Exhibit 4.(a)3

                    Amended and Restated Facility Agreement
                              dated July 1, 2004.

<PAGE>

THIS AMENDING AND RESTATING AGREEMENT is made on the 1st day of July 2004,

BETWEEN:

(1)   ECI TELECOM LTD., a company incorporated under the laws of Israel (company
      no. 52-003290-5), whose registered office is at 30 Hasivim Street, Petach
      Tiqva 49517, Israel

      ("the Borrower")

(2)   INOVIA TELECOMS LTD. (previously known as ECI Telecom Access Systems
      Ltd.), a company incorporated under the laws of Israel (company no.
      51-300354-1), whose registered office is c/o ECI Telecom Ltd., 30 Hasivim
      Street, Petach Tiqva 49517, Israel

      ("Inovia")

(3)   ECI TELECOM NGTS LTD., a company incorporated under the laws of Israel
      (company no. 51-300351-7), whose registered office is c/o ECI Telecom
      Ltd., 30 Hasivim Street, Petach Tiqva 49517, Israel

      ("ECI-NGTS")

(4)   LIGHTSCAPE NETWORKS LTD., a company incorporated under the laws of Israel
      (company no. 51-300365-7), whose registered office is c/o ECI Telecom
      Ltd., 30 Hasivim Street, Petach Tiqva 49517, Israel

      ("ECI-Optical")

(5)   ENAVIS NETWORKS LTD., a company incorporated under the laws of Israel
      (company no. 51-300353-3), whose registered office is c/o ECI Telecom
      Ltd., 30 Hasivim Street, Petach Tiqva 49517, Israel

      ("ECI-Transport")

(6)   ECI-WAVEINNO LTD. (previously known as Innowave ECI Wireless Systems
      Ltd.), a company incorporated under the laws of Israel (company no.
      51-255886-7), whose registered office is 4 Hashiloach Street, Petach Tiqva
      49104, Israel

      ("Waveinno")

<PAGE>
                                      -2-


AND

(7)   BANK LEUMI LE-ISRAEL B.M., a banking corporation incorporated in the State
      of Israel; and

(8)   BANK HAPOALIM B.M., a banking corporation incorporated in the State of
      Israel

WHEREAS:

(1)   the parties hereto are parties to an agreement dated February 5, 2001
      relating to the provision by Bank Leumi and Bank Hapoalim to the Borrower
      of a term loan credit facility of up to US $300,000,000 (three hundred
      million United States Dollars) ("the Facility Agreement"); and

(2)   ECI Telecom (1990) Export Limited (as it was known on the date of
      signature of the Facility Agreement), also a party to the Facility
      Agreement, has since merged into the Borrower; and

(3)   the Borrower has drawn US $250,000,000 (two hundred and fifty million
      United States Dollars) under the said credit facility (US $125,000,000
      (one hundred and twenty-five million United States Dollars) from each of
      Bank Leumi and Bank Hapoalim); and

(4)   following payments and prepayments of principal by the Borrower prior to
      the date hereof, the outstanding balance of the principal of the Loan
      under the said credit facility is US $37,500,000 (thirty seven million
      five hundred thousand United States Dollars) (US $18,750,000 (eighteen
      million seven hundred and fifty thousand United States Dollars) to each of
      Bank Leumi and Bank Hapoalim); and

(5)   by letter dated December, 2002, a copy of which and of the enclosures
      thereto are attached as Schedule P/5/1 hereto ("the Veraz Letter"), Bank
      Leumi and Bank Hapoalim have consented to the transaction referred to in
      the Veraz Letter and involving transfer of certain assets of ECI-NGTS to
      Veraz Networks, Inc. and following such consent, the said transaction has
      been executed and a pledge of shares held by the Borrower in Veraz
      Networks, Inc. has been created by share pledge dated December 31, 2002, a
      copy of which is attached as Schedule P/5/2 ("the Veraz Share Pledge");
      and

(6)   by letter dated March 10, 2003, a copy of which and of the enclosures
      thereto are attached as Schedule P/6 hereto ("the Waveinno Letter"), Bank
      Leumi and Bank Hapoalim have consented to the sale of assets of Waveinno
      to Alvarion Ltd. and such sale has taken place; and

<PAGE>
                                      -3-


(7)   the parties wish to amend the Facility Agreement so as to reflect certain
      of the provisions of that certain letter agreement dated May 28, 2003
      between the Borrower, Bank Leumi, Bank Hapoalim and the Original
      Subsidiaries ("the Letter Agreement"), including those relating to the
      restructuring of the credit facility granted under the Facility Agreement,
      of the Veraz Letter and of the Waveinno Letter and in certain other
      respects, including other matters referred to above, all subject to and in
      accordance with the terms and conditions hereinafter set forth,

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

1.    INTERPRETATION

1.1.  In this Agreement, the following terms have the meanings given to them in
      this clause 1.1:

1.1.1.      "Access Debenture"        -  means the debenture, a copy of which
                                         is attached as Schedule 1.1.1 hereto
                                         and which was executed pursuant to
                                         the Original Facility Agreement;

1.1.2.      "Accounting Period"       -  means any period of one Quarter or a
                                         Fiscal Year for which Accounts are

                                         prepared;

1.1.3.      "Accounts"                -  means:

                                         (a)     each of the audited
                                                 consolidated annual financial
                                                 statements of the Borrower,
                                                 the separate audited annual
                                                 financial statements of the
                                                 Excluded Subsidiary and the
                                                 Exclusion Statement relating
                                                 to each such consolidated
                                                 annual financial statement;
                                                 and

                                         (b)     each of the reviewed
                                                 consolidated quarterly
                                                 financial statements of the
                                                 Borrower, the separate
                                                 audited quarterly financial
                                                 statements of the Excluded
                                                 Subsidiary and the Exclusion
                                                 Statement relating to each
                                                 such consolidated quarterly
                                                 financial statement;

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                                      -4-


1.1.4.      Reserved

1.1.5.      "Additional
            Credit Facilities"           means the Cash Credit Facilities and
                                         the Off Balance-Sheet Facilities;

1.1.6.      "Additional Lender"       -  has the meaning assigned to such term
                                         in clause 26.3 below;

1.1.7.      "Advance"                 -  means an advance made or to be made
                                         by the Banks under the Facility or,
                                         as the case may be, the principal
                                         amount thereof outstanding from time
                                         to time;

1.1.8.      "Approved
            Financial Institutions"   -  means banks and other financial
                                         institutions incorporated outside
                                         Israel, which are rated BBB or higher
                                         by Standard & Poor or by Moody's at
                                         the relevant time and banks and other
                                         financial institutions incorporated
                                         in Israel which are rated AA or
                                         higher by Maalot at the relevant
                                         time, provided that for the purpose
                                         of clause 1.1.23 below, an asset held
                                         or issued by an institution at a
                                         certain date (in this definition "the
                                         Relevant Date"), shall be deemed held
                                         or issued by an Approved Financial
                                         Institution, even if the institution
                                         is no longer an Approved Financial
                                         Institution at the Relevant Date, if
                                         it was an Approved Financial
                                         Institution at the time the asset was
                                         first owned by the Borrower and at
                                         the Relevant Date no more than 3
                                         (three) months have passed since the
                                         institution has ceased to be an
                                         Approved Financial Institution;

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                                      -5-


1.1.9.      "Approved Percentage(s)"  -  means the percentage(s) fixed by the
                                         Bank of Israel in the Rules of
                                         Practice, as the Credit Conversion
                                         Factors for Off Balance-Sheet
                                         Facilities (Mekadmei Hamara Le-Ashrai
                                         Shel Saifim Hutz Maazanim);

1.1.10.     Reserved

1.1.11.     "Auditors"                -  means the auditors for the time being
                                         of the Borrower;

1.1.12.     "Authorisations"          -  has the meaning assigned to such term
                                         in clause 14.7 below;

1.1.13.     "Availability Period"     -  means the period commencing on the
                                         Closing Date and ending on the
                                         Termination Date, except as otherwise
                                         provided in clauses 2.1.2, 25 and 29
                                         below;

1.1.14.     "Available Commitment"    -  means, in relation to a Bank at any
                                         time, such Bank's Commitment at such
                                         time, less the aggregate amount of
                                         the Extended Portion advanced by such
                                         Bank at such time;

1.1.15.     "Bank Hapoalim"           -  means Bank Hapoalim B.M.;

1.1.16.     "Bank Leumi"              -  means Bank Leumi Le-Israel B.M.;

1.1.17.     "Banks"                   -  means Bank Hapoalim, Bank Leumi, and
                                         any bank or financial institution
                                         which becomes a party to this
                                         Agreement pursuant to clause 24.3
                                         below;

1.1.18.     Reserved

1.1.19.     "Borrower's Debenture"    -  means the debenture, a copy of which
                                         is attached as Schedule 1.1.19 hereto
                                         and which was executed pursuant to
                                         the Letter Agreement;

<PAGE>
                                      -6-


1.1.20.     "Borrowing"               -  means:

