presentation of this Warrant Certificate with the Irrevocable Exercise Notice in
the form attached hereto,  duly executed (with a signature guarantee as provided
thereon) and, if not exercised on a  Net-Issuance  Basis as set forth in Section
2(b) of the Agreement, simultaneous payment of the Exercise Consideration at the
principal office of TAT. Payment of such Exercise Consideration shall be made at
the option of TATOP in cash or by bank check, in same day funds.

Upon any partial exercise of the Warrant evidenced hereby, there shall be signed
and issued, to TATOP, a new Warrant Certificate in respect of the balance of the
Warrant  Shares as to which the  Warrant  evidenced  hereby  shall not have been
exercised.  No  fractional  Ordinary  Shares will be issued upon the exercise of
rights to purchase  hereunder,  but TAT shall pay the cash value of any fraction
upon the exercise of one or more Warrant.

This Warrant is neither transferable nor assignable.



TAT Technologies Ltd.______

______________________________
ATTEST:_______________________


                                       9


<PAGE>


TAT Warrant Agreement


Dated: __________
TAT Technologies Ltd.
Industrial Zone
Yasur, Gedera, 70780                                 Via Fax: _______
(POBox 80/70750)                                            and Registered Mail

IRREVOCABLE EXERCISE NOTICE


TA-TOP, Limited Partnership,  hereby irrevocably elects to exercise the right of
purchase represented by the Non-Assignable Warrant Certificate with respect to


________ [Note: not less than 25,000] Ordinary Shares (the "Shares"),  with cash
payment equal to the Exercise  Price of US$8.5 per share/on a Net Issuance Basis
(Please delete the non-applicable option)


and requests that certificates for the Ordinary Shares be issued in the name of:

(name and address must be printed or typewritten)
_____________________________
 TA-TOP, Limited Partnership,
_____________________________
Address

and, if the Shares shall be less than the total  number of Ordinary  Shares that
TATOP  is  entitled  to  purchase  pursuant  to  this  Warrant,  a  new  Warrant
Certificate  shall be registered  for the balance of the Ordinary  Shares in the
name of the undersigned and delivered to the address stated below.

Dated:      __________________

 TA-TOP, Limited Partnership

(Please Print)
Address:______________________________
        ______________________________
Signature: ___________________________

Note: The above signature must correspond with the name as written upon the face
of  this  Warrant  Certificate  in  every  particular,   without  alteration  or
enlargement or any change whatever.

Signature Witnessed:




                                       10

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.9
<SEQUENCE>8
<FILENAME>ex4_9.txt
<DESCRIPTION>LIMCO MMBRSHP INTRST PRCHSE AGRMNT 5/24/05
<TEXT>
                                                                     EXHIBIT 4.9






                     MEMBERSHIP INTEREST PURCHASE AGREEMENT

     MEMBERSHIP  INTEREST  PURCHASE  AGREEMENT (the "Agreement ") dated the 24th
day  of  May,  2005  between  Limco-Airepair,   Inc.,  an  Oklahoma  corporation
(hereinafter  referred to as the "Purchaser"),  and Claude L. Buller,  Thomas W.
Ferrell, Paul R. Hilliard and Jim Taylor (collectively referred to as "Members")
and Piedmont  Aviation  Component  Services,  L.L.C.,  a North Carolina  limited
liability company (hereinafter  referred to as "Company",  and collectively with
the Members referred to as "Seller").

                                    RECITALS

         A. Members are the owners of all outstanding ownership units evidencing
their  membership  interest in the Company as have been issued by the Company as
follows:

                                         Units Owned     Percentage
                 Claude L. Buller          9,900             33%
                 Paul R. Hilliard          9,900             33%
                 Thomas W. Ferrell         9,900             33%
                 Jim Taylor                  300             01%
                                           -----             ---
                 TOTAL ISSUED AND
                 OUTSTANDING UNITS        30,000            100%

which units of  membership  interests  are fully paid and non  assessable by the
Company.

         B. The Company  conducts  business as an authorized  and fully licensed
and/or authorized or recommended aviation Repair Station or authority for, among
others,  Honeywell Aerospace,  McCauley and Hartzell Propeller, in the overhaul,
repair,  maintenance,  service and supply of, among other products,  Propellers,
Landing Gear and APU/LRU units, and products made in its machine shop with metal
finishing capability, as well as supplying parts through brokerage some of which
products and activities are limited in scope by the United States  Department of
Transportation,  Federal  Aviation  Administration  Air Agency  Certificate Nos.
QKPR504X (issued August 10, 2004) and QWPR503X (issued  September 21, 2004), all
of which  licenses,  certificates  and authorities are fully and properly issued
and are not now  suspended,  revoked,  or in  default  or  under  suspension  or
revocation  proceedings  or  notifications.  (hereinafter  referred  to  as  the
"Company's Business")

         C. The Purchaser  desires to purchase all units of membership  interest
from the Members free and clear of any and all liens, judgments, orders, decrees
or  encumbrances  of any kind in order to have 100% ownership of the Company and
thus  acquire all of the  Company's  business  free an clear of all liens debts,
obligations  of  whatever  kind  or  character  except  for  those   obligations
specifically  assumed by the  Purchaser  as are  hereinafter  described  in this
Agreement (e.g.,  obligations  identified in the audited financial  statement of
December 31, 2004 and acquired in the normal course of business  since that date
to date of Closing as is specifically described hereinafter).


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MEMBERSHIP INTEREST AGREEMENT
Page 2


         D.  Upon  execution  of  this  Agreement  by the  parties  hereto,  the
foregoing  recitals  A, B, and C shall be deemed to be true and  correct  and to
form a material part of the inducement for Purchaser to enter this Agreement.

         NOW,  THEREFORE,   in  consideration  of  the  covenants,   agreements,
representations,  and warranties contained in this Agreement, the parties hereto
hereby agree as follows:

                                   ARTICLE I.
                   PURCHASE AND SALE OF MEMBERSHIP INTERESTS;
                   COMPANY'S BUSINESS; PURCHASE PRICE; CLOSING

         1.1 Purchase and Sale of Membership Interests. Subject to the terms and
conditions  of this  Agreement,  on the  Closing  Date (as  defined  herein) the
Members shall sell, transfer,  convey, assign, and deliver to the Purchaser, and
the Purchaser shall purchase,  acquire,  and accept from the Members, all of the
Member's  right,  title,  and interest in and to the  membership  interest (also
referred  to as  "ownership  units") of the  Company  (and any  evidence of such
ownership  such as  certificates),  the purpose  being to vest in the  Purchaser
title to all of the  ownership  units,  right and interest in the  Company;  the
Purchaser thereby becoming the sole member and owner of the Company, and as such
indirectly  acquiring  all of the assets  owned and  controlled  by the Company,
inclusive  of  any  and  all  intellectual   property,   trade  names,  patents,
copyrights,  proprietary  information,  trade secrets, rolling stock, equipment,
inventory,  goods,  materials of every kind as are used, employed and stored for
the purpose of operating the Company's Business.

         1.2 Excluded Assets. No assets owned by the Company are excluded from
this sale.

         1.3 Assumption of Liabilities or Obligations.  Notwithstanding anything
to the contrary in this Agreement, the Company shall retain and remain obligated
for and the Purchaser, as the sole member and owner of the Company, shall assume
all  liabilities  or  obligations  of the Company  accruing,  accrued and as are
disclosed in the Audited  Financials  dated  December 31, 2004, as well as those
debts and obligations entered into or incurred in the normal course of operating
the business of the Company from and after December 31, 2004 until Closing,  and
as are fully set forth on the monthly Financial  Statements of the Company since
December 31, 2004 (which have been provided to the Purchaser  prior to Closing),
or as are  recorded  in  Company's  normal  business  records,  (e.g.,  accounts
payable,  payroll  ledger and the like  records  has have been  supplied  to the
Purchaser prior to Closing) and/or the Disclosure Schedule 1.3 Assumed Debts and
Obligations,  which is attached and made a part hereof.  No other liabilities of
the Company are assumed and shall be deemed to be  undisclosed  liabilities  and
subject to the indemnity provisions of Article IX of this Agreement in the event
of subsequent claims for payment lodged against the Purchaser.

                  (a) At  Closing,  Purchaser  shall pay and satisfy in full all
financial  obligations of the Company under that Promissory Note executed by the
Company  and  payable to Blue Ridge  Investors,  II Limited  Partnership,  dated
November 18, 2002, in the original amount of $2,000,000.00, as the same may have
been modified or amended from time to time.


<PAGE>

MEMBERSHIP INTEREST AGREEMENT
Page 3


                  (b) At  Closing,  Purchaser  shall pay in full and satisfy all
obligations of the Company under that Credit and Security  Agreement executed by
the Company, as Borrower, and Whitehall Business Credit Corporation,  as Lender,
on November  15, 2002,  and the  documents  and  instruments  pursuant  thereto,
including  that  Revolving  Credit  Note in the  original  principal  amount  of
$7,500,000.00;  that  Term  Loan  Note  in  the  original  principal  amount  of
$675,000.00;  and that Capital  Expenditures Loan Note in the original principal
amount of  $500,000.00,  as the foregoing may have been modified or amended from
time to time. At Closing,  the  aggregate  amount of the  obligations  under the
above-described Whitehall loan shall not exceed $7,500,000.00.

         1.4 Purchase Price. The aggregate consideration for the Purchase of the
Membership   Interests  and   Company's   Business   transferred   to  Purchaser
("Transferred  Membership  Interest")  shall be  $5,500,000  payable  in cash or
certified funds at Closing.

                                   ARTICLE II.
                  REPRESENTATIONS AND WARRANTIES OF THE SELLER

         Except  as  otherwise  set  forth  in the  schedules  attached  to this
Agreement  by  reference  to specific  sections of this  Agreement  (hereinafter
collectively  referred to as the "Disclosure  Schedule"),  the Seller represents
and warrants to the Purchaser as set forth below:

         2.1 Organization and Good Standing.  The Company is a limited liability
company duly organized, validly existing, and in good standing under the laws of
the State of North Carolina, and (a) is duly qualified to transact business as a
limited  liability  company and is in good standing in every other  jurisdiction
within the United States in which the conduct of its business  requires it to be
so qualified, (b) to the extent it has its EASA Repair Certificate,  the Company
is duly qualified to transact  business as a limited liability company and is in
good  standing  in every  European  jurisdiction  in which  the  conduct  of its
business requires it to be so qualified,  and (c) to Seller's knowledge, is duly
qualified  to transact  business as a limited  liability  company and is in good
standing in every other jurisdiction  outside of the United States and Europe in
which the conduct of its business requires it to be so qualified.  Copies of the
Articles  and/or  Certificate  of  Organization  or Formation  and the Operating
Agreement of the Company and all amendments  thereto as presently in effect,  as
well as any minutes of Members' or managers' meetings, and requisite notices and
or waivers of notice fully endorsed have been delivered to the Purchaser and are
complete and correct as of the date hereof.

         2.2  Authorization.  Subject to receiving the approval of the Company's
managers,  the Seller has full power and authority to enter into this Agreement,
both individually,  and as authorized by the Members and managers of the Company
and as is allowable under the Company's Operating  Agreement),  inclusive of all
exhibits and schedules  hereto,  and all  agreements  contemplated  herein (this
Agreement  and  all  such  exhibits,   schedules,  and  other  agreements  being
collectively referred to herein as the "Acquisition Documents"),  to perform its
obligations hereunder and there under, to assign,  transfer, sale and convey the
units  of  Membership  Interest  purchased  hereunder,  and  to  carry  out  the
transactions

<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 4


contemplated hereby and thereby. The Managers of the Company have taken, or will
take  before the  Closing  Date,  all actions  required  by law,  its  Operating
Agreement  or  otherwise to  authorize  (i) the  execution  and delivery of this
Agreement and the other Acquisition  Documents,  and (ii) the performance of its
obligations hereunder and there under. This Agreement has been duly executed and
delivered by the Seller and upon the  execution  and  delivery of the  remaining
Acquisition  Documents by a duly authorized Members and managers of the Company,
the remaining  Acquisition  Documents will have been duly executed and delivered
by the Seller,  and this Agreement is and such other Acquisition  Documents will
be, upon due  execution  and delivery  thereof,  the legal,  valid,  and binding
obligations of the Seller enforceable according to their terms

         2.3 Title to Ownership Units Transferred.  Except as set forth below in
this  Section  2.3,  the Members own and have good and  marketable  title to all
ownership units evidencing their Transferred Membership Interest, free and clear
of all Liens. Seller hereby specifically  discloses to Buyer (a) that Blue Ridge
Investors,  II  Limited  Partnership  holds  a  warrant  to  acquire  additional
membership  units in the  Company,  (ii)  that  there  are  restrictions  on the
transfer  of  the  Membership  Interest  contained  in the  Company's  Operating
Agreement,  and (iii) that there are rights of first refusal and restrictions on
the  transfer of the  Membership  Interest  contained  in that Loan and Purchase
Agreement between the Company and Blue Ridge Investors,  II Limited Partnership,
dated  November 18, 2002,  and an option in favor of Member Jim Taylor to obtain
up to five percent (5%) of all outstanding  Membership Interest. As specified in
Section 6.4, it is a condition  precedent to Closing this Agreement that (i) the
warrant and any other  rights or  interests  in the  Company  held by Blue Ridge
Investments  II, Limited  Partnership  shall be terminated and released and (ii)
Jim  Taylor  terminate  and  release  any and all  option  rights he may have to
acquire additional units of ownership or future Membership Interests.

