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<SEC-DOCUMENT>0000950172-05-001347.txt : 20050427
<SEC-HEADER>0000950172-05-001347.hdr.sgml : 20050427
<ACCEPTANCE-DATETIME>20050427151648
ACCESSION NUMBER:		0000950172-05-001347
CONFORMED SUBMISSION TYPE:	SC 13D
PUBLIC DOCUMENT COUNT:		4
FILED AS OF DATE:		20050427
DATE AS OF CHANGE:		20050427

SUBJECT COMPANY:	

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ELBIT SYSTEMS LTD
		CENTRAL INDEX KEY:			0001027664
		STANDARD INDUSTRIAL CLASSIFICATION:	AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728]
		IRS NUMBER:				000000000
		STATE OF INCORPORATION:			L3
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		SC 13D
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	005-50156
		FILM NUMBER:		05776168

	BUSINESS ADDRESS:	
		STREET 1:		ADVANCED TECHNOLOGY CENTER
		STREET 2:		PO BOX 539
		CITY:			HAIFA, ISRAEL
		STATE:			L3
		ZIP:			31053
		BUSINESS PHONE:		01197248316626

	MAIL ADDRESS:	
		STREET 1:		ADVANCED TECHNOLOGY CENTER
		STREET 2:		PO BOX 539
		CITY:			HAIFA, ISRAEL
		STATE:			L3
		ZIP:			31053

FILED BY:		

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			KOOR INDUSTRIES LTD
		CENTRAL INDEX KEY:			0000791531
		STANDARD INDUSTRIAL CLASSIFICATION:	RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663]
		IRS NUMBER:				000000000
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		SC 13D

	BUSINESS ADDRESS:	
		STREET 1:		14 HAMELACHA STREET
		STREET 2:		PARK AFEK
		CITY:			ROSH HA AYIN
		STATE:			L3
</SEC-HEADER>
<DOCUMENT>
<TYPE>SC 13D
<SEQUENCE>1
<FILENAME>lon418335.txt
<DESCRIPTION>SCHEDULE 13D
<TEXT>


                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                  SCHEDULE 13D

                   Under the Securities Exchange Act of 1934
                           (Amendment No. ________)*

                               ELBIT SYSTEMS LTD.
- -------------------------------------------------------------------------------
                                (Name of Issuer)

               ORDINARY SHARES, NOMINAL VALUE NIS 1.00 PER SHARE
- -------------------------------------------------------------------------------
                         (Title of Class of Securities)

                                   M3760D101
- -------------------------------------------------------------------------------
                                 (CUSIP Number)

                                 Shlomo Heller
                              Koor Industries Ltd.
                                Telrad Building
                              14 Hamelacha Street
                                   Park Afek
                          Rosh Ha'ayin, 48091, Israel
                                +972 3 900 8420
- -------------------------------------------------------------------------------
            (Name, Address and Telephone Number of Person Authorized
                     to Receive Notices and Communications)

                                 April 18, 2005
- -------------------------------------------------------------------------------
            (Date of Event Which Requires Filing of This Statement)

If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box. |_|

Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss. 240.13d-7 for other
parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).

                                 Page 1 of 10
<PAGE>

                                  SCHEDULE 13D

CUSIP No. M29925100

- -------------------------------------------------------------------------------
   1    NAME OF REPORTING PERSONS
        I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

        Koor Industries Ltd.
- -------------------------------------------------------------------------------

   2    CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
        (a) |_|
        (b) |X|
- -------------------------------------------------------------------------------

   3    SEC USE ONLY

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

   4    SOURCE OF FUNDS

        OO
- -------------------------------------------------------------------------------

   5    CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
        ITEM 2(d) OR 2(e) |_|

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

   6    CITIZENSHIP OR PLACE OF ORGANIZATION

       Israel
- -------------------------------------------------------------------------------
                       7    SOLE VOTING POWER

                            2,160,000*+
      NUMBER OF        --------------------------------------------------------
       SHARES          8    SHARED VOTING POWER
    BENEFICIALLY
      OWNED BY              - 0 -
        EACH           --------------------------------------------------------
      REPORTING        9    SOLE DISPOSITIVE POWER
       PERSON
        WITH                2,160,000*+
                       --------------------------------------------------------
                       10   SHARED DISPOSITIVE POWER

                            - 0 -
- -------------------------------------------------------------------------------

   11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

        2,160,000*+
- -------------------------------------------------------------------------------

   12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
        (See Instructions)   |_|*+

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

   13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

        5.26%*+
- -------------------------------------------------------------------------------

   14   TYPE OF REPORTING PERSON

        CO
- -------------------------------------------------------------------------------

* See Items 4 and 5 of this Statement.

+ Koor Industries Ltd. may be deemed to be part of a group with the
  Federmann Parties (as defined below) pursuant to the terms of the
  Shareholders Agreement (as defined below) as described in Items 4 and 5 of
  this Statement. Koor Industries Ltd. does not affirm to be part of a group
  and expressly disclaims beneficial ownership of the 17,778,469 Ordinary
  Shares (as defined herein), in the aggregate, beneficially owned by the
  Federmann Parties. Accordingly, such Ordinary Shares are not included in
  the amounts specified by Koor Industries Ltd. above.


                                 Page 2 of 10
<PAGE>

Item 1.  Security and Issuer

         The class of securities to which this Statement relates is the
ordinary shares, nominal value 1.00 New Israeli Shekels per share (the
"Ordinary Shares"), of Elbit Systems Ltd., a company organized under the laws
of the State of Israel (the "Issuer"), whose principal executive offices are
located at Advanced Technology Center, P.O. Box 539, Haifa 31053, Israel.

Item 2.  Identity and Background

         (a)-(c), (f)This Statement is filed by Koor Industries Ltd. ("Koor").
Koor is an Israeli corporation with its principal executive offices located at
14 Hamelacha Street, Park Afek, Rosh Ha'ayin 48091, Israel. Koor is a
multi-industry holding company engaged through its direct and indirect wholly
and partially owned subsidiaries and affiliates in the following core
businesses: telecommunications, defense electronics, agrochemicals and
investments in start-ups in the fields of telecommunication and life science.
Koor is also involved in tourism, real estate and international trade
businesses. The names, business addresses, present principal occupation or
employment (and names, principal businesses and addresses of places of
additional employment) and citizenship of the executive officers and directors
of Koor are set forth in Annex A hereto and incorporated herein by reference.

         (d)-(e) Neither Koor nor, to the best of its knowledge, have any of
its executive officers and directors listed on Annex A hereto, has during the
last five years (i) been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) been a party to any civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which such person was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.

Item 3.  Source and Amount of Funds or Other Consideration

         The aggregate amount of funds used by Koor in making the purchase of
Ordinary Shares reported herein was U.S.$53,186,984. These funds came from the
sale by Koor of approximately 13.8% of the outstanding share capital of Tadiran
Communications Ltd., a company organized under the laws of the State of Israel
("Tadiran"), to the Issuer for U.S.$62,455,142 pursuant to a Share Transfer
Deed, dated December 27, 2004, between Koor and the Issuer, which is attached
hereto as Exhibit A (the "Tadiran Deed") and is incorporated herein by
reference, in connection with the transactions described in Item 4 below.

Item 4.  Purpose of Transaction

         On December 27, 2004, Koor entered into a series of agreements with
the Issuer and with Federmann Enterprises Ltd., a company organized under the
laws of the State of Israel ("Federmann").

         Under the terms of the Tadiran Deed, Koor agreed to sell its entire
holdings in Tadiran consisting of 3,944,276 ordinary shares (or approximately
32% of the outstanding share capital of Tadiran) to the Issuer for aggregate
consideration of approximately U.S.$146 million, based on a purchase price of
U.S.$36.74 per share.

                                 Page 3 of 10
<PAGE>

         Concurrently with the signing of the Tadiran Deed, pursuant to a Share
Transfer Deed, dated December 27, 2004, between Federmann and Koor, which is
attached hereto as Exhibit B (the "Federmann Deed" and, together with the
Tadiran Deed, the "Deeds") and is incorporated herein by reference, Koor agreed
to acquire 4,000,000 Ordinary Shares (or approximately 9.8% of the outstanding
share capital of the Issuer) from Federmann for aggregate consideration of
approximately U.S.$99 million, based on a purchase price of U.S.$24.70 per
Ordinary Share (subject to deductions for dividends paid by the Issuer and to
interest payable for any amounts paid after April 1, 2005). On the date the
Deeds were signed, the Issuer held approximately 4.2% of the outstanding share
capital of Tadiran and Federmann held approximately 49% of the outstanding
share capital of the Issuer.

         Pursuant to the Deeds, the transactions between Koor and Federmann and
Koor and the Issuer (collectively, the "Transactions") are interconnected, will
be completed in two stages and are subject to certain conditions, including,
but not limited to approval of the applicable anti-trust regulators.

         In "Stage A" (as defined in the Tadiran Deed), the first stage of the
Transactions, which closed on April 18, 2005, Koor has sold 1,700,000 ordinary
shares of Tadiran (or approximately 13.8% of the outstanding share capital of
Tadiran) to the Issuer for U.S.$62,455,142 pursuant to the Tadiran Deed, and
Koor has acquired 2,160,000 Ordinary Shares (or approximately 5.25% of the
outstanding share capital of the Issuer) from Federmann for U.S.$53,186,984
pursuant to the Federmann Deed.

         In "Stage B" (as defined in the Federmann Deed), the second stage of
the Transactions, Koor will sell the balance of its holdings in Tadiran, an
additional 2,244,276 ordinary shares (or approximately 18.2% of the outstanding
share capital of Tadiran), to the Issuer for approximately U.S.$83 million
pursuant to the Tadiran Deed, and Koor will acquire 1,840,000 Ordinary Shares
(or approximately 4.5% of the outstanding share capital of the Issuer) for
approximately U.S.$45.5 million pursuant to the Federmann Deed. "Stage B" is
contingent, among other things, on the closing of a transaction in which
Tadiran will acquire from Koor its approximately 70% holdings in Elisra
Electronic Systems Ltd. (the "Elisra Transaction"). The parties agreed that the
closing date for "Stage B" is currently scheduled for October 31, 2005.
However, if the conditions for "Stage B" will not be satisfied by October 31,
2005, the closing date for "Stage B" will be automatically postponed to January
31, 2006. If the Elisra Transaction is not closed by such date, the closing
date for "Stage B" can be postponed by Koor to August 31, 2006 or to another
date agreed upon by the parties. Notwithstanding the above, Federmann has the
right under the Federmann Deed not to postpone the closing date for "Stage B"
until January 31, 2006 or until August 31, 2006, all as detailed in the
Federmann Deed.

         On December 27, 2004, in connection with the Transactions, Koor,
Federmann and Heris Aktiengesellschaft, a corporation existing under the laws
of the State of Liechtenstein and controlled by Federmann ("Heris" and,
together with Federmann, the "Federmann Parties") entered into a Shareholders
Agreement, which is attached hereto as Exhibit C (the "Shareholders Agreement")
and is incorporated herein by reference. The Shareholders Agreement became
effective upon the closing of "Stage A" and relates to, among other things, the
voting and transfer of the Ordinary Shares of the Issuer held by the parties.

                                 Page 4 of 10
<PAGE>

         Pursuant to the Shareholders Agreement, from the closing of "Stage A"
until the closing of "Stage B", or if such second closing does not occur, until
such time as Koor's ownership of Ordinary Shares falls below 4.32% of the
outstanding Ordinary Shares, the Federmann Parties agree to vote their Ordinary
Shares in favor of the election to the Issuer's board of directors (the
"Board") of one director nominated by Koor. In connection with the closing of
"Stage A" Jonathan Kolber, Koor's Chief Executive Officer, was elected to the
Board. From the closing of "Stage B" until such time as Koor's ownership of
Ordinary Shares falls below 6.45% of the outstanding Ordinary Shares, the
Federmann Parties agree to vote their Ordinary Shares in favor of the election
to the Board of such number of candidates nominated by Koor, which is the
greater of two directors or 20% of the members of the Board, and the
appointment of one director nominated by Koor to serve as vice-chairman of the
Board. Following the closing of "Stage B", from such time as Koor's ownership
of Ordinary Shares falls below 6.45% of the outstanding Ordinary Shares until
such time as Koor's ownership of Ordinary Shares falls below 4.32% of the
outstanding Ordinary Shares, Koor's right to nominate directors to the Board
will be reduced to one director, and if Koor's ownership of Ordinary Shares
falls below 4.32% of the outstanding Ordinary Shares, Koor will no longer have
any right to nominate directors to the Board. In addition, from the closing of
"Stage B" to the extent requested to do so by Koor, the Federmann Parties agree
to vote their Ordinary Shares at the Issuer's general shareholder meeting in
order to pass a resolution of the Issuer approving the Issuer's entering into a
registration rights agreement with Koor, which will entitle Koor to one demand
registration so long as it holds 5% or more of the Ordinary Shares.

         In addition, pursuant to the Shareholders Agreement, for so long as
the Federmann Parties hold in the aggregate 20% or more of the outstanding
Ordinary Shares, Koor agrees to vote its Ordinary Shares in favor of the
election to the Board of all directors nominated by the Federmann Parties (in
addition to those nominated by Koor, as stated above). In addition, pursuant to
the Shareholders Agreement and subject to certain limitations described
therein, Koor agrees to vote its Ordinary Shares at any meeting of the
shareholders of the Issuer in accordance with the written instructions of the
Federmann Parties.

         The Shareholders Agreement also contains provisions (i) restricting
the transfer by Koor of Ordinary Shares for twelve months following the closing
of "Stage A" or if "Stage B" is closed, for nine months following such closing,
(ii) granting Koor tag-along rights with respect to dispositions by the
Federmann Parties of more than half their Ordinary Shares, (iii) granting
certain rights of first refusal to the Federmann Parties with respect to
certain dispositions by Koor of its Ordinary Shares and (iv) granting purchase
participation rights to any party in the event that the other party purchases
Ordinary Shares for total consideration in excess of U.S.$ 25 million from a
single third party.

         The Shareholders' Agreement will remain in effect until the earlier of
(i) April 18, 2020 and (ii) the date on which the Federmann Parties' holdings
of Ordinary Shares together with Koor's holdings of Ordinary Shares falls below
25% of the issued share capital of the Issuer, provided that all the rights and
obligations of the Federmann Parties or Koor under the Shareholders Agreement
have not been previously transferred or transferred concurrently with such
reduction to a new party (in which case the Shareholders Agreement will not
terminate but will bind the new party). In addition, as of October 1, 2008,
Koor will have the right to inform the Federmann Parties, in writing, if it
wishes to terminate its rights and obligations under certain provisions of the
Shareholders Agreement, and six months after submitting such a notice such
rights and obligations will be terminated.

                                 Page 5 of 10
<PAGE>

         The foregoing summary of certain provisions of the Deeds and the
Shareholders Agreement is not intended to be complete and is qualified in its
entirety by reference to the full text of such agreements. Copies of the
translation into English of such agreements are filed as Exhibits A, B and C,
respectively, to this Statement and are incorporated herein by reference.

         Except as set forth in this Item 4, Koor does not have any present
plans or proposals that relate to or would result in any of the actions
specified in clauses (a) through (j) of Item 4 of Schedule 13D.

Item 5.  Interest in Securities of the Issuer

         (a) Koor is the direct beneficial owner of 2,160,000 Ordinary Shares
or approximately 5.26% of the outstanding Ordinary Shares, based on 41,091,763
Ordinary Shares outstanding as of April 18, 2005.

         In addition, by virtue of the Shareholders Agreement, it could be
alleged that a "group," within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or Rule
13d-5(b)(1) thereunder, has been formed that includes the Federmann Parties
and Koor. Such a group including the Federmann Parties and Koor would be
deemed to beneficially own, in the aggregate, 19,938,469 Ordinary Shares,
representing 48% of the Ordinary Shares outstanding as of April 18, 2005. Koor
expressly disclaims beneficial ownership of Ordinary Shares beneficially owned
by any of the Federmann Parties and does not affirm that any such "group"
exists.

         (b) Koor has sole voting and dispositive power with respect to the
2,160,000 Ordinary Shares beneficially owned by it.

         Pursuant to, and to the extent set forth in, the Shareholders
Agreement, it could be alleged that Koor shares voting and dispositive power
with respect to the Ordinary Shares beneficially owned by the Federmann
Parties. To the knowledge of Koor and based on documents publicly filed by the
Federmann Parties, the name, state of organization, business address and
principal business of each of the Federmann Parties is as follows:

                  (i) Federmann is a corporation existing under the laws of
         the State of Israel with its principal executive offices located at
         87 Hayarkon Street, Tel-Aviv, Israel. The principal business activity
         of Federmann is the holding and managing of investments in private
         and public companies; and

                  (ii) Heris is a corporation existing under the laws of the
         State of Liechtenstein with its principal executive offices located
         at Aeulestrasse 38 F1-9490 Vaduz Forstentum Liechtenstein, c/o
         Prasidial-Anstalt. The principal business activity of Heris is the
         holding of investments in private and public companies.

         To the knowledge of Koor and based on documents publicly filed by the
Federmann Parties, during the last five years, none of the Federmann Parties
has been: (i) convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors), or (ii) a party to a

                                 Page 6 of 10
<PAGE>

civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to Federal or State securities laws or finding
any violation with respect to such laws.

         (c) Except as set forth or incorporated herein, Koor has not effected
any transaction in the Ordinary Shares during the past 60 days.

         (d) Not applicable.

         (e) Not applicable.

Item 6.  Contracts, Arrangements, Understandings or Relationships with Respect
         to Securities of the Issuer

         Other than the Deeds and the Shareholders Agreement, there are no
present contracts, arrangements, understandings or relationships (legal or
otherwise) between Koor and any other person with respect to the securities of
the Issuer, including, but not limited to, transfer or voting of any of the
securities, finder's fees, joint ventures, loan or option arrangement, puts or
calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.

Item 7.  Material to Be Filed as Exhibits

    Exhibit A:   English Translation of the Share Transfer Deed, dated
                 December 27, 2004, between Koor Industries Ltd. and Elbit
                 Systems Ltd.*

    Exhibit B:   English Translation of the Share Transfer Deed, dated December
                 27, 2004, between Federmann Enterprises Ltd. and Koor
                 Industries Ltd.*

    Exhibit C:   English Translation of the Shareholders Agreement, dated
                 December 27, 2004, between Koor Industries Ltd., Federmann
                 Enterprises Ltd. and Heris Aktiengesellschaft*

* All the translations of the agreements filed as exhibits to this Statement
and incorporated herein by reference are for the convenience of the reader, and
in the event of any discrepancy between the translations and the original
Hebrew documents, the Hebrew documents will prevail.

                                 Page 7 of 10
<PAGE>

                                   SIGNATURE

         After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete
and correct.


Dated: April 27, 2005


                                       KOOR INDUSTRIES LTD.


                                       By: /s/ Shlomo Heller
                                           ------------------------------
                                       Name:  Shlomo Heller
                                       Title: General Counsel



                                 Page 8 of 10
<PAGE>

                                    ANNEX A

         Set forth below is the name, current business address, the present
principal occupation or employment and citizenship of each director and
executive officer of Koor Industries Limited. Unless otherwise indicated, each
person identified below is employed by Koor Industries Limited. The principal
address of Koor Industries Limited, and unless otherwise indicated below, the
current business address for each individual listed below, is 14 Hamelacha
Street, Park Afek, Rosh Ha'ayin 48091, Israel.


 Name, Position with Koor      Present Principal Occupation
  and Business Address         or Employment                       Citizenship
- --------------------------    --------------------------------    -------------

1.  Charles R. Bronfman        Director, Chairman of the Board     Canada
     Chairman of the Board     of Claridge Israel L.L.C.

     Seagram Building
     375 Park Avenue
     New York, NY  10152

2.  Rolando Eisen              Chairman of the Board               Israel
     Director                  of Green Market
     2a Gaiger Street
     N'vey Avivim
     Tel Aviv 69341
     Israel

3.  Paulette Eitan             Managing Director of Paulette       Israel
     Director                   Eitan, Business Planning Services
     6 Mazada Street            Ltd.
     Herzlia Pituah 46750
     Israel

4.  Ron Feinstein              Senior Partner in the Law Office    Israel
     Director                  of Feinstein and Feinstein

     14 Hatibonim Street
     Jerusalem 92386
     Israel

5.  Andrew Hauptman            President of Andell Inc.            United States
     Director

     14 Walpole Street
     London SW34QP England

6.  Chemi Peres                Managing Director of Pitango        Israel
     Director                  Venture Capital
     11 Ha'Menofim Street
     Herzlia Pituah 46725
     Israel

                                 Page 9 of 10
<PAGE>

 Name, Position with Koor      Present Principal Occupation
  and Business Address         or Employment                       Citizenship
- --------------------------    --------------------------------    -------------

7. Dan Propper                 Managing Director and Chief         Israel
    Director                   Executive Officer of the Osem
                               Group of Companies
    61 Zabotinski Street
    Petah Tikva 49517
    Israe

8.  David Rubner               Chairman and Chief Executive        Israel
     Director                  Officer of Rubner Technology
                               Ventures Ltd.
     11 Ha'melacha Street
     Park Afek,
     Rosh Ha'ayn 48092
     Israel

9.  Gabriella Shalev           Professor at the Hebrew             Israel
     Director                  University

     9 Ha'Hardufim Street
     Even Yehuda 40500
     Israel

10. Jonathan Kolber            Chief Executive Officer of Koor     Canada and
     Chief Executive Officer                                       Israel

11. Danny Biran                President of Koor                   Israel
     President

12. Yuval Yanai                Chief Financial Officer of Koor     Israel
     Chief Financial Officer

13. Aron Zuker                 Vice President of Koor              Israel
     Vice President

14. Shlomo Heller              General Counsel and Corporate       Israel
     General Counsel and       Secretary of Koor
     Corporate Secretary

                                Page 10 of 10
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>2
<FILENAME>koorsc13dexhibita.txt
<DESCRIPTION>EXH. A - SHARE TRANSFER DEED - KOORS
<TEXT>

                                                                     Exhibit A


                              SHARE TRANSFER DEED


                                    BETWEEN



                              KOOR INDUSTRIES LTD.


                                      AND


                               ELBIT SYSTEMS LTD.



<PAGE>


                     [TRANSLATED FROM THE HEBREW ORIGINAL]


                              SHARE TRANSFER DEED
                              -------------------

                Made in Tel Aviv this 27th day of December 2004


                                    BETWEEN

                              KOOR INDUSTRIES LTD.
                         Public Company No. 52-001414-3
        of 14 Hamalacha Street, Afek Industrial Park, Rosh Ha'ayin 48091
                                    ("Koor")

                                                                of the one part
                                                                ---------------


                                      AND

                               ELBIT SYSTEMS LTD.
                         Public Company No. 52-004302-7
                 of the Advanced Technology Center, Haifa 31053
                                   ("Elbit")


                                                               of the other part
                                                               -----------------


WHEREAS                    Koor is the holder of 3,944,276 Ordinary Shares of
                           the issued and paid up share capital of Tadiran
                           Communications Ltd., a public company duly
                           incorporated in Israel, whose number with the
                           Companies Registrar is Public Company No.
                           51-207441-0 (hereinafter the "Company");

AND WHEREAS                Koor wishes to sell and transfer to Elbit, in two
                           stages, 3,944,276 Ordinary Shares, which on the
                           date of signing this Deed constitute approximately
                           32% of the Company's issued and paid-up share
                           capital, while in the first stage Koor will sell
                           and transfer




                                      A-2
<PAGE>


                           to Elbit 1,700,000 Ordinary Shares, which on the
                           date of signing this Deed constitute approximately
                           13.8% of the Company's issued and paid-up share
                           capital, and in the second stage Koor will sell and
                           transfer to Elbit 2,244,276 Ordinary Shares, which
                           on the date of signing this Deed constitute
                           approximately 18.2% of the Company's issued and
                           paid-up share capital, subject to and in accordance
                           with the provisions of this Deed;

AND WHEREAS                Elbit wishes to purchase and receive from Koor the
                           Shares Being Sold, subject to and in accordance with
                           the provisions of this Deed;

AND WHEREAS                the performance of this Deed, in both stages, is
                           subject to the Conditions Precedent as set out below
                           in this Deed;

AND WHEREAS                Elbit believes, without placing Elbit under any
                           obligation prior to the transaction contemplated by
                           this Deed being duly approved, if at all, by Elbit's
                           General Meeting of shareholders, that there should
                           be a consolidation of defense industries in Israel
                           and that in that context the transaction
                           contemplated by this Deed as well as the Elisra
                           Transaction, on appropriate terms and conditions,
                           are in the interest of Elbit and the Company, from
                           the perspective of Elbit as a shareholder of the
                           Company;

AND WHEREAS                Koor is interested in the performance of the
                           transaction contemplated by this Deed as part of an
                           overall transaction, in the scope of which Koor will
                           purchase shares of Elbit from Federmann Enterprises
                           Ltd, as set out in the Koor-Federmann Deed and this
                           Deed;

AND WHEREAS                the parties wish to set forth their relationship in
                           respect of the sale and purchase of the Shares Being
                           Sold in the context of this Deed.


NOW, THEREFORE, THE PARTIES HEREBY WARRANT, PROVIDE AND AGREE BETWEEN THEM AS
FOLLOWS:


1.       Preamble, Appendices and Interpretations
         ----------------------------------------

         1.1        The preamble and Appendices hereto constitute an integral
                    part hereof.

         1.2        The clause headings in this Deed are solely for the sake of
                    convenience and shall not be applied in the interpretation
                    hereof.