                                         (a)     monies borrowed (including
                                                 the Loan) or monies raised
                                                 which are in the nature of
                                                 borrowings or having the
                                                 commercial effect of
                                                 borrowing (including, monies
                                                 raised by the sale of
                                                 receivables, invoices, bills
                                                 or notes or other financial
                                                 assets on terms that recourse
                                                 may be had to the vendor in
                                                 the event of non-payment of
                                                 such receivables, invoices,
                                                 bills or financial assets
                                                 when due, to the extent of
                                                 such recourse, to the extent
                                                 that the underlying payment
                                                 obligation is not covered by
                                                 insurance) and monies raised
                                                 under acceptance credit
                                                 facilities and through the
                                                 issue of bonds, notes,
                                                 debentures, bills, loan
                                                 stocks and other debt
                                                 securities (including any
                                                 debt security convertible,
                                                 but not at the relevant time
                                                 converted, into share
                                                 capital);

                                         (b)     the acquisition cost of
                                                 assets, including goods or
                                                 services to the extent
                                                 payable on deferred payment
                                                 terms more than 180 (one
                                                 hundred and eighty) days (or
                                                 365 (three hundred and
                                                 sixty-five) days for the
                                                 purpose of the definition of
                                                 "Debt Service" in
                                                 clause 1.1.37 below) after
                                                 the time of acquisition or
                                                 possession thereof by the
                                                 party liable (whether or not
                                                 evidenced by any bond, note,
                                                 debenture, loan stock or
                                                 other debt security),
                                                 excluding any such cost
                                                 payable on deferred payment
                                                 terms which are treated as
                                                 trade credit in accordance
                                                 with GAAP;

<PAGE>
                                      -7-


                                         (c)     monies received in
                                                 consideration for the supply
                                                 of goods and/or services to
                                                 the extent received more than
                                                 6 (six) months before the due
                                                 date for such supply (but
                                                 excluding any liability in
                                                 respect of deposits received
                                                 from customers in the
                                                 ordinary course of trade)
                                                 where the receipt as
                                                 aforesaid is arranged
                                                 primarily as a method of
                                                 raising finance;

                                         (d)     leases (whether in respect of
                                                 land, machinery, equipment or
                                                 otherwise) and hire purchase
                                                 agreements, conditional sale
                                                 agreements, sale and lease
                                                 back, sale and repurchase and
                                                 similar agreements and
                                                 instruments, provided, in the
                                                 case of leases, they are
                                                 treated as finance leases in
                                                 accordance with GAAP; and/or

                                         (e)     any guarantee, indemnity or
                                                 other legally binding
                                                 instrument to assure payment
                                                 of, or against loss in
                                                 respect of non-payment of,
                                                 any of the indebtedness
                                                 specified in this definition
                                                 and any counter-indemnity in
                                                 respect of any thereof or in
                                                 respect of any letter of
                                                 credit or guarantee issued by
                                                 any bank or other financial
                                                 institution in respect of any
                                                 indebtedness referred to in
                                                 this definition (all
                                                 guarantees, indemnities and
                                                 other instruments as
                                                 aforesaid issued by the
                                                 Borrower or any Included
                                                 Subsidiary as well as
                                                 counter-indemnities as
                                                 aforesaid issued in respect
                                                 thereof by any bank or
                                                 financial institution, are
                                                 referred to, hereinafter,
                                                 collectively, in this
                                                 clause 15.20(e), as
                                                 "Guarantees"), it being
                                                 agreed that:

<PAGE>
                                      -8-


                                                 (i)    except as provided in
                                                        (ii) and (iii) below,
                                                        the full amount of all
                                                        Guarantees shall be
                                                        included in
                                                        Borrowings, regardless
                                                        of whether or not any
                                                        demand has been made
                                                        thereunder or in
                                                        connection therewith
                                                        and regardless of
                                                        whether or not any
                                                        dispute has arisen as
                                                        a consequence of which
                                                        such demand may be
                                                        made;

                                                 (ii)   the value of Uncalled
                                                        Guarantees to be taken
                                                        into account in
                                                        determining Borrowings
                                                        for the purpose of
                                                        clause 15.24 below at
                                                        any time, shall be the
                                                        relevant Approved
                                                        Percentage, at such
                                                        time, of the amounts
                                                        of the Uncalled
                                                        Guarantees; and
<PAGE>
                                      -9-


                                                 (iii)  Uncalled Guarantees
                                                        shall not be taken
                                                        into account in
                                                        determining Borrowings
                                                        for the purpose of the
                                                        definition of "Debt
                                                        Service" in
                                                        clause 1.1.37 below.

                                                 "Uncalled Guarantees" means
                                                 Guarantees in respect of
                                                 which no demand has been made
                                                 and no dispute (known to the
                                                 Borrower or any Included
                                                 Subsidiary) has arisen as a
                                                 consequence of which such
                                                 demand may be made; and

                                         (f)     the relevant Approved
                                                 Percentage of the value of
                                                 any  Forex Transaction not
                                                 yet completed to which the
                                                 Borrower or an Included
                                                 Subsidiary is party, but
                                                 excluding any Forex
                                                 Transaction to which the
                                                 Borrower or an Included
                                                 Subsidiary is party with
                                                 respect to which there is a
                                                 Forex Transaction of the same
                                                 kind which will be set-off
                                                 against the first Forex
                                                 Transaction on its date of
                                                 maturity (as long as such
                                                 exclusion is included in the
                                                 definition of future or
                                                 forward transactions in the
                                                 Rules of Practice);
<PAGE>
                                      -10-


1.1.21.     "Business Day"            -  means:

                                         (a)     with respect to payment,
                                                 purchase or any other
                                                 transaction in, or
                                                 determination of LIBOR for,
                                                 or performance of
                                                 calculations in, sums
                                                 denominated in US Dollars or
                                                 Euros, as the case may be, a
                                                 day on which: (i) the Banks
                                                 are open for trading in
                                                 Israel in US Dollars or
                                                 Euros, as the case may be;
                                                 and (ii) banks generally are
                                                 open for trading in
                                                 US Dollars or in Euros, as
                                                 the case may be, in London
                                                 and New York; and

                                         (b)     in all other cases, as a
                                                 reference to a day (other
                                                 than Saturday) on which banks
                                                 generally are open for
                                                 business in Israel;

1.1.22.     Reserved

1.1.23.     "Cash Balance"            -  means:

                                         (a)     for the purpose of
                                                 clause 15.28 below, at or
                                                 with respect to any date (in
                                                 this definition, "the
                                                 Reference Date"), the
                                                 following assets (provided
                                                 they are not Charged Assets):

                                                 (i)    cash in current
                                                        accounts in Approved
                                                        Financial
                                                        Institutions;

                                                 (ii)   Cash Equivalents  held
                                                        in Approved Financial
                                                        Institutions;

                                                 (iii)  short term cash
                                                        deposits in Approved
                                                        Financial Institutions;
<PAGE>
                                      -11-


                                                 (iv)   long term cash
                                                        deposits in Approved
                                                        Financial
                                                        Institutions;

                                                 (v)    cash deposit
                                                        instruments, including
                                                        structured cash
                                                        deposit instruments,
                                                        payment of the
                                                        principal of which on
                                                        maturity is 100%
                                                        guaranteed and which
                                                        are held with Approved
                                                        Financial
                                                        Institutions; and

                                                 (vi)   bonds and notes
                                                        (hereinafter,
                                                        together,  in this
                                                        clause 1.1.23(a)(vi),
                                                        "financial
                                                        instruments")
                                                        (excluding, for the
                                                        removal of doubt,
                                                        stocks, shares and
                                                        units in mutual funds
                                                        and any instruments
                                                        which constitute,
                                                        directly or
                                                        indirectly, an
                                                        investment in stocks,
                                                        shares and/or units in
                                                        mutual funds),
                                                        provided that if such
                                                        financial instrument
                                                        is issued by an entity
                                                        incorporated outside
                                                        Israel it (i.e., such
                                                        financial instrument)
                                                        is rated BBB or higher
                                                        by Standard & Poor or
                                                        by Moody's at the
                                                        Reference Date or if
                                                        it is issued by an
                                                        entity incorporated in
                                                        Israel it (i.e., such
                                                        financial instrument)
                                                        is rated AA or higher
                                                        by Maalot at the
                                                        Reference Date, it
                                                        being agreed that the
                                                        value, at the
                                                        Reference Date, for
                                                        the purpose of this
                                                        definition, of any
                                                        asset included in this
                                                        category (vi), shall
                                                        be the  value of such
                                                        asset according to the
                                                        Accounts of the
                                                        Borrower last
                                                        published prior to the

<PAGE>
                                      -12-


                                                        Reference Date, or,
                                                        if the asset was
                                                        acquired after the
                                                        date of the Accounts
                                                        last published, then
                                                        according to the value
                                                        that would   be
                                                        ascribed to such asset
                                                        in the  Accounts of
                                                        the Borrower, were
                                                        such Accounts to be
                                                        drawn up as of the
                                                        Reference Date,
                                                        in accordance with the
                                                        method consistently
                                                        applied in  the
                                                        Borrower's Accounts in
                                                        determining the value
                                                        of assets of the kind
                                                        in question, in the
                                                        latter case,  as
                                                        certified in writing
                                                        by the Chief Financial
                                                        Officer of the
                                                        Borrower;