         2.4 Title to Properties; Absence of Liens and Encumbrances. The Company
has good and  marketable  title to or a valid  leasehold  interest in all of its
properties  and assets,  tangible and  intangible,  free and clear of all liens,
mortgagees  and  encumbrances  except for (i) those set forth in the  Disclosure
Schedule 2.4, List of Liens,  Mortgages and other  Encumbrances  attached,  (ii)
liens for  current  taxes not yet due and  payable,  and (iii) such other  minor
imperfections of title and encumbrances,  if any, that do not, in the aggregate,
have a material adverse effect on the Company's  Business,  assets, or financial
condition of the Company (collectively hereinafter referred to as the "Permitted
Liens"). To Seller's  knowledge,  there is no material asset used or required by
the  Company in the  conduct of  Company's  Business,  which is not owned by the
Company or licensed  or leased to it  pursuant to one of the  licenses or leases
listed in Disclosure Schedule 2.6, List of Leases and Licenses.

         2.5 Owned Real Property. The Company and Sellers own no right, title or
interest in or to any real property (other than leasehold interests) nor do they
have  any  options  to  purchase  any  real  property  used  by the  Company  in
conjunction with operation and conduct of Company's Business.

         2.6  Leases.  Disclosure  Schedule  2.6,  List of Leases  and  Licenses
attached hereto contains a complete list of (i) each lease pursuant to which the
Company  leases,  as  lessee,  any real  property  interest  and (ii) each lease
pursuant to which the Seller leases, as lessee, any


<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 5


type of  property  (real or  personal)  in which the  Purchaser's  inability  to
acquire the  Seller's  rights there under would have a material  adverse  effect
upon the business assets or financial  condition of the Company and in which the
rental  payments  pursuant  to such lease  exceed $ 10,000 per annum.  Each such
lease is valid and  binding  and is in full force and  effect,  subject  only to
exceptions  based  on  bankruptcy,   insolvency,  or  similar  laws  of  general
application,  and there are no existing defaults by any party to any such lease,
or any condition,  event, or act known to the Seller which, with notice or lapse
of  time  or  both,  would  constitute  such a  default.  Without  limiting  the
foregoing, the Seller is not in default under any of such leases, and the Seller
has not  received  any notice from any person  asserting a default by the Seller
under any such lease.

         2.7 No Violation.  Except as set forth on Disclosure Schedule 2.7, none
of (i)  the  execution  and  delivery  of  this  Agreement  or any of the  other
Acquisition  Documents by the Seller,  (ii) the performance by the Seller of its
obligations hereunder or there under, (iii) the consummation of the transactions
contemplated hereby or thereby after the Closing, will (A) violate any provision
of the Certificate of Organization or Formation Articles of the Company,  or the
Operating  Agreement  under which the Company  operates;  (B) violate,  or be in
conflict  with,  or  constitute  a  default  under or breach  of, or permit  the
termination  of, or cause the  acceleration  of the maturity of, any  indenture,
mortgage,  contract,  commitment,  debt,  or  obligation  of the  Seller,  which
violation,  conflict,  default,  breach,  termination,  or acceleration,  either
individually  or in the  aggregate  with all other such  violations,  conflicts,
defaults,  breaches,  terminations,  and  accelerations,  would  have a material
adverse effect on the operations,  business,  assets, or financial  condition of
the Company or the Transferred  Member Interests;  (C) except for the consent of
Managers, require the consent of any other party to or result in the creation or
imposition  of any Lien  upon any  property  or  assets  of the  Company  or the
Transferred   Membership  Interest  under  any  indenture,   mortgage  contract,
commitment,  debt or obligation of or to which the Seller is a party or by which
the Seller is bound;  (D) violate any statute,  law,  judgment,  decree,  order,
regulation,  or rule of any court or governmental  authority to which the Seller
or the Transferred  Membership  Interests are subject; or (E) result in the loss
of any material  license,  privilege,  or  certificate  benefiting  the Company.
Purchaser  acknowledges and agrees that the items listed on Disclosure  Schedule
2.7 are agreements  and  instruments to which the Company is a party (or permits
and licenses  held by the  Company),  which may be violated upon transfer of the
Transferred  Membership  Interest  by the  Members to  Purchaser,  and for which
Purchaser may need to obtain consent,  approval, or authorization.  As specified
in Section 5.4, it is a condition of this Agreement, it is a condition precedent
to Closing that Purchaser obtain such consents, approvals, or authorizations.

         2.8 Consents and Approvals of Governmental  Authorities.  Except as set
forth on Disclosure Schedule 2.8, no consent,  approval, or authorization of, or
declaration,  filing,  or  registration  with,  any  governmental  or regulatory
authority  is required to be made or obtained by the Seller in  connection  with
the execution,  delivery,  and performance of this Agreement or any of the other
Acquisition Documents by the Seller.  Purchaser acknowledges and agrees that the
items listed on  Disclosure  Schedule  2.8 are permits and licenses  held by the
Company, for which Purchaser may need to obtain governmental consent,  approval,
or  authorization.  As  specified  in Section  5.4,  it is a  condition  of this
Agreement,  it is a condition  precedent to Closing that  Purchaser  obtain such
consents, approvals, or authorizations.


<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 6


         2.9 Financial Statements.

                  (a) Delivery.  The Seller has delivered to the Purchaser  true
and complete  copies of the Company's  audited  financial  statements  including
balance sheets,  statements of operations and retained earnings,  and statements
of changes in  financial  position,  as of and for the years ended  December 31,
2004 (the "Audited  Financials") as well as its un-audited financial statements,
including balance sheets,  statements of operations and retained  earnings,  and
statements  of changes in financial  position,  as of and for the months  and/or
quarters  from and after  December 31, 2004 until the month  preceding the month
Closing occurs, and thereafter  internally  generated financial statements up to
the date of Closing (such un-audited  financial  statements  (income and expense
statement,  as well as the balance  sheet) of the Company and any notes  thereto
being hereinafter referred to as the Company's "Financial Statements."

                  (b) Accuracy. The Audited Financials, Financial Statements are
materially  true and correct and fairly  present the financial  condition of the
Company as of the respective  dates thereof and the results of operations of the
Company  for the  periods  then  ended in  accordance  with  generally  accepted
accounting  principles  ("GAAP")  applied on a consistent  basis  throughout the
periods involved.

         2.10 Absence of Certain  Changes. Since the most recent  period of time
for which the  Financial Statements apply  and until the date  of  Closing,  the
Company has not:

                  (a)  Suffered  any  material  adverse  change  in its  working
capital,  condition  (financial or otherwise),  assets,  liabilities,  reserves,
business operations, or prospects;

                  (b) Suffered any damage, destruction, or loss, whether covered
by insurance or not, materially adversely affecting its business operations,  or
prospects, assets, or condition, financial or otherwise;

                  (c)  Permitted or allowed any of its property or assets (real,
personal,  or mixed,  tangible or  intangible)  to be subjected to any mortgage,
pledge, security interest, conditional sale, or other title retention agreement,
encumbrance,  lien, easement, claim, right of way, warrant, option, or charge of
any kind  (individually and collectively  hereinafter  referred to as a "Lien"),
except Permitted Liens;

                  (d)  Created  or  incurred  any  liability  (fixed,  absolute,
accrued,  contingent,  or otherwise)  except for unsecured  current  liabilities
incurred for other than money borrowed,  and liabilities under contracts entered
into in the ordinary course of business and for amounts and for terms consistent
with past practice;

                  (e) Canceled or compromised  any debts, or waived or permitted
to lapse,  any material  claims or rights,  or sold,  transferred,  or otherwise
disposed of any of its properties or assets (real,  personal, or mixed, tangible
or  intangible),  except in the ordinary  course of business and consistent with
past practice;

                  (f) Transferred or granted any concessions,  leases, licenses,
or agreements with respect to or disposed of or permitted to lapse any rights to
the use of any patent,

<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 7


registered  trademark,  servicemark,  trade name,  or copyright  material to the
business of the Company (all of which are listed on Schedule  2.11), or disposed
of or disclosed to any person any material,  trade secret, formula,  process, or
know-how not theretofore a matter of public knowledge;

                  (g) Entered into any material commitment or transaction not in
the ordinary  course of business and  consistent  with past practice or made any
capital  expenditures  or commitments  for any additions to property,  plant, or
equipment that in the aggregate exceed $5,000;

                  (h)  Paid,  loaned,  or  advanced  any  amount  to,  or  sold,
purchased,  transferred,  or leased any properties or assets (real, personal, or
mixed,  tangible or  intangible)  to or from,  or entered into any  agreement or
arrangement  with, any of its Company Members,  managers,  or employees,  or any
family member of any of its members,  managers or employees, or any partnership,
company, corporation or other entity controlled by, controlling, or under common
control  with it, or any  partner,  officer,  director  or  employee of any such
corporation or other entity, or any such individual's family members;

                  (i) Purchased,  redeemed,  issued, sold, or otherwise acquired
or disposed of,  directly or  indirectly,  any  membership  interests,  options,
warrants,  bonds,  notes, or other securities,  or rights to purchase or convert
into any securities of the Company;

                  (j) Declared or paid, or set aside funds in  anticipation  of,
any dividends or other  distributions of Company funds for any Member or Manager
of the Company;

                  (k) Made any  acquisition  or  disposition of assets except in
the ordinary course of business, consistent with past practice;

                  (l)  Introduced  any  material  change  with  respect  to  the
operation  of  its  business,  including,  without  limitation,  its  method  of
accounting;

                  (m) Except for sales of inventories in the ordinary  course of
business, sold or otherwise disposed of, or entered into or agreed to enter into
any agreement or other  arrangement to sell or otherwise  dispose of, any of its
assets,  properties,  or  rights or any  agreement  or other  arrangement  which
requires  the consent of any party to the transfer  and  assignment  of any such
assets, properties, or rights;

                  (n) Paid or agreed to pay any bonus or  extraordinary  payment
to any  employee or Member  (including  payment by the Company of attorney  fees
related to this  transaction)  or  changed  or agreed to change in any  material
respect the compensation of any employee; or

                  (o)  Agreed,  whether in  writing or  otherwise,  to  take any
action  described  in this Section.

         2.11    Patents,  Trademarks,  Trade  Names.  Except   as set forth  on
 Disclosure  Schedule  2.11, the Seller owns, is licensed,  or otherwise has the
full  right to use all  patents,  trademarks,   servicemarks, trade  names,  and
copyrights used in the business of the Company as currently


<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 8


conducted.  Disclosure Schedule 2.11, Intellectual Materials Owned or Controlled
by Company,  attached  hereto  contains a complete and accurate  list of (i) all
patents,  trademarks,   servicemarks,   trade  names,  copyrights,   technology,
know-how,  recipes,  and processes  used or proposed to be used by the Seller in
operation  of the  Company's  Business,  all  applications  therefore,  and  all
licenses and other agreements relating thereto, and (ii) all agreements relating
to technology,  know-how,  recipes,  or processes that the Seller is licensed or
authorized to use by others or licenses or authorizes  others to use.  Except as
set forth in any of such  licenses  or  agreements,  the Seller has the sole and
exclusive  right to use its  patents,  trademarks,  servicemarks,  trade  names,
copyrights,   technology,   know-how,   recipes,  and  processes  identified  in
Disclosure  Schedule 2.11 hereto,  and no consent of any third party is required
for the use  thereof by the  Company  upon  completion  of the  transfer  of the
Transferred  Membership  Interest to Purchaser.  No claims have been asserted by
any  person  to the use of any such  patents,  trademarks,  servicemarks,  trade
names, copyrights,  technology,  know-how, recipes, or processes, or challenging
or questioning the validity or  effectiveness  of any such license or agreement,
and the Seller knows of no valid basis for any such  claims.  The Seller has not
received any notice or is aware of any facts or alleged  facts  indicating  that
the use of such  patents,  trademarks,  servicemarks,  trade names,  copyrights,
technology,  know-how,  recipes,  or processes  by the Company  infringes on the
rights of any other person.  No additional  proprietary  rights other than those
listed on  Disclosure  Schedule  2.11  hereto are  necessary  or material to the
conduct the Company's Business.

         2.12  Litigation.  Disclosure  Schedule 2.12,  Litigation and Potential
Claims,  which is attached hereto sets forth all actions,  claims,  proceedings,
and  investigations  ("Actions"),   including  without  limitation  Actions  for
personal  injuries,  products  liability,  or breach of  warranty  arising  from
products  sold by the  Company,  pending  or to  Seller's  knowledge  threatened
against the Company, any properties or rights of the Company (including, without
limitation,  the patents,  trademarks,  servicemarks,  trade names,  copyrights,
technology,  know-how,  recipes, or processes listed in Disclosure Schedule 2.11
hereto),  or the  transactions  contemplated  by  this  Agreement  or any  other
Acquisition  Document  before  any  court,  arbitrator,   or  administrative  or
governmental body. To the best knowledge of the Seller, no state of facts exists
or has existed that would  constitute  grounds for the institution of any Action
against the Company or against  any  properties  or rights of the Company or the
transactions  contemplated by this Agreement or any other Acquisition  Document.
The  Seller is not  subject to any  judgment,  order,  or decree  entered in any
lawsuit  or  proceeding  that has  materially  adversely  affected,  or that can
reasonably  be  expected  to  materially   adversely  affect,  the  transactions
contemplated  by this  Agreement,  the  Seller,  or the  Transferred  Membership
Interest in the Company,  including,  without limitation, the Company's Business
practices  and its  ability to acquire any  property or conduct  business in any
way.