                                      A-3
<PAGE>

2.       Definitions

         2.1        In this Deed, the following expressions shall have the
                    meanings herein ascribed to them, unless expressly stated
                    otherwise:

                    "Elbit" means as defined in the preamble hereto;

                    "Elisra" means Elisra Electronic Systems Ltd. , Private
                    Company No. 52-003587-4;

                    "General Meeting" means as defined in the Companies Law,
                    and any adjourned meeting;

                    "U.S. dollar" or "$" means United States dollars;

                    "Stock Exchange" means the Tel-Aviv Stock Exchange Ltd.;

                    "Company" means as defined in the preamble hereto;

                    "Shareholders Agreement" means an agreement between Koor
                    and Elbit in the form of Appendix "10.7" hereto, which is
                    to be signed contemporaneously with the signature of this
                    Deed and will take effect on the First Closing Date;

                    "Stage 'A' Conditions Precedent" means the Conditions
                    Precedent for Stage 'A' of the Transaction, as set out in
                    Appendix "9.2" hereto;

                    "Stage 'B' Conditions Precedent" means the Conditions
                    Precedent for Stage 'B' of the Transaction, as set out in
                    Appendix "12.2" hereto;

                    "Conditions Precedent" means the Stage 'A' Conditions
                    Precedent and the Stage 'B' Conditions Precedent;

                    "Companies Law" means the [Israel] Companies Law, 5759-1999;

                    "Business Day" means a day on which the two major banks in
                    Israel are open for business, other than Fridays and
                    holiday eves, which shall not be treated as a Business Day;

                    "Koor" means as defined in the preamble hereto;


                                      A-4
<PAGE>

                    "First Closing Date" means the third Business Day after the
                    date on which all the Stage 'A' Suspending Conditions have
                    been fulfilled or such later date as may be agreed by the
                    parties, as provided in Clause 20.3 below;

                    "Koor-Federmann Deed First Closing Date" means the First
                    Closing Date as the term is defined in the Koor-Federmann
                    Deed;

                    "Second Closing Date" means the third Business Day after
                    the date on which all the Stage 'B' Conditions Precedent
                    have been fulfilled or such later date as may be agreed by
                    the parties, as provided in Clause 20.3 below;

                    "Koor-Federmann Deed Second Closing Date" means the Second
                    Closing Date as the term is defined in the Koor-Federmann
                    Deed;

                    "Stage 'A' Completion Deadline" means as defined in Clause
                    9.1 below;

                    "Stage 'B' Completion Deadline" means as defined in Clause
                    12.1 below;

                    "Koor-Federmann Deed Stage 'B' Completion Deadline" means
                    the Stage 'B' Completion Deadline as the term is defined in
                    the Koor-Federmann Deed;

                    "Confidential Information" means all information relating
                    to the parties hereto or to the Company, other than (a)
                    information that was in the public domain or came into the
                    public domain otherwise than due to a breach of this Deed
                    and (b) information the disclosure of which is required in
                    accordance with the provisions of applicable law;

                    "Ordinary Share" or "Ordinary Shares" means ordinary shares
                    of 1 NIS par value each of the Company's issued capital;

                    "Stage 'A' Shares" mean 1,700,000 (one million seven
                    hundred thousand) Ordinary Shares;

                    "Stage 'B' Shares" mean 2,244,276 (two million two hundred
                    forty-four thousand two hundred and seventy-six) Ordinary
                    Shares;

                    "Koor-Federmann Deed Stage 'A' Shares" means the Stage 'A'
                    Shares as the term is defined in the Koor-Federmann Deed;

                                      A-5
<PAGE>


                    "Koor-Federmann Deed Stage 'B' Shares" means the Stage 'B'
                    Shares as the term is defined in the Koor-Federmann Deed;

                    "Shares Being Sold" means the Stage 'A' Shares and the
                    Stage 'B' Shares;

                    "Federmann Enterprises" means Federmann Enterprises Ltd.,
                    Private Company No. 51-227839-1;

                    "Free and Clear" means free and clear of any charge,
                    pledge, attachment, levy, debt, lien, claim, right of
                    pre-emption, right of refusal, option, lock-up arrangement
                    or any additional or other third party right whatsoever;

                    "Elisra Transaction" means a transaction pursuant to which
                    the Company will purchase shares constituting at least 70%
                    of Elisra's issued capital;

                    "Interest" means three-month LIBOR at Bank Leumi Le-Israel
                    B.M., plus annual interest at the rate of 1.5%, compounded
                    every three months;

                    "Deed" or "this Deed" means this Share Transfer Deed
                    together with all the Appendices hereto;

                    "Koor-Federmann Deed" means the Share Transfer Deed
                    together with all the Appendices thereto made between Koor
                    and Federmann Enterprises contemporaneously with the
                    signature of this Deed, subject to the terms thereof
                    pursuant to which Federmann Enterprises will sell and
                    transfer to Koor, in two stages, 4,000,000 (four million)
                    ordinary shares of 1 NIS par value each of Elbit, which on
                    the date of signing this Deed constitute approximately 9.8%
                    of Elbit's issued share capital;

                    "Stage 'A' of the Transaction" means as defined in Clause
                    8.1 below;

                    "Stage 'B' of the Transaction" means as defined in Clause
                    11.1 below;

                    "Koor-Federmann Deed Stage 'A'" means Stage 'A' of the
                    transaction contemplated by the Koor-Federmann Deed as the
                    term is defined in the Koor-Federmann Deed;

                    "Koor-Federmann Deed Stage 'B'" means Stage 'B' of the
                    transaction contemplated by the Koor-Federmann Deed as the
                    term is defined in the Koor-Federmann Deed;


                                      A-6
<PAGE>

                    "Stage 'A' Consideration" means US$37 (thirty-seven U.S.
                    dollars) for each of the Stage 'A' Shares, totalling
                    US$62,900,000 (sixty-two million nine hundred thousand U.S.
                    dollars), and insofar as all or part of that amount is
                    actually paid after April 1, 2005, such amount shall be
                    subject to the addition of Interest from April 1, 2005
                    until the time of actual payment, all subject to the
                    adjustments as set out in Clause 15 below;

                    "Stage 'B' Consideration" means US$37 (thirty-seven U.S.
                    dollars) for each of the Stage 'B' Shares, totalling
                    US$83,038,212 (eighty-three million thirty-eight thousand
                    two hundred and twelve U.S. dollars), and insofar as all or
                    part of that amount is actually paid after April 1, 2005,
                    such amount shall be subject to the addition of Interest
                    from April 1, 2005 until the time of actual payment, all
                    subject to the adjustments as set out in Clause 15 below;

                    "Consideration" means the Stage 'A' Consideration and the
                    Stage 'B' Consideration together;

                    "Qualification Conditions" means all the requirements in
                    accordance with applicable law and pursuant to the
                    Company's incorporation documents for a person to serve as
                    a director of the Company, including security clearance as
                    required in Israel for the purpose of such service.

         2.2        The following terms shall have the meanings defined in
                    Section 1 of the [Israel] Securities Law, 5728-1968:

                    "securities", "company", "subsidiary", "acquisition of
                    securities", "holding and acquisition" and "control".

         2.3        The following terms shall have the meanings defined in
                    Section 1 of the Companies Law:

                    "dividend", "director", "external director", "public
                    company", "distribution", "bonus shares", "officer",
                    "personal interest", "transaction", "extraordinary
                    transaction", "act" and "Company Registrar".

3.       Appendices

         The following Appendices, which constitute an integral part hereof,
         are annexed to this Deed:

         3.1        Appendix 9.2 - the Stage 'A' Conditions Precedent;


                                      A-7
<PAGE>

         3.2        Appendix 10.7 - the Shareholders Agreement between Koor and
                    Elbit, which is to be entered into contemporaneously with
                    the signature of this Deed and will take effect on the
                    First Closing Date;

         3.3        Appendix 12.2 - the Stage 'B' Conditions Precedent.

4.       The Koor-Federmann Deed

         Contemporaneously with the signing this Deed, the Koor-Federmann Deed
         is also being signed. The Koor-Federmann Deed and this Deed are
         separate and unrelated deeds, except as expressly provided in this
         Deed. For the avoidance of doubt it is hereby clarified that Elbit is
         not a party to the Koor-Federmann Deed, and the provisions of the
         Koor-Federmann Deed do not impose any obligation, that is not
         expressly provided in this Deed, on Koor to Elbit or on Elbit to Koor.

5.       The Parties' Warranties and Undertakings

         The parties hereby warrant and undertake to each other as follows:

         5.1        The representations and warranties of the parties in this
                    Deed are solely as set out in this Clause 5 and in Clauses
                    6 and 7 below, as the case may be.

         5.2        The parties' warranties and undertakings as set out in this
                    Clause 5 and in Clauses 6 and 7 below, as the case may be,
                    will continue to be correct, complete and accurate as of
                    the First Closing Date and the Second Closing Date, and
                    they shall be deemed as having been given again by each of
                    the parties as of both the First Closing Date and on the
                    Second Closing Date.

6.       Koor's Warranties and Undertakings

         Koor hereby warrants and undertakes to Elbit as follows:

         6.1        That it is a duly incorporated public company, that its
                    number with the Companies Registrar is as appears in the
                    preamble hereto and that no actions or proceedings for
                    delisting, liquidation, winding-up, receivership or like
                    acts have been taken or are threatened against it.

         6.2        That on signing this Deed and until the completion of Stage
                    'A' of the Transaction it is and shall be the sole owner of
                    the Shares Being Sold (subject to the Fixed Lien), and
                    after the completion of Stage 'A' of the Transaction and
                    until the completion of Stage 'B' of the Transaction it is
                    and shall be the sole owner of the Stage 'B' Shares
                    (subject to the Fixed Lien, as will be modified as provided
                    in Clause 10.3 below), that it will not grant any person or
                    entity an option or right to purchase all or any of

                                      A-8
<PAGE>

                    the Shares Being Sold, that it has not undertaken to grant
                    such an option or right as aforesaid, that no person or
                    entity has any right of first refusal or tag-along right in
                    connection with all or any of the Shares Being Sold and
                    that on the date of signing this Deed, apart from the
                    Shares Being Sold, it does not hold securities of the
                    Company or any rights to receive or acquire securities of
                    the Company.

         6.3        That the Shares Being Sold are fully paid and Free and
                    Clear, save for a fixed lien in favor of Bank Hapoalim
                    B.M.. (in this Deed the "Bank") over all the Shares Being
                    Sold, including all the rights, income and proceeds that
                    Koor now or in future has from them (in this Deed the
                    "Fixed Lien") and that in the context of the Fixed Lien the
                    Shares Being Sold are held in a trust account at the Bank
                    in the name of Poalim Trust Services Ltd. (in this Deed the
                    "Trust Account") and that on the First Closing Date, upon
                    the Stage 'A' Consideration being received in Koor's
                    account, the Stage 'A' Shares will be Free and Clear and
                    that on the Second Closing Date, upon the Stage 'B'
                    Consideration being received in Koor's account, the Stage
                    'B' Shares will be Free and Clear.

         6.4        That apart from Koor's board of directors' approval, Koor
                    has no need, including pursuant to its incorporation
                    documents and applicable law, in Israel or abroad, to
                    obtain any other approvals from any of its organs for the
                    purpose of entering into this Deed and performing all its
                    obligations pursuant hereto.

         6.5        That subject to ratification by Koor's board of directors,
                    the signatories on Koor's behalf to this Deed and the
                    documents ancillary hereto are the persons who are
                    empowered, on Koor's behalf, to sign this Deed and the
                    documents ancillary hereto and/or necessary for the
                    performance hereof and to obligate Koor by their signature,
                    and this Deed, together with all its terms and conditions,
                    obligates Koor in all respects.

         6.6        That subject to the approval of Koor's board of directors
                    and the fulfilment of the Conditions Precedent, there is no
                    legal or other impediment to its entering into this Deed
                    and the performance hereof and that this Deed and the
                    performance of its obligations pursuant hereto are not
                    contrary to any judgment, order or direction of a court, to
                    any contract, understanding or agreement to which Koor is a
                    party, to its incorporation documents or to any other
                    obligation of Koor, whether by virtue of contract (oral, by
                    conduct or written) or by virtue of law.

         6.7        That apart from Koor's board of directors' approval and the
                    Conditions Precedent, all the approvals, consents and
                    permits have been obtained and all the necessary
                    proceedings have been performed, including with any


                                      A-9
<PAGE>

                    authorities, government entities or any other body, for the
                    purpose of Koor's entering into this Deed and performing
                    its obligations pursuant hereto, including transferring the
                    Shares Being Sold to Elbit.

         6.8        That from the time of Koor's acquisition of the Shares
                    Being Sold, Koor and/or its controlling shareholders and/or
                    officers have not entered into a transaction in which any
                    of them has a personal interest with the Company and/or its
                    subsidiaries, apart from the payment of remuneration to the
                    Company's directors, as customary with the Company, and
                    apart from arrangements for the grant of relief, insurance
                    and indemnity by the Company to the Company's directors.

                    Nothing in this Clause 6.8 shall be deemed to prevent Koor
                    and the Company from entering into the Elisra Transaction
                    or into transactions to which Elbit has given its consent
                    by written notice signed by two officers of Elbit, without
                    any further approval being necessary.

         6.9        That as at the time of signing this Deed, the Company
                    and/or its subsidiaries have not entered into a transaction
                    in which Koor and/or its subsidiaries and/or Koor's
                    controlling shareholders and/or officers and/or companies
                    controlled by any of them have a personal interest, other
                    than: (1) transactions in the ordinary course of business
                    with Elisra and its subsidiaries, the total financial value
                    of which does not exceed $5,000,000; (2) a transaction in
                    connection with the provision of warehousing services by
                    the Company to subsidiaries of Elisra; (3) payment of
                    remuneration to the Company's directors; (4) arrangements
                    for the grant of relief, insurance and indemnity by the
                    Company to the Company's directors; and that from the time
                    of signing this Deed until the Second Closing Date, the
                    Company and/or its subsidiaries will not enter into a
                    transaction in which Koor and/or its subsidiaries and/or
                    controlling shareholders and/or officers of Koor and/or the
                    companies controlled by any of them have a personal
                    interest, other than: (1) transactions in the ordinary
                    course of business with Elisra and its subsidiaries; (2)
                    transactions not in the ordinary course of business, the
                    total financial value of which does not exceed $5,000,000;
                    (3) a transaction in connection with the provision of
                    warehousing services by the Company to subsidiaries of
                    Elisra; (4) payment of remuneration to the Company's
                    directors as customary in the Company; and (5) arrangements
                    for the grant of relief, insurance and indemnity by the
                    Company to the Company's directors.

                    Nothing in this Clause 6.8 [sic] shall be deemed to prevent
                    Koor and the Company from entering into the Elisra
                    Transaction or transactions to which Elbit has granted its
                    consent by written notice signed by two officers of Elbit,
                    without any further approval being necessary.


                                     A-10
<PAGE>

         6.10       That from the time the Shares Being Sold were acquired by
                    Koor until the time of signing this Deed, the Company had
                    not brought to Koor's attention nor given any report to the
                    public that any material agreement to which the Company is
                    a party had been terminated or modified or that there was
                    any intent to terminate or modify any material agreement to
                    which the Company is a party.

7.       Elbit's Warranties and Undertakings

         Elbit hereby warrants and undertakes to Koor as follows:

         7.1        That it is a duly incorporated public company, that its
                    number with the Companies Registrar is as appears in the
                    preamble hereto and that no actions or proceedings for
                    delisting, liquidation, winding-up, receivership or like
                    acts have been taken or are being threatened against it.

         7.2        That it has the ability and resources to perform its
                    obligations pursuant to this Deed in full and on time and
                    that it is in possession of the financial resources
                    sufficient for payment of the Consideration in full and at
                    the times set out in this Deed.

         7.3        That apart from approval by Elbit's audit committee and
                    board of directors, Elbit has no need, including pursuant
                    to its incorporation documents and law, in Israel or
                    abroad, to obtain any other approvals from any of its
                    organs for the purpose of entering into this Deed and
                    performing all its obligations pursuant hereto, except for
                    approval by Elbit's General Meeting in accordance with
                    Section 275 of the Companies Law, if and insofar as not yet
                    obtained. At the time of signing this Deed, Elbit's General
                    Meeting's approval had not yet been obtained.

         7.4        That subject to the approvals of Elbit's audit committee
                    and board of directors, the signatories on behalf of Elbit
                    to this Deed and the documents ancillary hereto are those
                    who are empowered, on Elbit's behalf, to sign this Deed and
                    the documents ancillary hereto and/or necessary for the
                    performance hereof, and to obligate Elbit by their
                    signatures, and this Deed, including all its terms and
                    conditions, obligates Elbit in all respects, subject to
                    obtaining Elbit's General Meeting's approval.

         7.5        That subject to the approvals of Elbit's audit committee
                    and board of directors and the fulfilment of the Conditions
                    Precedent, there is no legal or other impediment to its
                    entering into and performing this Deed and that this Deed
                    and the performance of its obligations pursuant hereto are
                    not contrary to any judgment, order or direction of a
                    court, to any contract,


                                     A-11
<PAGE>

                    understanding or agreement to which it is a party, to its
                    incorporation documents or to any other obligation of
                    Elbit, whether by virtue of contract (oral, by conduct or
                    written) or by virtue of law.

         7.6        That apart from the approvals of Elbit's audit committee
                    and board of directors and apart from the Conditions
                    Precedent, including Elbit's General Meeting's approval,
                    all the approvals, consents and permits have been obtained
                    and all the necessary proceedings have been performed,
                    including with any authorities, government entities or any
                    other body, for the purpose of Elbit's entering into this
                    Deed and performing its obligations pursuant hereto,
                    including the acquisition from Koor of the Shares Being
                    Sold.

         7.7        That on signing this Deed it is the holder of 518,488
                    Ordinary Shares.

         7.8        That subject only to Koor's warranties and representations
                    in Clauses 5 and 6 of this Deed, the Shares Being Sold are
                    being purchased in their actual condition, and the actual
                    condition of the Company and its assets, and they are "As
                    Is", without any other representations or warranties being
                    received from or on behalf of Koor and that the
                    Consideration, as agreed between the parties, has been
                    fixed having regard also to the fact that the purchase is
                    on such an "As Is" basis.

8.       Stage 'A' of the Transaction

         8.1        On the First Closing Date and subject to the fulfilment of
                    Stage 'A' Conditions Precedent by the Stage 'A' Completion
                    Deadline, Koor shall sell and transfer to Elbit, on and
                    against payment of the whole of Stage 'A' Consideration,
                    1,700,000 (one million seven hundred thousand) Ordinary
                    Shares (the Stage 'A' Shares), fully paid and Free and
                    Clear, and Elbit shall purchase and receive from Koor the
                    Stage 'A' Shares and pay Koor the full amount of the Stage
                    'A' Consideration (in this Deed "Stage 'A' of the
                    Transaction").

         8.2        Furthermore, on the First Closing Date, Koor shall purchase
                    from Federmann Enterprises 2,160,000 (two million one
                    hundred and sixty thousand) ordinary shares of 1 NIS par
                    value each of Elbit, which on the date of signing this Deed
                    constitute approximately 5.3% of Elbit's issued share
                    capital, in accordance with the Koor-Federmann Deed, which
                    is being signed contemporaneously with this Deed. The
                    Koor-Federmann Deed Stage 'A' and Stage 'A' of the
                    Transaction shall be performed contemporaneously, and Stage
                    'A' of the Transaction (contemplated by this Deed) shall
                    not be performed without the Koor-Federmann Deed Stage 'A'
                    being performed.


                                     A-12
<PAGE>


         8.3        For the avoidance of doubt, after the performance and
                    completion of Stage 'A' of the Transaction, Stage 'A' of
                    the Transaction will not be revoked, even if Stage 'B' of
                    the Transaction is not performed or completed for any
                    reason.

9.       The Stage 'A' Completion Deadline and the Stage 'A' Conditions
         Precedent

         9.1        In this Deed the "Stage 'A" Completion Deadline" means:

                    9.1.1       31 March 2005;

                    or -

                    9.1.2       If by 31 March 2005 all the Stage 'A'
                                Conditions Precedent have been fulfilled, other
                                than the approval of the [Israel] Commissioner
                                of Restrictive Trade Practices, as set out in
                                Clause (3) of Appendix "9.2", the Stage 'A'
                                Completion Deadline shall be automatically
                                deferred until 31 May 2005 or to such later
                                date as may be fixed by the parties as provided
                                in Clause 20.3 below.

         9.2        The Stage 'A' Conditions Precedent are set out in Appendix
                    "9.2".

         9.3        Should all the Stage 'A' Conditions Precedent not have been
                    fulfilled by the Stage 'A' Completion Deadline, this Deed
                    shall be void - except, if and insofar as Elbit's General
                    Meeting's approval for its entering into the transaction
                    contemplated by this Deed has been obtained, the provisions
                    of Clauses 14.3 (except insofar as concerns the acquisition
                    of Ordinary Shares), 14.5 and 17 hereof, without either of
                    the parties having any complaint and/or claim and/or demand
                    against the other. For the avoidance of doubt, it is
                    clarified that if the Stage 'A' Conditions Precedent have
                    not been fulfilled by the Stage 'A' Completion Deadline,
                    neither of the parties shall be subject to any restriction
                    as regards the acquisition of Ordinary Shares.

                    Nothing in the provisions of this Clause 9.3 above shall be
                    deemed to derogate from any right or other remedy pursuant
                    to this Deed or by law that is available to the parties in
                    respect of a breach of any of the provisions of this Deed
                    (insofar as breached). Without prejudice to the above
                    provisions of this Clause 9.3, it is clarified that no
                    provision of this Deed shall obligate Elbit in any manner
                    whatsoever, prior to obtaining the approval of its General
                    Meeting, to enter into the transactions contemplated by
                    this Deed.

                                     A-13
<PAGE>

10.      The First Closing Date

         Subject to the Stage 'A' Conditions Precedent being fulfilled by the
         Stage 'A' Completion Deadline, the parties shall meet on the First
         Closing Date at such place as determined by the parties and the
         following interdependent acts shall be performed contemporaneously:

         10.1       Elbit shall remit the Stage 'A' Consideration by bank
                    transfer to Koor's bank account at the Bank, the details of
                    which shall be provided to it in writing by Koor by the
                    First Closing Date (in this Deed "Koor's Account") and
                    confirmation from the Bank shall be provided to Koor that
                    the Stage 'A' Consideration has been received in Koor's
                    Account.

         10.2       Koor shall provide Elbit confirmation from the Bank,
                    according to which the Bank agrees that on and against
                    receipt of the Stage 'A' Consideration in Koor's Account,
                    it will discharge the Fixed Lien from the Stage 'A' Shares.

         10.3       Koor shall provide Elbit a letter of instructions from the
                    Bank, in the Bank's standard form, addressed to the
                    Companies Registrar, pursuant to which the Bank applies to
                    the Companies Registrar to amend the Fixed Lien to the
                    effect that the Fixed Lien will be discharged from the
                    Stage 'A' Shares.

         10.4       Koor shall provide Elbit a written certificate from Poalim
                    Trust Services Ltd., in which Poalim Trust Services Ltd.
                    gives instructions to transfer the Stage 'A' Shares from
                    the Trust Account to Elbit's securities account, the
                    details of which shall be provided to Koor by Elbit in
                    writing by the First Closing Date (hereinafter "Elbit's
                    Account").

         10.5       Koor shall provide the Bank an irrevocable instruction to
                    transfer the Stage 'A' Shares, by means of a transaction
                    outside the Stock Exchange, from the Trust Account to
                    Elbit's Account, and confirmation from the Bank that the
                    Stage 'A' Shares have been received in Elbit's Account
                    shall be provided to Elbit.

         10.6       Koor shall provide Elbit a copy of the Company's board of
                    directors' resolution to the effect that, subject to the
                    performance of Stage 'A' of the Transaction, there shall be
                    added to the Company's board of directors and serve thereon
                    as directors such number of nominees as proposed for office
                    by Elbit, who meet the Qualification Conditions, such that
                    after their addition to the board of directors, the number
                    of directors proposed for office by Elbit shall be the
                    greater of:

                                     A-14
<PAGE>

                    (1)         three directors; or

                    (2)         a number of directors equal to 20% of the
                                number of the Company's directors (including
                                external directors and the directors who are
                                added in accordance with Elbit's nomination as
                                aforesaid), rounded up to the nearest whole
                                number (for example, if the number of directors
                                who are serving in the Company immediately
                                after the addition of Elbit's nominees is 11,
                                three nominees who have been proposed by Elbit
                                shall be added as directors).

                    In said board of directors' resolution it shall be provided
                    that Elbit's nominees as aforesaid shall be added to the
                    Company's board of directors on the First Closing Date.

                    Koor undertakes that there shall be sufficient vacancies on
                    the Company's board of directors to enable the addition of
                    Elbit's nominees as aforesaid.

                    If for any reason any of the nominees proposed by Elbit as
                    aforesaid cannot be appointed as a director or directors of
                    the Company, another nominee or nominees, as proposed by
                    Elbit, shall be appointed in his or their place.

                    Elbit shall give prior written notice to Koor and the
                    Company of the name of such nominees as aforesaid or of the
                    other nominees in their place, and Elbit (with the
                    assistance of Koor) shall coordinate with the Company's
                    corporate secretary such nominees' compliance with the
                    Qualification Conditions, all by no later than 14 days
                    prior to the earlier of (1) the Stage 'A' Completion
                    Deadline or (2) the First Closing Date. Without prejudice
                    to the foregoing, if any of the nominees proposed by Elbit
                    as aforesaid is not added to the Company's board of
                    directors on the First Closing Date, Koor shall hold a
                    General Meeting of the Company as soon as possible, the
                    agenda of which shall be the appointment of the nominees
                    proposed by Elbit, who have not been appointed as
                    aforesaid, as directors of the Company. Koor undertakes to
                    vote in favor of the appointment of the nominees proposed
                    by Elbit who have not been appointed as aforesaid but who
                    do meet the Qualification Requirements. If and insofar as
                    it is required by law that a majority of the Company's
                    directors meet any Qualification Requirements, then if the
                    number of directors appointed in accordance with Elbit's
                    nomination is an equal number, one half of the directors
                    appointed in accordance with Elbit's nomination as
                    aforesaid shall meet said conditions, and if the number of
                    directors appointed in accordance with Elbit's nomination
                    is an odd number, the majority of the


                                     A-15
<PAGE>

                    Company's directors who are appointed in accordance with
                    Elbit's nomination as aforesaid shall meet the above
                    conditions.

         10.7       The Shareholders Agreement, in the terms annexed hereto as
                    Appendix "10.7", shall become effective.

         10.8       Koor shall provide Elbit a written declaration, duly signed
                    by Koor, according to which all the warranties and
                    representations of Koor as set out in Clauses 5 and 6 of
                    this Deed are also correct, complete and accurate as of the
                    First Closing Date.