                                                 provided that for the purpose
                                                 of clause 15.28 below, (aa)
                                                 notwithstanding the
                                                 provisions of sub-paragraph
                                                 (vi) above, financial
                                                 instruments as defined in the
                                                 said sub-paragraph, which are
                                                 issued by an entity
                                                 incorporated outside Israel,
                                                 are rated BBB- (BBB minus) or
                                                 higher by Standard & Poor or
                                                 Moody's and have an aggregate
                                                 value of up to US $10,000,000
                                                 (ten million United States
                                                 Dollars) shall be included in
                                                 Cash Balance, and (bb)
                                                 assets of the kind referred
                                                 to in sub-paragraphs  (i) to
                                                 (vi) above having an
                                                 aggregate value of up to
                                                 US $5,000,000 (five million
                                                 United States Dollars) shall
                                                 be included in Cash Balance,
                                                 even if the conditions
                                                 specified in this definition
                                                 above relating to the rating
                                                 of the institution holding or
                                                 issuing such asset or as to
                                                 the rating of the asset are
                                                 not fulfilled; and
<PAGE>
                                      -13-


                                         (b)     for the purpose of the
                                                 definition of "Total
                                                 Liabilities", at or with
                                                 respect to any Ratio
                                                 Determination Date, "Cash
                                                 Balance" as defined in (a)
                                                 above, except that assets
                                                 which are charged by fixed
                                                 Encumbrance as security for
                                                 liabilities included in Total
                                                 Liabilities as defined below
                                                 prior to the deduction
                                                 specified in that definition,
                                                 shall not be excluded as
                                                 Charged Assets in the
                                                 calculation of "Cash Balance";

1.1.23A.    "Cash Credit Facilities"     means any cash credit facilities made
                                         available to the Borrower by Bank
                                         Leumi or Bank Hapoalim or by any
                                         other person or entity, other than
                                         the Loan;
<PAGE>
                                      -14-


1.1.24.     "Cash Equivalents"        -  to be construed in accordance with
                                         GAAP;

1.1.25.     Reserved

1.1.26.     "a Change of
            Ownership"                -  shall occur when the Koor Group shall
                                         no longer have the ability to appoint
                                         the majority of the members of the
                                         Board of Directors of the Borrower;

1.1.26A     "Charged Asset"           -  means any asset included in
                                         categories (i) to (vi) of
                                         clause 1.1.23(a) above (other than
                                         the cash deposit in the amount of
                                         US $8,300,000 (eight million three
                                         hundred thousand United States
                                         Dollars) pledged in favour of Bank
                                         Hapoalim to secure the Ji-Tong
                                         Transaction) which is charged by any
                                         fixed Encumbrance and/or is subject
                                         to a specific right of set-off in
                                         favour of or by the Approved
                                         Financial Institution or other entity
                                         holding the asset, it being agreed
                                         that: (i) the existence and freedom
                                         from Encumbrance of any such asset
                                         shall be supported by copies of
                                         statements and other appropriate
                                         documents of the relevant Approved
                                         Financial Institution or other entity
                                         certified by it as correct and
                                         (ii) the freedom of all such assets
                                         from any specific right of set-off as
                                         aforesaid shall be supported by the
                                         certificate last issued pursuant to
                                         clause 15.4.3(b) or clause 15.28
                                         below by the Chief Financial Officer
                                         of the Borrower, except that if a
                                         certificate should have been provided
                                         pursuant to the provisions of
                                         clause 15.4.3(b) or clause 15.28
                                         below and has not been provided, the
                                         assets in question shall be deemed
                                         subject to a specific right of
                                         set-off;
<PAGE>
                                      -15-


1.1.27.     "Closing Date"            -  means February 14, 2001;
                                         means, in relation to a Bank at any
                                         time, such Bank's commitment under
                                         the Facility, being, in the case of
                                         Bank Leumi and Bank Hapoalim at the
                                         date hereof, the amounts specified in
                                         clause 29 below, and in the case of
                                         any Bank which becomes a party to
                                         this Agreement in accordance with
                                         clause 24.3 below, the amount of such
                                         Commitment assigned or transferred to
                                         it pursuant to such clause, as such
                                         amounts may respectively be reduced,
                                         cancelled, assigned or transferred in
                                         accordance with this Agreement;

1.1.28.     "Commitment"              -

1.1.29.     "Completion"              -  means completion of receipt by the
                                         Banks, before the Effective Date, of
                                         all the documents, matters and things
                                         listed in clauses 3.1 to 3.9
                                         (inclusive) below in form and
                                         substance satisfactory to the Banks;

1.1.30.     Reserved

1.1.31.     "Contribution"            -  means, in relation to a Bank at any
                                         time, that portion of the Loan
                                         outstanding at the time that is owing
                                         to such Bank;

1.1.32.     Reserved

1.1.33.     Reserved

1.1.34.     "Current Assets"          -  means any assets which, in accordance
                                         with GAAP, will be classified as
                                         Current Assets;

1.1.35.     "Current Liabilities"     -  means any liabilities which, in
                                         accordance with GAAP, will be
                                         classified as Current Liabilities;
<PAGE>
                                      -16-


1.1.36.     "Dangerous Substance"     -  means any radioactive or
                                         electromagnetic emissions and any
                                         natural or artificial substance
                                         (whether in the form of a solid,
                                         liquid, gas or vapour) the
                                         generation, transportation, storage,
                                         treatment, use or disposal of which
                                         (whether alone or in combination with
                                         any other substance and including any
                                         controlled, special, hazardous,
                                         toxic, radioactive or dangerous
                                         waste), gives rise to a risk of
                                         causing harm to man or any other
                                         living organism or damaging the
                                         Environment or public health;

1.1.37.     "Debt Service"            -  means, in relation to any Ratio
                                         Determination Date:

                                         (a)     all Interest in respect of
                                                 the Facility and all other
                                                 Borrowings scheduled to be
                                                 paid (whether or not paid and
                                                 whether or not capitalised)
                                                 by the Borrower and the
                                                 Included Subsidiaries in
                                                 respect of the 12 (twelve)
                                                 month period commencing on
                                                 the first day of the Quarter
                                                 immediately following such
                                                 Ratio Determination Date
                                                 ("the Relevant Twelve-Month
                                                 Period") as well as any
                                                 Interest due prior to the
                                                 Relevant Twelve-Month Period
                                                 and not paid by commencement
                                                 thereof; and

                                         (b)     scheduled repayments of
                                                 principal by the Borrower and
                                                 the Included Subsidiaries in
                                                 respect of the Facility and
                                                 all other Borrowings (other
                                                 than Borrowings being Cash
                                                 Credit Facilities to be
                                                 repaid within no more than 12
                                                 (twelve) months of being
                                                 borrowed and not being
                                                 renewable or extendable
                                                 without the prior consent of
                                                 the lender, in accordance
                                                 with the terms and conditions
                                                 governing such facility at
                                                 the time of its grant) in the
                                                 Relevant Twelve-Month Period;
<PAGE>
                                      -17-


1.1.38.     Reserved

1.1.39.     "Default"                 -  means any Event of Default or any
                                         event which with the giving of notice
                                         or lapse of time, or the making of
                                         any determination hereunder, or the
                                         satisfaction of any other condition
                                         (or any combination thereof) would
                                         constitute an Event of Default;

1.1.40.     "Distribution"            -  has the meaning assigned to the term
                                         "haluka" in the Companies Law, 1999;

1.1.41.     "Drawdown Date"           -  means, in respect of any Drawdown
                                         Request, the requested date for the
                                         making of the relevant Advance as set
                                         out in such Drawdown Request;

1.1.42.     "Drawdown Request"        -  means a notice substantially in the
                                         form of Schedule 1.1.42 hereto;

1.1.43.     "EBITDA"                  -  means, in relation to any Ratio
                                         Determination Date, the sum of the
                                         following, multiplied by 4 (four),
                                         all as appearing in the Accounts
                                         (after Exclusion), for the period
                                         being the Quarter ending on the Ratio
                                         Determination Date ("the relevant
                                         period"):
<PAGE>
                                      -18-


                                         (a)     the consolidated operating
                                                 profits of the Borrower in
                                                 the relevant period,
                                                 excluding any one-time
                                                 credits and charges;

                                         (b)     any amortisation and
                                                 depreciation reflected in the
                                                 Accounts (after Exclusion)
                                                 for the relevant period,
                                                 excluding any one-time items;

                                         (c)     interest actually received by
                                                 the Borrower in the relevant
                                                 period on credit granted to
                                                 customers, on fixed deposits,
                                                 in banks and other financial
                                                 institutions and pursuant to
                                                 the GVT Tranche A Agreement
                                                 and the GVT Tranche B
                                                 Agreement, in the relevant
                                                 period; and

                                         (d)     interest accruing in the
                                                 relevant period to (but not
                                                 actually received by) the
                                                 Borrower on assets included
                                                 in the assets listed in
                                                 paragraphs (a)(i) to (v)
                                                 (inclusive) of the definition
                                                 of "Cash Balance" in
                                                 clause 1.1.23 above;