         2.13 Tax  Returns and  Payments.  All of the tax returns and reports of
the Company or respecting  the  operations of the Company  required by law to be
filed on or before the date hereof  have been duly and timely  filed or extended
and all taxes  shown as due  thereon  have been  either  paid or are  accrued in
liquid form and saved for future payment thereof. There are in effect no waivers
of any applicable statute of limitations  related to such returns.  No liability
for any tax will be imposed  upon the  Transferred  Membership  Interest  in the
Company  or the  Company's  Business  or its assets  with  respect to any period
before the Closing Date for which there is not an adequate reserve  reflected in
the balance sheet and


<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 9


held in cash form. The  provisions of this Section 2.13 shall  include,  without
limiting the generality of this Section, all reports,  returns, and payments due
under all  federal,  state,  or local laws or  regulations  relating  to income,
sales,  use  and  withholding  taxes,  withholding   obligations,   unemployment
insurance, Social Security, workers' compensation,  and other obligations of the
same or of a similar  nature.  The  Seller is not  subject  to any open audit in
respect of its taxes, no deficiency  assessment or proposed adjustment for taxes
is pending,  and the Seller has no  knowledge of any  liability,  whether or not
proposed,  for any tax with respect to any period  through the date hereof to be
imposed upon any of its  properties or assets for which there is not an adequate
reserve (in cash) reflected in its respective  Audited  Financials and Financial
Statements.

         2.14 Banks. Disclosure Schedule 2.14, Bank Accounts,  which is attached
lists all the names and  locations of all banks,  trust  companies,  savings and
loan  associations,  and  other  financial  institutions  at which  the  Company
maintains accounts or lock boxes and the corresponding  account numbers, if any,
relating to the Company and the names of all persons  authorized to draw on such
accounts or who have access to such boxes.

         2.15 Insurance.  Disclosure Schedule 2.15, Insurance Policies, which is
attached  contains  (i) a complete  and accurate  description  of the  Company's
self-insurance  practices and items covered by such  self-insurance,  if any and
(ii) a complete  list of all  material  policies  of fire,  liability,  workers'
compensation,  products  liability and other forms of insurance owned or held by
or for the benefit of the Company (collectively,  the "Insurance Policies"). The
Seller has delivered to the Purchaser true and complete  copies of the Insurance
Policies,  along with copies of all past Insurance Policies reasonably available
after due and diligent search. To Seller's knowledge the Company's tangible real
and  personal  property  and  assets,  whether  owned or leased,  are insured by
reputable insurance companies licensed to do business in the state in which such
property  is  located  in  such  amounts   customarily   carried  by  comparable
businesses, and as is required by any agreements with licensors and/or customers
except to the extent that any  failures  to insure  would not, in the event of a
loss,  have a material  adverse  effect upon the  Company's  Business.  All such
Insurance  Policies  are and will  remain in full force and effect  through  the
Closing Date and, to the best knowledge of the Seller;  there is no notice of or
basis for any  modification,  suspension,  termination,  or  cancellation of any
Insurance Policy.

         2.16 Contracts and Commitments.

                  (a) Disclosure Schedule 2.16, Contract  Commitments,  which is
attached hereto, contains a complete list of each contract and commitment of the
Seller that is material to the  operations,  assets,  and  business or financial
condition  of the  Company or that by its terms can  reasonably  be  expected to
require  future  payment by or to the Company of $10,000 or more,  including but
not limited to the following:

                           (i) All employment  contracts and commitments between
the Company  and its  employees, other  than  those terminable by the Company at
will and without payment or penalty;

                           (ii) All collective  bargaining  agreements and union
contracts to which the Company is a party;



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                           (iii) All contracts or commitments,  written or oral,
with    distributors,    brokers,    manufacturer's    representatives,    sales
representatives,  service  or  warranty  representatives,  customers,  and other
persons,  firms,  or  corporations  engaged in the sale or  distribution  of the
Company's products or services;

                           (iv) All  purchase  orders  issued by the  Company in
excess of $20,000,  all sales orders received by the Seller in excess of $25,000
and all purchase or sales orders that call for delivery or performance on a date
more than one year from the date of this Agreement;

                           (v)  All  contracts  and  arrangements   between  the
Company or any person or entity that  controls,  is  controlled  by, or is under
common  control  with,  the Seller or any family member of any such person (such
entity or person, being hereinafter referred to as an "Affiliate");

                           (vi) All contracts and arrangements, written or oral,
under  which  the  Company  is  either  a bailor  or  bailee  including  without
limitation contracts for the bailment of Aircraft;

                           (vii) All  agreements  pursuant  to which the Company
acquired its Trade Name or a substantial portion of its assets; and

                           (viii) All other  contracts  and  commitments  of the
Company  (excluding  leases  for  the  purpose  of  this  Section  2.16(a))  and
instruments  reflecting obligations for borrowed money or for other indebtedness
or guarantees thereof.

                  (b) At the  Purchaser's  request,  the Seller shall deliver or
cause to be delivered to the Purchaser full and complete copies of the documents
identified  above and all such other agreements and instruments as the Purchaser
may reasonably request.

                  (c) The Seller is not a party to any  written  agreement  that
would restrict it from carrying on any line of business anywhere in the world.

                  (d) Each of the contracts  listed on Disclosure  Schedule 2.16
is valid and binding,  and each of the contracts binding on the Company (whether
or not listed on Disclosure Schedule 2.16) has been entered into in the ordinary
course of  business.  To Seller's  knowledge,  neither the Company nor any other
party hereto is in default  under or in breach or violation  of, and neither the
Company nor any other party hereto has received  notice of any asserted claim of
default  by any other  party  under,  or a breach or  violation  of,  any of the
contracts, agreements, and commitments described in this Section 2.16, including
without  limitation,  any  licensing  or usage  agreements  with  respect to the
technology that the Company now uses or currently intends and plans to use.

         2.17  Distributors  and Customers.  To the Seller's best knowledge,  it
enjoys  good  working   relationships  under  all  of  its  distributor,   sales
representative,  and similar  agreements  necessary  to the normal  operation of
Company's Business.  Except as set forth on Disclosure Schedule 2.17, the Seller
has no  knowledge or basis for  knowledge  that any customer or group of related
customers (i.e., any customers who are directly or indirectly


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MEMBERSHIP INTEREST AGREEMENT
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through one or more  intermediaries  under common control),  who, for the fiscal
year ended 2004 and during each of the two preceding  fiscal years accounted for
more than 10% in aggregate volume of gross sales of the Company,  has terminated
or  expects to  terminate  a material  portion of its normal  business  with the
Company.

         2.18 Fringe Benefit Plans.

                  (a) List of Plans.  Disclosure  Schedule 2.18,  Benefit Plans,
which is attached, contains a true and complete list and summary description of,
and the Company has delivered to the Purchaser true and complete copies of, each
pension,  retirement,  profit-sharing,  stock purchase,  stock option, vacation,
deferred compensation,  bonus or other incentive plan, or other employee benefit
program, arrangement,  agreement, or understanding,  or medical, vision, dental,
or other  health  plan,  or life  insurance  or  disability  plan,  or any other
employee benefit plans,  including,  without  limitation,  any "employee benefit
plan" as defined in section 3(3) of the Employee  Retirement Income Security Act
of 1974, as amended ("ERISA"'),  whether formal or informal, written or oral, to
which the Seller contributes,  or is a party, or is bound, or under which it may
have liability, and under which employees or former employees of the Company (or
their  beneficiaries)  are  eligible to  participate  or derive a benefit.  Each
employee  benefit plan which is a "group health plan" as such term is defined in
section 162(i)(2) of the Internal Revenue Code of 1986, as amended (the "Code"),
satisfies the applicable  requirements  of section 4980B of the Code.  Except as
described on Disclosure  Schedule  2.18, the Company does not have the intention
or commitment,  whether legally  binding or not, to create any additional  plan,
practice,  or agreement,  or to modify or change any existing plan, practice, or
agreement  that would affect any employee or terminated  employee of the Seller,
and benefits under all employee  benefit plans are as  represented  and have not
been and will not be  increased  after  the date on which  documents  have  been
provided.

                  (b) Representations with Respect to Plans. Except as disclosed
on  Disclosure  Schedule  2.18,  the  Company  does not  sponsor,  maintain,  or
contribute  to any employee  benefit plans within the meaning of section 3(3) of
ERISA,  which are subject to Title I of ERISA (the "ERISA Plans").  Each pension
plan within the meaning of section 3(2) of ERISA ("Pension  Plan") is identified
on Disclosure Schedule 2.18. The following  representations are made with regard
to the ERISA Plans or the Pension Plans, if any and so limited:

                           (i) The Company  does not  contribute  to, or have an
obligation  to  contribute  to,  or  has at any  time  contributed  to or had an
obligation to contribute to, sponsor, or maintain,  or at any time has sponsored
or maintained, a multiemployer plan within the meaning of section 3(37) of ERISA
and the  Company  has not  incurred  any  withdrawal  liability,  or  suffered a
"complete  withdrawal" or a "partial withdrawal" with respect to a multiemployer
plan;

                           (ii) The  Pension  Plans are  qualified  plans,  have
remained  qualified  under the Code since  inception and have been determined by
the Internal  Revenue Service ("IRS") to be so qualified,  and the IRS has taken
no action to revoke such determination or qualification;



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MEMBERSHIP INTEREST AGREEMENT
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                           (iii) The  Company  has,  in all  material  respects,
performed all  obligations,  whether arising by operation of law,  contract,  or
past custom,  required to be  performed  under or in  connection  with the ERISA
Plans,  and the Company does not have any  knowledge of any default or violation
by any other party with respect to the ERISA Plans;

                           (iv) To Seller's knowledge,  the Company has complied
in all material respects with ERISA, and, where applicable,  the Code, regarding
the ERISA Plans;

                           (v) All reports and disclosures relating to the ERISA
Plans  required to be filed with or furnished  to  governmental  agencies,  plan
participants,  or plan  beneficiaries have been or will be filed or furnished in
accordance with applicable law in a timely manner;

                           (vi) There are no Actions pending (other than routine
claims for benefits) or, to the knowledge of the Seller threatened,  against any
ERISA Plan or against the assets funding any ERISA Plan;

                           (vii)  Full  payment  has  been or will be  made,  in
accordance with section  404(a)(6) of the Code, of all amounts which the Company
is required to pay under the terms of the Pension Plans as  contributions to the
Pension  Plans as of the last day of the most  recent  plan year of the  Pension
Plans ended before the date of this Agreement, and neither the Pension Plans nor
the trusts  established  there  under have  incurred  any  "accumulated  funding
deficiency"  (as  defined in section  302 of ERISA and section 412 of the Code),
whether or not  waived,  as of the last day of the most  recent plan year of the
Pension Plans ended before the date of this Agreement;

                           (viii)The Company maintains  adequate accruals on its
books to reflect  accrued  contributions  to each of the  Pension  Plans for the
current plan year and to reflect accrued medical and dental claims incurred, but
not yet paid,  under the terms of any ERISA Plan which is a welfare  plan within
the meaning of section 3(1) of ERISA (a "Welfare Plan");

                           (ix) No transaction  has occurred with respect to the
Pension Plans or the assets  thereof which could result in the imposition on the
Seller or the  administrators  or  trustees  under  the  Pension  Plans,  either
directly or indirectly,  of taxes or penalties imposed under section 4975 of the
Code or section 502(i) of ERISA;

                           (x) With respect to the Pension Plans,  regardless of
whether  such  plans  are  subject  to  Title IV of  ERISA,  no  termination  or
reportable  event,  as defined in section  4043(b) of ERISA has  occurred  or is
anticipated to occur;

                           (xi) As of the most  recently  dated  plan  statement
received by the  Company,  the fair market  value of assets of each Pension Plan
which is a "defined benefit plan" as defined in section 3(35) of ERISA ("Defined
Benefit  Plan")  equals or exceeds the  aggregate  present  value of the accrued
benefits  there  under  of all  participants,  computed  on a "plan  termination
basis," based upon actuarial assumptions which are reasonable in the aggregate;



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MEMBERSHIP INTEREST AGREEMENT
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                           (xii) Other than applications for  determination,  no
action is  pending  with  respect  to the  Pension  Plans  before  the IRS,  the
Department of Labor, the Pension Benefit Guaranty Corporation ("PBGC") or before
any state or local governmental agency;

                           (xiii) No act or  omission  constituting  a breach of
fiduciary  duties has  occurred  with  respect to the ERISA  Plans or the assets
thereof,  which could subject the Seller or the  Purchaser,  either  directly or
indirectly, to any liability;

                           (xiv) No  liability  under Title IV of ERISA has been
incurred by the Company  which has been  satisfied  in full and the Company does
not know of any facts or circumstances which might give rise to any liability of
the Company  under Title IV of ERISA which could  reasonably be  anticipated  to
result in any claims being made against the Purchaser or the Seller by the PBGC;

                           (xv) The PBGC has not instituted  any  proceedings to
terminate any of the Pension Plans; and

                           (xvi) Each Welfare Plan is intended to meet currently
applicable  requirements for tax-favored treatment under Subchapter B of Chapter
1 of the Code, is in compliance with such requirements,  and if applicable, with
the  requirements  of  sections  419  and  419A of the  Code,  and  there  is no
disqualified  benefit  (as such term is defined in section  4976(a) of the Code)
which would subject the Seller or the Purchaser to a tax under section 4976.