         10.9       Elbit shall provide Koor a written declaration, duly signed
                    by Elbit, according to which all the warranties and
                    representations of Elbit as set out in Clauses 5 and 7 of
                    this Deed are also correct, complete and accurate as of the
                    First Closing Date.

         10.10      The Koor-Federmann Deed Stage 'A' shall be completed,
                    namely all the acts that are to be performed on the
                    Koor-Federmann Deed First Closing Date shall be performed,
                    as provided in Clause 10 of the Koor-Federmann Deed.

         10.11      Each party undertakes to do all the acts for which it is
                    responsible pursuant to this Clause 10.

         10.12      All the acts mentioned above in this Clause 10 shall be
                    deemed as having been performed contemporaneously, no
                    individual act shall be deemed as completed and no
                    individual document shall be deemed as delivered until all
                    such acts have been completed and all the documents have
                    been delivered.

11.      Stage 'B' of the Transaction

         11.1       On the Second Closing Date and subject to the fulfilment of
                    the Stage 'B' Conditions Precedent by the Stage 'B'
                    Completion Deadline, Koor shall sell and transfer to Elbit,
                    on and against payment of the full Stage 'B' Consideration,
                    2,244,276 (two million two hundred forty-four thousand two
                    hundred and seventy-six) Ordinary Shares (the Stage 'B'
                    Shares), fully paid and Free and Clear, and Elbit shall
                    purchase and receive from Koor the Stage 'B' Shares and pay
                    Koor the full amount of the Stage 'B' Consideration
                    (hereinafter in this Deed "Stage 'B' of the Transaction").

         11.2       On the Second Closing Date Koor shall purchase from
                    Federmann Enterprises 1,840,000 (one million eight hundred
                    and forty thousand) ordinary shares of 1 NIS par value each
                    of Elbit, constituting

                                     A-16
<PAGE>

                    approximately 4.51% of Elbit's issued and paid up share
                    capital in accordance with the Koor-Federmann Deed, which
                    is being signed contemporaneously with this Deed, and Stage
                    'B' of the Transaction and the Koor-Federmann Deed Stage
                    'B' shall be performed together, and Stage 'B' of the
                    Transaction (contemplated by this Deed) shall not be
                    performed without the performance of the Koor-Federmann
                    Deed Stage 'B'. Nevertheless, it is agreed that the
                    provisions of this Clause 11.2 shall not apply if Federmann
                    gives notice as provided in Clause 12.1.3 of the
                    Koor-Federmann Deed or as provided in Clause 12.1.5 of the
                    Koor-Federmann Deed, as the case may be.

12.      The Stage 'B' Completion Deadline and the Stage 'B' Conditions
         Precedent

         12.1       In this Deed the "Stage 'B' Completion Deadline" means:

                    12.1.1      30 June 2005; or

                    12.1.2      if all the Stage 'B' Conditions Precedent have
                                not been fulfilled by 30 June 2005, the Stage
                                'B' Completion Deadline shall automatically be
                                deferred until 30 September 2005; or

                    12.1.3      if by 30 September 2005 all the Stage 'B'
                                Conditions Precedent have been fulfilled,
                                except for the completion of the Elisra
                                Transaction as set out in Clause (2) of
                                Appendix "12.2", Koor shall be entitled to
                                provide written notice to Elbit, to be received
                                by Elbit by said date, of the Stage 'B'
                                Completion Deadline's deferral until 30 April
                                2006 or such later date as may be determined by
                                the parties, as provided in Clause 20.3 below.

         12.2       The Stage 'B' Conditions Precedent are set out in Appendix
                    "12.2".

         12.3       Should all the Stage 'B' Conditions Precedent not be
                    fulfilled by the Stage 'B' Completion Deadline, Stage 'B'
                    of the Transaction shall not be performed, the provisions
                    in connection with the performance of Stage 'B' of the
                    Transaction in this Deed shall be deemed null and void and
                    be of no effect and, inter alia, Koor shall not sell Elbit
                    the Stage 'B' Shares and Elbit shall not pay the Stage 'B'
                    Consideration to Koor, and neither party shall have any
                    demand, claim or complaint against the other in connection
                    with Stage 'B' of the Transaction. For the avoidance of
                    doubt, it is clarified that the foregoing provisions of
                    this Clause 12.3 shall not be deemed to derogate from the
                    validity of any other provision, including the provisions
                    of Clauses 14.3 (except insofar as concerns the acquisition
                    of Ordinary Shares) or 14.5 of this Deed or as provided in
                    the Shareholders Agreement, which shall enter into effect
                    on the First Closing Date, or from

                                     A-17
<PAGE>

                    any other right or remedy pursuant to this Deed or by law
                    that is available to the parties in respect of a breach of
                    any of the provisions of this Deed (if and insofar as
                    breached).

         12.4       Should Federmann act as provided in Clause 12.1.3 of the
                    Koor-Federmann Deed or as provided in Clause 12.1.5 of the
                    Koor-Federmann Deed, and should the Stage 'B' Conditions
                    Precedent be fulfilled by the Stage 'B' Completion
                    Deadline, the parties shall perform and Complete Stage 'B'
                    of the Transaction pursuant to this Deed on the Second
                    Closing Date, and the provisions of Clause 11.2 above and
                    Clause 13.9 below shall not apply.

13.      The Second Closing Date

         Subject to the fulfilment of the Stage 'B' Conditions Precedent by the
         Stage 'B' Completion Deadline, the parties shall meet on the Second
         Closing Date at such place as determined by them, and the following
         interdependent acts shall be performed contemporaneously:

         13.1       Elbit shall remit the Stage 'B' Consideration by bank
                    transfer to Koor's Account, and confirmation from the Bank
                    shall be provided to Koor that the Stage 'B' Consideration
                    has been received in Koor's Account.

         13.2       Koor shall provide Elbit confirmation from the Bank,
                    according to which the Bank agrees that on and against
                    receipt of the Stage 'B' Consideration in Koor's Account,
                    it will discharge the Fixed Lien from the Stage 'B' Shares.

         13.3       Koor shall provide Elbit a letter of instructions from the
                    Bank, in the Bank's standard terms, addressed to the
                    Companies Registrar pursuant to which the Bank applies to
                    the Companies Registrar to discharge the Fixed Lien from
                    the Stage 'B' Shares.

         13.4       Koor shall provide Elbit a written certificate from Poalim
                    Trust Services Ltd. in which it provides instructions to
                    transfer the Stage 'B' Shares from the Trust Account to
                    Elbit's Account.

         13.5       Koor shall provide the Bank an irrevocable instruction to
                    transfer the Stage 'B' Shares by means of a transaction
                    outside the Stock Exchange from the Trust Account to
                    Elbit's Account, and confirmation from the Bank that the
                    Stage 'B' Shares have been received in Elbit's Account
                    shall be provided to Elbit.

                                     A-18
<PAGE>

         13.6       Koor shall cause the addition to the Company's board of
                    directors on the Second Closing Date of such number of
                    nominees who are proposed for their office by Elbit and
                    meet the Qualification Requirements so that on the
                    appointment of those nominees to the Company's board of
                    directors those nominees will, together with the directors
                    appointed to their office per Elbit's nomination as
                    provided in Clause 10.6 above, constitute more than 50% of
                    the total directors of the Company at that time, including
                    external directors and directors who are appointed to their
                    position per Elbit's nomination as aforesaid. Without
                    prejudice to the generality of the foregoing, Koor
                    undertakes that there will be sufficient vacancies on the
                    Company's board of directors for the performance of its
                    foregoing obligations.

                    Elbit shall provide Koor and the Company prior written
                    notice of its nominees as aforesaid or of the other
                    nominees in their place as provided below in this Clause,
                    and Elbit shall coordinate with the Company's corporate
                    secretary such nominees' compliance with all the conditions
                    required of the Company's directors, all by no later than
                    14 days from the earlier of (1) the Stage 'B' Completion
                    Deadline or (2) the Second Closing Date. If for any reason
                    any of such nominees as aforesaid cannot be appointed as a
                    director or directors of the Company, another nominee or
                    nominees, as proposed by Elbit, who meet the Qualification
                    Requirements, shall be appointed in his or their place.

         13.7       Koor shall provide Elbit a written declaration duly signed
                    by Koor according to which all Koor's warranties and
                    representations as set out in Clauses 5 and 6 of this Deed
                    are also correct, complete and accurate as of the Second
                    Closing Date.

         13.8       Elbit shall provide Koor a written declaration duly signed
                    by Elbit according to which all Elbit's warranties and
                    representations as set out in Clauses 5 and 7 of this Deed
                    are also correct, complete and accurate as of the Second
                    Closing Date.

         13.9       The Koor-Federmann Deed Stage 'B' shall be completed,
                    namely all the acts that are to be performed on the
                    Koor-Federmann Deed Second Closing Date as provided in
                    Clause 13 of the Koor-Federmann Deed shall be performed.
                    Nevertheless, it is agreed that this Clause 13.9 shall not
                    apply if Federmann acts as provided in Clause 12.1.3 or as
                    provided in Clause 12.1.5 of the Koor-Federmann Deed.

         13.10      Each party undertakes to perform all the acts for which it
                    is responsible pursuant to this Clause 13.

                                     A-19
<PAGE>

         13.11      All the acts mentioned above in this Clause 13 shall be
                    deemed as having been performed contemporaneously, no
                    individual act shall be deemed as having been completed and
                    no individual document shall be construed as delivered
                    until all such acts are completed and all the documents are
                    delivered.

14.      Acts and Obligations after the Signature of this Deed

         14.1       Immediately after the signature of this Deed, the parties
                    shall act and use their best efforts to cause the
                    fulfilment of all the Conditions Precedent, including
                    obtaining all the required certificates, permits and
                    consents, as early as possible. In such connection and
                    without derogating from the generality of the foregoing,
                    the parties shall apply to every competent authority and to
                    every other entity whose approval is necessary for the
                    performance of the transaction involved in this Deed, in
                    both its stages, they shall submit all the applications and
                    deliver all the information, data and particulars in their
                    possession, without delay, and act to resolve or avoid a
                    disapproval, if any, by the various government authorities
                    in any respect relating to or arising out of this Deed.

         14.2       It is hereby agreed that the provisions of this Deed are
                    not such as to place either of the parties under a duty to
                    make any payment for the fulfilment of the Conditions
                    Precedent or any of them, other than official fees and
                    other reasonable expenses (such payment as aforesaid,
                    excluding official fees and other reasonable expenses as
                    aforesaid, a "Fulfilment Payment"), provided that if a
                    party to this Deed refuses to make a Fulfilment Payment,
                    the other party may make it for the fulfilment of all or
                    any of the Conditions Precedent, provided that the first
                    party shall not be liable to indemnify the other party in
                    respect of a Fulfilment Payment, and the party that makes
                    the Fulfilment Payment shall have no demand, claim or right
                    of recourse against the other party in respect of the
                    making of such payment.

         14.3       Subject to the provisions of Clause 9.3 above and Clause
                    14.4 below, from the date of signing this Deed until 30
                    April 2006 (the "Lock-up Period"), Koor and Elbit shall not
                    conduct any transaction (including any transfer, sale or
                    acquisition) in Ordinary Shares, either on or outside the
                    Stock Exchange, unless otherwise agreed between the
                    parties, by written notice signed by two officers of each
                    of Koor and Elbit, without any further approval being
                    necessary. Said obligation shall continue in force even if
                    this Deed is cancelled for any reason, save for rescission
                    due to its breach by Koor and except if Elbit exercises its
                    right to rescind the Deed pursuant to the provisions of
                    Clause 16.1 below.

                                     A-20
<PAGE>

         14.4       Notwithstanding as provided in Clause 14.3 above, during
                    the Lock-up Period each party may purchase, either on or
                    outside the Stock Exchange, up to 350,000 Ordinary Shares
                    (the "Acquirable Quantity") without the other party's
                    consent, provided that it gives written notice to the other
                    party of the purchase of the shares and the quantity of
                    shares purchased within 48 hours of making each purchase.
                    Should one party purchase 350,000 Ordinary Shares (in this
                    Clause the "Purchasing Party") and the other party not
                    purchase 350,000 Ordinary Shares, the Purchasing Party may
                    send written notice to the other party (in this Clause the
                    "Purchase Notice") stating that it wishes to purchase
                    additional shares of the Company in a quantity not
                    exceeding the difference between 350,000 Ordinary Shares
                    and the quantity of shares purchased under this Clause by
                    the other party (in this Clause the "Acquirable Shares").
                    Should 14 days elapse from the date of providing the
                    Purchase Notice (in this Clause the "Other Party's Purchase
                    Period") and the other party not have purchased all the
                    Acquirable Shares in trading on the Stock Exchange, the
                    Purchasing Party may purchase the Acquirable Shares in
                    trading on the Stock Exchange within 14 days of the end of
                    the other party's Purchase Period. Should the Purchasing
                    Party not purchase the Acquirable Shares during said
                    period, it shall be responsible to provide the other party
                    Purchase Notice in order to purchase additional shares.

         14.5       Subject to the provisions in Clause 9.3 above, Elbit shall
                    vote in the Company's General Meeting by virtue of all the
                    Shares in the Company that are held by it at that time in
                    favor of approving the Elisra Transaction, whether or not
                    all or any of the transactions involved in this Deed are
                    actually implemented, provided that: (a) the Elisra
                    Transaction consideration is established in reliance on an
                    evaluation by an outside independent appraiser obtained for
                    the purpose of the Elisra Transaction, and the
                    consideration and terms and conditions of the Elisra
                    Transaction have been duly approved by the Company's audit
                    committee and board of directors and by every independent
                    committee of the Company that is established for the
                    purpose of considering the Elisra Transaction, insofar as
                    established, and the Company's audit committee and board of
                    directors have determined that the Elisra Transaction is
                    not contrary to the Company's interests; (b) the
                    consideration for the Elisra Transaction, as payable by the
                    Company, reflects a company value for Elisra of up to
                    US$225 million; and (c) the Elisra Transaction has been
                    referred to the Company's General Meeting for a vote by 30
                    April 2006. Elbit's said obligation shall expire on the
                    earlier of: (1) 1 May 2006, or (2) the completion of the
                    Elisra Transaction, or (3) on the rescission of this Deed
                    due to its breach by Koor, whichever is earlier.

                                     A-21
<PAGE>

         14.6       Without prejudice to Clauses 15 and 16 below, Koor hereby
                    undertakes that from the date of the signature of this Deed
                    until the earlier of: (1) the Stage 'A' Completion
                    Deadline, if the Stage 'A' Conditions Precedent have not
                    been fulfilled by that time; or (2) the Stage 'B'
                    Completion Deadline, if the Stage 'B' Conditions Precedent
                    have not been fulfilled by that time; or (3) the Second
                    Closing Date, Koor and/or its subsidiaries and/or the
                    controlling shareholders and/or officers of Koor and/or
                    companies under the control of any of them shall not enter
                    into an extraordinary transaction with the Company, in
                    which any of them has a personal interest, except for the
                    Elisra Transaction.

         14.7       From the date of obtaining Elbit's General Meeting's
                    approval of its entering into the transaction contemplated
                    by this Deed until the Second Closing Date, Koor's
                    president shall from time to time, in his discretion,
                    update Elbit's president regarding the status of the
                    Company's business, all subject to applicable legal
                    requirements (including antitrust laws).

         14.8       Subject to applicable law and except for the purpose
                    mentioned in Clause 3.4.3 of the Shareholders Agreement,
                    Koor, as a shareholder of the Company, undertakes that
                    after the Company's annual General Meeting that is held
                    after the date of signing this Deed, it will not act to
                    hold an annual General Meeting of the Company before the
                    Stage 'B' Completion Deadline, unless Elbit consents
                    thereto by written notice signed by two officers of Elbit,
                    without any further approval being necessary.

15.      Modifications to the Consideration or the Number of Shares Being Sold

         15.1       During the period from the date of signing this Deed until
                    the earlier of: (1) the Stage 'A' Completion Deadline, if
                    the Stage 'A' Conditions Precedent have not been fulfilled
                    by that time; (2) the Stage 'B' Completion Deadline, if the
                    Stage 'B' Conditions Precedent have not been fulfilled by
                    that time; or (3) the Second Closing Date; Koor shall,
                    insofar as it is able, oppose and vote by virtue of all the
                    Company's Shares that it holds at that time against any
                    resolution, except - for the purpose of sub-clauses (c),
                    (e) and (f) - a resolution with regard to the Elisra
                    Transaction, which concerns: (a) the making of any
                    distribution whatsoever, whether in cash or in kind, or by
                    a distribution of bonus shares, to the Company's
                    shareholders, except from the distribution of a regular
                    cash dividend of not more than 1.5 NIS per Ordinary Share
                    in any calendar quarter; (b) a rights offering for the
                    acquisition of any securities of the Company; (c) a sale of
                    the Company's shares that are held by the Company or its
                    subsidiaries; (d) any modification to the Company's
                    incorporation documents, except for the purpose of
                    increasing the Company's authorized share capital; (e)
                    transactions that are not in the ordinary course of the
                    Company's business


                                     A-22
<PAGE>

                    and transactions that concern an investment or acquisition
                    of rights in entities and/or the acquisition of businesses
                    (Asset Transactions) (in this Deed the "New Transactions"),
                    the aggregate financial amount of which exceeds
                    $25,000,000, excluding the Elisra Transaction; (f) any
                    allotment of the Company's securities except for an
                    allotment of shares deriving from the exercise of options
                    existing at the time of signing this Deed and, without
                    derogating from the provisions of Clause 14.5 above, except
                    for an allotment of options to employees of the Company or
                    its subsidiaries in a proportion not exceeding 2% of the
                    Company's issued share capital and on the Company's
                    customary terms, all unless Elbit's consent thereto is
                    provided by written notice to be signed by two officers of
                    Elbit, without any further approval being necessary.

         15.2       Insofar as during the period from the date of signing this
                    Deed until the First Closing Date or until the Second
                    Closing Date, as the case may be, one or more of the
                    below-mentioned events occurs, despite or in accordance
                    with the provisions of Clause 15.1 above, the Consideration
                    or number of the Shares Being Sold, as the case may be,
                    shall be adjusted in accordance with the following
                    provisions:

                    15.2.1      If the Company resolves to make any
                                distribution to its shareholders, the
                                Consideration shall be subject to the deduction
                                of any amount (translated into dollars at the
                                representative exchange rate on the earlier of
                                the date of actually making the distribution or
                                the First Closing Date or the Second Closing
                                Date, as the case may be) that Koor will be
                                entitled to receive in respect of the Shares
                                Being Sold (gross) (namely the record date for
                                its distribution is prior to the First Closing
                                Date or the Second Closing Date, as the case
                                may be).

                    15.2.2      If the Company offers its shareholders rights
                                for the acquisition of any securities, the
                                record date for the exercise of which is prior
                                to the First Closing Date or the Second Closing
                                Date, as the case may be, the amount of the
                                Consideration shall be adjusted for the bonus
                                element embodied (if at all) in the rights,
                                unless Elbit instructs Koor in writing prior to
                                the exercise date in respect of those rights to
                                exercise the rights and in such event Koor
                                shall exercise the rights by virtue of the
                                Shares Being Sold which have not yet been
                                transferred to Elbit as of that time and it
                                shall transfer to Elbit, immediately on the
                                occurrence of the earlier of (1) the exercise
                                date or (2) the First Closing Date, or after
                                the Second Closing Date, as the case may be,
                                the securities exercised as aforesaid on and
                                against payment of the entire exercise amount
                                paid by Koor to the Company for the exercise


                                     A-23
<PAGE>

                                thereof, plus Interest from the date of Koor's
                                paying the exercise price to the date of actual
                                payment to Koor by Elbit.

                    15.2.3      If the Company distributes bonus shares or
                                dividends in kind to its shareholders before
                                the First Closing Date or the Second Closing
                                Date, as the case may be, the Consideration
                                shall not be adjusted but the Shares Being Sold
                                shall be subject to the addition of the bonus
                                shares, Free and Clear, or of assets received
                                as dividends in kind (gross) in respect of the
                                Shares Being Sold, Free and Clear, without
                                Elbit being required to pay additional
                                consideration for them.

                    15.2.4      If the Company makes a consolidation, reduction
                                or sub-division of its share capital or does
                                any other act of similar effect, the Stage 'A'
                                Consideration and/or the Stage 'B'
                                Consideration, as the case may be, shall be
                                adjusted and the number of Shares Being Sold
                                shall also be adjusted pro rata to the
                                consolidation or sub-division.

16.      Elbit's Right to Rescind the Deed

         16.1       On the occurrence of one or more of the events set out in
                    Clause 16.2 below, unless it occurs with Elbit's consent,
                    Elbit may rescind this Deed or any of its stages before it
                    has been completed and performed (provided that if one of
                    the events set out in Clause 16.2 below occurs before the
                    performance of Stage 'A' of the Transaction, Elbit may only
                    rescind this Deed in full). Such rescission shall be
                    effected by Elbit by written notice, to be received by Koor
                    within 10 Business Days of the date on which Elbit learns
                    of the occurrence of one of the events set out in Clause
                    16.2 below. Should Elbit provide such notice of the
                    rescission of this Deed after the completion of Stage 'A'
                    of the Transaction, the sale of the Stage 'A' Shares to
                    Elbit shall not be rescinded, Elbit shall not return to
                    Koor the Stage 'A' Shares and Koor shall not refund to
                    Elbit the Stage 'A' Consideration, and nevertheless, all
                    the parties' other obligations and rights pursuant to this
                    Deed and the Appendices hereto, except for the Shareholders
                    Agreement and the provision of Clause 14.5 above, shall be
                    void. For the avoidance of doubt, it is clarified that
                    after Elbit has given notice in accordance with this Clause
                    16.1, Elbit may sell Ordinary Shares held by it or purchase
                    Ordinary Shares without any restriction.

                                     A-24
<PAGE>

         16.2       The events are as follows:

                    16.2.1      If a receiver or temporary receiver and/or
                                temporary liquidator and/or liquidator and/or
                                trustee is appointed for the Company and/or if
                                a winding-up order and/or receivership order
                                and/or suspension of proceedings order is
                                awarded against it and/or if any of the
                                Company's material assets is attached, provided
                                that such appointment, order or attachment is
                                not set aside within 30 days.

                    16.2.2      If the Company enters into merger proceedings
                                as provided in Chapter Eight of the Companies
                                Law or compromise or arrangement proceedings in
                                accordance with Section 350 of the Companies
                                Law or restructuring and/or merger proceedings
                                in accordance with Section 351 of the Companies
                                Law.

                    16.2.3      If any alteration is made to the Company's
                                incorporation documents, except for the purpose
                                of increasing the Company's authorized share
                                capital.

                    16.2.4      If the Company makes a private placement that
                                vests a right to more than 1,500,000 Ordinary
                                Shares, except for an issuance of shares
                                deriving from the exercise of options existing
                                on the date of signing this Deed and except for
                                an issuance of options to employees of the
                                Company and its subsidiaries in a amount of not
                                more than 2% of the Company's issued and paid
                                up share capital as customary in the Company,
                                at an exercise price per share that is not
                                materially less than the market price.

                    16.2.5      If the Company enters into New Transactions, as
                                defined in Clause 15.1 above, insofar as their
                                aggregate amount exceeds US$35 million, except
                                for the Elisra Transaction.

                    16.2.6      If the Company makes a distribution, either in
                                cash or in kind (except for a distribution of
                                bonus shares or rights offering) in an
                                aggregate amount exceeding 2.5 NIS per share in
                                any calendar quarter commencing on 1 January
                                2005.

                    16.2.7      If the Elisra Transaction has been completed
                                for consideration that has been paid by the
                                Company and reflects a company value for Elisra
                                in excess of US$225 million.

                                     A-25
<PAGE>

         16.3       Koor shall provide Elbit written notice immediately on the
                    occurrence of any of the events set out in Clause 16.2
                    above, all in accordance with applicable legal
                    requirements.

17.      Confidentiality and Notices

         17.1       The parties shall use Confidential Information that comes
                    into their possession in connection with this Deed and the
                    Company solely for the performance of their obligations
                    pursuant to this Deed, and they shall not disclose or
                    transfer in any manner whatsoever Confidential Information
                    to any third party, other than to their employees or
                    independent advisors and except insofar as required for the
                    fulfilment of the Conditions Precedent and insofar as
                    possible by prior coordination with the other party.
                    Without derogating from the foregoing, if the transaction
                    contemplated by this Deed is not actually implemented, each
                    party shall return to the other party hereto all
                    Confidential Information that has come into its possession
                    in connection with this Deed, if any. This obligation is
                    not limited in time and shall continue in force even after
                    the end of the term of this Deed or if this Deed is
                    annulled or rescinded for any reason.

         17.2       If and insofar as possible, and subject to applicable legal
                    requirements and to the time periods mandated by law, the
                    parties shall coordinate in advance the wording of every
                    report, application, communication or notice published by
                    either of them in connection with their entering into this
                    Deed, its performance and the fulfilment of the conditions
                    pursuant hereto.

18.      Taxes and Mandatory Payments

         18.1       Unless otherwise provided in this Deed, each party shall
                    bear the mandatory payments and taxes that may be imposed
                    on it by law (if and insofar as charged) in respect of the
                    sale or acquisition of the Shares Being Sold pursuant to
                    this Deed.

         18.2       If any amount payable in accordance with the provisions of
                    this Deed is subject to a duty to withhold tax at source,
                    tax shall be duly withheld by the paying party unless the
                    party receiving the payment produces a valid tax
                    withholding exemption certificate issued by the tax
                    authorities.

         18.3       Each party shall bear its own expenses, including the
                    professional fees of its legal advisers in connection with
                    the preparation and performance of this Deed.

         18.4       If any amount paid by one party to the other in accordance
                    with the provisions of this Deed is subject under
                    applicable law to value added tax

                                     A-26
<PAGE>

                    (VAT), the paying party shall, at the same time and in the
                    same manner as it pays that amount, also pay the VAT at its
                    legal rate on and against a duly issued tax invoice.

19.      Entry into Effect

         19.1       This Deed shall enter into effect upon the receipt of all
                    the following approvals:

                    19.1.1      Approval of Koor's board of directors for Koor
                                to enter into this Deed and the Shareholders
                                Agreement and for performance thereof by Koor
                                in accordance with their terms and conditions,
                                including ratification of the signatures of
                                Messrs. Jonathan Kolber and Danny Biran to this
                                Deed and the Shareholders Agreement.