1.1.44.     "ECI-NGTS"                -  means ECI Telecom NGTS Ltd., Israeli
                                         company no. 51-300351-7;

1.1.45.     "ECI-Optical"             -  means Lightscape Networks Ltd.,
                                         Israeli company no. 51-300365-7;

1.1.46.     "ECI-Transport"           -  means Enavis Networks Ltd., Israeli
                                         company no. 51-300353-3;

1.1.47.     "ECtel"                   -  means ECtel Ltd., Israeli company
                                         no. 52-004446-2;
<PAGE>
                                      -19-


1.1.48.     "ECtel Shares
            Debenture"                -  means the debenture, a copy of which
                                         and of the amendment thereto are
                                         attached as Schedules 1.1.48(A),
                                         1.1.48(B) and 1.1.48(C) hereto and
                                         which were executed pursuant to the
                                         Original Facility Agreement;

1.1.49.     "Effective Date"          -  means July 1, 2004;

1.1.50.     "Encumbrance"             -  means:

                                         (a)     any mortgage, charge (whether
                                                 fixed or floating), pledge,
                                                 lien, assignment, security
                                                 interest, title retention or
                                                 other encumbrance of any kind
                                                 securing, or any right
                                                 conferring a priority of
                                                 payment in respect of, any
                                                 obligation of any person;

                                         (b)     any arrangement under which
                                                 moneys or claims to, or the
                                                 benefit of, a bank or other
                                                 account may be set-off or
                                                 made subject to a combination
                                                 of accounts so as to effect
                                                 payments of sums owed or
                                                 payable to any person; or

                                         (c)     any other type of
                                                 preferential arrangement
                                                 having similar effect;

1.1.51.     "Environment"             -  means all, or any of, the following
                                         media, the air (including the air
                                         within buildings and the air within
                                         other natural or man-made structures
                                         above or below ground), water
                                         (including, ground and surface
                                         water), land (including, surface and
                                         sub-surface soil) and all other
                                         natural resources;
<PAGE>
                                      -20-


1.1.52.     "Environmental Claim"     -  means any claim by any person:

                                         (a)     in respect of any loss or
                                                 liability suffered or
                                                 incurred by that person as a
                                                 result of or in connection
                                                 with any violation of
                                                 Environmental Law; or

                                         (b)     that arises as a result of or
                                                 in connection with
                                                 Environmental Contamination
                                                 and that could give rise to
                                                 any remedy or penalty
                                                 (whether interim or final)
                                                 that may be enforced or
                                                 assessed by private or public
                                                 legal action or
                                                 administrative order or
                                                 proceedings including, any
                                                 such claim that arises from
                                                 injury to persons or property;

1.1.53.     "Environmental
            Contamination"            -  means each of the following and their
                                         consequences:

                                         (a)     any release, emission,
                                                 leakage or spillage of any
                                                 Dangerous Substance at or
                                                 from any site or equipment
                                                 owned, occupied, leased or
                                                 otherwise controlled by the
                                                 Borrower into any part of the
                                                 Environment;

                                         (b)     any accident, fire, explosion
                                                 or sudden event at any site
                                                 or equipment owned, occupied,
                                                 leased or otherwise
                                                 controlled by the Borrower
                                                 which is directly caused by
                                                 or attributable to any
                                                 Dangerous Substance; or
<PAGE>
                                      -21-


                                         (c)     any other pollution of the
                                                 Environment arising at or
                                                 from any site or equipment
                                                 owned, occupied, leased or
                                                 otherwise controlled by the
                                                 Borrower;

1.1.54.     "Environmental Law"       -  means all laws and treaties
                                         concerning pollution, the Environment
                                         or Dangerous Substances;

1.1.55.     "Environmental Licence"   -  means any permit, licence,
                                         authorisation, consent or other
                                         approval required by any
                                         Environmental Law applicable to the

                                         Borrower;

1.1.56.     "Equity"                  -  to be construed in accordance with
                                         GAAP;

1.1.57.     "Event of Default"        -  means any of the events or
                                         circumstances described in clause 16
                                         below;

1.1.58.     "Excluded Subsidiary"     -  means HETC;

1.1.59.     "Exclusion"               -  means the exclusion from any
                                         consolidated or quarterly financial
                                         statement included in the Accounts,
                                         of data relating to the Excluded
                                         Subsidiary, so as to obtain data
                                         relating exclusively to the Borrower
                                         itself and the Included Subsidiaries,
                                         all as detailed in a statement in the
                                         form of Schedule 1.1.59 hereto and
                                         certified as correct by the Auditors
                                         or the Chief Financial Officer of the
                                         Borrower ("Exclusion Statement");

1.1.60.     "Existing Encumbrances"   -  means the Encumbrances listed in
                                         Schedule 1.1.60 hereto;

1.1.60A.    "Extended Portion"        -  has the meaning assigned to such term
                                         in clause 29.1 below;
<PAGE>
                                      -22-


1.1.60B.    "Facility"                -  means the long term loan facility
                                         granted to the Borrower by the Banks
                                         pursuant to the Facility Agreement,
                                         including the Extended Portion;

1.1.61.     "Facilities"              -  means the Facility and the Cash
                                         Credit Facilities provided pursuant
                                         to clause 25 below;

1.1.62.     Reserved

1.1.63.     "Facility Accounts"       -  means the bank accounts designated by
                                         the Banks, by notice in writing to
                                         the Borrower, from time to time, to
                                         which any payments due to the Banks
                                         hereunder shall be made;

1.1.64.     "Facility Agreement"      -  means the Original Facility Agreement
                                         or the Original Facility Agreement as
                                         and to the extent amended and
                                         restated hereby, as the context

                                         requires;

1.1.65.     Reserved

1.1.66.     Reserved

1.1.67.     "Final Maturity Date"     -  means the last Business Day of the
                                         fourth Quarter of 2005 except as
                                         otherwise provided in
                                         clause 29.2.2(c) below;

1.1.68.     "Finance Documents"       -  means this Agreement, the Facility
                                         Agreement, the Letter Agreement, the
                                         Veraz Letter, the Waveinno Letter,
                                         the Security Documents and/or any
                                         other agreement or document required
                                         pursuant to any of the aforegoing (in
                                         relation to the Facilities) to which
                                         the Borrower and/or any Original
                                         Subsidiary is party and designated by
                                         the Majority Banks or the bank which
                                         is a party to or beneficiary of such
                                         agreement or document as a Finance
                                         Document;
<PAGE>
                                      -23-


1.1.69.     "Fiscal Year"             -  means a calendar year;

1.1.69A.    "Fixed Assets"            -  means any assets which, in accordance
                                         with GAAP, will be classified as
                                         Fixed Assets;

1.1.70.     "Foreign Subsidiaries"    -  means ECI Telecom SARL, ECI Telecom
                                         (U.K.) Ltd., and ECI Telecom GmbH;

1.1.71.     "Foreign Subsidiary
            Negative Pledges"         -  means the undertakings of the
                                         Borrower pursuant to clause 15.7.2
                                         below;

1.1.72.     "Forex Transaction"       -  means any foreign exchange
                                         transaction (excluding "spot"
                                         transactions i.e. transactions with a
                                         settlement period not exceeding 48
                                         (forty eight) hours), including any
                                         future or forward transaction, in a
                                         foreign currency or in the basket of
                                         currencies, currency swap
                                         transaction, cross-currency swap
                                         transaction, currency option or other
                                         similar transaction (including any
                                         option with respect thereto and any
                                         combination in respect thereof);

1.1.73.     "GAAP"                    -  means Israeli generally accepted
                                         accounting principles, in force from
                                         time to time, provided that if the
                                         Borrower shall maintain Accounts
                                         according to US generally accepted
                                         accounting principles and shall not
                                         be bound also to maintain Accounts
                                         according to Israeli generally
                                         accepted accounting principles, then
                                         "GAAP" shall mean, with respect to
                                         those Accounts, US generally accepted
                                         accounting principles;
<PAGE>
                                      -24-


1.1.74.     "Guarantee"               -  means the instrument, a copy of which
                                         is attached as Schedule 1.1.74 hereto
                                         and executed pursuant to the Original
                                         Facility Agreement;

1.1.75.     "GVT"                     -  means Global Village Telecom Ltd., a
                                         company organised under the laws of

                                         Brazil;

1.1.76.     "GVT Tranche A
            Agreement"                -  means the Secured Note Purchase
                                         Agreement dated October 31, 2000
                                         between the Borrower and GVT, a brief
                                         summary of which has been provided to
                                         the Banks in a letter dated July 1,
                                         2004 from the Borrower;

1.1.77.     "GVT Tranche B
            Agreement"                -  means the agreement dated
                                         November 30, 2000_ between the
                                         Borrower and GVT Antilles, Inc., a
                                         brief summary of which has been
                                         provided to the Banks in a letter
                                         dated July 1, 2004 from the Borrower;

1.1.78.     "HETC"                    -  means Hangzau ECI Telecommunication
                                         Corporation, an entity incorporated
                                         in Hangzhou, China;