                  (c) Plan Documents.  The Seller has delivered to the Purchaser
and its counsel true and complete copies, if any, of (i) all documents governing
the ERISA Plans, including all amendments thereto which will become effective at
a later date, (ii) all agreements and arrangements listed on Disclosure Schedule
2.18, (iii) the latest IRS determination letter obtained with respect to each of
the Pension  Plans,  (iv) Form 5500 for the most recent  completed plan year for
each of the ERISA Plans, together with all schedules forming a part thereof, (v)
the most recent actuarial valuation for any Defined Benefit Plan, (vi) any form,
other than Form 5500,  required to be filed for the most recently completed plan
year for any  Defined  Benefit  Plan  with any  governmental  agency,  (vii) all
summary  plan  descriptions  relating  to the ERISA  Plans,  (viii) the  annuity
contracts  funding  obligations  of any  Defined  Benefit  Plan,  and  (ix)  all
employment manuals.

         2.19 Labor  Relations.  No employee of the Company is  represented by a
labor union or under a collective bargaining  agreement,  except as set forth on
Disclosure  Schedule 2.19,  Collective  Bargaining  Agreements,  if any, and the
particular  collective bargaining agreement or agreements have been delivered to
the  Purchaser.  No petition  has been filed or  proceedings  instituted  by any
employee  or  group  of  employees  with  any  labor   relations  board  seeking
recognition of a bargaining representative.  There are no matters pending before
the National Labor  Relations  Board or any similar state or local labor agency,
and  the  Company  is  neither  engaged  in  nor  subject  to any  penalties  or
enforcement  action in  respect of any unfair  labor  practices,  and the Seller
believes  that it enjoys good labor  relations.  There are no  controversies  or
disputes  pending between the Company and any of its employees,  except for such
controversies  and  disputes  as do not and  will  not,  individually  or in the
aggregate, have a material adverse effect on its business,  operations,  assets,
prospects, or condition, financial or otherwise.


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MEMBERSHIP INTEREST AGREEMENT
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         2.20 Environmental Matters.

                  (a) For  purposes of this  Section  2.20,  the property of the
Seller  shall mean such  property  whether now or in the past owned or leased by
it. Additionally, for purposes of this Section 2.20, "Hazardous Substance" means
(i) a hazardous substance as defined in 42 U.S.C.  ss.9601(14),  as amended from
time to time, and all rules, regulations,  and orders promulgated there under as
in effect  from time to time,  (ii)  "hazardous  waste" as  defined in 42 U.S.C.
ss.6903(5), as amended from time to time, and all rules, regulations, and orders
promulgated there under as in effect from time to time, (iii) if not included in
(i) or (ii)  above,  "hazardous  waste  constituents"  as  defined  in 40 C.F.R.
ss.260.10,  specifically  including  Appendix  VII and VIII of  Subpart  D of 40
C.F.R.  ss.261,  as amended from time to time, and all rules,  regulations,  and
orders  promulgated  there  under  as in  effect  from  time to  time,  and (iv)
"source,"  "special  nuclear," or "by-product  material" as defined in 42 U.S.C.
ss.3011, et seq., as amended from time to time, and all rules, regulations,  and
orders  promulgated  there  under  as in  effect  from  time to  time.  Further,
"Requirements  of Law" shall  mean all  applicable  federal,  state,  local,  or
foreign  laws,   statutes,   ordinances,   rules,   regulations,   or  court  or
administrative orders or processes, or arbitrator's orders or processes.

                  (b) Except as set forth on Disclosure  Schedule 2.20 Hazardous
Substances, or as set forth in any and all reports, studies, plans, governmental
interventions,  indemnity  agreements,  insurance  policies  or other  documents
concerning  the  Hazardous  condition of the property or Company's  Business set
forth thereon or otherwise delivered to Purchaser,  to Seller's  knowledge,  the
Seller is and has been in compliance  with all  Requirements  of Law relating to
Hazardous  Substances and applicable to any of its properties.  Without limiting
the foregoing,  (i) neither the  operations of the Company nor the  development,
manufacture, or sale of the processes,  technology,  results, or products of the
Company violate or have violated any  Requirements of Law relating to air, soil,
water, or noise pollution, or the production, storage, processing,  utilization,
labeling, transportation,  disposal, emission, or other disposition of Hazardous
Substances,  and (ii) to  Seller's  knowledge,  the  Company,  or any current or
former owner, occupant or operator of any property at any time owned, leased, or
operated by the Seller for the Company's Business,  or any portion thereof,  has
never  utilized  any such  property or any portion  thereof in  violation of any
environmental  Requirements of Law, except those hazards specified in Disclosure
Schedule 2.20 Hazardous Substances, which is attached hereto, or as set forth in
any and all  reports,  studies,  plans,  governmental  interventions,  indemnity
agreements,  insurance  policies or other  documents  concerning  the  Hazardous
condition of the property or Company's  Business set forth  thereon or otherwise
delivered to Purchaser.

                  (c) Except as set forth on Disclosure  Schedule 2.20 Hazardous
Substances, or as set forth in any and all reports, studies, plans, governmental
interventions,  indemnity  agreements,  insurance  policies  or other  documents
concerning  the  Hazardous  condition of the property or Company's  Business set
forth thereon or otherwise  delivered to Purchaser,  to Seller's  knowledge,  no
discharge,  release, spillage,  uncontrolled loss, seepage, or filtration of any
Hazardous  Substance  or any  fuel,  gasoline,  or other  petroleum  product  or
by-product  has  occurred  at,  upon,  or under any  property at any time owned,
leased, or operated by the Seller in an amount that violates any Requirements of
Law.



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MEMBERSHIP INTEREST AGREEMENT
Page 15


                  (d) Except as set forth on Disclosure  Schedule 2.20 Hazardous
Substances, or as set forth in any and all reports, studies, plans, governmental
interventions,  indemnity  agreements,  insurance  policies  or other  documents
concerning  the  Hazardous  condition of the property or Company's  Business set
forth thereon or otherwise delivered to Purchaser, the Company does not utilize,
store,  dispose of, treat,  generate,  process,  transport,  release, or own any
Hazardous Substance, nor has the Company ever done so.

                  (e) The Seller has in a timely  manner  obtained  all Licenses
and filed all reports  required to be filed under or pursuant to any  applicable
environmental Requirements of Law.

                  (f) Except as set forth on Disclosure  Schedule 2.20 Hazardous
Substances, or as set forth in any and all reports, studies, plans, governmental
interventions,  indemnity  agreements,  insurance  policies  or other  documents
concerning  the  Hazardous  condition of the property or Company's  Business set
forth thereon or otherwise  delivered to Purchaser,  to Seller's  knowledge,  no
property at any time owned, leased, or operated by the Company now contains, or,
to the knowledge of the Seller,  in the past has contained,  any  underground or
aboveground  tanks  for the  storage  of any  Hazardous  Substance  or fuel oil,
gasoline, or any other petroleum product or by-product.

                  (g) Except as set forth on Disclosure  Schedule 2.20 Hazardous
Substances, or as set forth in any and all reports, studies, plans, governmental
interventions,  indemnity  agreements,  insurance  policies  or other  documents
concerning  the  Hazardous  condition of the property or Company's  Business set
forth thereon or otherwise  delivered to Purchaser,  the Seller has not received
any notice of writs, injunctions,  decrees, orders, or judgments outstanding, or
suits, claims, actions,  proceedings, or investigations instituted or threatened
under any environmental  Requirements of Law applicable to any of the properties
at any time owned, leased, or operated by the Company, including but not limited
to any notice  from any  governmental  authority  or  private  or public  entity
advising the Seller that it is or is potentially  responsible for response costs
under the Comprehensive  Environmental Response,  Compensation and Liability Act
("CERCLA"),  as  amended,  with  respect to a release or  threatened  release of
Hazardous Substances.

                  (h) Except as set forth on Disclosure  Schedule 2.20 Hazardous
Substances, or as set forth in any and all reports, studies, plans, governmental
interventions,  indemnity  agreements,  insurance  policies  or other  documents
concerning  the  Hazardous  condition of the property or Company's  Business set
forth thereon or otherwise  delivered to Purchaser,  the Seller has not received
notice of any violation of any environmental, zoning, worker safety, or land use
Requirements  of Law  relating to the  operation of the Company or to any of the
processes used or followed,  results obtained,  or products developed,  made, or
sold by the  Seller  including,  without  limitation,  under  CERCLA,  the Toxic
Substances  Control  Act of 1976,  as amended,  the  Resource  Conservation  and
Recovery  Act of 1976,  as amended,  the Clean Air Act, as amended,  the Federal
Water Pollution Control Act, as amended,  or the Occupational  Safety and Health
Act of 1970, as amended.

         2.21  Compliance  with Laws.  The Seller has not been  charged with any
violation of, or, to the best of its  knowledge,  Seller is not in violation of,
and is not under any  investigation  with respect to any charge  concerning  any
violation of any  Requirements of Law, in which


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MEMBERSHIP INTEREST AGREEMENT
Page 16


such  violation  either singly or in the aggregate with other  violations  would
have a  material  adverse  effect  upon  the  operations,  assets,  business  or
financial  condition of the Company.  The Company is not in default with respect
to  any  order,  writ,   injunction,   or  decree  of  any  court,   agency,  or
instrumentality.  Without limiting the generality of the foregoing,  to Seller's
knowledge, the Company is in compliance with all Requirements of Law promulgated
by the Occupational Safety and Health Administration.

         2.22  Licenses,  Permits,  and  Authorizations.   The  Seller  has  all
approvals,  authorizations,  consents, licenses,  franchises,  orders, and other
permits (collectively, "Licenses") of (i) any governmental or regulatory agency,
whether  federal,  state,  local or  foreign,  and (ii)  all  trade or  industry
associations,  required  to  permit  it to carry on its  business  as  presently
conducted,  all of which are in full force and effect.  Disclosure Schedule 2.22
Operational  Licenses  hereto  sets  forth all such  Licenses  required  for the
operation of the business of the Company to the extent not previously include in
Disclosure Schedule 2.6.

         2.23  Inventory.  Except as set forth on Disclosure  Schedule 2.23, the
inventories  of the  Company  reflected  on the Balance  Sheets of its  "Audited
Financials" and "Financial  Statements" (both terms collectively  referred to as
"Company  Financials");   taken  as  a  whole  are  substantially  in  good  and
merchantable  condition  and are suitable and usable or saleable in the ordinary
course of business for the purposes intended,  net of the reserves stated on the
Company  Financials.  The  value  of the  inventory  set  forth  on the  Company
Financials  (net of such reserves) was  established in accordance  with GAAP and
with the Company's  inventory  valuation and write-down policies so that the net
value thereof stated on such Company Financials shall have been determined.  The
Company has reasonable  inventories to conduct its business consistent with past
practices.  There has been no material adverse change since December 31, 2004 in
the amount or condition of the inventories or the reserves with respect thereto.

         2.24  Accounts  Receivable.  All  accounts  receivable  of the  Company
represent  bona  fide and valid  claims  arising  in  connection  with  sales of
products by the Company and,  except to the extent of the reserves stated on the
Company Financials, to Seller's knowledge, the Company's accounts receivable are
collectible  and are not subject to any  counterclaim  or setoff,  except as set
forth on Disclosure  Schedule 2.24. There has been no material adverse change at
the time of Closing in the amount,  validity,  or collectibility of the accounts
receivable of the Company from that stated on the Company's Financials.

         2.25  Property  of Others.  Except as set forth on  Schedule  2.25,  no
shortage  exists in (i) any  inventory of raw  material,  work in  progress,  or
finished  goods owned by  customers  or suppliers of the Company and stored upon
its premises or otherwise,  or (ii) any other item of personal property owned by
another for which the Company is  accountable to another.  Without  limiting the
foregoing,  except as set forth on Schedule 2.25 all items of personal  property
for which the Company is accountable under any bailment  agreement,  consignment
contract,  loan program,  or otherwise are fully accounted for with no shortages
or missing or lost items, are in workable,  usable, and saleable condition,  and
have suffered no damage or deterioration, ordinary wear and tear excepted.

         2.26  Disclosure of  Confidential  Information.  The  Seller has  fully
disclosed, or will disclose to the Purchaser, on or before the Closing Date, all
processes, inventions, recipes, methods,


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MEMBERSHIP INTEREST AGREEMENT
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formulas,  plans,  drawings,  customer lists, secret information,  recipes,  and
know-how  (whether secret or not) known to it or in its possession and usable by
the Company in  connection  with its business as now conducted or proposed to be
conducted.

         2.27  Condition  of  Tangible  Assets.  Except as set forth on Schedule
2.27,  to  Seller's  knowledge,  all of the  facilities  of the  Company and its
equipment and other tangible assets,  are in good condition and repair (ordinary
wear and tear excepted) and workable, usable, and adequate for the uses to which
they have been put by the Company in the ordinary  course of business,  and none
of  such  facilities  and  none of  such  equipment  or  other  tangible  assets
(exclusive  of obsolete  items no longer used in the  Company's  business) is in
need of other than routine  maintenance or repair.  The Company has not received
any notice of any  violations  of any  Requirements  of Law with  respect to the
Company's properties or operations that have not been cured.

         2.28  Product  and  Service   Warranties.   Disclosure  Schedule  2.28,
Warranties,  which is attached hereto,  contains a true and complete description
of all  warranties  and terms and  conditions of sale to third parties which are
not  included in the Customer  maintenance  and service  Agreement  disclosed in
Disclosure Schedule 2.16 with respect to all products overhauled,  manufactured,
assembled,  repaired or sold by the Company that have been in effect at any time
over the last five years, except for warranties imposed by law.

         2.29 Absence of Undisclosed Liabilities.  The Company does not have any
material debt, liability, or obligation of any nature, whether known or unknown,
or fixed, absolute,  accrued,  contingent, or otherwise,  except those which (i)
are accrued or reserved against it in the Company's  Financials,  (ii) have been
disclosed in this Agreement or in any of the  Disclosure  Schedules  hereto,  or
(iii) have been incurred since May 24,, 2005 in the ordinary  course of business
in amounts and for terms consistent, individually and in the aggregate, with the
Company's past practice.