                    19.2.1      Approval of Elbit's audit committee and board
                                of directors for Elbit to enter into this Deed
                                and the Shareholders Agreement and for
                                performance thereof by Elbit in accordance with
                                their terms and conditions, including
                                ratification of the signatures of Messrs.
                                Joseph Ackerman and Joseph Gaspar to this Deed
                                and the Shareholders Agreement.

                    Provided that:

                    (1)         such approvals as mentioned in Clauses 19.1.1
                                and 19.1.2 have been obtained by no later than
                                January 6, 2005 by 17:00 (in this Clause the
                                "Effective Date");

                    (2)         by the Effective Date, a copy of Koor's board
                                of directors' resolution, as mentioned in
                                Clause 19.1.1 above, has been received at
                                Elbit's offices together with written
                                confirmation from Koor's legal counsel that the
                                said resolutions were duly adopted and Messrs.
                                Jonathan Kolber and Danny Biran were empowered
                                jointly to sign, on behalf of Koor, this Deed
                                and the documents ancillary hereto or those
                                necessary for the purpose of its performance,
                                and also the Shareholders Agreement, and to
                                obligate Koor thereunder;

                    (3)         by the Effective Date, copies of the
                                resolutions of Elbit's audit committee and
                                board of directors, as mentioned in Clause
                                19.1.2 above, have been received at Koor's
                                offices, together with written confirmation
                                from Elbit's attorneys that the resolutions
                                were duly adopted and Messrs. Joseph Ackerman
                                and Joseph

                                     A-27
<PAGE>

                    Gaspar were empowered jointly to sign, on Elbit's behalf,
                    this Deed and the documents ancillary hereto or those
                    necessary for the purpose of its performance and also the
                    Shareholders Agreement and to obligate Elbit thereunder,
                    subject to the approval of Elbit's General Meeting; and

                    (4)         all the approvals, as mentioned in Clause 19.1
                                of the Federmann-Koor  Deed, have been obtained
                                by the Effective Date.

         19.2       Should all the approvals as mentioned in Clauses 19.1.1 and
                    19.1.2 not have been obtained by the Effective Date, and
                    without derogating from the provisions of Clause 20.3
                    below, this Deed shall automatically expire and be null and
                    void, without either of the parties having any complaint,
                    claim or demand against the other.

         19.3       This Deed shall become effective, if and insofar as it
                    becomes effective, at such time as mentioned in Clause 19.1
                    above, nevertheless:

                    19.3.1      none of the provisions of this Deed shall
                                obligate Elbit in any way until Elbit's General
                                Meeting duly approves its entering into the
                                transaction contemplated by this Deed; and

                    19.3.2      the performance and completion of Stage 'A' of
                                the Transaction are conditioned upon the
                                fulfilment of all the Stage 'A' Conditions
                                Precedent by the Stage 'A' Completion Deadline
                                and, apart from the obligations in Clauses 14
                                to 18 above and Clause 20.8 below, neither
                                party shall be liable to do any act for the
                                performance and completion of Stage 'A' of the
                                Transaction before the fulfilment of all the
                                Stage 'A' Conditions Precedent; and

                    19.3.3      the performance and completion of Stage 'B' of
                                the Transaction are conditional upon the
                                fulfilment of all the Stage 'B' Conditions
                                Precedent by the Stage 'B' Completion Deadline
                                and, apart from the obligations in Clauses 14
                                to 18 above and Clause 20.8 below, neither
                                party shall be liable to do any act for the
                                performance and completion of Stage 'B' of the
                                Transaction before the fulfilment of all the
                                Stage 'B' Conditions Precedent.

                                     A-28
<PAGE>

20.      Miscellaneous

         20.1       This Deed shall be governed by the laws of the State of
                    Israel. Sole and exclusive jurisdiction in all respects
                    relating to this Deed shall be vested only in the courts of
                    the District Court in the City of Tel Aviv-Jaffa, and no
                    other court shall have jurisdiction thereover.

         20.2       Any modification, addendum or addition, waiver, extension,
                    concession or failure to exercise a right pursuant to this
                    Deed shall only be effective if done in an express document
                    signed by all the parties hereto and shall only apply to
                    the case specified in such document and shall not derogate
                    from other rights of any party pursuant to this Deed.

         20.3       The parties hereto may extend or reduce any time specified
                    in this Deed and waive the performance of any of the
                    provisions of this Deed, either once or several times, by
                    written notice signed by two officers of each of Koor and
                    Elbit, without any further authority being necessary.

         20.4       This Deed fully contains, embodies, merges, expresses and
                    exhausts all the understandings of the parties hereto
                    solely in respect of the matters mentioned herein. Any
                    promises, guarantees or agreements, whether written or
                    oral, undertakings or representations concerning the
                    subject matter of this Deed given or made by the parties
                    prior to entering into this Deed, orally or in writing,
                    that are not specifically expressed herein, shall not be
                    deemed to augment the rights and obligations prescribed in
                    this Deed or to derogate from or modify them, and the
                    parties shall not be bound by them, insofar as they were
                    bound, as from the date of this Deed. Without derogating
                    from the generality of the foregoing, the documents
                    exchanged between the parties prior to the signature
                    hereof, including the drafts exchanged between them, shall
                    have no significance in the interpretation of this Deed.
                    For the avoidance of doubt, the terms of the Koor-Federmann
                    Deed shall not be applied in the interpretation of this
                    Deed.

         20.5       No conduct by either of the parties shall be construed as a
                    waiver of any of its rights pursuant hereto or by law or as
                    a waiver on its behalf of or acquiescence in any breach or
                    non-performance of a condition of the Deed by the other
                    party or as granting a postponement or extension or as a
                    modification, cancellation or addition of any condition,
                    unless done expressly and in writing.

         20.6       Unless otherwise expressly provided in this Deed, the
                    parties hereto may not assign or transfer their rights or
                    obligations pursuant to this Deed to any third party or
                    perform this deed through any third party, unless the


                                     A-29
<PAGE>

                    other party's prior written consent has been obtained, and
                    nothing in this Deed shall be deemed to vest any right in
                    anyone who is not a party hereto.

         20.7       Should either of the parties not enforce or delay in
                    enforcing any of the rights vested in it pursuant to this
                    Deed or by law in a particular case or series of cases,
                    such shall not be deemed a waiver of said right or of any
                    other rights.

         20.8       Subject in the provisions of Clause 14.2 above in
                    connection with the Conditions Precedent, the parties shall
                    cooperate between them in the implementation of the
                    provisions of this Deed, and they shall assist each other
                    insofar as reasonable and necessary, and in such connection
                    they shall sign every reasonable document, application and
                    approval necessary for such purpose.

         20.9       Notices pursuant to this Deed shall be given in writing to
                    the parties' addresses as set out in the heading hereto or
                    to such other addresses of which the parties may give
                    notice in accordance with the provisions of this Clause.
                    Any notice sent by one party to the other by registered
                    mail shall be deemed to have reached the addressee
                    following the passage of three days from the date of being
                    posted, and notice delivered in person by 17:00 hours on
                    any Business Day shall be treated as received on delivery,
                    or if delivered after 17:00 hours on any Business Day, then
                    on the first Business Day after its delivery.


IN WITNESS WHEREOF THE PARTIES HAVE EXECUTED THIS AGREEMENT:

  (signed)                                      (signed)
- ----------------------------                ----------------------------------
KOOR INDUSTRIES LTD.                        ELBIT SYSTEMS LTD.


By: Jonathan Kolber                         By: Joseph Ackerman

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

By: Danny Biran                             By: Joseph Gaspar
- ----------------------------                ----------------------------------


                                     A-30
<PAGE>

                                                                 Appendix 9.2


The Conditions Precedent for the Performance of Stage 'A' of the Transaction

Set out below are the Conditions Precedent and approvals required, insofar as
necessary, for the Completion of Stage 'A' of the Transaction contemplated by
the Deed of which this Appendix is an integral part ("this Deed"):

(1)      Obtaining all the consents and approvals necessary and the fulfilment
         of all the Koor-Federmann Deed Stage 'A' Conditions Precedent, as set
         out in the Koor - Federmann Deed,

(2)      Obtaining approval from Elbit's General Meeting for Elbit's entering
         into this Deed, in both its stages, as required by law and after the
         transaction contemplated by the Koor-Federmann Deed has also been
         presented to Elbit's General Meeting, and also written confirmation
         from Elbit's attorneys that such approval has been duly obtained.

(3)      Insofar as necessary, obtaining the [Israel] Commissioner of
         Restrictive Trade Practices' approval, after the entire framework of
         the transaction contemplated by this Deed has been provided to him,
         for the parties' to enter into this Deed and perform Stage 'A' of the
         Transaction, provided that the said authority's disapproval of Stage
         'B' of the Transaction is not received.

(4)      Insofar as necessary, obtaining approval from the antitrust authority
         in the United States and/or Europe, after the entire framework of the
         Transaction contemplated by this Deed has been provided to it, for the
         parties' to enter into this Deed and to perform Stage 'A' of the
         Transaction, provided that the disapproval of any such authorities as
         aforesaid to approve Stage 'B' of the Transaction is not received.

(5)      Obtaining approval from the [Israel] Ministry of Defense for the
         parties' to enter into this Deed and perform the transaction
         contemplated by this Deed, insofar as required.

(6)      Obtaining approval from the [Israel] Investment Center and/or the
         [Israel] Chief Scientist in respect of the terms and conditions of
         grants or benefits that the Company has obtained, for the performance
         of Stage 'A' of the Transaction contemplated by this Deed, insofar as
         required.

(7)      Obtaining approvals from Bank Hapoalim B.M., Bank Leumi Le-Israel
         B.M., United Mizrahi Bank Ltd., Israel Discount Bank Ltd., BNP Paribas
         or other banks or financial institutions for the performance of Stage
         'A' of the Transaction contemplated by this Deed, insofar as required.

                                     A-31
<PAGE>

In this Appendix 9.2, "approval" means - including an approval that is subject
to conditions but excluding an approval that is subject to conditions that are
such as to materially alter the business activity of Elbit and/or the Company,
as existing at the time of signing this Deed or that may arise in the future,
in accordance with resolutions that have been passed by Elbit and/or the
Company, as the case may be, prior to signing this Deed, or the way in which
Elbit and/or the Company conducts its business.



                                     A-32
<PAGE>

                                                                 Appendix 12.2

The Conditions Precedent for the Performance of Stage 'B' of the Transaction

Set out below are the Conditions Precedent and approvals required, insofar as
necessary, for the completion of Stage 'B' of the Transaction contemplated by
the Deed of which this Appendix is an integral part ("this Deed"):

(1)      The completion of Stage 'A' of the Transaction contemplated by this
         Deed.

(2)      The completion of the Elisra Transaction.

(3)      Obtaining all the consents and approvals necessary and the fulfilment
         of all the Koor-Federmann Deed Stage 'B' Conditions Precedent, as set
         out in the Koor-Federmann Deed. Nevertheless, this condition will not
         apply if Federmann gives notice as set out in Clause 12.1.3 of the
         Koor-Federmann Deed or in Clause 12.1.5 of the Koor - Federmann Deed.

(4)      Insofar as necessary, obtaining the [Israel] Commissioner of
         Restrictive Trade Practices' approval of the parties' to enter into to
         this Deed and perform Stage 'B' of the Transaction contemplated by
         this Deed, insofar as such approval is not given in Stage 'A' of the
         Transaction.

(5)      Insofar as necessary, obtaining approval from the antitrust authority
         in the United States and/or Europe of the parties' to enter into this
         Deed and the performance of Stage 'B' of the Transaction contemplated
         by this Deed, insofar as said authority's approval is not given in
         Stage 'A' of the Transaction.

(6)      Obtaining approval from the [Israel] Investment Center and/or the
         [Israel] Chief Scientist in respect of the terms and conditions of
         grants or benefits that the Company has obtained, for the performance
         of Stage 'B' of the Transaction contemplated by this Deed, insofar as
         required.

(7)      Obtaining approvals from Bank Hapoalim B.M., Bank Leumi Le-Israel
         B.M., United Mizrahi Bank Ltd., Israel Discount Bank Ltd., BNP Paribas
         or other banks or financial institutions to enter into in Stage 'B' of
         the Transaction contemplated by this Deed, insofar as required.

In this Appendix 12.2, "approval" means - including an approval that is subject
to conditions but excluding an approval that is subject to conditions that are
such as to materially alter the business activity of Elbit and/or the Company,
as existing at the time of signing this Deed or that may arise in the future,
in accordance with resolutions that have been passed by Elbit and/or the
Company, as the case may be, prior to signing this Deed, or the way in which
Elbit and/or the Company conducts its business.


                                     A-33
<PAGE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>3
<FILENAME>koorsc13dexhibitb.txt
<DESCRIPTION>EXH. B. - SHARE TRANSFER DEED - FEDERMANN
<TEXT>

                                                                    Exhibit B


                              SHARE TRANSFER DEED


                                    BETWEEN


                           FEDERMANN ENTERPRISES LTD.


                                      AND


                              KOOR INDUSTRIES LTD.


                                      B-1
<PAGE>


                     [TRANSLATED FROM THE HEBREW ORIGINAL]


                              SHARE TRANSFER DEED
                              -------------------

                Made in Tel Aviv this 27th day of December 2004


                                    BETWEEN


                           FEDERMANN ENTERPRISES LTD.
                       (Public Company No. 51 - 227839-1)
                        of 99 Hayarkon Street, Tel Aviv
                                 ("Federmann")

                                                                of the one part
                                                                ---------------


                                      AND

                              KOOR INDUSTRIES LTD.
                       (Public Company No. 52 - 001414-3)
        of 14 Hamalacha Street, Afek Industrial Park, Rosh Ha'ayin 48091
                                    ("Koor")


                                                              of the other part
                                                              -----------------


                          (hereinafter the "Parties")


WHEREAS                    Federmann is the holder of 19,915,448 Ordinary
                           Shares of the issued and paid up share capital of
                           Elbit Systems Ltd., a public company duly
                           incorporated in Israel, whose number with the
                           Companies Registrar is Public Company No.
                           52-004302-7 (hereinafter the "Company");

AND WHEREAS                Federmann wishes to sell and transfer to Koor, in
                           two stages, 4,000,000 (four million) Ordinary
                           Shares, which on the date of signing this Deed
                           constitute approximately 9.8% of the Company's
                           issued and paid-up share capital, while in the first
                           stage Federmann will sell and transfer to Koor
                           2,160,000 (two million one hundred and sixty
                           thousand) Ordinary Shares, which

                                      B-2
<PAGE>

                           on the date of signing this Deed constitute
                           approximately 5.3% of the Company's issued and
                           paid-up share capital, and in the second stage
                           Federmann will sell and transfer to Koor 1,840,000
                           (one million eight hundred and forty thousand)
                           Ordinary Shares, which on the date of signing this
                           Deed constitute approximately 4.5% of the Company's
                           issued and paid-up share capital, subject to and in
                           accordance with the provisions of this Deed;

AND WHEREAS                Koor wishes to purchase and receive from Federmann
                           the Shares Being Sold, subject to and in accordance
                           with the provisions of this Deed;

AND WHEREAS                the performance of this Deed, in both stages, is
                           subject to Conditions Precedent as provided below
                           in this Deed;

AND WHEREAS                The Parties wish to set forth their relationship
                           with respect to the sale and purchase of the Shares
                           Being Sold in the context of this Deed;

AND WHEREAS                Koor is interested in the performance of the
                           Transaction contemplated by this Deed as part of an
                           overall Transaction, in the scope of which Koor
                           will sell to the Company shares of Tadiran
                           Communications, as set out in the Elbit-Koor Deed
                           and this Deed.


NOW, THEREFORE, IT IS WARRANTED, PROVIDED AND AGREED BETWEEN THE PARTIES AS
FOLLOWS:

1.       Preamble, Appendices and Interpretation
         ---------------------------------------

         1.1        The preamble and appendices hereto constitute an integral
                    part hereof.

         1.2        The clause headings in this Deed are solely for the sake of
                    convenience and shall not be applied in the interpretation
                    hereof.

2.       Definitions

         2.1        In this Deed, the following terms shall have the meanings
                    herein ascribed to them, unless expressly stated otherwise:

                    "Elisra" means Elisra Electronic Systems Ltd., Private
                    Company No. 52-003587-4;

                    "General Meeting" means as defined in the Companies Law,
                    and any adjourned meeting;

                                      B-3
<PAGE>

                    "U.S. Dollar" or "$" means United States dollars;

                    "Company" means as defined in the preamble hereto;

                    "Shareholders Agreement" means the Agreement between
                    Federmann and Koor in the form of Appendix "10.7" hereto,
                    which is to be signed on the signature of this Deed and
                    will enter into effect on the First Closing Date;

                    "Stage 'A' Conditions Precedent" means the Conditions
                    Precedent for Stage 'A' of the Transaction, as provided in
                    Appendix "9.2" hereto;

                    "Stage 'B' Conditions Precedent" means the Conditions
                    Precedent for Stage 'B' of the Transaction, as provided in
                    Appendix "12.2" hereto;

                    "Conditions Precedent" means the Stage 'A' Conditions
                    Precedent and the Stage 'B' Conditions Precedent;

                    "Companies Law" means the [Israel] Companies Law, 5759-1999;

                    "Business Day" means a day on which the two major banks in
                    Israel are open for business, other than Fridays and
                    holiday eves, which shall not be treated as a "Business
                    Day";

                    "Koor" means as defined in the preamble hereto;

                    "First Closing Date" means the third Business Day after the
                    date on which all the Stage 'A' Conditions Precedent have
                    been fulfilled or such later date as agreed by the Parties,
                    as provided in Clause 20.3 below;

                    "Elbit-Koor Deed First Closing Date" means the First
                    Closing Date as the term is defined in the Elbit-Koor Deed;

                    "Second Closing Date" means the third Business Day after
                    the date on which all the Stage 'B' Conditions Precedent
                    have been fulfilled or in the event that the Stage 'B'
                    Conditions Precedent are deemed wholly fulfilled in
                    accordance with the provisions of Clause 12.4 or 12.5
                    below, as the case may be, the 14th Business Day after 30th
                    June 2005 or after the date of receiving Koor's notice
                    pursuant to Clause 12.5, as the case may be, or such later
                    date as agreed by the Parties, as provided in Clause 20.3
                    below;

                                      B-4
<PAGE>

                    "Elbit-Koor Deed Second Closing Date" means the Second
                    Closing Date as the term is defined in the Elbit-Koor Deed;

                    "Stage 'A' Completion Deadline" means as defined in Clause
                    9.1 below;

                    "Stage 'B' Completion Deadline" means as defined in Clause
                    12.1 below;

                    "Elbit-Koor Deed Stage 'B' Completion Deadline" means the
                    Stage 'B' Completion Deadline as the term is defined in the
                    Elbit-Koor Deed;

                    "Confidential Information" means all information relating
                    to the Parties hereto or to the Company, other than (a)
                    information that was in the public domain or came into the
                    public domain otherwise than due to a breach of this Deed
                    and (b) information the disclosure of which is required in
                    accordance with the provisions of law;

                    "Ordinary Share" or "Ordinary Shares" means Ordinary Shares
                    of 1 NIS par value each of the Company's issued share
                    capital;

                    "Stage 'A' Shares" mean 2,160,000 (two million one hundred
                    and sixty thousand) Ordinary Shares;

                    "Stage 'B' Shares" mean 1,840,000 (one million eight
                    hundred and forty thousand) Ordinary Shares;

                    "Shares Being Sold" means the Stage 'A' Shares and the
                    Stage 'B' Shares;

                    "Free and Clear" means free and clear of any charge,
                    pledge, attachment, levy, debt, lien, claim, right of
                    pre-emption, right of refusal, option, lock-up arrangement
                    or any further or other third party right whatsoever, other
                    than restrictions with respect to the transfer and/or
                    negotiability of shares that are imposed pursuant to U.S.
                    securities law (shares which are not registered under U.S.
                    securities laws);

                    "Elisra Transaction" means a transaction pursuant to which
                    Tadiran Communications will purchase shares constituting at
                    least 70% of Elisra's issued share capital;

                    "Federmann" means as defined in the preamble to this Deed;

                                      B-5
<PAGE>

                    "Interest" means three-month LIBOR at Bank Leumi Le-Israel
                    B.M., plus annual interest at the rate of 1.5%, compounded
                    every three months;

                    "Deed" means this Share Transfer Deed together with all the
                    appendices hereto;

                    "Elbit-Koor Deed" means the Share Transfer Deed together
                    with all the appendices thereto made between the Company
                    and Koor on the signature of this Deed, subject to and in
                    accordance with the conditions of which Koor will sell and
                    transfer to the Company, in two stages, 3,944,276 (three
                    million nine hundred forty-four thousand two hundred and
                    seventy-six) Ordinary Shares of 1 NIS par value each of
                    Tadiran Communications, which on the date of signing this
                    Deed constitute approximately 32% of Tadiran
                    Communication's issued share capital;

                    "Stage 'A' of the Transaction" means as defined in Clause
                    8.1 below;

                    "Stage 'B' of the Transaction" means as defined in Clause
                    11.1 below;

                    "Elbit-Koor Deed Stage 'A'" means Stage 'A' of the
                    Transaction contemplated by the Elbit-Koor Deed as the term
                    is defined in the Elbit-Koor Deed;

                    "Elbit-Koor Deed Stage 'B'" means Stage 'B' of the
                    Transaction contemplated by the Elbit-Koor Deed as the term
                    is defined in the Elbit-Koor Deed;

                    "Tadiran Communications" means Tadiran Communications Ltd.
                    (Private [sic] Company No. 51-207441-0);

                    "Stage 'A' Consideration" means US$24.70 (twenty-four U.S.
                    dollars and seventy cents) for each of the Stage 'A'
                    Shares, totaling US$53,352,000 (fifty-three million three
                    hundred and fifty-two thousand U.S. dollars), and insofar
                    as all or part of that amount is actually paid after April
                    1, 2005, such amount as aforesaid shall be subject to the
                    addition of the Interest from April 1, 2005 until the time
                    of actual payment, all subject to the adjustments as
                    provided in Clause 15 below;

                    "Stage 'B' Consideration" means US$24.70 (twenty-four U.S.
                    dollars and seventy cents) for each of the Stage 'B'
                    Shares, totaling US$- 45,448,000 (forty-five million four
                    hundred and forty-eight


                                      B-6
<PAGE>

                    thousand U.S. dollars), and insofar as all or part of that
                    amount is actually paid after April 1, 2005, such amount as
                    aforesaid shall be subject to the addition of the Interest
                    from April 1, 2005 until the time of actual payment, all
                    subject to the adjustments as provided in Clause 15 below;

                    "Consideration" means the Stage 'A' Consideration and the
                    Stage 'B' Consideration together;

                    "Qualification Conditions" means all the requirements in
                    accordance with applicable law and pursuant to the
                    Company's incorporation documents for a person to serve as
                    a director of the Company, including security clearance as
                    required in Israel for the purpose of such service, but
                    excluding the conditions for an Independent Director;

                    "Independent Director" means a director who meets the
                    independence criteria in accordance with U.S. securities
                    law, including the Sarbanes-Oxley Act and the rules and
                    regulations that have been and are in future issued by
                    virtue thereof, including rules of the Nasdaq.

         2.2        The following terms shall have the meanings defined in
                    Section 1 of the [Israel] Securities Law, 5728-1968:

                    "securities", "company", "subsidiary", "acquisition of
                    securities", "holding and acquisition" and "control".

         2.3        The following terms shall have the meanings defined in
                    Section 1 of the Companies Law:

                    "dividend", "director", "external director", "public
                    company", "distribution", "bonus shares", "officer",
                    "personal interest", "transaction", "extraordinary
                    transaction", "act", the "Companies Registrar" and "share
                    certificate".

3.       Appendices

         The following appendices, which constitute an integral part hereof,
         are annexed to this Deed:

         3.1        Appendix "9.2" - the Stage 'A' Conditions Precedent;

         3.2        Appendix "10.7" - the Shareholders Agreement between
                    Federmann and Koor, which is to be signed contemporaneously
                    with the signature of this Deed and will enter into effect
                    on the First Closing Date;

                                      B-7
<PAGE>

         3.3        Appendix "12.2" - the Stage 'B' Conditions Precedent.

4.       The Elbit-Koor Deed

         Contemporaneously with the signing of this Deed, the Elbit-Koor Deed
         is also being signed. The Elbit-Koor Deed and this Deed are separate
         and unrelated deeds, except as expressly provided in this Deed. For
         the avoidance of doubt it is hereby clarified that the Company is not
         a Party to this Deed, and the provisions of the Elbit-Koor Deed do not
         impose any duty on Koor to Federmann or on Federmann to Koor that is
         not expressly provided in this Deed.

5.       The Parties' Warranties and Undertakings

         The Parties hereby warrant and undertake to each other as follows:

         5.1        The representations and warranties of the Parties in this
                    Deed are solely as provided in this Clause 5 and in Clauses
                    6 and 7 below, as the case may be.

         5.2        The Parties' warranties and undertakings as provided in
                    this Clause 5 and in Clauses 6 and 7 below, as the case may
                    be, will continue to be correct, complete and accurate on
                    the First Closing Date and the Second Closing Date, and
                    they shall be deemed as having been provided again by each
                    of the Parties on both the First Closing Date and on the
                    Second Closing Date.

6.       Federmann's Warranties and Undertakings

         Federmann hereby warrants and undertakes to Koor as follows:

         6.1        That it is a duly incorporated private company, that its
                    number with the Companies Registrar is as appears in the
                    preamble hereto and that no actions or proceedings for
                    delisting, liquidation, winding-up, receivership or like
                    acts have been taken or are threatened against it.

         6.2        That on signing this Deed and until the completion of Stage
                    'A' of the Transaction it is and shall be the sole owner of
                    the Shares Being Sold (subject to the Lien), and after the
                    completion of Stage 'A' of the Transaction and until the
                    completion of Stage 'B' of the Transaction it is and shall
                    be the sole owner of the Stage 'B' Shares (subject to the
                    Lien, as will be modified, amended as provided in Clause
                    10.4 below), that it will not grant any person or entity an
                    option or right to purchase all or any of the Shares Being
                    Sold, that it has not undertaken to grant such an option or
                    right as aforesaid, that no person or entity has any


                                      B-8
<PAGE>

                    right of first refusal or tag-along right in connection
                    with all or any of the Shares Being Sold and that on the
                    date of signing this Deed it holds 19,915,448 Ordinary
                    Shares.