1.1.79.     "Included Subsidiaries"   -  means any entity (other than the
                                         Borrower and other than the Excluded
                                         Subsidiary) the annual or quarterly
                                         financial statements of which are
                                         consolidated in the consolidated
                                         annual or quarterly financial
                                         statements of the Borrower;

1.1.80.     "Indebtedness"            -  means any obligation (whether
                                         incurred as principal or surety or
                                         guarantor) for the payment or
                                         repayment of money, whether present
                                         or future, actual or contingent,
                                         including all obligations with
                                         respect to the Facilities, calculated
                                         on the assumption that any available
                                         commitment from any bank or financial
                                         institution shall be drawn forthwith;
<PAGE>
                                      -25-


1.1.81.     "Initial Banks"           -  means Bank Leumi and Bank Hapoalim;

1.1.82.     Reserved

1.1.83.     Reserved

1.1.84.     "Inovia"                  -  means Inovia Telecoms Ltd., Israeli
                                         company no. 51-300354-1;

1.1.85.     "Intellectual
            Property Rights"          -  means all know-how, technology,
                                         patents, trademarks, designs, trade
                                         names, copyrights and other
                                         intellectual property rights (in each
                                         case whether registered or not and
                                         including all applications for the
                                         same);

1.1.86.     "Intercreditor            -  means the agreement between the Banks
            Agreement"                   and the Trustee governing the rights

                                         of the parties secured under the Long
                                         Term Security Documents;

1.1.87.     "Interest"                -  means:

                                         (a)     interest and amounts in the
                                                 nature of interest (including
                                                 the interest element of
                                                 finance leases, linkage
                                                 differentials and any similar
                                                 payment in respect of
                                                 indexation, in each case with
                                                 respect to such interest); and

                                         (b)     prepayment penalties or
                                                 premiums incurred in repaying
                                                 or prepaying any Borrowing
                                                 (including, for the avoidance
                                                 of doubt, amounts payable
                                                 pursuant to clause 18 below);
<PAGE>
                                      -26-


1.1.88.     "Interest
            Determination Date"       -  in relation to any Interest Period,
                                         means the Business Day falling 2
                                         (two) Business Days prior to the
                                         first day of such Interest Period;

1.1.89.     "Interest Payment Date"   -  means the last Business Day of each
                                         Quarter;

1.1.90.     "Interest Periods"        -  means (subject to clause 17.1 below)
                                         with respect to the Loan (or during
                                         the Availability Period, with respect
                                         to each Advance), consecutive periods
                                         of 1 (one) Quarter; provided that:

                                         (a)     if any Interest Period would
                                                 otherwise end on a day which
                                                 is not a Business Day, such
                                                 Interest Period shall end on
                                                 the next following Business
                                                 Day, unless such next
                                                 following Business Day falls
                                                 in another month, in which
                                                 case such Interest Period
                                                 shall end on the immediately
                                                 preceding Business Day;

                                         (b)     during the Availability
                                                 Period, the first Interest
                                                 Period in respect of any
                                                 Advance shall commence on the
                                                 date of the making of such
                                                 Advance and end on the last
                                                 Business Day of the Quarter
                                                 during which such Advance was
                                                 made;

                                         (c)     no Interest Period may extend
                                                 later than the Final Maturity
                                                 Date; and
<PAGE>
                                      -27-


                                         (d)     each Interest Period (other
                                                 than the first Interest
                                                 Period) shall commence on the
                                                 expiry of the Interest Period
                                                 preceding such Interest
                                                 Period and, for the removal
                                                 of doubt, shall, subject to
                                                 (a) above, end on the last
                                                 day of the Quarter following
                                                 such preceding Interest
                                                 Period;

1.1.91.     "Ji-Tong Transaction"     -  means the transaction pursuant to the
                                         Basic Agreement-Credit Facility
                                         relating to the Ji-Tong Golden Bridge
                                         Project--Phase I entered into on
                                         August 13, 1998 and pursuant to which
                                         Bank Hapoalim has granted a line of
                                         credit to the China Construction Bank
                                         for the finance of exports by the
                                         Borrower;

1.1.92.     "Koor"                    -  means Koor Industries Ltd., Israeli
                                         company


1.1.93.     "Koor Group"              -  means Koor, any person or entity
                                         controlling Koor and entities
                                         controlled by Koor, collectively;
                                         "control" herein meaning the ability
                                         to appoint the majority of the Board
                                         of Directors or equivalent organ of
                                         the controlled body;
<PAGE>
                                      -28-


1.1.94.     "LIBOR"                   -  means, with respect to each Interest
                                         Period, the rate per annum
                                         (rounded-up, if necessary, to the
                                         nearest whole multiple of 1/16%
                                         (one-sixteenth of one percent) for
                                         Euro-Dollar deposits (or deposits in
                                         Euros, as the case may be), for a
                                         period equal to the duration of such
                                         Interest Period, or if such Interest
                                         Period is less than a Quarter, then
                                         for the number of weeks of such
                                         Interest Period, rounded-up for part
                                         of a week, offered in the London
                                         Interbank market, as quoted at or
                                         about 11:00 a.m. (London time) on the
                                         Interest Determination Date for such
                                         Interest Period on the display
                                         designated as page LIBOR 01 to
                                         subscribers of the REUTERS service
                                         ("Reuters") or, in the absence of
                                         such page or pages, or if Reuters
                                         shall, for any reason whatsoever,
                                         amend, change or otherwise alter the
                                         data basis or the reference banks
                                         used by it on the date of signature
                                         of this Agreement, for quotations
                                         under said page LIBOR 01  the rate of
                                         Interest as quoted at or about
                                         11:00 a.m. London time on the
                                         relevant Interest Determination Date
                                         on such other page or pages of
                                         Reuters as shall be determined by the
                                         Majority Banks for a period equal to
                                         the duration of such Interest Period
                                         or, as the case may be, such number
                                         of weeks, rounded-up, as aforesaid.
                                         In the event that the Reuters service
                                         ceases to be available, the Majority
                                         Banks may specify another service
                                         (and the relevant page thereof)
                                         displaying the LIBOR rate;

1.1.95.     "Loan"                    -  means, at any time, the aggregate
                                         amount of all the Advances
                                         outstanding at such time;

1.1.96.     Reserved

1.1.97.     Reserved

1.1.98.     Reserved
<PAGE>
                                      -29-


1.1.99.     "Long Term
            Security Documents"       -  means:

                                         (a)     the ECtel Shares Debenture;

                                         (b)     the Optical Shares Debenture;

                                         (c)     the Veraz Share Pledge;

                                         (d)     the Access Debenture;

                                         (e)     each pledge or assignment by
                                                 way of charge executed or to
                                                 be executed, if any, in
                                                 favour of the Banks in
                                                 accordance with the
                                                 instruments specified in (a),
                                                 (b), (c) or (d) above;

                                         (f)     the Mortgages;

                                         (g)     the Guarantee;

                                         (h)     the Subsidiary Guarantees;

                                         (i)     all acknowledgments and
                                                 consents required to be
                                                 delivered pursuant to the
                                                 documents referred to above;

                                         (j)     the Veraz Loan Pledge and
                                                 Assignment (when executed);
                                                 and

                                         (k)     any other agreement or deed
                                                 (except the Borrower's
                                                 Debenture) from time to time
                                                 entered into by the Borrower
                                                 or any Original Subsidiary or
                                                 any other person or body in
                                                 favour of the Banks for the
                                                 purposes of securing any
                                                 obligations and liabilities
                                                 of the Borrower or of any
                                                 Original Subsidiary under the
                                                 Finance Documents;
<PAGE>
                                      -30-


1.1.100.    Reserved

1.1.101.    Reserved

1.1.102.    "Majority Banks"          -  means the Banks whose aggregate
                                         Contributions exceed 60% (sixty
                                         percent) of the Loan;

1.1.103.    Reserved

1.1.104.    Reserved

1.1.105.    "Material Adverse         -  means any effect, including any
            Effect"                      effect relating to any Subsidiary,

                                         which is or is likely to be
                                         materially adverse to: (a) the
                                         business or financial condition of
                                         the Borrower, as the case may be; or
                                         (b) the ability of the Borrower to
                                         perform its obligations under any of
                                         the Finance Documents;

1.1.106.    "Material Contracts"      -  means all sales contracts, the value
                                         or consideration for performance of
                                         which in terms of actual obligations
                                         to purchase by the counterparty
                                         subsequent to the date of signature
                                         of this Agreement, exceeds
                                         US $30,000,000 (thirty million United
                                         States Dollars) and the Agreements
                                         referred to in clause (f)(ii) of the
                                         Veraz Letter;

1.1.107.    "Mortgages"               -  means the instruments, copies of
                                         which are attached as
                                         Schedule 1.1.107 hereto;

1.1.108.    "Negative Pledges"        -  means the undertakings by the
                                         Borrower in clause 15.3 below and the
                                         Foreign Subsidiary Negative Pledges;
<PAGE>
                                      -31-


1.1.109.    "New Intercreditor
            Agreement"                -  has the meaning assigned to such term
                                         in clause 26.2 below;