         2.30 Disclosure.  No  representation  or warranty by the Seller in this
Agreement  or  any  of  the  other  Acquisition  Documents  (including,  without
limitation,  the  Disclosure  Schedule),  contains  or will  contain  any untrue
statement of a material  fact or omits or will omit to state any  material  fact
necessary to make the statements  herein or therein not misleading.  There is no
fact known to the Seller that materially  adversely affects,  or that, as of the
date  of  Closing,   might  in  the  future  materially  adversely  affect,  the
operations,  business, assets, properties, or condition, financial or otherwise,
of the Seller that has not been set forth in this  Agreement  or the  Disclosure
Schedule.

         2.31  Brokerage.  No broker or finder has acted  directly or indirectly
for the Seller or any of their  Affiliates in connection  with this Agreement or
the transactions contemplated hereby, and no broker or finder is entitled to any
brokerage or finder's fee or other  commission  in respect  thereof based in any
way  on  the  actions  or  statements  of,  or  agreements,   arrangements,   or
understandings made with the Seller or any of its Affiliates.

         2.32.  With respect to any  representation  or warranty  made by Seller
herein, the phrases "to Seller's best knowledge" or "to Seller's  knowledge" (or
similar phrases which limit a  representation  or warranty to matters within the
knowledge  or belief of Seller)  shall mean that no facts or  circumstances  are
known by or have come to the attention of the



<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 18


Members of the  Company,  which  would give any such  Members  knowledge  of the
inaccuracy  of the  substantive  facts  and  circumstances  set  forth  in  such
representation or warranty,  but shall not mean that Seller,  the Company or the
Members have undertaken  investigations  or  verifications  with respect to such
matters.

                                   ARTICLE III
                 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser hereby represents and warrants to the Seller as set forth below:

         3.1 Corporate  Organization,  etc. The Purchaser is on the date hereof,
and will be on the Closing Date, a corporation duly organized,  validly existing
and in good standing under the laws of the State of Oklahoma.

         3.2  Authorization,  etc. The  Purchaser has full  corporate  power and
authority to enter into this  Agreement and the other  Acquisition  Documents to
which it is or will be a party, to perform its  obligations  hereunder and there
under, and to carry out the transactions  contemplated  hereby and thereby.  The
Boards  of  Directors  of  the  Purchaser  and  its  Parent   corporation,   TAT
Technologies, Ltd. have taken, or will take before the Closing Date, all actions
required by law, its Certificate of  Incorporation,  its By-Laws or otherwise to
authorize  (i) the  execution  and  delivery  of this  Agreement  and the  other
Acquisition  Documents and (ii) the performance of its obligations hereunder and
there  under.  This  Agreement  has been  duly  executed  and  delivered  by the
Purchaser  and, upon the  execution  and delivery of the  remaining  Acquisition
Documents  by  a  duly  authorized  officer  of  the  Purchaser,  the  remaining
Acquisition  Documents  will  have  been  duly  executed  and  delivered  by the
Purchaser,  and this Agreement is, and such other Acquisition Documents will be,
upon  due  execution  and  delivery  thereof,  the  legal,  valid,  and  binding
obligations of the Purchaser, enforceable according to their terms.

         3.3 No  Violation.  None  of (i) the  execution  and  delivery  of this
Agreement  or  any  other  Acquisition  Document  by  the  Purchaser,  (ii)  the
performance  by the Purchaser of its  obligations  hereunder or there under,  or
(iii) the consummation of the transactions  contemplated  hereby or thereby will
(A) violate any provision of the Certificate of  Incorporation or By-Laws of the
Purchaser, (B) violate, or be in conflict with, or permit the termination of, or
constitute  a default  under or breach  of,  or cause  the  acceleration  of the
maturity of, any contract,  debt, or other  obligation of the  Purchaser,  which
violation,  conflict,  default,  breach,  termination  or  acceleration,  either
individually  or in the  aggregate  with all other such  violations,  conflicts,
defaults,  breaches,  terminations  and  accelerations,  would  have a  material
adverse effect on the business,  assets or financial condition of the Purchaser,
(C) except as set forth in Disclosure  Schedule 3.3, if any hereof,  require the
consent of any other party to, or result in the  creation or  imposition  of any
Lien upon any  property  or  assets of the  Purchaser  under  any  agreement  or
commitment to which the Purchaser is a party or by which the Purchaser is bound,
or (D) to the best knowledge and belief of the Purchaser, violate any statute or
law or any  judgment,  decree,  order,  regulation,  or  rule  of any  court  or
governmental authority to which the Purchaser is subject.

         3.4 Litigation. There is no action  pending or,  to the best  knowledge
and belief of the Purchaser, threatened against the Purchaser, or any properties
or rights of the Purchaser,


<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 19


that  questions or challenges the validity of this Agreement or any of the other
Acquisition  Documents,  nor any  action  taken or to be taken by the  Purchaser
pursuant hereto or thereto or in connection with the  transactions  contemplated
hereby  or  thereby  and  the  Purchaser  does  not  know  of any  such  action,
proceeding, or investigation that may be asserted.

         3.5 Disclosure.  No representation or warranty by the Purchaser in this
Agreement  contains or will contain any untrue  statement of a material  fact or
omits or will omit to state any material fact  necessary to make the  statements
herein not misleading.

         3.6 Brokerage. No broker or finder has acted directly or indirectly for
the  Purchaser  or its  Affiliates  in  connection  with this  Agreement  or the
transactions  contemplated  hereby,  and no broker or finder is  entitled to any
brokerage or finder's fee or other  commission  in respect  thereof based in any
way on the  actions  or  statements  of,  or the  agreements,  arrangements,  or
understandings made with the Purchaser or its Affiliates.

                                   ARTICLE IV
                           OBLIGATIONS OF THE PARTIES

   The Seller  hereby  covenants and agrees with the Purchaser and the Purchaser
hereby covenants and agrees with the Seller that:

         4.1 Reasonable  Access. The Seller shall or shall cause its Members and
managers,  accountants,   counsel,  and  other  authorized  representatives  and
affiliated  parties to afford the  Purchaser and its counsel,  accountants,  and
other authorized  representatives reasonable access during normal business hours
to its plants, properties, books and records that the Purchaser and its advisors
may have the  opportunity to make such reasonable  investigations  as they shall
desire to make of the  affairs  of the  Seller;  provided,  however,  except for
managers,   representatives  and  employees  designated  by  the  managers,  the
Purchaser shall not contact employees of the Company to discuss the transactions
contemplated by this  Agreement.  The Company shall furnish to the Purchaser any
additional  financial and operating data and other  information as the Purchaser
and its counsel,  accountants,  and other authorized  representatives shall from
time to time reasonably request.

         4.2 Conduct  Before  Closing Date.  Before the Closing Date,  except as
otherwise  contemplated  by this  Agreement or as permitted by the prior written
consent of the Purchaser,  but without making any commitment on the  Purchaser's
behalf, the Company shall:
                  (a) Conduct its business and  operations  only in the ordinary
course,  including,  without  limitation,  maintaining  inventories , taken as a
whole, at levels consistent with past practice;

                  (b)  Maintain  all  of  its  properties  and  assets  in  good
condition, working order, and repair (except for ordinary wear and tear);

                  (c) Perform its obligations under all agreements  binding upon
it and maintain all of its Licenses in good standing;



<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 20


                  (d)  Continue  in effect the  Insurance  Policies  (or similar
coverage) referred to in Section 2.14 hereof;

                  (e) Keep  available  the services of its current  managers and
employees;

                  (f)  Maintain  and  preserve  the good will of the  suppliers,
customers, and others having business relations with it;

                  (g) Before the Closing Date,  consult with the Purchaser  from
time to time with  respect to any  actual or  proposed  material  conduct of its
business;

                  (h)  Continue  all  capital  expenditure  programs in progress
before the Closing Date; and

                  (i)  Obtain  the  approval  of  Purchaser  prior to making any
extraordinary (not in the ordinary course of business)  expenditure in excess of
$2,500.00.

         4.3 Prohibited  Transactions  Before Closing Date.  Before  the Closing
Date,  except as otherwise  contemplated  by this  Agreement or permitted by the
prior written consent of the Purchaser, the Company shall not:

                  (a) Become a party to any agreement,  which, if it had existed
on the date hereof,  would have come within the scope of the Disclosure Schedule
pursuant to Section 2.16 hereof;

                  (b) Do any of the things listed in Section 2.10 hereof;

                  (c) Enter into any compromise or settlement of any litigation,
proceeding or governmental investigation relating to its properties or Company's
Business; or

                  (d) Directly or  indirectly,  in any way,  contact,  initiate,
enter  into,  or conduct  any  discussions  or  negotiations,  or enter into any
agreements,  whether  written or oral, with any person or entity with respect to
the sale of any of the Company's assets or units evidencing Membership Interests
or a merger or consolidation of the Company with any other entity.

         4.4 Further Assurances. Before and after the Closing, each party hereto
shall  execute and deliver such  instruments  and take such other actions as any
other party may reasonably request for the purpose of carrying out the intent of
this Agreement and the other Acquisition Documents.  Each party hereto shall use
its best efforts to cause the  transactions  contemplated  by this Agreement and
the other  Acquisition  Documents to be consummated,  and,  without limiting the
generality  of the  foregoing,  to obtain all  consents  and  authorizations  of
government  agencies and third parties and to make all filings with and give all
notices to  government  agencies  and third  parties  that may be  necessary  or
reasonably  required to effect the  transactions  contemplated by this Agreement
and the other Acquisition Documents.  The Seller shall give prompt notice to the
Purchaser,  after receipt thereof by the Seller,  of (i) any notice of, or other
communication  relating  to, any default or event that,  with notice or lapse of
time or both, would become a default under any


<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 21


indenture,  instrument,  or  agreement  material  to the  Company,  to which the
Company  is a party or by which the  Company  is bound,  and (ii) any  notice or
other communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions  contemplated by
this Agreement and the other Acquisition  Documents.  Each corporate party shall
deliver to the other at Closing,  appropriate  evidence  of the  approval of its
respective  Managers  or Board of  Directors  and  stockholders  or Members  (if
required by law) of this  Agreement,  the other  Acquisition  Documents  and the
transactions contemplated hereby and thereby.

         4.5 Confidentiality.  Before and after the Closing,  each party to this
Agreement shall, cause its managers, officers,  accountants,  counsel, and other
authorized  representatives and affiliated parties, to hold in strict confidence
and not use or disclose to any other party without the prior written  consent of
the other party,  all information  obtained from the other parties in connection
with the transactions  contemplated hereby,  except such information may be used
or  disclosed:  (i) as may be  necessarily  published by Purchaser to any public
market,  business reporting service,  or stock exchange or as may be required by
governmental  stock  exchange   regulations  or  rules,  or  as  required  under
agreements  with  customers,  vendors,  lenders or other third parties,  (ii) if
required by court  order or decree or  applicable  law,  (iii) if it is publicly
available  other than as a result of a breach of this  Agreement,  (iv) if it is
otherwise contemplated herein.

                                    ARTICLE V
                      CONDITIONS TO PURCHASER'S OBLIGATIONS

         The obligation of the Purchaser  under this Agreement to consummate the
Closing on the Closing Date shall be subject to the  satisfaction,  on or before
the Closing Date, of each of the following conditions:

         5.1  Representations  and  Warranties  True.  The  representations  and
warranties of the Seller contained herein,  in the other  Acquisition  Documents
(including,  without limitation,  all schedules and exhibits hereto and thereto)
and in all certificates and documents  delivered by the Seller shall be true and
accurate as of the Closing Date, except for changes permitted or contemplated by
this Agreement.

         5.2 No Material Changes.

                  (a) No portion of the assets  material to the operation of the
business of the Company  shall,  after December 31, 2004 until the Closing Date,
be damaged,  destroyed, or taken by condemnation,  whether or not covered by any
Insurance Policy;

                  (b) After  December 31, 2004 and until the Closing  Date,  the
Company shall not have suffered or become bound by changes of any kind or nature
that either  individually or in the aggregate have a material  adverse effect on
its ability to continue its business operations; and,

                  (c) No material  adverse  change in the business,  assets,  or
financial  condition of the Company shall have occurred  after December 31, 2004
and be continuing.



<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 22


         5.3  Performance.  The Seller shall have  performed and complied in all
material respect with all agreements,  obligations,  and conditions  required by
this  Agreement or the other  Acquisition  Documents to be performed or complied
with by them on or before the Closing Date.

         5.4 Consents.  All filings with and consents from  government  agencies
and third parties  required to consummate the transactions  contemplated  hereby
and by the  other  Acquisition  Documents  shall  have  been  made  or  obtained
(including  without  limitation  the  consents of the  lessors  under the leases
referred to in Section 2.6 hereof and the  consents and  approvals  specified in
Section 2.7 and Section  2.8),  except to the extent that making any such filing
or obtaining any such consent has been waived in writing by the Purchaser or the
failure to obtain  any such  consent  or make any such  filing  would not have a
material  adverse effect on the assets,  properties,  operations,  business,  or
condition, financial or otherwise, of the Company.