         6.3        That the Shares Being Sold are fully paid and Free and
                    Clear, except for a first ranking fixed lien and an
                    assignment by way of charge, of unlimited amount, which are
                    registered in favor of Bank Leumi Le-Israel B.M. (in this
                    Deed the "Bank") over the Shares Being Sold and over
                    Federmann's rights in the Shares Being Sold (in this Deed
                    the "Lien") and that pursuant to the Lien the Shares Being
                    Sold are held by and registered in the name of Bank Leumi
                    Le-Israel Trust Co. Ltd., and that on the First Closing
                    Date, upon the Stage 'A' Consideration being received in
                    Federmann's Account, the Stage 'A' Shares will be Free and
                    Clear and that on the Second Closing Date, upon the Stage
                    'B' Consideration being received in Federmann's Account,
                    the Stage 'B' Shares will be Free and Clear.

         6.4        That apart from approval by Federmann's General Meeting and
                    board of directors, Federmann has no need, including
                    pursuant to its incorporation documents and applicable law,
                    in Israel or abroad, to obtain any other approvals from any
                    of its organs for the purpose of entering into this Deed
                    and performing all its obligations pursuant hereto.

         6.5        That subject to ratification by Federmann's General Meeting
                    and board of directors, the signatories on Federmann's
                    behalf to this Deed and the documents ancillary hereto are
                    the persons who are empowered, on Federmann's behalf, to
                    sign this Deed and the documents ancillary hereto and/or
                    necessary for the performance hereof and to obligate
                    Federmann by their signature, and this Deed, together with
                    all its terms and conditions, obligates Federmann in all
                    respects.

         6.6        That subject to the approval of Federmann's General Meeting
                    and board of directors and the fulfillment of the
                    Conditions Precedent, there is no legal or other impediment
                    to its entering into this Deed and the performance hereof
                    and that this Deed and the performance of its obligations
                    pursuant hereto are not contrary to any judgment, order or
                    direction of a court, to any contract, understanding or
                    agreement to which Federmann is a party, to its
                    incorporation documents or to any other obligation of
                    Federmann, whether by virtue of an contract (oral, by
                    conduct or written) or by virtue of law.

         6.7        That apart from the approval of Federmann's General Meeting
                    and board of directors and the Conditions Precedent, all
                    the approvals, consents and permits have been obtained and
                    all the necessary


                                      B-9
<PAGE>

                    proceedings have been performed, including with any
                    authorities, government entities or any other body, for the
                    purpose of Federmann's entering into this Deed and
                    performing its obligations pursuant hereto, including
                    transferring the Shares Being Sold to Koor.

         6.8        That neither the Company nor any of its subsidiaries is
                    party to any transaction or agreement in which Federmann
                    and/or its subsidiaries and/or the controlling shareholders
                    and/or officers of Federmann and/or the companies
                    controlled by any of them has a personal interest, other
                    than (1) payment of remuneration to directors of the
                    Company, in the same amounts as paid to the Company's
                    external directors; (2) arrangements for the grant of
                    relief, insurance and indemnity by the Company to the
                    Company's directors; and (3) apart from, for the avoidance
                    of doubt, Federmann's holding of securities of companies
                    whose securities are also held by the Company.

7.       Koor's Warranties and Undertakings

         Koor hereby warrants and undertakes to Federmann as follows:

         7.1        That it is a duly incorporated public company, that its
                    number with the Companies Registrar is as appears in the
                    preamble hereto and that no actions or proceedings for
                    delisting, liquidation, winding up the receivership or like
                    acts have been taken or are being threatened against it.

         7.2        That it has the ability and resources to perform its
                    obligations pursuant to this Deed in full and on time and
                    that it is in possession of the financial resources
                    sufficient for payment of the Consideration in full and at
                    the times provided in this Deed.

         7.3        That apart from approval by Koor's board of directors, Koor
                    has no need, including pursuant to its incorporation
                    documents and applicable law, in Israel or abroad, to
                    obtain any other approvals from any of its organs for the
                    purpose of entering into this Deed and performing all its
                    obligations pursuant hereto.

         7.4        That subject to ratification by Koor's board of directors,
                    the signatories on behalf of Koor to this Deed and the
                    documents ancillary hereto are those who are empowered, on
                    Koor's behalf, to sign this Deed and the documents
                    ancillary hereto and/or necessary for the performance
                    hereof, and to obligate Koor by their signatures, and this
                    Deed, including all its terms and conditions, obligates
                    Koor in all respects.



                                     B-10
<PAGE>

         7.5        That subject to the approval of Koor's board of directors
                    and the fulfillment of the Conditions Precedent, there is
                    no legal or other impediment to its entering into and
                    performing this Deed and that this Deed and the performance
                    of its obligations pursuant hereto are not contrary to any
                    judgment, order or direction of a court, to any contract,
                    understanding or agreement to which it is a party, to its
                    incorporation documents or to any other obligation of Koor,
                    whether by virtue of a contract (oral, by conduct or
                    written) or by virtue of law.

         7.6        That except for the approval of Koor's board of directors
                    and except for the Conditions Precedent, all the approvals,
                    consents and permits have been obtained and all the
                    necessary proceedings have been performed, including with
                    any authorities, government entities or any other body, for
                    the purpose of Koor's entering into this Deed and
                    performing its obligations pursuant hereto, including the
                    acquisition from Federmann of the Shares Being Sold.

         7.7        That subject only to Federmann's warranties and
                    representations in Clauses 5 and 6 of this Deed, the Shares
                    Being Sold are being purchased in their actual condition,
                    and the actual condition of the Company and its assets, and
                    they are "As Is", without any other representations or
                    warranties being received from or on behalf of Federmann
                    and that the Consideration, as agreed between the Parties,
                    has been fixed having regard also to the fact that the
                    purchase is on such a "As Is" basis as aforesaid.

8.       Stage 'A' of the Transaction

         8.1        On the First Closing Date and subject to the fulfillment of
                    the Stage 'A' Conditions Precedent by the Stage 'A'
                    Completion Deadline, Federmann shall sell and transfer to
                    Koor, on and against payment of the full amount of the
                    Stage 'A' Consideration, 2,160,000 (two million one hundred
                    and sixty thousand) Ordinary Shares (the Stage 'A' Shares),
                    fully paid and Free and Clear, and Koor shall purchase and
                    receive from Federmann the Stage 'A' Shares and pay
                    Federmann the full amount of the Stage 'A' Consideration
                    (in this Deed "Stage 'A' of the Transaction").

         8.2        Furthermore, on the First Closing Date, the Company shall
                    purchase from Koor 1,700,000 (one million seven hundred
                    thousand) Ordinary Shares of 1 NIS par value each of
                    Tadiran Communications, which on the date of signing this
                    Deed constitute approximately 13.8% of Tadiran
                    Communication's issued share capital, in accordance with
                    the Elbit-Koor Deed, which is being signed
                    contemporaneously with this Deed. The Elbit-Koor Deed Stage
                    'A' and Stage 'A' of the Transaction contemplated by this
                    Deed shall be performed


                                     B-11
<PAGE>

                    contemporaneously and Stage 'A' of the Transaction
                    (contemplated by this Deed) shall not be performed without
                    the Elbit-Koor Deed Stage 'A' being performed.

         8.3        For the avoidance of doubt, after the performance and
                    completion of Stage 'A' of the Transaction, Stage 'A' of
                    the Transaction will not be revoked, even if Stage 'B' of
                    the Transaction is not performed or completed for any
                    reason.

9.       The Stage 'A' Completion Deadline and the Stage 'A' Conditions
         Precedent

         9.1        In this Deed the "Stage 'A' Completion Deadline" means:

                    9.1.1       March 31, 2005; or

                    9.1.2       if by March 31, 2005 all the Stage 'A'
                                Conditions Precedent have been fulfilled, other
                                than the approval of the [Israel] Commissioner
                                of Restrictive Trade Practices, as provided in
                                Clause 1 of Appendix "9.2", the Stage 'A'
                                Completion Deadline shall be automatically
                                deferred until May 31, 2005 or to such later
                                date as agreed by the Parties as provided in
                                Clause 20.3 below.

         9.2        The Stage 'A' Conditions Precedent are provided in Appendix
                    "9.2".

         9.3        Should all the Stage 'A' Conditions Precedent not have been
                    fulfilled by the Stage 'A' Completion Deadline, this Deed
                    shall be void, except for the provisions of Clause 17
                    hereof, without either of the Parties having any complaint
                    and/or claim and/or demand against the other. The foregoing
                    provisions of this Clause 9.3 shall not derogate from any
                    right or other remedy pursuant to this Deed or by law that
                    is available to the Parties with respect to a breach of any
                    of the provisions of this Deed (insofar as breached).

10.      The First Closing Date

         Subject to the Stage 'A' Conditions Precedent being fulfilled by the
         Stage 'A' Completion Deadline, the Parties shall meet on the First
         Closing Date at such place as determined by the Parties and the
         following interdependent acts shall be performed contemporaneously:

         10.1       Koor shall remit the Stage 'A' Consideration by bank
                    transfer to Federmann's bank account at the Bank, the
                    details of which shall be provided to it in writing by
                    Federmann by the First Closing Date (in this Deed
                    "Federmann's Account"), and confirmation from the Bank


                                     B-12
<PAGE>

                    that the Stage 'A' Consideration has been received in
                    Federmann's Account shall be provided to Federmann.

         10.2       Federmann shall deliver to the Company a share transfer
                    deed pursuant whereto the Stage 'A' Shares are being
                    transferred from Bank Leumi Le-Israel Trust Co. Ltd to
                    Federmann, signed by Bank Leumi Le-Israel Trust Co. Ltd and
                    Federmann, and the Company shall enter Federmann in its
                    shareholder registry as the holder of the Stage 'A' Shares.

         10.3       Federmann shall provide Koor confirmation from the Bank,
                    according to which the Bank agrees that, on and against
                    receipt of the Stage 'A' Consideration in Federmann's
                    Account, it will discharge the Lien from the Stage 'A'
                    Shares.

         10.4       Federmann shall provide Koor written instructions from the
                    Bank, in the Bank's standard form, addressed to the
                    Companies Registrar, pursuant to which the Bank applies to
                    the Companies Registrar to amend the Lien to the effect
                    that the Lien will be discharged from the Stage 'A' Shares.

         10.5       Federmann and Koor shall deliver this Deed to the Company,
                    and Federmann shall procure that Koor is entered in the
                    Company's shareholder registry as the holder of the Stage
                    'A' Shares and that Koor receives a share certificate from
                    the Company, in the Company's standard form, attesting to
                    Koor's ownership of the Stage 'A' Shares.

         10.6       Federmann shall provide Koor a copy of the Company's board
                    of directors' resolution to the effect that, subject to the
                    performance of Stage 'A' of the Transaction, as of the
                    First Closing Date there shall be added to the Company's
                    board of directors and serve thereon as a director one
                    nominee who shall be nominated for office by Koor and who
                    meets the Qualification Conditions. Federmann undertakes
                    that there will be a vacancy on the Company's board of
                    directors so that it will be possible to add Koor's nominee
                    as aforesaid to the Company's board of directors. Koor
                    shall provide Federmann and the Company prior written
                    notice of the name of such nominee or of another nominee,
                    as nominated by Koor, in his place, and Koor (with
                    Federmann's assistance) shall coordinate with the Company's
                    corporate secretary such nominee's compliance with the
                    Qualification Conditions, all no later than 14 days prior
                    to the earlier of: (1) the Stage 'A' Completion Deadline or
                    (2) the First Closing Date.

                    If for any reason it is not possible to appoint the nominee
                    nominated by Koor as aforesaid as a director of the
                    Company, another nominee nominated by Koor, who meets the
                    Qualification Conditions, shall be

                                     B-13
<PAGE>

                    appointed in his place. Without derogating from the
                    foregoing, if the nominee nominated by Koor as aforesaid is
                    not added to the Company's board of directors on the First
                    Closing Date, Federmann shall call a General Meeting of the
                    Company as soon as possible, on the agenda of which shall
                    be the appointment of the nominee nominated by Koor as
                    aforesaid as a director of the Company. Federmann
                    undertakes to vote in favor of the appointment of the
                    nominee nominated by Koor, who was not appointed as
                    aforesaid but does meet the Qualification Conditions.

         10.7       The Shareholders Agreement, in the form annexed hereto as
                    Appendix "10.7", shall become effective.

         10.8       Federmann shall provide Koor a written declaration, duly
                    signed by Federmann, according to which all the warranties
                    and representations of Federmann as provided in Clauses 5
                    and 6 of this Deed are also correct, complete and accurate
                    as of the First Closing Date.

         10.9       Koor shall provide Federmann a written declaration, duly
                    signed by Koor, according to which all the warranties and
                    representations of Koor as provided in Clauses 5 and 7 of
                    this Deed are also correct, complete and accurate as of the
                    First Closing Date.

         10.10      The Elbit-Koor Deed Stage 'A' shall be completed, namely
                    all the acts that are to be performed on the Elbit-Koor
                    Deed First Closing Date shall be performed, as provided in
                    Clause 10 of the Elbit-Koor Deed.

         10.11      Each Party undertakes to do all the acts for which it is
                    responsible pursuant to this Clause 10.

         10.12      All the acts mentioned above in this Clause 10 shall be
                    deemed as being made concurrently, no individual act shall
                    be deemed as completed and no individual document shall be
                    deemed as delivered until all the concurrent acts have been
                    completed and all the documents have been delivered.

11.      Stage 'B' of the Transaction

         11.1       On the Second Closing Date:

                    11.1.1      subject to the fulfillment of the Stage 'B'
                                Conditions Precedent by the Stage 'B'
                                Completion Deadline; or

                    11.1.2      in the event that the Stage 'B' Conditions
                                Precedent are treated as wholly fulfilled in
                                accordance with the provisions


                                     B-14
<PAGE>

                                of Clause 12.4 below or Clause 12.5 below, as
                                the case may be;

                    Federmann shall sell and transfer to Koor, on and against
                    payment of the full amount of the Stage 'B' Consideration,
                    1,840,000 (one million eight hundred and forty thousand)
                    Ordinary Shares (the Stage 'B' Shares), fully paid and Free
                    and Clear, and Koor shall purchase and receive from
                    Federmann the Stage 'B' Shares and pay Federmann the full
                    amount of the Stage 'B' Consideration (in this Deed "Stage
                    'B' of the Transaction").

         11.2       On the Second Closing Date the Company shall purchase from
                    Koor 2,244,276 Ordinary Shares of 1 NIS par value each of
                    Tadiran Communications, constituting approximately 18.2% of
                    Tadiran Communication's issued share capital in accordance
                    with the Elbit-Koor Deed, which is being signed
                    contemporaneously with this Deed, so that Stage 'B' of the
                    Transaction (contemplated by this Deed) and the Elbit-Koor
                    Deed Stage 'B' shall be performed contemporaneously, and
                    Stage 'B' of the Transaction (contemplated by this Deed)
                    shall not be performed without the performance of the
                    Elbit-Koor Deed Stage 'B'. This Clause 11.2 shall not apply
                    if Federmann provides notice to Koor as provided in Clause
                    12.1.3 below or Clause 12.1.5 below, as the case may be.

12.      The Stage 'B' Completion Deadline and the Stage 'B' Conditions
         Precedent

         12.1       In this Deed "the Stage 'B' Completion Deadline" means:

                    12.1.1      30th June 2005; or -

                    12.1.2      subject to the provisions of Clause 12.1.3 and
                                Clause 12.1.4 below, if all the Stage 'B'
                                Conditions Precedent have not been fulfilled by
                                30th June 2005, the Stage 'B' Completion
                                Deadline shall be automatically deferred until
                                30th September 2005;

                    12.1.3      notwithstanding as provided in Clause 12.1.2
                                above, it is agreed that Federmann may provide
                                notice to Koor, to be received by Koor by 21st
                                June 2005, that Federmann is not willing to
                                extend the Stage 'B' Completion Deadline as
                                provided in Clause 12.1.2 above, and in such
                                event the Stage 'B' Completion Deadline shall
                                be the date specified in Clause 12.1.1 above,
                                namely 30th June 2005;

                                     B-15
<PAGE>

                    12.1.4      notwithstanding as provided in Clause 12.1.2
                                above, if Koor provides notice to the Company
                                as provided in Clause 12.1.3 of the Elbit-Koor
                                Deed, and Federmann does not provide notice as
                                provided in Clause 12.1.3 of this Deed, the
                                Stage 'B' Completion Deadline shall be deferred
                                until April 30, 2006;

                    12.1.5      notwithstanding as provided in Clause 12.1.4
                                above, if Koor provides notice to the Company
                                as provided in Clause 12.1.3 of the Elbit-Koor
                                Deed, Federmann may provide notice to Koor, to
                                be received by Koor within seven Business Days
                                after the date on which Koor's notice is
                                received by the Company as aforesaid, that
                                Federmann is not willing to extend the Stage
                                'B' Completion Deadline as provided in Clause
                                12.1.4 above, and in such event the Stage 'B'
                                Completion Deadline shall be the date specified
                                in Clause 12.1.2, namely September 30, 2005,
                                even if Federmann's notice as aforesaid is
                                provided to Koor after September 30, 2005.

         12.2       The Stage 'B' Conditions Precedent are provided in Appendix
                    "12.2".

         12.3       Subject to Clauses 12.4 and 12.5 below, should all the
                    Stage 'B' Conditions Precedent not be fulfilled by the
                    Stage 'B' Completion Deadline, Stage 'B' of the Transaction
                    shall not be performed, the provisions in connection with
                    Stage 'B' of the Transaction in this Deed shall be deemed
                    null and void and be of no effect and, inter alia,
                    Federmann shall not sell to Koor the Stage 'B' Shares and
                    Koor shall not pay the Stage 'B' Consideration to
                    Federmann, and neither Party shall have any demand, claim
                    or complaint against the other in connection with Stage 'B'
                    of the Transaction. It is clarified that the provisions of
                    this Clause 12.3 are not such as to derogate from the
                    validity of any other provision of this Deed and/or from
                    the effect of the Shareholders Agreement, which shall enter
                    into effect on the First Closing Date, or to derogate from
                    any other right or remedy pursuant to this Deed or by law
                    that is available to the Parties with respect to a breach
                    of any of the provisions of this Deed (if and insofar as
                    breached).

         12.4       Notwithstanding as provided in Clause 12.3 above, it is
                    agreed that if the Stage 'B' Completion Deadline is
                    determined in accordance with the provisions of Clause
                    12.1.3 above, and insofar as Koor wishes to perform Stage
                    'B' of the Transaction despite the non-fulfillment of all
                    the Stage 'B' Conditions Precedent, Koor may provide
                    written notice to Federmann, to be received by Federmann by
                    no later than 30th June


                                     B-16
<PAGE>

                    2005, that Koor waives the fulfillment of the Stage 'B'
                    Conditions Precedent. In such event and provided that all
                    the Conditions Precedent for the completion of Stage 'B'
                    detailed in Appendix "12.2" of this Deed, other than the
                    Conditions Precedent in Clauses 3 and 4 of Appendix "12.2",
                    have been fulfilled by the Stage 'B' Completion Deadline,
                    all the Stage 'B' Conditions Precedent shall be treated as
                    though wholly fulfilled, and the Parties shall perform and
                    complete Stage 'B' of the Transaction on the Second Closing
                    Date. The foregoing is without the Elbit-Koor Deed Stage
                    'B' being performed and completed at the same time and
                    without the provisions of Clause 11.2 above and Clause 13.9
                    below applying and without Clauses 3 and 4 of Appendix
                    "12.2" constituting Conditions Precedent for Stage 'B'. The
                    foregoing shall not preclude the performance of the
                    Elbit-Koor Deed Stage 'B' pursuant to and subject to the
                    provisions of the Elbit-Koor Deed on the Elbit-Koor Deed
                    Second Closing Date if and when the Elbit-Koor Deed Stage
                    'B' Conditions Precedent (as defined in the Elbit-Koor
                    Deed) are fulfilled by the deadline fixed for their
                    performance in the Elbit-Koor Deed.

         12.5       Notwithstanding as provided in Clause 12.3 above, it is
                    agreed that if the transaction's Stage 'B' Completion
                    Deadline is fixed in accordance with the provisions of
                    Clause 12.1.5 and insofar as Koor wishes to perform Stage
                    'B' of the Transaction despite the non-fulfillment of all
                    the Stage 'B' Conditions Precedent, Koor may provide
                    Federmann written notice (in this Deed "Koor's Notice
                    Pursuant to Clause 12.5"), to be received by Federmann
                    within seven Business Days after the date on which Koor
                    receives Federmann's notice as provided in Clause 12.1.5
                    above, that it waives the fulfillment of the Stage 'B'
                    Conditions Precedent. In such event and provided that all
                    the Stage 'B' Conditions Precedent detailed in Appendix
                    "12.2" of this Deed, other than the Conditions Precedent in
                    Clauses 3 and 4 of Appendix "12.2", have been fulfilled by
                    the Stage 'B' Completion Deadline, all the Stage 'B'
                    Conditions Precedent shall be deemed as wholly fulfilled
                    and the Parties shall perform and complete Stage 'B' of the
                    Transaction on the Second Closing Date. The foregoing is
                    without the Elbit-Koor Deed Stage 'B' being performed and
                    completed at the same time and without the provisions of
                    Clause 11.2 above and Clause 13.9 below applying and
                    without Clauses 3 and 4 of Appendix "12.2" constituting
                    Conditions Precedent for Stage 'B'. The foregoing shall not
                    preclude the performance of the Elbit-Koor Deed Stage 'B'
                    pursuant to and subject to the provisions of the Elbit-Koor
                    Deed on the Elbit-Koor Deed Second Closing Date, if and
                    when the Elbit-Koor Deed Stage 'B' Conditions Precedent (as
                    defined in the Elbit-Koor Deed) are fulfilled by the
                    deadline fixed for their performance in the Elbit-Koor
                    Deed.

                                     B-17
<PAGE>

13.      The Second Closing Date

         Subject to the fulfillment of the Stage 'B' Conditions Precedent by
         the Stage 'B' Completion Deadline or if they are deemed as wholly
         fulfilled in accordance with the provisions of Clause 12.4 above or
         Clause 12.5 above, as the case may be, the Parties and the Company
         shall meet on the Second Closing Date at such place as determined by
         the Parties and the Company, and they shall perform the following
         interdependent acts contemporaneously:

         13.1       Koor shall remit the Stage 'B' Consideration by bank
                    transfer to Federmann's Account, and confirmation from the
                    Bank that the Stage 'B' Consideration has been received in
                    Federmann's Account shall be provided to Federmann.

         13.2       Federmann shall deliver to the Company a share transfer
                    deed pursuant to which the Stage 'B' Shares are being
                    transferred from Bank Leumi Le-Israel Trust Co. Ltd. to
                    Federmann, signed by Bank Leumi Le-Israel Trust Co. Ltd.
                    and Federmann, and the Company shall enter Federmann in its
                    shareholders registry as the holder of the Stage 'B'
                    Shares.

         13.3       Federmann shall provide Koor confirmation from the Bank,
                    according to which the Bank agrees that on and against
                    receipt of the Stage 'B' Consideration in Federmann's
                    Account, it will discharge the Lien from the Stage 'B'
                    Shares.

         13.4       Federmann shall provide Koor a letter of instructions from
                    the Bank, in the Bank's standard terms, addressed to the
                    Companies Registrar pursuant whereto the Bank applies to
                    the Companies Registrar to amend the Lien to the effect
                    that the Lien will be discharged from the Stage 'B' Shares.

         13.5       Federmann and Koor shall deliver this Deed to the Company,
                    and Federmann shall procure the entry of Koor in the
                    Company's shareholder registry as the holder of the Stage
                    'B' Shares and that Koor receives a share certificate from
                    the Company in the Company's standard form attesting to
                    Koor's ownership of the Stage 'B' Shares.

         13.6       Federmann shall provide Koor a copy of the Company's board
                    of directors' resolution that, subject to the performance
                    of Stage 'B' of the Transaction, there shall be added to
                    the Company's board of directors and serve on it an
                    additional director or directors another nominee or such
                    number of other nominees who is or are nominated for office
                    by Koor to the effect that after his or their addition to
                    the board of directors, the number of the Company's
                    directors who have been nominated for office by Koor and
                    meet the Qualification


                                     B-18
<PAGE>

                    Requirements, including the director added to the Board of
                    Directors as provided in Clause 10.6 above, shall be the
                    greater of:

                    (1)         two directors; or

                    (2)         a number of directors equal to 20% of the
                                number of the Company's directors (including
                                external directors and including the director
                                or directors added on Koor's nomination as
                                aforesaid), rounded up to the nearest whole
                                number.

                    Said board of directors' resolution shall provide that
                    Koor's nominee or nominees as aforesaid shall be added to
                    the Company's board of directors on the Second Closing
                    Date.

                    Federmann undertakes that there will be sufficient
                    vacancies on the Company's board of directors to make the
                    addition of Koor's nominee or nominees as aforesaid
                    possible.

                    Koor shall arrange to provide Federmann and the Company
                    prior written notice of the name or names of its nominee or
                    nominees as aforesaid or of another nominee or other
                    nominees, as nominated by Koor in his or their place, and
                    Koor (with Federmann's assistance) shall coordinate with
                    the Company's corporate secretary those nominees'
                    compliance with the Qualification Requirements, all by no
                    later than 14 days prior to the earlier of (i) the Stage
                    'B' Completion Deadline; or (ii) the Second Closing Date.

                    If for any reason it is not possible to appoint the nominee
                    or nominees that Koor proposes as aforesaid as a director
                    or directors of the Company, another nominee or nominees,
                    meeting the Qualification Requirements, shall be appointed
                    on Koor's nomination in his or their place.

                    If and insofar as according to U.S. securities laws,
                    including the U.S. Sarbanes-Oxley Act and the rules and
                    regulations that have been and are in future issued by
                    virtue thereof, including the rules of Nasdaq, it is
                    required that a majority of the Company's directors be
                    Independent Directors, then there shall be appointed as
                    additional directors of the Company, on Koor's nomination
                    as aforesaid, such number of nominees who fulfill the
                    requirements for Independent Directors, equal to one half
                    (50%) of the total number of directors who are elected to
                    office on Koor's nomination as provided in Clause 10.6
                    above and in this Clause 13.6, that number being rounded up
                    to the nearest whole number.