1.1.110.    "Off Balance-
            Sheet Facilities"         -  means:

                                         (a)     indemnities (including
                                                 indemnities to affiliates of
                                                 the issuing bank or other
                                                 issuing body (hereinafter, in
                                                 this definition, "bank"),
                                                 guarantees, letters of credit
                                                 and other such instruments
                                                 issued by a bank at the
                                                 request of the Borrower for
                                                 the Borrower or an Included
                                                 Subsidiary or at the request
                                                 of an Included Subsidiary for
                                                 such Included Subsidiary and
                                                 constituting or relating to
                                                 bid bonds, performance bonds,
                                                 advance payment bonds,
                                                 warranty bonds and similar
                                                 instruments;

                                         (b)     facilities in respect of
                                                 Forex Transactions;

                                         (c)     credit facilities provided
                                                 (or which a bank has
                                                 undertaken to provide) to
                                                 buyers of goods from the
                                                 Borrower or an Included
                                                 Subsidiary at the request of
                                                 the Borrower or an Included
                                                 Subsidiary and which are
                                                 secured by the indemnity or
                                                 guarantee of or other
                                                 recourse against the Borrower
                                                 or the Included Subsidiary,
                                                 to the extent of such
                                                 indemnity, guarantee or
                                                 recourse;

                                         (d)     credit facilities provided by
                                                 a bank to the Borrower or an
                                                 Included Subsidiary, in
                                                 respect of payments "subject
                                                 to reservation"; and

<PAGE>
                                      -32-


                                         (e)     any other facility or
                                                 service, other than a cash
                                                 facility, provided to a
                                                 Borrower or an Included
                                                 Subsidiary by a bank or other
                                                 financial institution;

1.1.111.    "Optical Shares
            Debenture"                -  means the instrument, a copy of which
                                         is attached as Schedule 1.1.111
                                         hereto and which was executed
                                         pursuant to the Original Facility
                                         Agreement;

1.1.112.    "Original Facility
            Agreement"                -  means the Facility Agreement referred
                                         to in the preamble hereto, prior to
                                         its amendment hereby;

1.1.113.    "Original Subsidiaries"   -  means ECI-NGTS, ECI-Optical,
                                         ECI-Transport, Waveinno and Inovia;

1.1.114.    Reserved

1.1.115.    "Quarter Days"            -  means 31 March, 30 June, 30 September
                                         and 31 December in any year and
                                         "Quarter Day" means any of them;

1.1.116.    "Quarters"                -  means each period commencing on the
                                         day after a Quarter Day and ending on
                                         the next following Quarter Day;

1.1.117.    "Ratio Determination
            Date"                     -  means every Quarter Day;

1.1.118.    "Representative Rate"     -  means, with respect to any currency
                                         other than NIS, the representative
                                         rate of exchange of the NIS and such
                                         currency, last published by the Bank
                                         of Israel immediately prior to the
                                         relevant date of payment or
                                         calculation (as the case may be) and,
                                         if the Bank of Israel shall cease to
                                         publish a representative rate, then
                                         any other rate of exchange of the NIS
                                         and such currency, officially
                                         published which comes in place of
                                         such representative rate, last
                                         published immediately prior to the
                                         relevant date of payment or
                                         calculation (as the case may be) and,
                                         in the absence of any such official
                                         rate, then the average of the selling
                                         and buying rates of exchange of such
                                         currency, for NIS (for cheques and
                                         remittances) prevailing at the Banks
                                         at the end of the last Business Day
                                         prior to the relevant date of payment
                                         or calculation (as the case may be);
<PAGE>
                                      -33-


1.1.119.    "Rules of Practice"       -  means the rules of practice issued by
                                         the Bank of Israel to Israeli
                                         banks--as amended and/or substituted
                                         from time to time;

1.1.120.    "Secured Party"           -  has the meaning assigned to such term
                                         in the Borrower's Debenture;

1.1.121.    "Security Documents"      -  means:

                                         (a)     the Long Term Security
                                                 Documents;

                                         (b)     the Borrower's Debenture; and

                                         (c)     all acknowledgments and
                                                 consents required to be
                                                 delivered pursuant to the
                                                 Borrower's Debenture;

1.1.122.    "Subsidiaries"            -  means the Included Subsidiaries
                                         (including the Foreign Subsidiaries
                                         which are Included Subsidiaries), the
                                         Excluded Subsidiary, all Foreign
                                         Subsidiaries, if any, not being an
                                         Included Subsidiary and any other
                                         entities the financial statements of
                                         which are included in the Borrowers'
                                         Accounts though not consolidated
                                         therein);
<PAGE>
                                      -34-


1.1.123.    "Subsidiary               -  means the instruments, copies of
            Guarantee(s)"                which are attached as
                                         Schedule 1.1.123 hereto and executed
                                         pursuant to the Original Facility
                                         Agreement;

1.1.124.    Reserved

1.1.125.    "Tangible Equity"         -  means, at any date of determination,
                                         total Equity less the aggregate
                                         amount of any: (i) intangible assets
                                         including, without limitation,
                                         goodwill, franchises, licences,
                                         patents, trademarks, trade names,
                                         copyrights, service marks and brand
                                         names, but excluding purchased
                                         software consistently shown as fixed
                                         assets in the relevant Accounts; and
                                         (ii) software capitalisation;

1.1.126.    "Taxes"                   -  means all income and other taxes,
                                         including, taxes or charges on
                                         capital gains, profits, value-added
                                         taxes and all other taxes of
                                         whatsoever nature and levies,
                                         imposts, duties (including stamp
                                         duty), charges, deductions and
                                         withholdings in the nature or on
                                         account of tax, together with
                                         Interest thereon and penalties and
                                         fees with respect thereto, if any,
                                         and any payments made on or in
                                         respect thereof and "Tax" and
                                         "Taxation" shall be construed
                                         accordingly;

1.1.127.    "Termination Date"        -  means December 31, 2001 except as
                                         otherwise provided in clause 29 below;
<PAGE>
                                      -35-


1.1.128.    "Total Liabilities"       -  to be construed in accordance with
                                         GAAP, excluding shareholder equity
                                         and after deduction of:

                                         (a)     the aggregate of
                                                 (i) short-term trade
                                                 payables; (ii) current
                                                 employee salaries and social
                                                 benefits payments; and
                                                 (iii) short-term credits
                                                 (excluding current maturities
                                                 of long-term debt); or

                                         (b)     the Cash Balance,

                                         whichever of (a) and (b) is the lower
                                         and, provided that, the said
                                         deduction shall be made only if
                                         supported by the certificate of the
                                         Auditors confirming the amount of
                                         each of the items in (a) and (b) and
                                         providing a breakdown of the
                                         components of each item;

1.1.129.    "the Trustee"             -  means The Bank Leumi Le-Israel Trust
                                         Company Ltd. or such other entity as
                                         may be designated from time to time,
                                         by the Majority Banks, by notice in
                                         writing to the Borrower, as the
                                         Trustee for the purposes of this
                                         Agreement, substituting the previous
                                         Trustee;

1.1.130.    Reserved

1.1.131.    "Veraz Loan Pledge
            and Assignment"           -  means the instruments to be entered
                                         into pursuant to clause (b)(i) of the
                                         Veraz Letter;

1.1.132.    "Waveinno"                -  means ECI-Waveinno Ltd. (previously
                                         knows as Innowave ECI Wireless
                                         Systems Ltd.), Israeli company
                                         no. 51-255886-7; and
<PAGE>
                                      -36-


1.1.133.    "Waveinno Contract"       -  means the agreement dated February
                                         17, 2003 between the Borrower and
                                         Alvarion Ltd., referred to in the
                                         Waveinno Letter.

1.2.  Clause headings and the table of contents are inserted for convenience of
      reference only and shall be ignored in the interpretation of this
      Agreement.