         5.5 Closing Documents. The Seller shall have delivered, or caused to be
delivered to the Purchaser, the documents and instruments described below:

                  (a) The  opinion  of  counsel  for  the  Seller,  in form  and
substance  reasonably   satisfactory  to  the  Purchaser  and  its  counsel  and
containing  such  assumptions and limitations as are customary or reasonable for
opinion letters normally provided in similar transactions, covering at least the
following:

                           (i) The Company is a North Carolina Limited Liability
Company  validly  existing and in good  standing  under the laws of its state in
which it was chartered;

                           (ii) The execution, delivery, and performance of this
Agreement,  the other Acquisition  Documents to which the Seller is a party, and
the other  instruments  or  documents  required  to be executed by the Seller in
connection  herewith and therewith have been authorized by all necessary Company
and other actions of the Seller and have been duly executed and delivered by the
Seller and  constitute  legal,  valid,  and binding  obligations of such parties
enforceable in accordance with their terms to the extent the Purchaser should be
able to realize the practical  benefits thereof,  except as such  enforceability
may be limited by bankruptcy, reorganization, insolvency, moratorium, or similar
laws  affecting  the  enforcement  of  creditor's   rights  and  except  as  the
availability of suitable remedies may be subject to judicial discretion;

                           (iii)   The    consummation   of   the   transactions
contemplated by this  Agreement,  the other  Acquisition  Documents to which the
Seller  is a party,  and all  other  instruments  or  documents  required  to be
executed by the Seller in connection  herewith and therewith will not violate or
result in a breach of or constitute a default under the Articles of Organization
or Operating Agreement or other organizational agreements of the Company;

                           (iv) Except for such actions and  proceedings  as are
disclosed  to the  Purchaser in writing,  Seller's  counsel does not know of any
limitation,   governmental   investigation,   actions,  or  suits,   pending  or
threatened,  against  or  relating  to the  transactions  contemplated  by  this
Agreement or any other Acquisition Document to which Seller is a party; and


<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 23


                           (v) On best  information and belief,  the transaction
contemplated  herein will not violate  any  securities  ("blue sky laws") of the
state of North Carolina.

                  (b) Certified copies of the resolutions adopted by the Members
and Managers of the Company, or by appropriate  committees thereof,  authorizing
this  Agreement  and  the  other  Acquisition  Documents  and  the  transactions
contemplated hereby and thereby.

                  (c)  Certificates  of the  Secretary  of  State of each of the
states in which the  Company is  qualified  to  transact  business  as a foreign
corporation,  dated no earlier than May 1, 2005, respecting the good standing of
the Company in each such  jurisdiction  the Company is domesticated or qualified
by certificate to conduct business.

                  (d)  Operating  Agreement  of the Company  certified as of the
Closing Date by a manager of the Company.

                  (e) Any and all licenses or  renewals,  and consents as may be
necessary to effect the continuation of the Company's  Business by the Purchaser
following the Closing of this Agreement.

                  (f) Such other  documents,  instruments,  or  certificates  as
shall be  reasonably  requested by the  Purchaser or its counsel  (inclusive  of
executed  conveyances  of  certificates  or units of ownership  and or cancelled
certificates  and other  assignments,  waivers and necessary  releases of liens,
mortgages and financial statements and security or UCC filings).

         5.6 Environmental  Report. If the Purchaser shall choose at its expense
to retain an  environmental  consulting  firm to render an  environmental  audit
report  respecting  the  Company  and such firm  renders a report  that  details
violations of federal,  state, or local  environmental  Requirements of Law, the
Seller shall have cured or shall have caused the cure of such  violations or the
Purchaser  shall have waived such  compliance  with this Section 5.6;  provided,
however, that the Seller shall not be obligated to cure any such violation.

         5.7  Certificates  of the Seller.  The Seller shall have furnished such
certificates  of its  managers and others as may  reasonably  be required by the
Purchaser to evidence  compliance  with the conditions set forth in this Article
5.

         5.8 Seller's  auditors and Purchaser's  auditors shall have agreed upon
both the method of compilation and accuracy of the financial  statements for the
Company from January 1, 2005 through the date of Closing.

         5.9  Seller  and   Purchaser   shall  have   agreed   upon  a  baseline
environmental audit as provided in Section 9.3 (e).



<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 24


                                   ARTICLE VI
                       CONDITIONS TO SELLER'S OBLIGATIONS

         The  obligation of the Seller under this  Agreement to  consummate  the
Closing on the Closing Date shall be subject to the  satisfaction,  on or before
the Closing Date, of each of the following conditions.

         6.1  Representations  and  Warranties  True.  The  representations  and
warranties of the Purchaser contained herein, in the other Acquisition Documents
(including,  without limitation, all schedules and exhibits hereto and thereto),
and in all certificates and documents delivered by the Purchaser,  shall be true
and  accurate  as  of  the  Closing  Date,   except  for  changes  permitted  or
contemplated by this Agreement.

         6.2 Performance. The Purchaser shall have performed and complied in all
material respects with all agreements,  obligations,  and conditions required by
this  Agreement to be performed or complied  with by it on or before the Closing
Date.

         6.3 Closing  Documents. The  Purchaser shall have  delivered  or caused
to be  delivered to the Seller the documents and instruments described below:
..
                  (a) The cash  payment as provided in Article I Section 4 (1.4,
above),  and  payment  and  satisfaction  in full of the Blue  Ridge II  Limited
Partnership  loan as provided in Section 1.3 (a) above,  and satisfaction of the
Whitehall loan as provided in Section 1.3(b) above.

                  (b) A certified copy of the resolutions  adopted by the Boards
of Directors of the Purchaser and its parent corporation, TAT Technologies, Ltd.
authorizing  this  Agreement  and  the  other  Acquisition   Documents  and  the
transactions contemplated hereby and thereby.

                  (c) The  opinion of  counsel  for the  Purchaser,  in form and
substance  reasonably  satisfactory to the Seller and its counsel and containing
such  assumptions  and  limitations  as are customary or reasonable  for opinion
letters  normally  provided  in  similar  transactions,  covering  at least  the
following:

                           (i) The Purchaser is a corporation  validly  existing
and in good standing under the laws of the State of Oklahoma;

                           (ii) The execution,  delivery, and performance of the
Agreement,  the other Acquisition Documents to which it is a party and the other
instruments or documents  required to be executed by the Purchaser in connection
herewith and  therewith,  have been  authorized by all  necessary  corporate and
other  actions of the Purchaser and have been duly executed and delivered by the
Purchaser and  constitute  the legal,  valid,  and binding  obligations  of such
parties  enforceable  in  accordance  with their  terms to the extent the Seller
should  be able to  realize  the  practical  benefits  thereof,  except  as such
enforceability  may  be  limited  by  bankruptcy,  reorganization,   insolvency,
moratorium,  or similar laws affecting the enforcement of creditors'  rights and
except as the  availability  of  suitable  remedies  may be subject to  judicial
discretion;


<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 25


                           (iii)   The    consummation   of   the   transactions
contemplated by this  Agreement,  the other  Acquisition  Documents to which the
Purchaser is a party,  and all other  instruments  or  documents  required to be
executed by the Purchaser in connection  herewith and therewith will not violate
or  result  in a breach  of or  constitute  a  default  under  the  Articles  of
Incorporation, By-Laws or other organizational agreements of the Purchaser; and

                  (d) Such other  documents,  instruments,  or  certificates  as
shall be reasonably requested by the Seller or its counsel.

         6.4 Seller shall have reached an agreement with Blue Ridge  Investments
II, Limited Partnership and its parent and affiliated companies, and at or prior
to Closing shall have consummated the same, whereby the warrant and other rights
and interest of Blue Ridge  Investments  II, Limited  Partnership in the Company
shall be released  and  terminated,  and Jim Taylor  shall have  terminated  and
released any and all options as are in his favor to acquire  additional units of
ownership or future Membership Interests in the Company.

         6.5 Seller and Buyer shall have  agreed  upon a baseline  environmental
audit as provided in Section 9.3 (e).

                                   ARTICLE VII
                              CLOSING; CLOSING DATE

         7.1  Closing.  The closing (the  "Closing")  will be held in on July 6,
2005 at 9:00 a.m., at the offices of Blancato,  Doughton & Hart,  Winston-Salem,
N.C, or at such other time and place as the parties  hereto may  mutually  agree
upon in writing  (the  "Closing  Date"),  at which  Closing  the  documents  and
instruments  referred to in Articles V and VI hereof  will be  delivered  by the
parties.  Notwithstanding  Closing Date shall occur later, the effective date of
this agreement shall be July 1, 2005.

                                  ARTICLE VIII
                         CERTAIN POST-CLOSING COVENANTS

         8.1  Access.  After the  Closing  Date,  the  Purchaser  shall,  at the
Seller's expense, permit the Seller, from time to time, to inspect and copy such
books of account and other  records of the Seller and to utilize the services of
the Purchaser's or the Seller's employees, all as may be necessary or convenient
to enable  the  Seller  to  prepare  and file tax  returns.  Until  the  seventh
anniversary  of the Closing  Date,  the Purchaser  shall not,  without the prior
written consent of the Seller or its successors in interest,  destroy or dispose
of any such records. Notwithstanding any of the foregoing, no covenant contained
in this  Section 8.1 on the part of the  Purchaser  is intended  to, and nothing
herein  shall be  construed  to,  benefit or confer any rights  upon any person,
firm, or corporation other than the Seller.

         8.2 Non-Competition Requirements.

                  (a) The Purchaser and the Seller agree that the Purchase Price
was fixed on the basis that the transfer of the Transferred  Membership Interest
to the Purchaser would provide the Purchaser with the full benefit and good will
of the Company as it existed on the


<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 26


Closing  Date.  The Seller  acknowledges  that it is proper for the Purchaser to
have assurance that the value of the Transferred Membership Interest will not be
diminished by acts of the Seller after the Closing Date.

         (b)  Excluding  Member  Jim  Taylor  because  of  his  minor  ownership
interest.,  the covenant of the other Members of the Company not to compete with
the Company following the transfer of their Transferred  Membership Interests to
the Purchaser at Closing, is a material inducement for the Purchaser to purchase
the Company.  Purchaser has committed additional consideration by this Agreement
to pay (the  "Non-Competition  Payments") the Members,  excluding Jim Taylor, in
consideration  of the full  and  faithful  performance  of the  covenant  not to
compete  as is set  forth  in this  Article,  collectively  the sum of  $600,000
payable  in 36  future  monthly  installments  of  $16,666.65  each  (the  final
installment  being  $16,666.90)  disbursed  to Members  monthly as and for their
respective  Covenants  Not To Compete  as set forth in this  Article 8 Section 2
(8.2), the first installment  commencing on like date as the date of Closing for
each successive  month following the date of Closing,  for a total of 36 months,
payable to Members as follows:

<TABLE>
<CAPTION>
         Member Name                %                Amount Mo.        Amount 36th      3 Year Total
         -----------               ---               Installment       Installment      ------------
                                                     -----------       -----------
           <S>                     <C>              <C>               <C>               <C>

           Claude L. Buller        33 1/3%           $5,555.55         $5,555.75        $200,000.00
           Paul R. Hilliard        33 1/3%           $5,555.55         $5,555.75        $200,000.00
           Thomas W. Ferrell       33 1/3%           $5,555.55         $5,555.75        $200,000.00

           TOTAL                   100%             $16,666.65        $16,667.25        $600.000.00
</TABLE>

         (c) In  consideration  of the  foregoing,  Claude  L.  Buller,  Paul R.
Hilliard  and Thomas W.  Ferrell  covenant  and agree  that,  commencing  on the
Closing  Date  and  ending  on like  anniversary  date of the  month  36  months
following the Closing Date ("3 Year Anniversary of Closing Date"), they will not
(i) directly or indirectly compete with, or own, manage,  operate, or control or
participate  in the ownership,  management,  operation or control of, or provide
consulting services to, any business,  firm, corporation,  partnership,  person,
proprietorship  or other  entity which is engaged in the  Company's  Business of
APU,  propeller or landing gear maintenance,  repair and overhaul or parts sales
(the "Restricted  Business"),  (ii) directly or indirectly solicit employment by
any person,  partnership,  corporation  or other entity of any of the employees,
consultants, agents, or independent contractors of the Company (for this purpose
the terms "employees,"  "consultants,"  "agents," and "independent  contractors"
shall  include any persons  having such status with regard to the Company at any
time during the six (6) months preceding any solicitation in question), or (iii)
solicit,  interfere with, or endeavor to entice away from the Company, on behalf
of any person,  partnership,  corporation,  or other entity, any customer of the
Restricted Business of the Company.  The foregoing provisions shall not apply to
investments in shares of stock of a corporation traded on a national  securities
exchange  or on the  national  over-the-counter  market,  which  shall  have  an
aggregate  market value, at the time of  acquisition,  of less than $100,000 and
constitute  less than two per cent of the  outstanding  shares of such  stock of
such corporation.  For purposes of this 8.2(c),  parts sales shall be defined as
the following:  (i) new and repaired or overhauled  parts,  including cores, for
APUs,  landing gear and propellers;  (ii) parts and logistic support for airline
heavy  maintenance  checks;  (iii)  consumables to both the airline and military
segments; and (iv) the


<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 27


following rotable  components to both airlines and corporate  aviation segments:
(a) Honeywell air cycle machines, and (b) Frisby actuators.

         Anything to the contrary set forth in Section 8.2  notwithstanding,  it
is understood and agreed that a Member may,  without  breaching or violating the
provisions  and  covenants  contained in this Section 8.2, be employed by or may
participate  in the ownership,  management,  operation or control of, or provide
consulting  services to, any division,  subsidiary  or  affiliated  business not
engaged in the Restricted Business.  Provided, however, Ferrell may seek written
approval  from  Purchaser  following  Closing to accept  employment,  consulting
assignments or other work from companies,  entities or individuals  which may be
considered as indirect  competitors  because,  for example,  such employers have
divisions  which  compete  directly  with  Company,  and  Purchaser  may  at its
discretion provide written consent for such engagement or employment, which such
consent shall not be unreasonably withheld. Purchaser shall provide its response
to  Ferrell's  request in writing  within 30 days of receipt of that  request or
Purchaser shall be deemed to approve. the request.