                                     B-19
<PAGE>

         13.7       Federmann shall provide Koor a written declaration duly
                    signed by Federmann that all Federmann's warranties and
                    representations as provided in Clauses 5 and 6 of this Deed
                    are also correct, complete and accurate as of the Second
                    Closing Date.

         13.8       Koor shall provide Federmann a written declaration duly
                    signed by Koor that all Koor's warranties and
                    representations as provided in Clauses 5 and 7 of this Deed
                    are also correct, complete and accurate as of the Second
                    Closing Date.

         13.9       The Elbit-Koor Deed Stage 'B' shall be completed, namely
                    all the acts that are to be performed on the Elbit-Koor
                    Deed Second Closing Date as provided in Clause 13 of the
                    Elbit-Koor Deed shall be performed. Nevertheless, this
                    Clause 13.9 shall not apply if Federmann provides notice as
                    provided in Clause 12.1.3 or as provided in Clause 12.1.5
                    above.

         13.10      Each Party undertakes to perform all the acts for which it
                    is responsible pursuant to this Clause 13.

         13.11      All the acts mentioned above in this Clause 13 shall be
                    deemed as being performed concurrently, no individual act
                    shall be deemed as completed and no individual document
                    shall be deemed as delivered until all the concurrent acts
                    have been completed and all the documents are delivered.

14.      Acts And Obligations after the Signature of this Deed

         14.1       Immediately after the signature of this Deed, the Parties
                    shall act and use their best efforts for the fulfillment of
                    all the Conditions Precedent, including obtaining all the
                    certificates, permits and consents necessary, as early as
                    possible. In such connection and without derogating from
                    the generality of the foregoing, the Parties shall apply to
                    every competent authority and to every other entity whose
                    approval is necessary for the performance of the
                    transaction contemplated by this Deed, in both its stages,
                    they shall submit all the applications and deliver all the
                    information, data and particulars in their possession,
                    without delay, and act to resolve or avoid a disapproval,
                    if any, by the various government authorities in any
                    respect relating to or arising out of this Deed.

         14.2       It is hereby agreed that the provisions of this Deed are
                    not such as to place either of the Parties under a duty to
                    make any payment for the fulfillment of the Conditions
                    Precedent or any of them, other than official fees and
                    other reasonable expenses (such payment as aforesaid,
                    excluding official fees and other reasonable expenses, is


                                     B-20
<PAGE>

                    hereinafter a "Fulfillment Payment"), provided that if a
                    Party to this Deed refuses to make a Fulfillment Payment,
                    the other Party may make it for the fulfillment of all or
                    any of the Conditions Precedent, provided that the first
                    Party shall not be responsible to indemnify the other Party
                    in respect of a Fulfillment Payment and the Party that
                    makes the Fulfillment Payment shall have no demand, claim
                    or right of recourse against the other Party with respect
                    to the making of such payment.

         14.3       Without prejudice to the provisions of Clauses 15 and 16
                    below, Federmann hereby undertakes that from the date of
                    signing this Deed until the earlier of:

                    14.3.1      the Stage 'A' Completion Deadline, if the Stage
                                'A' Conditions Precedent have not been
                                fulfilled by that time; or

                    14.3.2      the Stage 'B' Completion Deadline, if the Stage
                                'B' Conditions Precedent have not been
                                fulfilled by that time; or

                    14.3.3      the Second Closing Date;

                    Federmann and/or its subsidiaries and/or the controlling
                    shareholders and/or officers of Federmann and/or companies
                    under the control of any of them shall not enter into an
                    extraordinary transaction with the Company in which any of
                    them has a personal interest, other than the transactions
                    contemplated by this Deed and the Elbit-Koor Deed.


15.      Modifications to the Consideration or the Number of Shares Being Sold

         15.1       During the period from the date of signing this Deed until
                    the earlier of: (1) the Stage 'A' Completion Deadline, if
                    the Stage 'A' Conditions Precedent have not been fulfilled
                    by that time; (2) the Stage 'B' Completion Deadline, if the
                    Stage 'B' Conditions Precedent have not been fulfilled by
                    that time; or (3) the Second Closing Date; Federmann shall,
                    insofar as it is able, oppose and vote by virtue of all the
                    Company's shares that it holds at that time against any
                    resolution that concerns: (a) the making of any
                    distribution whatsoever, whether in cash, in kind or by a
                    distribution of bonus shares, to the Company's
                    shareholders, apart from the distribution of a current
                    dividend in cash of not more than $ 0.23 per Ordinary Share
                    in any calendar quarter; (b) an rights offering for the
                    acquisition of any securities of the Company; (c) any
                    modification to the Company's incorporation documents that
                    is such as to affect Koor's rights pursuant to the
                    Company's incorporation documents in a way that is
                    prejudicial to Koor in comparison with Federmann, all
                    unless Koor's consent is

                                     B-21
<PAGE>

                    provided thereto by written notice to be signed by two
                    officers of Koor without any further approval being
                    necessary.

         15.2       Insofar as during the period from the date of signing this
                    Deed until the First Closing Date or until the Second
                    Closing Date, as the case may be, one or more of the
                    following events occurs, despite or in accordance with the
                    provisions of Clause 15.1 above, the Consideration or
                    number of the Shares Being Sold, as the case may be, shall
                    be adjusted in accordance with the following provisions:

                    15.2.1      If the Company resolves to make any
                                distribution to its shareholders, the
                                Consideration shall be subject to the deduction
                                of any amount (translated into Dollars at the
                                representative exchange rate on the earlier of
                                the date of actually making the distribution or
                                the First Closing Date or the Second Closing
                                Date, as the case may be) that Federmann will
                                be entitled to receive in respect of the Shares
                                Being Sold (gross) (namely that the record date
                                for its distribution is prior to the First
                                Closing Date or the Second Closing Date, as the
                                case may be).

                    15.2.2      If the Company offers its Shareholders rights
                                for the acquisition of any securities, the
                                record date for the exercise of which is prior
                                to the First Closing Date or the Second Closing
                                Date, as the case may be, the Consideration
                                shall be adjusted for the bonus element
                                embodied (if at all) in the rights, unless Koor
                                instructs Federmann in writing prior to the
                                exercise date in respect of those rights to
                                exercise the rights and in such event Federmann
                                shall exercise the rights by virtue of the
                                Shares Being Sold which have not yet been
                                transferred to Koor as at that time, and it
                                shall transfer to Koor, immediately on the
                                occurrence of the earlier of (1) the exercise
                                date or (2) the First Closing Date, or after
                                the Second Closing Date, as the case may be,
                                the securities exercised as aforesaid on and
                                against payment of the whole exercise price
                                paid by Federmann to the Company for the
                                exercise thereof, plus Interest from the date
                                of Federmann's paying the exercise price to the
                                date of actual payment to Federmann by Koor.

                    15.2.3      If the Company distributes bonus shares or
                                dividend in kind to its shareholders prior to
                                the First Closing Date or the Second Closing
                                Date, as the case may be, the Consideration
                                shall not be adjusted but the Shares Being Sold
                                shall be subject to the addition of the bonus
                                Shares, Free and Clear, or of assets received
                                as dividend in kind (gross) in respect of


                                     B-22
<PAGE>

                                the Shares Being Sold, Free and Clear, without
                                Koor being required to pay additional
                                Consideration for them.

                    15.2.4      If the Company makes a consolidation, reduction
                                or sub-division of its share capital or does
                                any other act of similar effect, the number of
                                Shares Being Sold shall be adjusted pro rata to
                                the consolidation or sub-division and the
                                Consideration shall not be modified.

16.      Koor's Right to Rescind the Deed

         16.1       On the occurrence of one or more of the events set out in
                    Clause 16.2 below, unless it occurs with Koor's consent,
                    Koor may rescind this Deed or any of its stages before it
                    has been completed and performed (provided that if one of
                    the events set out in Clause 16.2 below occurs prior to the
                    performance of Stage 'A' of the Transaction, Koor may only
                    rescind this Deed in full). Such rescission shall be
                    effected by Koor by written notice, to be received by
                    Federmann within 10 Business Days of the date on which Koor
                    learns of the occurrence of one of the events set out in
                    Clause 16.2 below. Should Koor provide such notice of the
                    rescission of this Deed after the completion of Stage 'A'
                    of the Transaction, the sale of the Stage 'A' Shares to
                    Koor shall not be set aside, Koor shall not return to
                    Federmann the Stage 'A' Shares and Federmann shall not
                    refund to Koor the Stage 'A' Consideration. Nevertheless,
                    all the Parties' other obligations and rights pursuant to
                    this Deed and the appendices hereto, except for the
                    Shareholders Agreement, shall be void.

         16.2       The events are as follows:

                    16.2.1      If a temporary or permanent receiver and/or
                                temporary liquidator and/or liquidator and/or
                                trustee is appointed for the Company and/or if
                                a winding-up order and/or receivership order
                                and/or suspension of proceedings order is
                                awarded against it and/or if any of the
                                Company's material assets is attached, provided
                                that such appointment, order or attachment is
                                not set aside within 30 days.

                    16.2.2      If the Company enters into merger proceedings
                                as provided in Chapter Eight of the Companies
                                Law or compromise or arrangement proceedings in
                                accordance with Section 350 of the Companies
                                Law or restructuring and/or merger proceedings
                                in accordance with Section 351 of the Companies
                                Law.

                                     B-23
<PAGE>

         16.3       Subject to applicable law, Federmann shall provide written
                    notice to Koor of the occurrence of any of the events set
                    out in Clause 16.2 above, immediately upon its publication.

         16.4       The foregoing provisions of this Clause 16 shall not
                    derogate from any other right or remedy pursuant to this
                    Deed or by law that is available to Koor with respect to a
                    breach of any of the provisions of this Deed (if and
                    insofar as breached).


17.      Confidentiality and Notices

         17.1       The Parties shall use Confidential Information that comes
                    into their possession in connection with this Deed and the
                    Company solely for the performance of their obligations
                    pursuant to this Deed, and they shall not disclose or
                    transfer in any manner whatsoever Confidential Information
                    to any third party, other than to their employees or
                    independent advisors and except insofar as required for the
                    fulfillment of the Conditions Precedent and insofar as
                    possible by prior coordination with the other Party.
                    Without derogating from the foregoing, if the transaction
                    contemplated by this Deed is not actually implemented, each
                    Party shall return to the other Party hereto all
                    Confidential Information that has come into its possession
                    in connection with this Deed, if any. This obligation is
                    not limited in time and shall continue in force even after
                    the term of this Deed or if this Deed is cancelled or
                    rescinded for any reason.

         17.2       If and insofar as possible and subject to applicable law
                    and to the time periods mandated by law, the Parties shall
                    coordinate in advance the wording of every report,
                    communication or notice published by either of them in
                    connection with their entering into this Deed, its
                    performance and the fulfillment of the terms pursuant
                    hereto.

18.      Taxes and Mandatory Payments

         18.1       Unless otherwise provided in this Deed, each Party shall
                    bear the mandatory payments and taxes that may be imposed
                    on it by law (if and insofar as charged) in respect of the
                    sale or acquisition of the Shares Being Sold pursuant to
                    this Deed.

         18.2       If any amount payable in accordance with the provisions of
                    this Deed is subject to a duty to withhold taxes at source,
                    the tax shall be duly withheld by the paying Party unless
                    the recipient Party produces a valid tax withholding
                    exemption certificate issued by the tax authorities.

                                     B-24
<PAGE>

         18.3       Each Party shall bear its own expenses, including the
                    professional fees of its legal advisers in connection with
                    the preparation and performance of this Deed.

         18.4       If any amount paid by one Party to the other in accordance
                    with the provisions of this Deed is subject under
                    applicable law to value added tax (VAT), the paying Party
                    shall, at the same time and in the same manner as it pays
                    that amount, also pay the VAT at its legal rate on and
                    against a duly issued tax invoice.

19.      Entry into Effect

         19.1       This Deed shall enter into effect upon the receipt of all
                    the following approvals:

                    19.1.1      Approval from Federmann's General Meeting and
                                board of directors for it to enter into this
                                Deed and the Shareholders Agreement and for
                                performance thereof by Federmann in accordance
                                with their terms and conditions, including
                                ratification of the signatures of Messrs
                                Michael Federmann and Dov Ninveh to this Deed
                                and the Shareholders Agreement.

                    19.1.2      Approval by Koor's board of directors for it to
                                enter into this Deed and the Shareholders
                                Agreement and for performance thereof by Koor
                                in accordance with their terms and conditions,
                                including ratification of the signatures of
                                Messrs Jonathan Kolber and Danny Biran to this
                                Deed and the Shareholders Agreement.

                    Provided that:

                    (1)         such approvals as mentioned in Clauses 19.1.1
                                and 19.1.2 have been obtained by no later than
                                January 6, 2005 by 17:00 hours (in this Clause
                                referred to as the "Effective Date");

                    (2)         by the Effective Date copies of the resolutions
                                of Federmann's General Meeting and board of
                                directors, as mentioned in Clause 19.1.1 above,
                                have been received at Koor's offices jointly
                                with written confirmation from Federmann's
                                attorneys that the said resolutions were duly
                                adopted and Messrs Michael Federmann and Dov
                                Ninveh were together empowered to sign, on
                                behalf of Federmann, this Deed and the
                                documents ancillary hereto or those necessary
                                for the purpose of its performance, and also the

                                     B-25
<PAGE>

                                Shareholders Agreement, and to obligate it
                                thereunder; and written confirmation from the
                                attorneys of Heris Aktiengesellschaft that the
                                competent organs of Heris Aktiengesellschaft
                                have approved its entering into the
                                Shareholders Agreement and Mr. Michael
                                Federmann has been empowered to sign, on behalf
                                of Heris Aktiengesellschaft, the Shareholders
                                Agreement and obligate it by virtue thereof;

                    (3)         by the Effective Date a copy of the resolution
                                of Koor's board of directors, as mentioned in
                                Clause 19.1.2 above, has been received at
                                Federmann's offices, together with written
                                confirmation from Koor's legal counsel that the
                                resolution was duly adopted and Messrs Jonathan
                                Kolber and Danny Biran were together empowered
                                to sign, on Koor's behalf, this Deed and the
                                documents ancillary hereto or those necessary
                                for the purpose of its performance and also the
                                Shareholders Agreement and to obligate it
                                thereunder; and

                    (4)         all the approvals, as mentioned in Clause 19.1
                                of the Koor-Elbit Deed, have been obtained by
                                the Effective Date.

         19.2       Should all the approvals as mentioned in Clauses 19.1.1 and
                    19.1.2 not have been obtained by the Effective Date, and
                    without derogating from the provisions of Clause 20.3
                    below, this Deed shall automatically expire and be null and
                    void, without either of the Parties having any complaint,
                    claim or demand against the other.

         19.3       This Deed shall become effective, if and insofar as it
                    becomes effective, at such time as mentioned in Clause 19.1
                    above. Nevertheless:

                    19.3.1      the performance and completion of Stage 'A' of
                                the Transaction are conditional upon the
                                fulfillment of all the Stage 'A' Conditions
                                Precedent by the Stage 'A' Completion Deadline
                                and, except for the obligations in Clauses 14
                                to 18 above and Clause 20.8 below, neither
                                Party shall be liable to do any act for the
                                performance and completion of Stage 'A' of the
                                Transaction before the fulfillment of all the
                                Stage 'A' Conditions Precedent; and

                    19.3.2      the performance and completion of Stage 'B' of
                                the Transaction are conditional upon the
                                fulfillment of all the Stage 'B' Conditions
                                Precedent by the Stage 'B' Completion Deadline
                                and, except for the obligations in Clauses 14
                                to 18 above and Clause 20.8 below, neither
                                Party shall be liable to

                                     B-26
<PAGE>


                            do any act for the performance and completion of
                            Stage 'B' of the Transaction before the fulfillment
                            of all the Stage 'B' Conditions Precedent.

20.      Miscellaneous

         20.1       This Deed shall be governed by the laws of the State of
                    Israel. Sole and exclusive jurisdiction in all respects
                    relating to this Deed shall be vested only in the courts of
                    the District Court in the City of Tel Aviv-Jaffa, and no
                    other court shall have jurisdiction thereover.

         20.2       Any modification, addendum or addition, waiver, extension,
                    concession or failure to exercise a right pursuant to this
                    Deed shall only be effective if done in an express document
                    signed by all the Parties hereto and shall only apply to
                    the case specified in such document and shall not derogate
                    from other rights of any Party pursuant to this Deed.

         20.3       The Parties hereto may extend or reduce any time specified
                    in this Deed and waive the performance of any of the
                    provisions of this Deed, either once or several times, by
                    written notice signed by two officers of each of Federmann
                    and Koor, without any further authority being necessary.

         20.4       This Deed fully contains, embodies, merges, expresses and
                    exhausts all the understandings of the Parties hereto
                    solely in respect of the matters mentioned herein. Any
                    promises, guarantees or agreements, whether written or
                    oral, undertakings or representations concerning the
                    subject matter of this Deed provided or made by the Parties
                    prior to entering into this Deed, orally or in writing,
                    that are not specifically expressed herein, shall not be
                    deemed to augment the rights and obligations prescribed in
                    this Deed or to derogate from or modify them, and the
                    Parties shall not be bound by them, insofar as existed, as
                    from the date of this Deed. Without derogating from the
                    generality of the foregoing, the documents exchanged
                    between the Parties prior to the signature hereof,
                    including the drafts exchanged between them, shall have no
                    significance in the interpretation of this Deed. For the
                    avoidance of doubt, the terms of the Elbit-Koor Deed shall
                    not be applied in the interpretation hereof.

         20.5       No conduct by either of the Parties shall be construed as a
                    waiver of any of its rights pursuant hereto or by law or as
                    its waiver of or acquiescence to any breach or
                    non-performance of a condition of the Deed by the other
                    Party or as granting a postponement or extension or as a
                    modification, cancellation or addition of any condition,
                    unless done expressly and in writing.

                                     B-27
<PAGE>

         20.6       Unless otherwise expressly provided in this Deed, the
                    Parties hereto may not assign or transfer their rights or
                    obligations pursuant to this Deed to any third party or
                    perform this Deed through any third party, unless the other
                    Party's prior written consent has been obtained, and
                    nothing in this Deed shall be deemed to vest any right in
                    anyone who is not a Party hereto.

         20.7       Should either of the Parties not enforce or delay in
                    enforcing any of the rights vested in it pursuant to this
                    Deed or by law in a particular case or series of cases,
                    such shall not be deemed a waiver of said right or of any
                    other rights.

         20.8       Subject to the provisions of Clause 14.2 above in
                    connection with the Conditions Precedent, the Parties shall
                    cooperate between them in the implementation of the
                    provisions of this Deed and they shall assist each other
                    insofar as reasonable and necessary and in such connection
                    they shall sign every reasonable document, application and
                    approval necessary for such purpose.

         20.9       Notices pursuant to this Deed shall be provided in writing
                    to the Parties' addresses as set out in the preamble hereto
                    or to such other addresses of which the Parties may provide
                    notice in accordance with the provisions of this Clause.
                    Any notice sent by one Party to the other by registered
                    mail shall be deemed to have reached the addressee
                    following the passage of three days from the date of being
                    posted, and notice delivered in person by 17:00 hours on
                    any Business Day shall be treated as received immediately
                    on delivery, or if delivered after 17:00 hours on any
                    Business Day, it shall be treated as received on the first
                    Business Day after its delivery.


          IN WITNESS WHEREOF THE PARTIES HAVE EXECUTED THIS AGREEMENT


     (signed)                                (signed)
- --------------------------              ---------------------------------
KOOR INDUSTRIES LTD.                    FEDERMANN ENTERPRISES LTD.


By: Jonathan Kolber                          By: Michael Federmann
       Danny Biran                                 Dov Ninveh

                                     B-28
<PAGE>

                                                                  Appendix 9.2


The Conditions Precedent for the Performance of Stage 'A' of the Transaction
- ----------------------------------------------------------------------------

Set out below are the Conditions Precedent and approvals required, insofar as
necessary, for the completion of Stage 'A' of the Transaction contemplated by
the Deed of which this Appendix is an integral part ("this Deed") -

1.       Obtaining the [Israel] Commissioner of Restrictive Trade Practices'
         approval of the Parties' contracting pursuant to this Deed and the
         performance of Stage 'A' of the Transaction, provided that the
         Commissioner's disapproval of Stage 'B' of the Transaction is not
         received.

2.       Obtaining all the consents and approvals necessary and the fulfillment
         of all the Conditions Precedent for the Elbit-Koor Deed Stage 'A' to
         become effective, as provided in the Elbit-Koor Deed.

3.       Obtaining the [Israel] Ministry of Defense's approval of the Parties'
         contracting pursuant to this Deed and the performance of all their
         obligations pursuant hereto, including in connection with Stage 'B' of
         the Transaction, all insofar as necessary.

4.       Obtaining the [Israel] Chief Scientist's approval of the Parties'
         contracting pursuant to this Deed and the performance of all their
         obligations pursuant hereto, including in connection with Stage 'B' of
         the Transaction, all insofar as necessary.

5.       Obtaining the [Israel] Investment Center's approval of the Parties'
         contracting pursuant to this Deed and the performance of all their
         obligations pursuant hereto, including in connection with Stage 'B' of
         the Transaction, all insofar as necessary.

6.       Obtaining approval from banks, all insofar as necessary.

In this Appendix 9.2, "approval" means - including an approval that is subject
to conditions but excluding an approval that is subject to conditions that are
such as to materially alter the business activity of Elbit, as existing at the
time of signing this Deed or as may arise in the future in accordance with
resolutions that have been adopted by Elbit prior to signing this Deed, or the
way in which Elbit conducts its business.

                                     B-29
<PAGE>


                                                                 Appendix 12.2


Set out below are the Conditions Precedent and approvals required, insofar as
necessary, for the completion of Stage 'B' of the Transaction contemplated by
the Deed of which this Appendix is an integral part ("this Deed") -

1.       Insofar as necessary, obtaining the [Israel] Commissioner of
         Restrictive Trade Practices' approval of the Parties' contracting
         pursuant to this Deed and the performance of Stage 'B' of the
         Transaction contemplated by this Deed, insofar as such approval is not
         provided in Stage 'A' of the Transaction.

2.       The completion of Stage 'A' of the Transaction contemplated by this
         Deed.

3.       The completion of the Elisra Transaction.

4.       Obtaining all the consents and approvals necessary and the fulfillment
         of all the Koor-Elbit Deed Stage 'B' Conditions Precedent, as provided
         in the Koor-Elbit Deed, except for completion of the Elisra
         Transaction.

In this Appendix 12.2, "approval" means - including an approval that is subject
to conditions but excluding an approval that is subject to conditions that are
such as to materially alter the business activity of Elbit, as existing at the
time of signing this Deed or as may arise in the future in accordance with
resolutions that have been adopted by Elbit prior to signing this Deed, or the
way in which Elbit conducts its business.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>4
<FILENAME>koorsc13dexhibitc.txt
<DESCRIPTION>EXH. C. - SHAREHOLDERS AGREEMENT - FEDERMANN
<TEXT>


                                                                      Exhibit C

                             SHAREHOLDERS AGREEMENT


                                    BETWEEN


                             KOOR INDUSTRIES LTD.,


                           FEDERMANN ENTERPRISES LTD.

                                      AND

                            HERIS AKTIENGESELLSCHAFT























                                      C-1
<PAGE>

                     [TRANSLATED FROM THE HEBREW ORIGINAL]


                             SHAREHOLDERS AGREEMENT
                             ----------------------

                Made in Tel Aviv this 27th day of December 2004


                                    BETWEEN

                              Koor Industries Ltd.
                whose address for the purpose of this Agreement
               is 14 Hamalacha Street, Afek Industrial Park, Rosh
                                 Ha'ayin 48091
                                    ("Koor")

                                                                of the one part
                                                                ---------------

                                      AND

                         1.  Federmann Enterprises Ltd.
                             ("Federmann Enterprises")

                         2.  Heris Aktiengesellschaft
                                    ("Heris")
           whose address solely for the purpose of this Agreement is
                          99 Hayarkon Street, Tel Aviv
                (Federmann Enterprises and Heris are hereinafter
               jointly and severally referred to as "Federmann")

                                                              of the other part
                                                              -----------------

                          (hereinafter the "Parties")

WHEREAS           on the date of signing this Agreement Federmann is the holder
                  of 19,915,448 Ordinary Shares of 1 NIS par value each of
                  Elbit Systems Ltd, a public company whose Shares are traded
                  on the Tel Aviv Stock Exchange and on Nasdaq in the United
                  States (hereinafter the "Company"), of which Federmann
                  Enterprises is owner of 16,078,990 Ordinary Shares of 1 NIS
                  par value each of the Company and Heris is the owner of
                  3,836,458 Ordinary Shares of 1 NIS par value each of the
                  Company (those specific Shares and bonus Shares that are in
                  future issued in respect of them, if at all, excluding the
                  Koor Shares, as defined below, are hereinafter the "Federmann
                  Shares");

                                      C-2
<PAGE>

AND WHEREAS       in accordance with a Share Transfer Deed between Federmann
                  Enterprises and Koor, together with the appendices thereto,
                  of which this Agreement constitutes Appendix 10.7 (herein
                  the "Deed of Sale"), Federmann Enterprises and Koor have
                  agreed upon the sale of 4,000,000 (four million) Ordinary
                  Shares of 1 NIS par value each of the Company from Federmann
                  Enterprises to Koor, subject to various conditions precedent
                  and in two stages, in the first stage 2,160,000 (two million
                  one hundred and sixty thousand) Ordinary Shares of 1 NIS par
                  value each of the Company being sold to Koor, and in the
                  second stage an additional 1,840,000 (one million eight
                  hundred and forty thousand) Ordinary Shares of the Company
                  being sold to Koor, all subject to and in accordance with
                  the provisions of the Deed of Sale (the specific Shares that
                  are to be transferred to Koor from Federmann Enterprises
                  pursuant to the Deed of Sale and bonus Shares issued in
                  respect of them, if at all, are herein referred to as the
                  "Koor Shares");

AND WHEREAS       the Parties wish to set forth their relationship with respect
                  to their holdings of the Company's Shares.