1.3.  In this Agreement, unless the context otherwise requires:

1.3.1.      references to clauses and Schedules are to be construed as
            references to the clauses of, and Schedules to, this Agreement and
            references to this Agreement include its Schedules;

1.3.2.      references to (or to any specified provision of) this Agreement or
            any other document shall be construed as references to this
            Agreement, that provision or that document as in force for the time
            being and as amended in accordance with the terms thereof, or, as
            the case may be, with the agreement of the relevant parties;

1.3.3.      words importing the plural shall include the singular and vice
            versa;

1.3.4.      "Affiliate" shall, with respect to the Banks, mean any company which
            controls, is controlled by, or under common control with, the Banks;
            "control" shall in this clause 1.3.4 bear the meaning assigned to
            such term in Section 1 of the Securities Law;

1.3.5.      "Banks" shall be construed so as to include any subsequent permitted
            successors, transferees and permitted assigns of a Bank in
            accordance with their respective interests;

1.3.6.      the "equivalent" on any given date in one currency (the "first
            currency") of an amount denominated in another currency (the "second
            currency") means the amount of the first currency which could be
            purchased with the amount of the second currency at: (i) in the case
            that one of the two relevant currencies is NIS, the Representative
            Rate for the other currency; or (ii) in the case that neither of the
            relevant currencies is NIS, the rate equal to a fraction, the
            numerator of which is the Representative Rate of the second currency
            and the denominator of which is the Representative Rate of the first
            currency;
<PAGE>
                                      -37-


1.3.7.      "including" and "includes" means including, without limiting the
            generality of any description preceding such terms;

1.3.8.      a "law" includes any statute, law, regulation, rule, official
            directive, request or guideline (having the force of law) of any
            governmental body, agency, department or regulatory, self-regulatory
            or other authority or organisation, including, the position
            (guidelines) of the Examiner of Banks with respect to proper conduct
            of bank affairs ("Nihul Bankai Takin");

1.3.9.      a "person" shall be construed as a reference to any person, firm,
            company, corporation, government, state or agency of a state or any
            association or partnership (whether or not having separate legal
            personality) or two or more of the aforegoing;

1.3.10.     "US $", "USD", "dollars", "US Dollars" and "Dollars" denote the
            lawful currency of the United States of America; "Euro" denotes the
            single currency of Participating Member States introduced in
            accordance with the provisions of Article 109(1)4 of the Treaty;
            "Participating Member State" means a member state of the European
            Union that has adopted the single currency in accordance with the
            Treaty; "Treaty" means the Treaty establishing the European Economic
            Community, being the Treaty of Rome of 25 March 1957 as amended by
            the Single European Act 1986 and the Maastricht Treaty (which was
            signed on 7 February 1992 and came into force on 1 November 1993) as
            amended, varied or supplemented from time to time;

1.3.11.     "VAT" shall be construed as a reference to value added tax,
            including any similar Tax which may be imposed in place thereof from
            time to time;

1.3.12.     the "winding-up", "dissolution" or "administration" of a company or
            corporation shall be construed so as to include any equivalent or
            analogous proceedings under the law of the jurisdiction in which
            such company or corporation is incorporated or any jurisdiction in
            which such company or corporation carries on business, including the
            seeking of liquidation, winding-up, reorganisation, dissolution,
            administration, arrangement, adjustment, protection or relief of
            debtors;
<PAGE>
                                      -38-


1.3.13.     all accounting expressions which are not otherwise defined herein
            shall be construed in accordance with GAAP; and

1.3.14.     any reference in this Agreement to a law shall be construed as a
            reference to such law as the same may have been, or may from time to
            time be, amended or re-enacted.

2.    OUTSTANDING PRINCIPAL; EXTENSION OF AVAILABILITY; RESTRUCTURING

2.1.

2.1.1.      The parties hereto hereby confirm that, on signature of this
            Agreement, the outstanding principal of the Loan is US $37,500,000
            (thirty seven million five hundred thousand United States Dollars),
            owed as follows:

            (i)   US $18,750,000 (eighteen million seven hundred and fifty
                  thousand United States Dollars) to Bank Hapoalim;

            (ii)  US $18,7500,000 (eighteen million seven hundred and fifty
                  thousand United States Dollars) to Bank Leumi.

2.1.2.      The parties hereby agree: (i) that the Availability Period as
            defined in the Original Facility Agreement be extended, solely so as
            to enable the sum of US $50,000,000 (fifty million United States
            Dollars) included in the Commitment of US $300,000,000 (three
            hundred million United States Dollars) of Bank Leumi and Bank
            Hapoalim under the Original Facility Agreement and not drawn
            hitherto to be made available hereunder, and (ii) that the sum of US
            $10,000,000 (ten million United States Dollars) being part of the
            principal of the Loan already repaid (and only the said US
            $10,000,000 (ten million United States Dollars) be made available
            again in the manner specified hereunder, all as provided in and
            subject to the terms and conditions of clauses 25 and 29 below and
            the other terms and conditions of this Agreement. It is expressly
            stated, for the removal of doubt, that the aggregate amount of US
            $60,000,000 (sixty million United States Dollars) referred to in
            this clause 2.1.2 above is the same US $60,000,000 (sixty million
            United States Dollars) constituting the aggregate of the amounts
            referred to in clauses 25 and 29 below (and is not in addition
            thereto).
<PAGE>
                                      -39-


2.2.  The obligations of the Banks under this Agreement shall be several;
      accordingly, a failure of a Bank to perform its obligations under this
      Agreement shall not result in: (i) the obligations of any other Bank being
      increased; nor (ii) the Borrower or any other Bank being discharged (in
      whole or in part) from its obligations under this Agreement; and in no
      circumstances shall a Bank have any responsibility for a failure of
      another Bank to perform its obligations under this Agreement.

2.3.  The Borrower shall apply the Advances only for the following purposes or
      payments, all at the times and subject to the limits and conditions set
      out in this Agreement below:

2.3.1.      for financing the business operations of the Borrower;

2.3.2.      for payment of interest on the Loan, fees, costs and expenses
            arising in connection with the establishment or modification of the
            Facilities (including, without limitation, any fees, costs and
            expenses payable by the Borrower and referred to in clause 3 below
            or any of the Security Documents).

2.4.  The Banks shall not be under any obligation to monitor use of the proceeds
      of the Facility.

3.    CONDITIONS PRECEDENT

      The obligations of the Banks under this Agreement are subject to the
      condition that the Banks shall have received, before the Effective Date,
      the following documents, matters and things in form and substance
      satisfactory to the Banks:

3.1.  a copy, certified as a true copy by the general counsel of the Borrower,
      of the Certificate of Incorporation, Memorandum of Association (if any)
      and Articles of Association of the Borrower and of each Original
      Subsidiary, such copy to be certified as a true copy by the general
      counsel of the Borrower, provided that if any of the said documents were
      received by the Banks upon or before the Closing Date and has not been
      amended since then and general counsel of Borrower so certifies to the
      Banks in writing, then such certificates may be provided to the Banks in
      lieu of such documents;
<PAGE>
                                      -40-


3.2.  copies of resolutions of the Board of Directors of the Borrower and of
      each Original Subsidiary and to the extent applicable, its respective
      audit committees and shareholders, evidencing approval, as applicable, of
      this Agreement and the other Finance Documents to which the Borrower and
      any Original Subsidiary is party and which have not been executed and
      delivered to the Banks prior to the date hereof ("the Completion Finance
      Documents") and authorising named officers of the Borrower and each
      Original Subsidiary to execute, deliver and perform this Agreement and
      each of the Completion Finance Documents, together with a certificate from
      the Board of Directors of the Borrower and of each Original Subsidiary
      certifying, pursuant to Section 282 of the Companies Law, that all
      requisite approvals in connection with the aforegoing have been duly
      obtained;

3.3.  original executed copies of this Agreement, and the other Completion
      Finance Documents, together with any documents required to be delivered on
      the date of signature thereof or as conditions precedent to the
      effectiveness thereof, all such documents to bear counsel's certificate
      confirming the authority of the signatories thereon on behalf of the
      Borrower and the Original Subsidiaries and otherwise to be in a form and
      on terms and conditions acceptable to the Banks;

3.4.  all the Authorisations, if any, listed in Schedule 3.4 hereto;

3.5.1.      a certificate in the form of Schedule 3.5.1 hereto of the Auditors
            or the Chief Financial Officer or the Chief Executive Officer of the
            Borrower stating as at March 31, 2004 (in this clause 3.5.1, "the
            Reference Date"):

3.5.1.1.    the aggregate Borrowings (with detailed breakdown), so as to
            demonstrate compliance with the provisions of clause 15.7.1 below on
            the Reference Date;

3.5.1.2.    all data necessary to demonstrate compliance with the provisions of
            clause 15.7.2 below on the Reference Date; and

3.5.1.3.    all data necessary to demonstrate compliance with clause 15.28 below
            as at the Reference Date;

3.5.2.      a certificate in the form of Schedule 3.5.2 hereto of the Auditors
            or the Chief Finance Officer or the Chief Executive Officer of the
            Borrower confirming the truth and completeness of the
            representations and warranties set out in clause 14 below, subject
            to the qualifications set out in Schedule 14.1 hereto;
<PAGE>
                                      -41-


3.5.3.      a certificate in the form of Schedule 3.5.3 hereto of the Auditor or
            the Chief Finance Officer or Vice-President Finance or the Chief
            Executive Officer of the Borrower confirming compliance with the
            provision of clause 15.24 below as at the Ratio Determination Date
            falling on the last day of the first Quarter of 2004 and that,
            according to the information available to the Borrower, no event has
            occurred or is likely to occur that would cause the Borrower not to
            be in compliance with the provisions of clause 15.24 at the next
            Ratio Determination Date.