                  (d) If any of the Members  commits a breach,  or  threatens to
commit a breach,  of any of the  provisions  of this Section 8.2, the  Purchaser
shall  have the  right  and  remedy,  in  addition  to any  others,  to have the
provisions of this Section 8.2 specifically  enforced by any court having equity
jurisdiction,  together with an accounting therefore,  it being acknowledged and
understood  by the Seller that any such breach or  threatened  breach will cause
irreparable  injury to the  Purchaser and that money damages will not provide an
adequate remedy therefore.  In addition to any remedy Purchaser may have against
the Members breaching this covenant not to compete, the Purchaser shall have the
right to suspend  payments  pendent lite, and set off or off set future payments
to breaching Member or Members against any judgment,  order or decree of a court
of  competent  jurisdiction  awarding  damages  to  Purchaser.  Anything  to the
contrary  set forth in the Section 8.2  notwithstanding,  it is  understood  and
agreed that upon a breach or  threatened  breach of the covenants set forth this
Section  8.2,  Purchaser's  remedies  shall be only  against  Member or  Members
committing or  threatening  to commit such breach,  and Purchaser  shall have no
claim against and no right to suspend payments to the other non-breaching Member
or Members.

                  (e) Members agree the territorial  limitation  under which the
covenant not to compete  will apply shall be  worldwide  and that Members do not
consider such broad territorial limits to be unreasonable,  but in the event any
court of competent  jurisdiction  shall determine the territorial limits of this
covenant to be unreasonable,  then in that event,  the geographical  territorial
limits shall be fixed by the court to the maximum geographical territory allowed
by the law.

         8.3 Consulting Services Requirements. During the first three (3) months
following the Closing Date and at Purchaser's request, Thomas W. Ferrell, Claude
L. Buller and Paul R. Hilliard each agree to provide up to a maximum of 10 hours
per month in consulting  services at no additional cost to Purchaser.  The date,
time  and  location  for the  provision  of such  consulting  services  shall be
mutually  agreed upon by  Purchaser  and the Member to perform  such  consulting
services.



<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 28


         Should Purchaser request  consulting  services in excess of the 10 hour
monthly  maximum,  neither  Ferrell,  nor  Buller  nor  Hilliard  shall have any
obligation  to provide  such excess  services.  However,  if Ferrell,  Buller or
Hilliard  agree to  provide  any  consulting  services  in excess of the 10 hour
monthly  maximum  during the three (3) month period of time  following  Closing,
then in that event,  they will be paid, for actual hours worked at the same rate
of pay received by them from the Company prior to
Closing,  and  payable to them at times they were paid prior to  Closing.  After
conclusion of the third month following the Closing Date,  Purchaser and Members
may continue the consulting  services under terms as may be thereafter agreed by
them in writing;  however,  neither  Purchaser  nor the  Members  shall have any
obligation to continue such consulting services.

                                   ARTICLE IX
                                 INDEMNIFICATION

         9.1 Survival.  Notwithstanding  (i) the making of this Agreement,  (ii)
any  examination  made by or on  behalf  of the  parties  hereto,  and (iii) the
Closing  hereunder,  (A)  the  representations  and  warranties  of the  parties
contained  herein or in any  certificate  or other document  delivered  pursuant
hereto or in connection  herewith shall survive until the 3 Year  Anniversary of
Closing Date, except for the representations and warranties made in Section 2.13
hereof (Tax Returns and Payments),  which shall survive until  expiration of the
applicable  statute of limitations for the underlying  cause of action;  and (B)
the covenants and agreements required to be performed after the Closing pursuant
to any  provision of this  Agreement,  including  this Article 9, shall  survive
until fully performed or fulfilled.  No action for  indemnification  pursuant to
Sections  9.3 or 9.4  may be  brought  after  the  applicable  expiration  date,
provided,  however,  that if before such date one party  hereto has  notified in
writing the other party hereto of a claim for  indemnity  hereunder  (whether or
not formal legal action shall have been commenced  based upon such claim),  such
claim shall continue to be subject to indemnification in accordance herewith.

         9.2 Limitations on Member's Indemnity:

         (a) Purchaser shall not be entitled to any indemnification,  whether in
the form of payment or offset  against  the  Non-Competition  Payments,  for any
Damages,  unless  and until the  aggregate  amount of all  Damages  suffered  or
incurred  by  Purchaser  exceeds  $100,000.00,  in which  event such  Damages of
Purchaser  may  be  claimed  only  to  the  extent  that  such  Damages   exceed
$100,000.00.  Provided  however,  this  $100,000.00  minimum  shall not apply to
Damages  based on income  taxes of the  Company  pursuant  to Section  9.3(d) or
Damages based upon  Requirements  of Law related to Hazardous  Substances or any
release,  spill or discharge by the Company of any Hazardous Substances onto any
property  owned,  leased or operated by the Company  pursuant to Requirements of
Law related to Hazardous  Substances  or any release,  spill or discharge by the
Company of any Hazardous  Substances onto any property owned, leased or operated
by the Company pursuant to Section 9.3(e). below.

         (b) Except only as provided in 9.2(c) below,  none of the Members shall
have  any   liability   to  Purchaser   or  its   successors   or  assigns  (for
indemnification,  Damages or otherwise)  in excess of the unpaid  amounts of the
Non-Competition  Payments pursuant to Section 8.2, and Purchaser's sole recourse
for Damages under Section 9.3 or otherwise under this


<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 29


Agreement, shall be as an offset against the Non-Competition Payments coming due
under Section 8.2 above.

         (c) Provided, however, the Damages limitation set forth in 9.2(b) above
shall not apply to Damages incurred by Purchaser for undisclosed  liabilities on
account  of  Seller's   actual   fraud,   intentional   deceit  or   intentional
misrepresentation (for example, undisclosed liabilities of which the Members had
actual knowledge and  intentionally  failed to disclose the same or actively and
intentionally concealed the same).

         (d) The amount of any Damages of Purchaser  under  Section 9.3 shall be
reduced by the amount,  if any,  received by  Purchaser  from any third  person,
including, without limitation, any insurance company or other insurance provider
(such amount  being  referred to herein as a "Third  Party  Reimbursement"),  in
respect of the Damages suffered  thereby.  If, after receipt by Purchaser of any
indemnification  payment  or  off-set  against  the  Non-Competition   Payments,
Purchaser  receives a Third Party  Reimbursement  in respect of the same Damages
for which  indemnification  was made and such Third Party  Reimbursement was not
taken into account in assessing the amount of  indemnification,  then  Purchaser
shall turn over all of such Third Party Reimbursement to the Members (other than
Jim Taylor) up to the amount of the indemnification paid pursuant hereto.

         (e)   Anything   to  the   contrary   contained   in   this   Agreement
notwithstanding,  the  Members  shall  have no  obligation  to or  liability  to
indemnify Purchaser for any Damages for undisclosed liabilities or for breach of
any  representation  or warranty  where the basis of such  liabilities or breach
were  discovered by or known to Purchaser  prior to Closing (the burden of proof
being  on the  Members  that  the  basis of such  liabilities  were  known to or
discovered  by Purchaser  prior to Closing).  Further,  anything to the contrary
contained  in  this  Agreement  notwithstanding,   the  Members  shall  have  no
obligation  to  or  liability  to  indemnify   Purchaser  for  any  Damages  for
undisclosed  liabilities or for breach of any  representation  or warranty where
the basis of such  liabilities  or breach were disclosed to Purchaser in writing
(including paper,  photocopies,  facsimiles,  e-mails,  electronic,  magnetic or
digital data contained on a computer readable disk,prior to Closing.

         (f)   Anything   to  the   contrary   contained   in   this   Agreement
notwithstanding,  and except for Seller's  post closing  covenants  set forth in
Section 8.2 above,  Purchaser's sole remedy for any breach or default under this
Agreement (including any breach of representation or warranty), shall be a claim
for indemnification pursuant to Section 9.3 below, as limited by the limitations
set forth in Section 9.2.

         (g) At least one printed hard copy of all items contained in Disclosure
Schedules shall be maintained by the Company  following Closing and for a period
of five years following Closing.  All other copies of this Agreement provided to
Seller  and  Purchaser  shall  provide  copies of all  Disclosure  Schedules  on
magnetic or ditigal data contained on computer readable disk.

         9.3 Indemnification by the Seller. Subject to the conditions of Article
IX, Section 9 (9.2, above), the Members,  except for Jim Taylor, shall indemnify
and hold the Purchaser and its successors and assigns harmless in respect of any
and all claims, losses, damages,  liabilities, and expenses (including,  without
limitation, settlement costs and legal, accounting, and other


<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 30


expenses in connection therewith) (collectively,  the "Damages") incurred by the
Purchaser and its successors and assigns in connection  with each and all of the
following.

                  (a) Any claim by any person or other  entity for any  broker's
or  finder's  fee or similar fee  charged  for  commission  that arises from any
action, statement, or commitment made by the Seller or its agents or Affiliates.

                  (b) Any  breach or other  failure  to  perform  any  covenant,
agreement,  or obligation of the Seller  contained in this Agreement,  any other
Acquisition  Document  or any  other  instrument,  including  all  certificates,
contemplated hereby or thereby.

                  (c) Any breach of any representation or warranty by the Seller
contained  in this  Agreement,  any  other  Acquisition  Document  or any  other
instrument, including all certificates, contemplated hereby or thereby.

                  (d) The  Company's   failure  to pay  any  income  taxes it is
 required  to pay  prior to Closing.

                  (e) To the extent not otherwise indemnified under that certain
Indemnity  Agreement  in favor of  Company  and  Members  by  Piedmont  Aviation
Services,  Inc. and Piedmont Hawthorne  Aviation,  Inc. dated November 18, 2002,
which is attached  hereto marked Exhibit "A" and made a part hereof  ('Hawthorne
Indemnity"),  Members  (excluding  Jim  Taylor),  shall  additionally  indemnity
Purchaser  and  Company  in the same  manner  and  upon  the  same  terms of the
Hawthorne  Indemnity,  (which  for  purposes  of  this  indemnity,  the  Members
excluding  Jim Taylor  being  identified  as  "Indemnitor"  and the  Company and
Purchaser as well as their members, managers, officers, directors, shareholders,
employees, representative and attorneys being identified as Indemnitees as those
terms are defined in the Hawthorne  Indemnity.)  for Any Damages arising between
the dates of  November  18,  2002 and the  Closing  Date which are caused by the
Company's  failure to comply with any  Requirements  of Law related to Hazardous
Substances  or any release,  spill or discharge by the Company of any  Hazardous
Substances  onto  any  property  owned,   leased  or  operated  by  the  Company
(including,   without  limitation,  costs  of  response,  removal,  remediation,
investigation,  corrective action,  property damage,  personal injury,  economic
loss,  damage to natural  resources,  health  assessments  and  health  studies,
settlement,  interest accruing on recoverable amounts, penalties, and attorneys'
fees)  accruing to the Purchaser or the Company,  including  (i) remedial  work,
monitoring,  removal or other costs and expenses  associated with  environmental
matters with respect to any Hazardous  Substances  required by any environmental
Requirements of Law, (ii) injury, disease, or death of any person (including any
employee,  former employee, agent, or representative of any subcontractor of the
Company) arising out of any  environmental  matters,  or (iii) any damage to any
property.  (hereinafter  all of the above  damages  referenced  as  "Remediation
Damages')  The standard in  determination  of  contamination  levels  applicable
during the Members  operation of the Company upon which claims for contamination
may be made by the  Indemnitees  shall be the difference in  contaminate  levels
disclosed: (i) by the Environmental Site Aassessment results determining maximum
soil  contaminant  concentrations  listed on  Exhibits A and B of the  Hawthorne
Indemnity and results determining maximum soil contaminant concentrations listed
in the  Environmental  Site  Assessments  determining  maximum soil  contaminant
concentrations prepared for the Purchaser prior to Closing which is attached


<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 31


hereto as Exhibit "B" and made a part hereof.. Members liability for claims made
under this Section  shall not exceed the  Remediation  Damages as are ordered by
any governmental;  authority having competent  jurisdiction  over  environmental
matters.

         9.4 Indemnification by the Purchaser.  The Purchaser and its successors
and assigns shall  indemnify,  defend and hold harmless the Seller,  each of the
Members,  and their respective  successors and assigns in respect of any and all
Damages incurred by Seller, each of the Members, and their respective successors
and assigns in connection with each and all of the following.

                  (a) The claim by any person for any  broker's or finder's  fee
or similar fee charged for commission that arises from any actions,  statements,
or commitments made by the Purchaser or its agents or Affiliates.

                  (b) The  breach or other  failure  to  perform  any  covenant,
agreement,  or obligation of the  Purchaser  contained in this  Agreement or any
other Acquisition  Document or any other instrument,  including all certificates
contemplated  hereby or  thereby,  including  failure  to pay or hold any Member
harmless from assumed liabilities and obligations as are identified in Article I
section 3 (e.g., 1.3), above.

                  (c)  Any  breach  of any  representation  or  warranty  by the
Purchaser  contained in this Agreement or any other Acquisition  Document or any
other instrument,  including all certificates,  contemplated  hereby or thereby,
including  failure to pay or hold any Member  harmless from assumed  liabilities
and obligations as are identified in Article I section 3 (e.g., 1.3), above.