NOW THEREFORE THE PARTIES HEREBY WARRANT, PROVIDE AND AGREE BETWEEN THEM AS
FOLLOWS:

1.       Preamble and Interpretation
         ---------------------------

         1.1      The preamble and appendices hereto constitute an integral
                  part hereof and are as binding as the other terms hereof.

         1.2      The Clause headings herein are solely for the sake of
                  convenience and are not to be applied in the interpretation
                  hereof.

2.       Definitions
         -----------

         In this Agreement the following terms shall have the meanings ascribed
         to them, unless expressly stated otherwise:

         2.1      "Heris" means Heris Aktiengesellschaft (Company No.
                  56-002196-6);

         2.2      "Independent Director" means a director who meets all the
                  independence criteria in accordance with the Foreign Law;

                                      C-3
<PAGE>

         2.3      "Stock Exchange" means the Tel Aviv Stock Exchange Ltd. or
                  the Nasdaq National Market or any other stock exchange on
                  which the Company's Shares are listed for trade;

         2.4      "External Director" means as defined in the Companies Law;

         2.5        "Foreign Law" means the law applicable in the United States
                    regarding securities, including the provisions of the
                    Sarbanes Oxley Act and the rules and regulations that have
                    been and are in future issued by virtue thereof, and
                    including the rules of the Nasdaq National Market;

         2.6      "Agreement" means this Agreement together with the appendices
                  hereto;

         2.7      "Company" means Elbit Systems Ltd. (Public Company No.
                  520043027);

         2.8      "First Minimum Quantity" means 3,050,000 (three million fifty
                  thousand) Ordinary Shares, together with all bonus Shares
                  that are issued in respect of them, if any, and together with
                  all the Shares that are issued to Koor by virtue of rights
                  that are vested in Koor solely in respect of the Koor Shares
                  in the context of a rights offering of the Company to its
                  shareholders, if any, all from the time of signing this
                  Agreement;

         2.9      "Second Minimum Quantity" means 2,050,000 (two million fifty
                  thousand) Ordinary Shares, together with all bonus Shares
                  that are issued in respect of them, if any, and together with
                  all the Shares that are issued to Koor by virtue of rights
                  that are vested in Koor solely in respect of the Koor Shares
                  in the context of a rights offering of the Company to its
                  shareholders, if any, all from the time of signing this
                  Agreement;

         2.10     "Transfer" means a sale, gift, realization of a lien (but not
                  the creation of a lien), loan and any other transfer
                  whatsoever of a Share and/or any right vested in the Share's
                  owner and/or holder, whether or not for consideration and
                  whether voluntary or involuntary;

         2.11     "Companies Law" means the [Israeli] Companies Law, 5759-1999;

         2.12     "First Minimum Percentage" means 6.45% of the Company's
                  issued share capital at the time of computation;

         2.13     "Second Minimum Percentage" means 4.32% of the Company's
                  issued share capital at the time of computation;

                                      C-4
<PAGE>

         2.14     "Business Day" means a day on which the two major banks in
                  Israel are open for business, other than Fridays and holiday
                  eves, which shall not be treated as a Business Day;

         2.15     "Koor" means Koor Industries Ltd. (Public Company No.
                  520014143);

         2.16     "First Closing Date" means as defined in the Deed of Sale;

         2.17     "Second Closing Date" means as defined in the Deed of Sale;

         2.18     "Stock Exchange Sale" means a sale in the context of trading
                  on the Stock Exchange or a sale in a transaction outside the
                  Stock Exchange by means of a distributor to buyers whose
                  identity is unknown to the seller or a sale to trust funds in
                  Israel or abroad or to provident funds or to provident fund
                  management companies;

         2.19     "Koor Shares" means as stated in the preamble hereto;

         2.20     "Federmann Shares" means as stated in the preamble hereto;

         2.21     "Ordinary Shares", "Shares" or the "Company's Shares" means
                  Ordinary Shares of 1 NIS par value each in the Company;

         2.22     "Federmann Enterprises" means Federmann Enterprises Ltd.
                  (Private Company No. 512278391);

         2.23     "Officer" means as defined in the Companies Law;

         2.24     "Free and Clear" means free and clear of any charge, pledge,
                  attachment, levy, debt, lien, claim, right of pre-emption,
                  right of refusal, option, lock-up arrangement or any further
                  or other third party right whatsoever, other than
                  restrictions in respect of the Transfer and/or negotiability
                  of Shares that are imposed pursuant to the Foreign Law
                  (Shares which are not registered under U.S. securities laws);

         2.25     "Federmann" means as stated in the preamble hereto;

         2.26     "Acquisition" means acquisition, purchase, receipt of a gift
                  and any receipt of a Transfer, in any way whatsoever, of a
                  Share and/or right vested in the owner and/or holder of the
                  Share, whether or not for consideration;

         2.27     "Deed of Sale" means as stated in the preamble hereto;

                                      C-5
<PAGE>

         2.28     "Direct Control" means Control deriving from holding Shares
                  alone and not together with others;

         2.29     "Control" means as the term is defined in the [Israel]
                  Securities Law, 5728-1968;

         2.30     "Qualification Conditions" means all the requirements in
                  accordance with applicable law and pursuant to the Company's
                  documents of incorporation for a person to serve as a
                  director of the Company, including security clearance as
                  required in Israel for the purpose of such service, but
                  excluding the conditions for an Independent Director.

3.       The Parties' Warranties
         -----------------------

         3.1      Federmann hereby warrants that Federmann Enterprises is a
                  limited company, duly registered in Israel and that Heris is
                  a foreign company, duly registered in Liechtenstein.

         3.2      Koor hereby warrants that it is a limited company, duly
                  registered in Israel.

         3.3      Each of the Parties warrants that it is empowered to enter
                  into this Agreement and perform all its obligations pursuant
                  hereto and that its signatories hereto are duly empowered to
                  obligate it.

         3.4      Each of the Parties hereto warrants and undertakes that there
                  is no legal impediment and/or no impediment pursuant to its
                  incorporation documents and/or applicable law and/or any
                  order or direction of a court and/or any contract,
                  understanding or agreement to which it is a party, to its
                  entering into this Agreement and performing all its
                  obligations pursuant hereto.

         3.5      Except as set out in this Agreement, each of the Parties
                  hereby warrants that it is in possession of all the approvals
                  and consents necessary for the purpose of signing and
                  performing this Agreement.

         3.6      Each of the Parties further warrants that it is not a party
                  to any agreement, arrangement or obligation that is contrary
                  to and/or impairs its ability to perform all its obligations
                  pursuant hereto.

4.       Voting Agreement - Board of Directors
         -------------------------------------

         4.1      From the Second Closing Date until such time as Koor's
                  holdings of the Koor Shares fall below the First Minimum
                  Percentage or until such time as Koor's holdings of the Koor
                  Shares fall below the First Minimum Quantity, whichever is
                  earlier, Federmann shall vote by
                  virtue of all its holdings

                                      C-6
<PAGE>

                  in the Company's Shares in favor of the election to the
                  Company's Board of Directors of such number of candidates as
                  are nominated to office by Koor, which is the greater of:

                  (1)      two directors; or

                  (2)      a number of directors equal to 20% of the number of
                           the Company's directors, including External
                           Directors and including the directors who are
                           elected as aforesaid in accordance with Koor's
                           nomination, rounded up to the nearest whole number.

                  It is hereby agreed that if it is required in accordance with
                  the Foreign Law that a majority of the Company's directors
                  are Independent Directors, Koor undertakes that at least one
                  half of the directors who are elected to office in accordance
                  with its nomination as aforesaid, that number being rounded
                  up to the nearest whole number, will fulfil the conditions
                  required in respect of Independent Directors.

         4.2      After the Second Closing Date, from such time as Koor's
                  holdings of the Koor Shares fall below the First Minimum
                  Percentage or from such time as Koor's holdings of the Koor
                  Shares fall below the First Minimum Quantity, whichever is
                  earlier, until such time as Koor's holdings of the Koor
                  Shares fall below the Second Minimum Percentage or until such
                  time as Koor's holdings of the Koor Shares fall below the
                  Second Minimum Quantity, whichever is earlier, Federmann
                  shall vote by virtue of all its holdings in the Company's
                  Shares in favor of the election of one director who has been
                  nominated by Koor, provided that the candidate fulfils all
                  the Qualification Conditions.

         4.3      From the First Closing Date until:

                  (i)      the Second Closing Date; or

                  (ii)     to the extent that the Second Closing Date does not
                           occur, until such time as Koor's holdings of the
                           Koor Shares fall below the Second Minimum Percentage
                           or until such time as Koor's holdings of the Koor
                           Shares fall below the Second Minimum Quantity,
                           whichever is earlier;

                  Federmann shall vote by virtue of all its holdings in the
                  Company's Shares in favor of the election of one director who
                  has been nominated by Koor, provided that the candidate
                  fulfils all the Qualification Conditions.

                                      C-7
<PAGE>

         4.4        From the First Closing Date, so long as Federmann holds 20%
                    or more of the Company's issued share capital and so long
                    as Koor holds the Company's Shares, Koor shall vote by
                    virtue of all its holdings in the Company's Shares:

                  4.4.1    In favor of the election of all the directors of the
                           Company whose candidacy for office has been
                           nominated by Federmann, except for the directors for
                           whose election Federmann has undertaken to vote as
                           provided in Clauses 4.1 or 4.2 or 4.3, as the case
                           may be, except for a candidate who does not fulfil
                           the Qualification Conditions.

                  4.4.2    Without derogating from the generality of Clause
                           4.4.1 above, in favor of the appointment of all the
                           external directors whose candidacy is nominated by
                           Federmann.

                  4.4.3    In favor of the appointment of the chairperson of
                           the board of directors who has been nominated for
                           office by Federmann, provided that if at the time of
                           the General Meeting at which the appointment of the
                           chairperson of the Company's board of directors is
                           raised for discussion and vote, Koor is entitled to
                           the restricted right described in Clause 6.3 below,
                           then at the time of the General Meeting there shall
                           serve one of the directors who has been elected to
                           office in accordance with Koor's nomination as
                           provided in Clause 4.1 above, who is nominated by
                           Koor as Vice chairperson of the Company's board of
                           directors.

         4.5      In Clauses 4.6 to 4.8 below, "Proposing Party" means the
                  Party on whose nomination, as provided in Clauses 4.1 or 4.2
                  or 4.3 or 4.4 above, a particular candidate has been
                  appointed as a director of the Company.

         4.6      If a Proposing Party wishes to replace or terminate the
                  office of a director elected in accordance with its
                  nomination, the Parties shall act, to the extent necessary,
                  to hold a General Meeting of the Company and vote in favor of
                  a proposal to remove said director from office and in favor
                  of the appointment of another director in his place whose
                  candidacy is nominated by the Proposing Party and who fulfils
                  all the Qualification Conditions.

         4.7      The Parties shall vote against a proposal to remove from
                  office a director whose candidacy was nominated by Koor or
                  Federmann, unless the Proposing Party otherwise instructs in
                  writing and in advance.

                                      C-8
<PAGE>

         4.8      If the post of a director is vacated for any reason, the
                  Parties shall act, to the extent necessary, to hold a General
                  Meeting of the Company and vote for the appointment as a
                  director of such candidate as nominated by the Proposing
                  Party in place of the director whose post has become vacant,
                  provided that such candidate meets all the Qualification
                  Conditions.

         4.9      Before holding any General Meeting of the Company, on the
                  agenda of which is the appointment of directors, notice shall
                  be given by the Company or by Federmann to Koor in connection
                  with holding the General Meeting and, in accordance with
                  applicable law and the Company's incorporation documents,
                  each Party shall give the Company three Business Days' prior
                  written notice, with a copy to the other, of the candidates
                  nominated by it for the office of a director in the Company,
                  as provided in this Clause 4 above.

         4.10     Should Koor's holdings of the Koor Shares fall below the
                  First Minimum Percentage or should Koor's holdings of the
                  Koor Shares fall below the First Minimum Quantity, whichever
                  is earlier, Koor shall use its best efforts, subject to
                  applicable law, in order to procure that all the directors
                  who have been appointed to office on Koor's nomination as
                  provided in Clause 4.1 above, other than one director, will
                  immediately resign from their office as directors of the
                  Company.

         4.11     Should Koor's holdings of the Koor Shares fall below the
                  Second Minimum Percentage or should Koor's holdings of the
                  Koor Shares fall below the Second Minimum Quantity, whichever
                  is earlier, Koor shall use its best efforts, subject to
                  applicable law, to procure that the director appointed to
                  office on its nomination, as provided in Clauses 4.2 and/or
                  4.3 above, shall immediately resign from his office as a
                  director.

5.       General Voting Agreement
         ------------------------

         5.1      From the First Closing Date and subject to the provisions of
                  Clause 4 above, Koor undertakes to vote by virtue of all its
                  holdings in the Company's Shares, on every matter and
                  proposed resolution that is put to the Company's General
                  Meeting for decision and/or for a resolution of the Company's
                  shareholders in any manner whatsoever, in accordance with
                  written instructions that are given to it by Federmann at
                  least seven Business Days in advance before the time of the
                  relevant General Meeting or the time of passing the relevant
                  resolution, as the case may be.

                  Solely for the purpose of this Clause 5.1, Koor shall not be
                  deemed holder of the Company's Shares that are exclusively
                  owned by related

                                      C-9
<PAGE>

                  private companies that are not companies under Koor's Control
                  and by related public companies of Koor. At Federmann's
                  request and subject to applicable law, Koor shall make a
                  recommendation to those companies to vote in accordance with
                  such instructions as have been given to Koor by Federmann as
                  aforesaid.

         5.2      The provisions of Clause 5.1 above shall not apply:

                  (i)      as regards approval by the Company's General Meeting
                           of transactions that are to be approved by reason of
                           the fact that Federmann, Federmann's controlling
                           shareholders or the officers of any of them have a
                           personal interest in them; and

                  (ii)     in connection with a proposal to alter the Company's
                           Articles of Association that is such as to affect
                           Koor's rights in accordance with the Company's
                           Articles of Association in a manner that is
                           prejudicial to Koor in comparison with Federmann.

         5.3      For the performance of the provisions of Clauses 4 and 5
                  above, the Parties undertake to attend every General Meeting
                  of the Company and do all acts necessary, at the times
                  prescribed therefor, so that their voting in the General
                  Meeting by virtue of all their holdings in the Company will
                  be valid and effective in accordance with applicable law and
                  pursuant to the Company's incorporation documents.

6.       Other Non-Transferable Rights
         -----------------------------

         6.1      Koor undertakes to give Federmann written notice immediately
                  after it learns that members of Charles Bronfman's family
                  and/or trusts for the benefit of Charles Bronfman's family
                  have ceased being Koor's controlling shareholders.

                  Federmann may, in its discretion, give written notice to Koor
                  within 90 days of the date on which it receives Koor's
                  written notice as aforesaid that it has decided to bring to
                  an end the additional non-transferable rights set out in
                  Clause 6.3 below (the date on which Federmann's written
                  notice is received by Koor being referred to below in this
                  Clause as the "Termination Date").

         6.2      The provisions of Clauses 6.3 to 6.8 below shall only apply
                  in the period between the Second Closing Date and the earlier
                  of the following two dates:

                  6.2.1    such time as the number of the Koor Shares that are
                           exclusively owned by Koor falls below the First
                           Minimum

                                     C-10
<PAGE>

                           Percentage or such time as the number of the Koor
                           Shares that are exclusively owned by Koor falls
                           below the First Minimum Quantity, whichever is
                           earlier. For the avoidance of doubt, Shares owned by
                           a person or entity that is not Koor shall not be
                           deemed as Shares that are exclusively owned by Koor,
                           even if Koor is deemed to hold them by virtue of
                           Clause 17.6 below; or

                  6.2.2    the Termination Date, as defined in Clause 6.1
                           above.

         6.3      The Parties shall act, subject to applicable law, for the
                  appointment of one of the directors who have been elected to
                  office on the nomination of Koor as provided in Clause 4.1
                  above, who shall be nominated by Koor, as Vice Chairperson of
                  the Company's Board of Directors.

         6.4      The Parties shall act, subject to applicable law, so that on
                  every one of the Company's Board of Directors' committees
                  there shall be a member one of the directors elected for
                  office on Koor's nomination as provided in Clause 4.1 above,
                  who shall be nominated by Koor.

         6.5      The Parties shall act, subject to applicable law, so that
                  there shall be established in the Company a board of
                  directors' committee for strategic planning, its members
                  being: one of the directors elected for office on Koor's
                  nomination as provided in Clause 4.1 above, who shall be
                  nominated by Koor, at least one of the external directors and
                  such other directors as determined by the Company's board of
                  directors (hereinafter the "Strategic Planning Committee").
                  The function of the Strategic Planning Committee shall be to
                  assist and make recommendations to the Company's board of
                  directors on the strategic planning of the Company's business
                  activity.

         6.6      When the tenure of Mr Joseph Ackerman (hereinafter "Mr.
                  Ackerman") as President and CEO of the Company comes to an
                  end, the Parties shall act, subject to the provisions of
                  applicable law, so that the Company's board of directors
                  establishes a special search committee, the composition of
                  which shall include the Chairperson of the board of
                  directors, the Vice Chairperson of the board of directors, a
                  director elected to office on the nomination of Federmann as
                  provided in Clause 4.4.1 above and a director elected to
                  office on the nomination of Koor, as provided in Clause 4.1
                  above (hereinafter the "Search Committee"). The Search
                  Committee shall act for 30 days in an attempt to identify a
                  candidate for the post of the Company's CEO, who is agreed by
                  all the members of the Committee and it shall make a
                  recommendation to the Company's board of directors to elect
                  that candidate to the post of the Company's CEO. In any
                  event, even if the Search Committee has been unable to locate
                  a candidate agreed by all

                                     C-11
<PAGE>

                  the members of the Search Committee within 30 days as
                  aforesaid, the Company's CEO shall be elected by the
                  Company's board of directors.

                  For the avoidance of doubt, it is clarified that the
                  Company's President and CEO is currently Mr Ackerman, and
                  that the Company's board of directors may extend Mr
                  Ackerman's tenure as it deems fit, and that the Search
                  Committee mentioned above shall not be established for that
                  purpose.

         6.7      To the extent requested to do so by Koor, Federmann shall
                  vote in the Company's General Meeting by virtue of all its
                  holdings in the Company in order to pass a resolution of the
                  Company approving the Company's entering into a Registration
                  Rights Agreement with Koor, which will vest Koor, so long as
                  it holds 5% or more of the Company's issued share capital,
                  with one demand right on the same conditions, mutatis
                  mutandis, ("Registration Right") as those detailed in the
                  Registration Rights Agreement dated 5 July 2000 among the
                  Company, Elron Electronic Industries Ltd. and Federmann (the
                  "Registration Rights Agreement"). Federmann hereby undertakes
                  that to the extent that pursuant to the Registration Rights
                  Agreement it is vested with more than one demand right and to
                  the extent that the Company so requires for the purpose of
                  granting the Registration Right to Koor, Federmann shall,
                  without any consideration or compensation, relinquish one
                  demand right that is vested in it pursuant to the
                  Registration Rights Agreement.

         6.8      Should officers or controlling shareholders of Federmann
                  serve as directors of any subsidiary of the Company, the
                  Parties shall act, subject to applicable law, so that the
                  Company also appoints as a director of that subsidiary one of
                  the directors of the Company who has been appointed to office
                  on Koor's nomination as provided in Clause 4 above. The
                  foregoing shall not apply if there is any legal restriction
                  to the appointment of more than one director, who is a
                  director of the Company, to the subsidiary's board of
                  directors as aforesaid.

7.       For the avoidance of doubt, it is clarified that the rights granted to
         Koor pursuant to Clause 6 above, in all its sub-clauses, are personal
         (non-transferable) rights that are not attached to the Koor Shares
         that are held by Koor. Said rights are not assignable and/or
         transferable to any third party, either together with a Transfer of
         all or any of the Koor Shares in the Company or otherwise.

8.       Restrictions on Transfer of Shares
         ----------------------------------

                                     C-12
<PAGE>

         8.1      From the First Closing Date, Koor shall not Transfer all or
                  any of the Koor Shares, including in the event of a forced
                  sale due to receivership, execution proceedings or winding-up
                  proceedings, except subject to and in accordance with the
                  provisions of Clauses 10, 11 and 12 below.

         8.2      From the First Closing Date, Federmann shall not Transfer all
                  or any of the Federmann Shares, including in the event of a
                  forced sale due to receivership, execution proceedings or
                  winding-up proceedings, except subject to and in accordance
                  with the provisions of Clauses 9 and 12 below.

9.       Koor's Tag-Along Right on a Sale of the Federmann Shares
         --------------------------------------------------------

         9.1      Should Federmann wish to Transfer any of the Federmann Shares
                  that constitute more than half the Federmann Shares that are
                  held by Federmann for the time being to a third party (in
                  this Clause 9 the "Third Party"), Federmann shall provide
                  Koor written notice detailing the number of Shares that it
                  intends to Transfer to the Third Party (in this Clause "the
                  Offered Shares"), the identity of the Third Party, the
                  identity of all the Third Party's ultimate interested parties
                  or, to the extent that the Third Party wishes to receive a
                  Transfer of the Offered Shares indirectly through a trustee
                  and/or another person and/or another entity in any manner
                  whatsoever, the identity of every such trustee and other
                  person and entity as aforesaid and the identity of the third
                  party beneficiary and all its ultimate interested parties,
                  the number of Shares that are held by Federmann at the time
                  of giving the notice, all to the level of detail for which
                  the Company and/or the Third Party would be obligated, in
                  accordance with Israeli securities laws, for reporting the
                  identity of the said entities and persons, were the Third
                  Party an interested party in the Company, and the
                  consideration that the Third Party has undertaken to pay
                  Federmann for the Offered Shares, the payment terms and all
                  the other material conditions of the transaction, including
                  the transaction's conditions precedent (hereinafter in this
                  Clause the "Sale Notice").

         9.2      By the end of a period of 7 Business Days starting on the
                  date of Koor's receipt of the Sale Notice (hereinafter the
                  "Tag-Along Notice Period"), Koor may provide Federmann
                  written notice that it wishes to sell to the Third Party the
                  Koor Shares that it holds at that time or a portion thereof
                  together with the Offered Shares and at the price and on the
                  payment terms and other conditions specified in the Sale
                  Notice (in this Clause 9 the "Tag-Along Notice"). In the
                  Tag-Along Notice, which will be provided during the Tag-Along
                  Notice Period, Koor shall specify the quantity of Shares,
                  solely out of the Koor Shares, that Koor wishes to sell the
                  Third Party as aforesaid.

                                     C-13
<PAGE>

         9.3      Should Koor provide a Tag-Along Notice during the Tag-Along
                  Notice Period, Federmann shall be entitled to Transfer its
                  Shares to the Third Party, provided that the Third Party also
                  purchases from Koor, at the price and on the payment terms
                  and other conditions specified in the Sale Notice, and at the
                  same time, the Koor Shares specified by Koor in the Tag-Along
                  Notice. If the number of Offered Shares, together with the
                  number of the Koor Shares specified in the Tag-Along Notice,
                  exceeds the quantity of Shares that the Third Party is
                  willing to purchase, the quantity of Shares that is purchased
                  by the Third Party shall be apportioned pro rata between
                  Federmann and Koor in the ratio between the number of the
                  Federmann Shares that are held by Federmann prior to
                  completing the Share Transfer to the Third Party and the
                  number of the Koor Shares that are held by Koor prior to
                  completing the Share Transfer to the Third Party.

         9.4      Should Koor not provide a Tag-Along Notice during the
                  Tag-Along Notice Period, Federmann may Transfer the Offered
                  Shares to the Third Party for consideration and on payment
                  terms and other conditions no better to Federmann than those
                  detailed in the Sale Notice, provided that an Agreement for
                  the Transfer of the Offered Shares is signed by Federmann and
                  the Third Party within 30 Business Days of the end of the
                  Tag-Along Notice Period and the Transfer of the Offered
                  Shares pursuant thereto is completed within 180 days of the
                  end of the Tag-Along Notice Period, all subject to the
                  provisions of Clauses 12.1 to 12.3 below.

         9.5      For the avoidance of doubt, to the extent that a transaction
                  for the Transfer to the Third Party of the Offered Shares is
                  not signed by the expiration of 30 Business Days from the end
                  of the Tag-Along Notice Period or the transaction for the
                  Transfer of the Offered Shares is not completed within 180
                  days of the end of the Tag-Along Notice Period, Federmann may
                  only Transfer the Offered Shares after again providing a
                  Tag-Along Notice to Koor as provided above in this Clause 9.

         9.6      For the purpose of the foregoing provisions of Clause 9,
                  there shall be deemed as a single Transfer (1) a number of
                  transactions for the Transfer of Shares that are effected
                  with a single Third Party during a six-month period and for
                  such purpose a "Transaction for the Transfer of Shares"
                  includes the grant, Transfer or sale of any option or right
                  to acquire or receive Shares; and the "Single Third Party"
                  includes any related company (as defined in the Securities
                  Law, 5728-1968) of the Third Party and any interested party
                  (as defined in the Securities Law, 5728-1968) in any of them
                  and includes anyone acting with the Third Party, in
                  cooperation under an agreement, whether written or oral, and

                                     C-14
<PAGE>

                  also (2) a transaction for the Transfer of Shares (as defined
                  above) in the scope of which there are Transferred in any
                  manner whatsoever - including as a result of a Transfer of
                  Control in Heris from Federmann Enterprises to a Third Party
                  or Third Parties and/or in other subsidiaries of Federmann
                  from Federmann to any Third Party or Third Parties and/or a
                  Transfer of actual economic control of the Federmann Shares
                  that are owned by Heris and/or other subsidiaries of
                  Federmann from Federmann to any Third Party or Third Parties
                  - Shares of Federmann, from Federmann to any Third Party or
                  Third Parties, in a percentage of more than 50% of the
                  Federmann Shares that are then held by Federmann.

         9.7      For the avoidance of doubt, the foregoing shall not preclude
                  Federmann from entering into an agreement to Transfer the
                  Offered Shares to the Third Party before giving the Sale
                  Notice, provided that such does not preclude Koor from
                  tagging along in the sale of the Offered Shares to the Third
                  Party in accordance with the provisions of this Clause 9.