         9.5 Notice and  Defense of Claim.  Whenever  any claim  shall arise for
indemnification   hereunder,   the  party  entitled  to   indemnification   (the
"Indemnified  Party")  shall  provide  written  notice to the other  party  (the
"Indemnifying  Party")  within 60 (sixty) days of becoming aware of the right to
indemnification  and,  as  expeditiously  as  possible  thereafter,   the  facts
constituting  the basis for such claim. In connection with any claim giving rise
to  indemnity  hereunder,  resulting  from or arising  out of any claim or legal
proceeding by a person who is not a party to this  Agreement,  the  Indemnifying
Party,  at its sole cost and expense and upon written notice to the  Indemnified
Party, may assume the defense of any such claim or legal proceeding with counsel
reasonably satisfactory to the Indemnified Party. The Indemnified Party shall be
entitled to participate in the defense of any such action,  with its counsel and
at its own expense. If the Indemnifying Party does not assume the defense of any
such claim or litigation  resulting there from, the  Indemnified  Party may, but
shall not be  obligated  to,  defend  against such claim or  litigation  in such
manner as it may deem appropriate  including,  but not limited to, settling such
claim or litigation,  after giving notice of it to the  Indemnifying  Party,  on
such terms as the Indemnified  Party may deem appropriate and no action taken by
the  Indemnified  Party in  accordance  with such defense and  settlement  shall
relieve  the  Indemnifying  Party  of  its  indemnification  obligations  herein
provided with respect to any Damages resulting there from.



<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 32


                                    ARTICLE X
                                   TERMINATION

10.1  Termination.  This  Agreement  may be  terminated  at any time  before the
Closing Date:

                  (a) By mutual consent of the Purchaser and the Seller;

                  (b) By either the  Purchaser  or the Seller if the Closing has
not  occurred on or before the Closing  Date as may be extended  for  reasonable
cause,  provided  that this  provision  shall not be  available to the party who
fails or refuses to consummate the transactions  contemplated  herein or to take
any other action referred to herein as necessary to consummate the  transactions
contemplated hereby in breach of such party's obligations contained herein; and

                  (c) By either the  Purchaser or the Seller if there has been a
material  breach on the part of the other party in any material  representation,
warranty or covenant  set forth in this  Agreement  that is not cured within ten
(10)  business  days after such other  party has been  notified of the intent to
terminate this Agreement pursuant to this clause 10.1 (c).

                  (d) By Purchaser in the event of its  inability to meet any of
the four (4) contingencies set forth in paragraph 3 of the Letter of Intent from
Purchaser  to  Seller  dated  March  29,  2005  (the   "Contingencies"),   these
Contingencies,  and  only the  Contingencies,  being  specifically  incorporated
herein by  reference  and made a part  hereof  as  though  fully set out in this
Agreement

         10.2  Effect  of  Termination.  In the  event  of  termination  of this
Agreement as expressly permitted under Section 10.1 hereof, this Agreement shall
forthwith  become  void  and of no  force  and  effect,  and  there  shall be no
liability on the part of either the Seller,  the Purchaser,  or their respective
managers, officers,  directors,  representatives or agents, provided however, if
such  termination  occurs  pursuant  to Section  10.1(c) and  resulted  from the
material  misrepresentation  or material  breach by a party of the  covenants of
such party contained in this Agreement, (and the breach remains uncured for more
than the 10 day period of time) such breaching  party shall be fully liable as a
result of the material  misrepresentation or breach. In the event of termination
hereunder  before the  Closing,  each party shall  return  promptly to the other
Party all  documents,  work  papers,  and  other  material  of the  other  party
furnished or made available to such party or its  representatives  or agents and
all copies thereof.

                                   ARTICLE XI
                            MISCELLANEOUS PROVISIONS

         11.1 Amendment and Modification;  Waiver of Compliance.  Subject to the
applicable law, this Agreement may be amended,  modified,  and supplemented only
by written agreement signed by the Purchaser and the Seller.  Any failure by any
party to this Agreement to comply with any obligation,  covenant,  agreement, or
condition  contained  herein  may be  expressly  waived in  writing by the other
parties  hereto,  but such waiver or failure to insist  upon  strict  compliance
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other  failure.  Whenever this  Agreement  requires or permits  consent by or on
behalf of any


<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 33


party  hereto,  such  consent  shall be given  in a manner  consistent  with the
requirements for a waiver of compliance as set forth in this Section.

         11.2 Fees and Expenses.  Except as otherwise  provided herein,  each of
the parties hereto will pay its own fees and expenses (including  attorneys' and
accountants'  fees, legal costs, and expenses)  incurred in connection with this
Agreement,   the  other  Acquisition  Documents  and  the  consummation  of  the
transactions contemplated hereby and thereby.

         11.3 Notices. All notices, requests,  demands, and other communications
required or permitted  hereunder shall be in writing and shall be deemed to have
been given if  delivered  by hand,  overnight  courier,  or mailed  certified or
registered mail with postage prepaid as follows.

                  (a) If to the Purchaser, to:

                           Limco-Airepair, Inc.
                           5304 South Lawton Ave
                           Tulsa, OK 74107
                           Attention: Shaul Menachem, President

                           With a copy to: Jack N. Herrold
                                           Herrold Herrold & Co., Lawyers, P.C.
                                           300 ONEOK Plaza
                                           100 West Fifth Street
                                           Tulsa OK 74103

                  (b) If to the Seller, to:

                           Claude L. Buller
                           115 Manchester Place
                           Greensboro, NC 27410

                            Paul R. Hilliard
                           2803 Kinsey Ct.
                           Summerfield, NC 27358

                           Thomas W. Ferrell
                           315 Beechcliff Ct.
                           Winston-Salem, NC 27104

                           Jim Taylor
                           601 Chesham Dr.
                           Kernersville, NC  27284


                           With Copy to:  Andrew D. Hart
                                          Blancato Doughton & Hart PLLC
                                          633 W Fourth Street, STE 150
                                          Winston-Salem, N.C. 27101




<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 34

         11.4 Assignment.  This Agreement and all of the provisions hereof shall
be  binding  upon and  inure to the  benefit  of the  parties  hereto  and their
respective successors and permitted assigns.

         11.5 Governing Law. This Agreement and the legal relations  between the
parties hereto shall be governed by, and construed in accordance  with, the laws
of the State of Delaware,  without  reference to the conflict of laws principles
thereof;  provided  however,  Section 8.2  concerning  Non-Competition  shall be
governed by, and  construed in  accordance  with either the laws of the State of
North  Carolina or the laws of the State of Oklahoma,  whichever best allows for
enforcement  of the  covenant  not to  compete in  accordance  with the terms of
section 8.2.

         11.6 Counterparts. This Agreement may be executed simultaneously in two
or more  counterparts,  each of which  shall be deemed an  original,  but all of
which together shall  constitute one and the same  instrument.  Faxed signatures
shall have the same effect as an original signature.

         11.7  Headings.  The headings  contained in this Agreement are inserted
for convenience only and shall not constitute a part hereof.

         11.8 Attorney fees in Litigation. The prevailing party in any litigated
claim between the parties hereto  (including those brought in Arbitration  under
Section  11.11,  below) shall be entitled to recover all costs and attorney fees
they  have  expended  as  may  deemed  reasonable  by  the  court  of  competent
jurisdiction in which the controversy or action is pending.

         11.9  Entire  Agreement.  This  Agreement,   including  the  Disclosure
Schedules, the exhibits hereto and other documents referred to herein which form
a part hereof,  embody the entire  agreement  and  understanding  of the parties
hereto in respect of the subject matter contained herein and supersede all prior
agreements and  understandings  between the parties with respect to such subject
matter,  including, by way of illustration and not by limitation,  the Letter of
Intent  dated March 29,  2005  (except the terms  therein  contained  concerning
Purchaser  contingencies,  which have been  incorporated  herein by  reference).
There are no  restrictions,  promises,  warranties,  covenants,  or undertakings
other than those expressly set forth or referred to herein.

         11.10  Definitional  Provisions.  All terms  defined in this  Agreement
shall have such  defined  meanings  when used in any exhibit,  schedule,  or any
certificate  or other  document  made or delivered  pursuant  hereto or thereto,
unless otherwise defined therein.


         11.11 Arbitration.  Any and all controversies and claims arising out of
or relating to this  Agreement or any of the  Acquisition  Documents,  or breach
thereof,  shall  be  settled  by  binding  private  arbitration.  The  place  of
arbitration  shall  be  Greensboro,   North  Carolina.   There  shall  be  three
arbitrators,  who  shall be  licensed  attorneys,  chosen  as  follows:  (a) one
arbitrator shall be chosen by Purchaser,  and (b) one arbitrator shall be chosen
by the Members,  and (c) the two arbitrators thus named will then be directed to
name a third  arbitrator.  The  decisions and  determinations  by any two of the
three  arbitrators  shall be  binding  on all  parties  to the  arbitration  The
arbitration shall be administered in accordance



<PAGE>


MEMBERSHIP INTEREST AGREEMENT
Page 35


with the American Arbitration Association's Commercial Arbitration Rules, except
that (i) there shall be no  discovery  depositions,  unless any witness will not
personally appear and testify at the arbitration;  and (ii) each party agrees to
provide any  relevant  documents  requested  by the other  party,  except to the
extent such documents are not  discoverable  under  applicable  law. Any dispute
concerning discovery  depositions or the provision of documents shall be decided
by the arbitrators. Any award shall be a conclusive determination of the matter,
shall be binding  upon the parties  thereto and shall not be contested by any of
them.  Judgment on the award  rendered by the  arbitrator  may be entered in any
court having jurisdiction  thereof.  The parties shall share equally the cost of
the  arbitrator's  fees and  expenses  and any  administrative  expenses as they
arise.  As part of such  award,  the  prevailing  party  (as  determined  by the
arbitrator)  shall  be  awarded  the  arbitrator's  fees  and  expenses  and any
administrative expenses previously paid by such party.

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

                                               "Purchaser"

                                         LIMCO-AIREPAIR, INC.


                                         ---------------------------------
                                         by Shaul Menachem, President

                                               "Seller"

                                         PIEDMONT AVIATION COMPONENT
                                         SERVICE, L.L.C.


                                         ----------------------------------
                                         by Claude L. Buller, Authorized Manager
                                               "Member and Managers"

                                         -----------------------------------
                                         Claude L. Buller, Member and Manger


                                         ---------------------------------
                                         Paul R. Hilliard, Member and Manager


                                         ----------------------------------
                                         Thomas W. Ferrell, Member and Manager


                                         ----------------------------------
                                         Jim Taylor, Member and Manager

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-8
<SEQUENCE>9
<FILENAME>ex8.txt
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
<TEXT>
                                                                       Exhibit 8



                     List of Subsidiaries of the Registrant
                     --------------------------------------

1. Limco-Airepair International, Inc. our 100% owned subsidiary is located in
Tulsa, Oklahoma.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>10
<FILENAME>ex12_1.txt
<DESCRIPTION>RULE 13A-14(A)/15D-14(A) CERTIFICATION OF CEO
<TEXT>



                                                                    Exhibit 12.1

                            CERTIFICATION PURSUANT TO

                SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Shlomo Ostersetzer, certify that:

1. I have reviewed this annual report on Form 20-F of TAT Technologies Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13(a)-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
Subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

(b) [Reserved]

(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the period covered by the annual
report that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Date:  June 30, 2005

/s/ Shlomo Ostersetzer*
- -----------------------
Shlomo Ostersetzer
Chief Executive Officer


* The originally executed copy of this Certification will be maintained at the
Company's offices and will be made available for inspection upon request.






</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.2
<SEQUENCE>11
<FILENAME>ex12_2.txt
<DESCRIPTION>RULE 13A-14(A)/15D-14(A) CERTIFICATION OF CFO
<TEXT>




                                                                    Exhibit 12.2

                            CERTIFICATION PURSUANT TO

                SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Israel Ofen, certify that:

1. I have reviewed this annual report on Form 20-F of TAT Technologies Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13(a)-15(e) and 15d-15(e)) for the registrant and have:

 (a)Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
Subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

(b) [Reserved]

(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the period covered by the annual
report that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.


Date: June 30, 2005*

/s/ Israel Ofen
- ---------------
Israel Ofen
Chief Financial Officer

* The originally executed copy of this Certification will be maintained at the
Company's offices and will be made available for inspection upon request.





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.1
<SEQUENCE>12
<FILENAME>ex13_1.txt
<DESCRIPTION>SECTION 1350 CERTIFICATION OF CEO
<TEXT>




                                                                    Exhibit 13.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of TAT Technologies Ltd. (the "Company") on
Form 20-F for the period ending December 31, 2004 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Shlomo
Ostersetzer, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:

         (1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

         (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.


/s/ Shlomo Ostersetzer*
- -----------------------
Shlomo Ostersetzer
Chief Executive Officer

June 30, 2005


* The originally executed copy of this Certification will be maintained at the
Company's offices and will be made available for inspection upon request.




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.2
<SEQUENCE>13
<FILENAME>ex13_2.txt
<DESCRIPTION>SECTION 1350 CERTIFICATION OF CFO
<TEXT>




                                                                    Exhibit 13.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of TAT Technologies Ltd. (the "Company") on
Form 20-F for the period ending December 31, 2004, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Israel Ofen, Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

         (1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

         (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.


/s/ Israel Ofen*
- ----------------
Israel Ofen
Chief Financial Officer
June 30, 2005



* The originally executed copy of this Certification will be maintained at the
Company's offices and will be made available for inspection upon request.





</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