         9.8      Without derogating from and in addition to the provisions of
                  Clause 9.6, the provisions of Clauses 9.1 to 9.7 above shall
                  not apply, and Koor shall not have a Tag-Along Right, in
                  respect of a Transfer of any of the Federmann Shares from
                  Federmann Enterprises to Heris and vice versa. Nevertheless,
                  if Federmann Enterprises sells Control of Heris and at the
                  time of the sale Heris holds more than 50% of the Federmann
                  Shares, Federmann shall grant Koor the Tag-Along Right as
                  provided in Clauses 9.1 to 9.7 above, mutatis mutandis. To
                  the extent that at the time of the Transfer of Control of
                  Heris, Heris holds other assets, in addition to the Federmann
                  Shares, the value of the Federmann Shares that are held by
                  Heris at that time shall be determined by an appraiser agreed
                  between the Parties, and in the absence of such agreement,
                  then by the chairperson of the accounting firm of Somekh
                  Chaikin (KPMG), who may also appoint himself.

         9.9      It is agreed that the foregoing provisions of Clauses 9.1 to
                  9.8 shall not apply and Koor's Tag-Along Right shall expire
                  from such time as Koor's holdings of the Koor Shares fall
                  below the Second Minimum Percentage or from such time as
                  Koor's holdings fall below the Second Minimum Quantity,
                  whichever is earlier.

10.      Non-Transfer of Shares by Koor
         ------------------------------

         Koor shall not Transfer the Koor Shares or any of them during the
         period commencing on the date of signing this Agreement and ending at
         the later of the following two dates:

                                     C-15
<PAGE>

         10.1     on the expiration of 12 months after the First Closing Date;
                  or

         10.2     if the performance of Stage 'B' of the Transaction pursuant
                  to the Deed of Sale is completed - the expiration of nine
                  months after the Second Closing Date;

         (hereinafter the "Prohibited Sales Period").

11.      Federmann's Right of First Refusal
         ----------------------------------

         11.1     Subject to the provisions of Clause 10 above and Clause 12
                  below, if Koor wishes to Transfer any of the Koor Shares to a
                  Third Party, it may only do so if it first enters into an
                  agreement with a specific Third Party for the Transfer of
                  those Shares, the agreement being subject to the Right of
                  First Refusal vested in Federmann pursuant to this Agreement,
                  and subject to the following provisions.

                  Koor shall provide Federmann written notice within 2 Business
                  Days of entering the agreement with the Third Party, in which
                  it shall notify Federmann that it has entered into a binding
                  agreement for the Transfer of Shares from the Koor Shares to
                  a Third Party (in this Clause 11 the "Third Party"), subject
                  to the Right of First Refusal vested in Federmann pursuant to
                  this Clause 11, and in the notice it shall detail the number
                  of Shares that it has undertaken to Transfer to the Third
                  Party (in this Clause the "Offered Shares"), the identify of
                  the Third Party and the identity of all the Third Party's
                  ultimate interested parties or to the extent that the Third
                  Party wishes to receive a Transfer of the Offered Shares
                  indirectly through a trustee and/or other person and/or
                  entity in any manner, then the identity of every such trustee
                  and other person and entity as aforesaid, the identity of the
                  Third Party beneficiary and of all its ultimate interested
                  parties, the number of the Shares held by the Third Party on
                  the date of providing the notice, all to the same level of
                  detail for which the Company and/or the Third Party would be
                  obligated, in accordance with Israeli securities laws, for
                  reporting the identity of the said entities and persons, were
                  the Third Party an interested party in the Company, and the
                  consideration that the Third Party has undertaken to pay to
                  Koor for the Offered Shares (which shall only be cash
                  consideration), the payment terms and all the other material
                  conditions of the transaction, including all the conditions
                  precedent of the transaction (hereinafter in this Clause the
                  "Sales Notice").

         11.2     Until the end of a period of 21 Business Days commencing on
                  the date of Federmann's receipt of the Sales Notice
                  (hereinafter in this Clause 11 the "Acceptance Notice
                  Period"), Federmann may give Koor written notice that it has
                  decided to purchase the Offered Shares for

                                     C-16
<PAGE>

                  the consideration and on the payment terms and other
                  conditions detailed in the Sales Notice (hereinafter the
                  "Acceptance Notice").

         11.3     In the event of Acceptance Notice being provided, Koor shall
                  Transfer to Federmann and Federmann shall take a Transfer
                  from Koor of all the Offered Shares, Free and Clear, for the
                  consideration and on the terms and conditions detailed in the
                  Sale Notice, within 7 Business Days of the date on which all
                  the approvals and permits necessary for such transaction as
                  aforesaid in accordance with applicable law are obtained and
                  in any event not later than the expiration of 60 days from
                  the date the Acceptance Notice is provided (hereinafter the
                  "Completion Period"). The Parties shall cooperate in order to
                  obtain all the approvals and permits necessary for the
                  transaction as aforesaid as soon as possible.

         11.4     Should Federmann not provide Koor an Acceptance Notice in
                  writing by the end of the Acceptance Notice Period or should
                  Federmann provide an Acceptance Notice but the transaction
                  mentioned in Clause 11.3 above not be completed by the end of
                  the Completion Period other than due to a breach of this
                  Agreement by Koor, Koor may Transfer the Offered Shares to
                  the Third Party for the consideration and on the payment
                  terms and other conditions detailed in the Sales Notice,
                  provided that the transaction for the sale to the Third Party
                  of the Offered Shares is completed by the expiration of 120
                  days from the end of the Acceptance Notice Period or from the
                  end of the Completion Period, as the case may be (hereinafter
                  the "Maximum Sales Period"), all subject to the provisions of
                  Clauses 12.1 to 12.3 below.

         11.5     For the avoidance of doubt, should the transaction for the
                  sale of the Offered Shares to the Third Party not be
                  completed by the end of the Maximum Sales Period, Koor may
                  only Transfer the Offered Shares after again providing a
                  Right of First Refusal to Federmann as provided above in this
                  Clause 11.

         11.6     From the end of the Prohibited Sales Period, the provisions
                  of Clauses 11.1 to 11.5 above shall not apply with respect to
                  a Stock Exchange sale of the Koor Shares by Koor in aggregate
                  quantities not exceeding in any 12-month period 2% of the
                  Company's issued share capital.

         11.7     Notwithstanding the provision of Clause 11.6 above, Koor may
                  not Transfer, pursuant to Clause 11.6 above, in the
                  aggregate, more than 950,000 of the Koor Shares that are held
                  by it:

                  11.7.1   unless Federmann Transfers any of the Federmann
                           Shares, except on a Transfer subject to Koor's
                           Tag-Along Right

                                     C-17
<PAGE>

                           pursuant to Clause 9 above, and except for a
                           Transfer to a person or entity, the Shares held by
                           which are deemed as held by Federmann in accordance
                           with the provisions of Clause 17.6 below; or

                  11.7.2   unless the quantity of the Federmann Shares together
                           with the Koor Shares falls below 45% of the
                           Company's issued share capital, other than as a
                           result of a breach of this Agreement by Koor.

12.      Transfer of Shares and Obligations Pursuant to the Agreement
         ------------------------------------------------------------

         Without derogating from the other provisions of this Agreement,
         including Clause 7 above, it is agreed that on any Transfer of the
         Federmann Shares by Federmann that is subject to Koor's Tag-Along
         Right under Clause 9 above, and on any Transfer of the Koor Shares by
         Koor that is subject to Federmann's Right of First Refusal under
         Clause 11 above (hereinafter in this Clause 12 the "Shares Being
         Transferred", and Koor and Federmann being respectively the
         "Transferor Party"), the following provisions shall apply:

         12.1     If the Transferor Party wishes to Transfer all the Federmann
                  Shares or all the Koor Shares, as the case may be, the
                  Transferor Party may not do so and such a Transfer shall be
                  ineffective unless the Transferor Party Transfers and assigns
                  to the transferee the Shares Being Transferred (in this
                  Clause 12 the "Purchaser"), together with the Transfer of the
                  Shares Being Transferred, all the rights and obligations of
                  the Transferor Party pursuant to this Agreement, and the
                  Purchaser and the Transferor Party so confirm in writing to
                  the other Party as provided in Clause 12.3 below. On
                  completion of the assignment and Transfer of all the
                  Transferor Party's rights and obligations as aforesaid, the
                  Transferor Party shall cease being a Party to this Agreement
                  and shall be succeeded by the Purchaser.

         12.2     If the Transferor Party wishes to Transfer only a portion of
                  the Federmann Shares or only a portion of the Koor Shares, as
                  the case may be, then the Transferor Party may not do so and
                  such a Transfer shall be ineffective, unless, together with
                  the Transfer of the Shares being Transferred, the Purchaser
                  assumes all the obligations of the Transferor Party jointly
                  and severally with the Transferor Party and confirms said
                  obligation in writing to the other Party as provided in
                  Clause 12.3 below. For the avoidance of doubt, it is
                  clarified that the Transferor shall continue to be entitled
                  as against the other Party to all the rights vested in the
                  Federmann Shares or the Koor Shares, as the case may be, that
                  are held by it.

                                     C-18
<PAGE>

         12.3     In the event that Koor is the Transferor Party, Koor shall
                  provide Federmann, together with the Sales Notice as
                  mentioned in Clause 11.1 above, the written confirmation of
                  Koor and the Purchaser as provided in Clause 12.1 above or
                  the written confirmation of the Purchaser as provided in
                  Clause 12.2 above, as the case may be, duly signed by the
                  Purchaser and/or Koor, as the case may be.

                  In the event that Federmann is the Transferor Party,
                  Federmann shall provide Koor, within 2 Business Days of
                  signing an agreement with the Purchaser for the Transfer of
                  the Offered Shares, as provided in Clause 9.4 or Clause 9.7
                  above, the written confirmation of the Purchaser, as provided
                  in Clause 12.1 above or the written confirmation of Federmann
                  and the Purchaser, as provided in Clause 12.2 above, as the
                  case may be, duly signed by the Purchaser and/or Federmann,
                  as the case may be.

         12.4     In addition to the foregoing, even in a case or cases in
                  which Federmann Transfers any of the Federmann Shares that
                  are held by it, the Transfer of which is not subject to
                  Koor's Tag-Along Right pursuant to Clause 9 above, Federmann
                  may, if it so desires, assign and Transfer its obligations
                  pursuant to this Agreement or any of them so that the
                  transferee of the Shares and Federmann shall be jointly and
                  severally liable to Koor for all the obligations pursuant to
                  this Agreement or a portion of them, in such proportion as
                  determined between Federmann and the transferee of the
                  Shares. For the avoidance of doubt, Federmann may exercise
                  its right to assign and Transfer all or any of its
                  obligations as provided in this Clause 12.4 together with a
                  Transfer of any of the Federmann Shares, once or several
                  times, in its discretion.

13.      Limitation on Restrictions and Rights
         -------------------------------------

         The limitations imposed with respect to a Share Transfer and the
         rights vested in the Parties in connection with a Share Transfer
         pursuant to Clauses 9 to 12 above only apply to the Federmann Shares
         and the Koor Shares, and those limitations and rights shall not apply
         with respect to other Shares in the Company that may be held by
         Federmann or Koor, as the case may be.

14.      Tag-Along Right to Purchase
         ---------------------------

         Should a Party to this Agreement (in this Clause 14 the "Purchasing
         Party") directly or indirectly, including through subsidiaries and/or
         any trustee, acquire Shares of the Company for total consideration in
         excess of US$ 25 million (in this Clause 14 the "Purchased Shares")
         from a Single Third Party, as defined in Clause 9.6 above (in this
         Clause 14 the "Seller"), whether or not on the Stock Exchange (in this
         Clause 14 the "Purchase Transaction"), the other

                                     C-19
<PAGE>

         Party to the Agreement (in this Clause 14 the "Other Party") shall
         have a right to tag along on such Acquisition as aforesaid, on the
         terms of the Purchase Transaction, and to acquire a portion of the
         securities that are being purchased (in this Clause 14 the "Purchase
         Tag-Along Right") in accordance with the provisions set out below:

         14.1     The Purchasing Party shall provide the other Party written
                  notice within 3 Business Days of the completion of the
                  Purchase Transaction, detailing the terms of the Purchase
                  Transaction that it has made, including the quantity of
                  additional Shares, the price (which shall only be cash
                  consideration), the payment terms, the Seller's identity and
                  every other material condition (in this Clause 14 the
                  "Seller's Notice").

         14.2     Within 14 Business Days of receiving the Purchaser's notice,
                  the Other Party shall give the Purchasing Party written
                  notice if it is tagging along in the Purchase Transaction and
                  of the quantity of Shares, out of the additional Shares, that
                  it wishes to purchase, not exceeding such quantity the ratio
                  between which it and the rest of the additional Shares is
                  equal to the ratio:

                  (i)      if Koor is the Other Party - between the Koor Shares
                           that are held by Koor on the date the Purchaser's
                           notice is given and the Federmann Shares that are
                           held by Federmann on the date the Purchaser's notice
                           is given;

                  (ii)     if Federmann is the Other Party - between the
                           Federmann Shares that are held by Federmann on the
                           date the Purchaser's notice is given and the Koor
                           Shares that are held by Koor on the date the
                           Purchaser's notice is given.

         14.3     Should the Other Party give the Purchasing Party Tag-Along
                  notice at such time as mentioned in Clause 14.2 above, the
                  Purchasing Party shall Transfer to the Other Party Shares of
                  the Company in the quantity specified in the Tag-Along
                  notice, Free and Clear, for the consideration and on the
                  terms detailed in the Purchaser's notice, all within 7
                  Business Days of the date of giving the Tag-Along notice.

15.      Term of the Agreement and Effect of the Agreement
         -------------------------------------------------

         15.1     This Agreement shall take effect on the First Closing Date.
                  Should Stage 'A' of the Transaction (as the term is defined
                  in the Deed of

                                     C-20
<PAGE>

                  Sale) not be performed and completed by the end of 3 Business
                  Days after the Stage 'A' Completion Deadline (as defined in
                  the Deed of Sale), then this Agreement shall be null and void
                  and ineffective, without either of the Parties having any
                  claim, complaint or demand against the other.

         15.2     This Agreement shall be in effect until the end of a period
                  of 15 years from the date on which it enters into effect as
                  provided in Clause 15.1 above or until such time as
                  Federmann's holdings of the Federmann Shares together with
                  Koor's holdings of the Koor Shares fall below 25% of the
                  Company's issued share capital, whichever is the earlier.

         15.3     For the avoidance of doubt, it is clarified that this
                  Agreement shall not come to an end if Koor or Federmann
                  ceases to hold Koor Shares or the Federmann Shares, as the
                  case may be, if together with a Transfer of the remainder of
                  the Federmann Shares or the Koor Shares, as the case may be,
                  the Transferor Party (as defined in Clause 12 above)
                  Transferred and assigned all its rights and obligations
                  pursuant to this Agreement to the Purchaser (as defined in
                  Clause 12 above), and the provisions of this Agreement shall
                  continue to apply and obligate the Purchaser and the Other
                  Party.

16.      Koor's Withdrawal from the Controlling Interest
         -----------------------------------------------

         16.1     Koor may at any time from October 1, 2008, provide written
                  notice to Federmann in which it shall inform Federmann of
                  Koor's desire to bring to an end its rights and obligations
                  pursuant to Clauses 4, 6 (if Koor is entitled to rights
                  pursuant to Clause 6 at that time), 7, 8, 9, 10, 11 (except
                  for Clauses 11.6 and 11.7), 12, 13 and 14 of this Agreement
                  (hereinafter in this Clause 16 the "Revoked Clauses"), and on
                  the expiration of 6 months from the date on which Federmann
                  is given Koor's written notice as aforesaid (hereinafter in
                  this Clause 16 the "Expiration Date"), all the Parties'
                  rights and obligations pursuant to the Revoked Clauses shall
                  expire so that the sole rights and obligations that will
                  continue to obligate and entitle the Parties pursuant to this
                  Agreement shall be the rights and obligations in Clause 5
                  above and this Clause 16, all without prejudice to either of
                  the Party's rights to any relief in respect of a breach of
                  any of the provisions of the Revoked Clauses that occurred
                  prior to the Expiration Date.

         16.2     Should such notice be given by Koor and to the extent that
                  Federmann so wishes, the Parties shall discuss the
                  possibility of Koor's Shares that are held by Koor at that
                  time being acquired by Federmann, alone or together with
                  others, without the provisions of this Clause being such as
                  to obligate either of the Parties to enter into such a
                  purchase

                                     C-21
<PAGE>

                  agreement or to permit Koor to Transfer the Koor Shares
                  otherwise than in accordance with the provisions of Clauses
                  16.3 and 16.4 below.

         16.3     As from the Expiration Date, Koor may Transfer all or any of
                  the Koor Shares that are held by it in any way, either by a
                  Stock Exchange sale or otherwise, including a distribution in
                  kind to its shareholders, subject nevertheless to Federmann's
                  Right of First Offer as provided in Clause 16.4 below or in
                  accordance with the provisions of Clauses 11.6 and 11.7
                  above.

         16.4     Federmann's Right of First Offer
                  --------------------------------

                  16.4.1   As of the Expiration Date, Koor may not Transfer any
                           of the Koor Shares unless it first gives Federmann
                           written notice detailing the quantity of the Koor
                           Shares that it wishes to transfer (hereinafter the
                           "Offered Shares").

                  16.4.2   Federmann may, but is not required to, within 14
                           Business Days of receiving Koor's notice as
                           aforesaid (hereinafter in this Clause 16.4 the
                           "Offer Period"), provide Koor written notice
                           (hereinafter in this Clause 16.4 "Federmann's
                           Notice"), informing Koor that it wishes to purchase
                           from Koor the Offered Shares or the portion of them
                           as specified by Federmann in Federmann's Notice
                           (hereinafter in this Clause 16. the "Shares for
                           Purchase") and the price per Share that it is
                           willing to pay for those Shares (hereinafter in this
                           Clause 16.4 the "Price Offered").

                  16.4.3   Within 7 Business Days of Koor's receiving
                           Federmann's Notice, Koor shall provide Federmann
                           written notice (hereinafter in this Clause 16.4 the
                           "Koor's Notice") if it agrees or if it does not
                           agree to Transfer to Federmann the Shares for
                           Purchase at the Price Offered. Should Koor inform
                           Federmann in Koor's Notice that it agrees to
                           Transfer to Federmann the Shares for Purchase at the
                           Price Offered, Koor shall Transfer to Federmann and
                           Federmann shall accept from Koor a Transfer of the
                           Shares for Purchase, and Federmann shall pay Koor
                           the Price Offered, all by the expiration of 21
                           Business Days from the date Koor's Notice is
                           received by Federmann (hereinafter in this Clause
                           16.4 the "Completion Period").

                  16.4.4   Should Koor inform Federmann in Koor's Notice that
                           it does not agree to Transfer to Federmann the
                           Shares for Purchase at the Price Offered, Koor may
                           Transfer the Shares for

                                     C-22
<PAGE>

                           Purchase to a Third Party or Third Parties, but only
                           at a price greater than the Price Offered on the
                           same or more favorable payment terms to Koor than
                           those specified in Clause 16.4.3 above, without any
                           further obligation of Koor, all within 90 Business
                           Days of the date Koor's Notice is given. For the
                           avoidance of doubt, to the extent that the Shares
                           for Purchase have not been Transferred by Koor to a
                           Third Party as aforesaid within 90 Business Days of
                           the date of Koor's notice being provided, Koor may
                           only Transfer the Shares for Purchase after again
                           providing Federmann the Right of First Offer as
                           provided in this Clause 16.4.

                  16.4.5   Should Federmann not provide Federmann's Notice
                           within the 14 Business Days mentioned in Clause
                           16.4.2 above or should Federmann state in
                           Federmann's Notice that it wishes to acquire only
                           some of the Offered Shares or if the Transfer of the
                           Shares for Purchase has not been completed by the
                           end of the Completion Period, otherwise than due to
                           a breach of contract by Koor, Koor may, within 90
                           Business Days of the date on which Koor's Notice was
                           provided as provided in Clause 16.4.3 above or from
                           the end of the Completion Period, as the case may
                           be, sell the Offered Shares (if Federmann's Notice
                           has not been provided as aforesaid) or that portion
                           of them that are not included in the Shares for
                           Purchase (if Federmann's Notice is provided with
                           respect to only a portion of the offered Shares).

                  16.4.6   For the purpose of Clauses 16.4.3 and 16.4.5 above,
                           a Transfer of Shares by means of their distribution
                           as a dividend in kind by Koor to its shareholders
                           shall be deemed as a Transfer of Shares that is made
                           on the date determining the rights to receive the
                           dividend in kind by Koor's shareholders, and such
                           Transfer as aforesaid shall be deemed as though made
                           at the average closing price of the Company's shares
                           on the Tel Aviv Stock Exchange in the 12 trading
                           days before and in the 12 trading days after the
                           date of giving Koor's written notice as provided in
                           Clause 16.4.1 above.

17.      Miscellaneous
         -------------

         17.1     This Agreement may be signed in several separate copies and
                  each copy signed by one of the Parties shall be treated as an
                  original and all together they shall be treated as a single,
                  complete document.

                                     C-23
<PAGE>

         17.2     No conduct by either of the Parties shall be deemed a waiver
                  of any of its rights pursuant to this Agreement or by law or
                  as its waiver of or acquiescence to in any breach or
                  non-performance of any condition, unless the waiver,
                  acquiescence, postponement, modification, cancellation or
                  addendum has been done expressly and in writing.

         17.3     This Agreement contains, embodies, merges and expresses all
                  the terms and conditions agreed between the Parties on the
                  matters mentioned herein. Any promises, guarantees,
                  agreements, whether written or oral, undertakings or
                  representations on the matters mentioned in this Agreement
                  that were given or made by the Parties prior to the making of
                  this Agreement that have not found specific expression herein
                  shall not be deemed to augment, derogate from or modify the
                  rights and obligations provided in this Agreement or deriving
                  herefrom, and the Parties shall not be bound by them from the
                  date of this Agreement (hereinafter "Revocation of the
                  Obligations Preceding Signature"). It is hereby expressly
                  agreed that the Revocation of the Obligations Preceding
                  Signature shall be effective even in the event that this
                  Agreement is revoked or rescinded for any reason. The
                  foregoing shall not be such as to impair the effect of the
                  Parties' rights and obligations pursuant to the Sale [sic]
                  Agreement.

         17.4     For the avoidance of doubt, the provisions of the
                  Shareholders Agreement between Koor and the Company,
                  including wording that is different from the wording of this
                  Agreement, shall not in any manner be applied in the
                  interpretation of this Agreement. Without prejudice to the
                  generality of the foregoing, the exchanges of documents
                  between the Parties prior to the signature of this Agreement,
                  including the drafts exchanged between them, shall have no
                  significance in the interpretation of this Agreement.

         17.5     Except as otherwise provided in this Agreement, the Parties'
                  rights and obligations pursuant to this Agreement are not
                  assignable and/or transferable. The provisions of this Clause
                  are not such as to affect Federmann's right to exercise its
                  right of first refusal as provided in Clause 11 above by
                  means of any third party and/or third parties.

         17.6     In this Agreement any person or entity shall be deemed as
                  holding all the Shares held by it, directly or indirectly
                  and, without prejudice to the generality of the foregoing,
                  all the Shares held, directly or indirectly, by any related
                  entity and by any member of his family, as they are defined
                  in the Securities Law, 5728-1968; and also all the Shares
                  that are held by any person and/or entity that is construed
                  in accordance with the provisions of the Securities Law,
                  5728-1968 as holding Shares of the Company together with that
                  person or entity and also all the Shares held through a
                  trustee and/or registration company,

                                     C-24
<PAGE>

                  and also all the Shares that are held by another shareholder
                  of the Company who is jointly and severally liable with a
                  Party to this Agreement for the obligations pursuant to this
                  Agreement. Nevertheless, a Party to this Agreement shall not,
                  for the purpose of this Agreement, be treated as holding
                  Shares that are held by the other Party to this Agreement.

         17.7     This Agreement shall be governed by the laws of the State of
                  Israel, without taking into account its choice of law rules.
                  Exclusive jurisdiction on all matters relating to this
                  Agreement or deriving herefrom is vested in the competent
                  courts in the City of Tel Aviv-Jaffa and in them alone.

         17.8     Each of the Parties to this Agreement shall bear the legal
                  expenses that it is charged in respect of this Agreement.

         17.9     An obligation to vote by virtue of all of a Party's Shares in
                  the Company in connection with any resolution in any way also
                  includes the obligation to participate in the vote by virtue
                  of all those Shares, and not to vote for any further or other
                  proposed resolution that is such as to contradict, cancel or
                  diminish said resolution.

         17.10    Without being such as to impose any further limitations on
                  the Transfer of Shares other than that expressly provided in
                  this Agreement, each of the Parties undertakes to act in good
                  faith towards the other and not, by act or omission, to cause
                  the frustration of this Agreement's provisions or any of them
                  and/or to make them unrealizable.

         17.11    The Parties hereto may extend any time specified in this
                  Agreement, either once or several times, by written notice
                  signed by two officers of each Party to this Agreement,
                  without any further approval being necessary.

18.      Notices

         18.1     The Parties' addresses for the purpose of this Agreement are
                  as set out in the heading hereto or any other address in
                  Israel of which one Party gives the other written notice.

         18.2     Any notice pursuant to this Agreement shall be in writing and
                  be sent by registered mail or personal delivery by messenger
                  to the address of the relevant Party, as mentioned in Clause
                  18.1 above, and that address shall in all respects in
                  connection with this Agreement also be the address of that
                  Party for the service of court process.

                                     C-25
<PAGE>

         18.3     Notice that is sent shall be treated as having reached the
                  addressee and come to its knowledge within five Business Days
                  if sent by registered mail or, if delivered in person by
                  messenger by 17:00 hours on any Business Day, it shall be
                  treated as received on the Business Day after delivery.


          IN WITNESS WHEREOF THE PARTIES HAVE EXECUTED THIS AGREEMENT:


        (signed)                                           (signed)
   --------------------------                     --------------------------
   Koor Industries Ltd.                           Federmann Enterprises Ltd.

                                   (signed)
                          --------------------------
                          Heris Aktiengesellschaft

























                                     C-26
<PAGE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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