3.6.  a certificate in the form of Schedule 3.6 hereto of the Auditors or the
      Chief Financial Officer of the Borrower stating the amount of the Cash
      Credit Facilities and Off Balance-Sheet Facilities granted by each Bank to
      the Borrower as at the Reference Date, it being understood that in order
      to facilitate the provision of the said certificate, each Bank shall
      provide the Borrower, following Borrower's written request specifying the
      relevant branches and requested information and against payment of the
      relevant bank charges, with statements customarily furnished by each Bank
      to its customers relating to such information, provided that the records
      of each Bank and not any certificates so issued, shall be prima facie
      evidence of the matters recorded therein;

3.7.  opinions of the Borrower's and each Original Subsidiary's external legal
      counsel or in-house legal counsel addressed to the Banks in the form of
      Schedule 3.7 (A and B) hereto;

3.8.  evidence that this Agreement and all documentation pursuant thereto
      subject to stamp duty, has been stamped and the relevant duty payable has
      been paid, as required, to the satisfaction of the Banks, provided that,
      with the prior written consent of the Banks, the Borrower shall be
      responsible for ensuring that such actions shall be performed and evidence
      thereof shall be delivered to the Banks within 14 (fourteen) days of the
      Effective Date;

3.9.

3.9.1.      the documents, in form satisfactory to the Banks, listed in Schedule
            3.9(A) and Schedule 3.9(B) hereto, provided that the documents
            listed in clauses 1(b), 1(d), 1(e), 2(a), 3(a) and 4 of Schedule
            3.9(B) shall be delivered to the Banks within 14 (fourteen) days of
            the Effective Date and the documents listed in clauses 1 and 2 of
            Schedule 3.9(A) shall be delivered to the Banks within 30 (thirty)
            days of the Effective Date;
<PAGE>
                                      -42-


3.9.2.      letters in the form of Schedule 3.9.2 hereto from the Original
            Subsidiaries canceling the money limit in the Subsidiary Guarantees;

3.9.3.      a letter of irrevocable instructions in the form of Schedule 3.9.3
            hereto from the Borrower to ECtel regarding payment of dividends and
            other payments owing or becoming due to the Borrower from ECtel;

3.9.4.      a letter in the form of Schedule 3.9.4 hereto, duly countersigned by
            the Borrower and the Original Subsidiaries;

3.10.

3.10.1.     in the event that the conditions precedent (other than those which
            the Banks have agreed to the performance thereof within the time
            periods set forth in clause 3.9.1 above ("the Delayed Conditions
            Precedent")) are not fulfilled prior to the Effective Date, then,
            save for clause 3.10.2, this Agreement shall be null and void and
            the Original Facility Agreement (subject to the amendments thereto
            made in the Letter Agreement which were not conditional on signature
            and closing of this Agreement) and all the rights and obligations of
            the parties thereunder shall remain in full force and effect and,
            save as aforesaid and except as may be agreed by separate written
            instrument signed by the Banks and the Borrower, neither party shall
            have any claim against the other party arising out of or in
            connection with this Agreement.

3.10.2.     It is expressly agreed, for the removal of doubt, that in the event
            the conditions precedent are not fulfilled prior to the Effective
            Date as aforesaid, the Letter Agreement shall remain in full force
            and effect (without modification), except that the provisions in the
            Letter Agreement conditional upon signature and closing of this
            Agreement shall lapse and be of no further effect; and

3.11. upon Completion, including performance of the actions (if any) with
      respect to which the Banks have consented, pursuant to clause 3.8 above,
      to performance thereof after the Effective Date, the Banks will have no
      claims of any kind against the Borrower with respect to the obligations of
      the Borrower under clause 15.24 of the Original Facility Agreement
      relating to any Ratio Determination Date up to and including the Ratio
      Determination Date at the end of the second Quarter of 2002. Upon
      Completion as aforesaid and subject as aforesaid, the provisions of clause
      15.24 of the Original Facility Agreement shall be substituted, as to any
      Ratio Determination Date beginning with that falling at the end of the
      second Quarter of 2002, by clause 15.24 below.
<PAGE>
                                      -43-


4.    DRAWDOWN

4.1.  It is expressly agreed, for the removal of doubt, that the Availability
      Period has ended, except as provided in clause 2.1.2 above, except for
      Advances contemplated in clause 29 below and except as provided in clause
      25 below. The making of an Advance under the Facility pursuant to clause
      29 below, shall be subject to compliance with the following conditions (as
      modified in clause 29 below):

4.1.1.      the Borrower shall have delivered to the Banks a Drawdown Request
            for such Advance, specifying a date for making such Advance, being
            at least 7 (seven) Business Days after the date of delivery of such
            Drawdown Request;

4.1.2.      the proposed date for the making of such Advance is a Business Day
            which is or precedes the Termination Date;

4.1.3.      no Default has occurred and is continuing and no Default shall occur
            as a result of the making of such Advance;

4.1.4.      the share of the Advance requested from each Bank does not exceed
            the Available Commitment of that Bank as at the Drawdown Date;

4.1.5.      the Borrower shall have delivered to the Banks a certificate, in the
            form of Schedule 4.1.5 hereto, of the Auditors or the Chief
            Financial Officer or the Chief Executive Officer of the Borrower
            confirming the truth and completeness of the representations and
            warranties set out in clause 14 below (as qualified in Schedule
            14.1) and in each Security Document are true and accurate in all
            material respects on and as at the proposed date for the making of
            such Advance, provided that updating of Schedule 14.1 as permitted
            pursuant to clause 14.23 below shall not be grounds for refusal of
            an Advance, unless: (i) as to the representations and warranties in
            clauses 14.7 (as to Environmental Authorisations) and 14.9 below,
            such updating reflects, in the opinion of the Banks, a Material
            Adverse Effect and/or the Banks are not satisfied that the Borrower
            is taking the steps necessary to remedy the deviation; (ii) as to
            the representations and warranties in clause 14.11, such updating
            reflects, in the opinion of the Banks, a Material Adverse Effect and
            (iii) as to clause 14.19, such updating constitutes a Default; and
<PAGE>
                                      -44-


4.1.6.      the minimum amount of each Advance shall be US $5,000,000 (five
            million United States Dollars or (euro)5,000,000 (five million
            Euros) in the event the Advance is requested in Euros and the Banks
            have agreed to make the Advance in Euros pursuant to clause 32
            below) and each Advance shall be a multiple of US $5,000,000 (five
            million United States Dollars) or (euro)5,000,000 (five million
            Euros), as the case may be.

4.1.7.      the Borrower shall have delivered to the Banks a certificate in the
            form of Schedule 4.1.7 hereto of the Auditors or the Chief Financial
            Officer or the Chief Executive Officer or Vice President Finance of
            the Borrower stating as at a specified date (such date being no
            earlier than 10 (ten) Business Days before the date of delivery of
            the Drawdown Request) (in this clause 4.1.7, "the Reference Date"):

4.1.7.1.    the aggregate Borrowings (with detailed breakdown), so as to
            demonstrate compliance with the provisions of clause 15.7.1 below on
            the Reference Date;

4.1.7.2.    all data necessary to demonstrate compliance with the provisions of
            clause 15.7.2 below on the Reference Date;

4.1.7.3.    all data necessary to demonstrate compliance with clause 15.28 below
            on the Reference Date;

4.1.8.      the Borrower shall have delivered to the Banks:

4.1.8.1.    a certificate, in the form of Schedule 4.1.8.1 hereto, from the
            Auditors or the Chief Financial Officer or Vice President Finance or
            the Chief Executive Officer of the Borrower confirming compliance
            with the Financial Undertakings pursuant to clause 15.24 below at
            the Ratio Determination Date last occurring before the date of
            delivery of such Drawdown Request, except that with respect to the
            Financial Undertaking relating to the ratio between EBITDA and Debt
            Service, such certificate shall confirm compliance (at the said
            Ratio Determination Date) with the provisions of clause 29.2.1
            below, such certificate to be supported by suitable financial
            statements setting out in detail all data relevant for determination
            of compliance with the said financial undertakings; and
<PAGE>
                                      -45-


4.1.8.2.    a certificate, in the form of Schedule 4.1.8.2 hereto, from the
            Auditors or the Chief Financial Officer or Vice President Finance or
            the Chief Executive Officer of the Borrower confirming that
            according to the information available to the Borrower, no event has
            occurred or is likely to occur that would cause the Borrower not to
            be in compliance with the provisions of the Financial Undertakings
            pursuant to clause 15.24 and clause 29.2.1 as aforesaid at the next
            Ratio Determination Date;

4.1.9.      the Delayed Conditions Precedent shall have been fulfilled to the
            Banks' satisfaction.

4.2.  Subject to clause 32 below, all Advances made under this Agreement shall
      be in US Dollars.

4.3.  Subject to clause 29 below, on the Termination Date, the aggregate
      principal amount of all Advances then outstanding shall become one loan,
      the term of which will terminate on the Final Maturity Date and which will
      be repayable in accordance with clause 5 below (for the removal of doubt,
      without derogating from clauses 6 and 7 below).

4.4.  Subject to the terms of this Agreement, on the Drawdown Date relating to
      an Advance, each Bank shall make available the amount of its participation
      in such Advance in an amount equal to the proportion thereof which its
      Available Commitment bears to the total Available Commitments at such
      Drawdown Date.

4.5.  All Advances shall be made by transfer of the amount thereof to an account
      of the Borrower maintained at the main Tel-Aviv branch of the Bank making
      the Advance.

4.6.  No Advances shall be made after the Termination Date and, for the removal
      of doubt, all Available Commitments as at the Termination Date shall be
      cancelled.
<PAGE>
                                      -46-


5.    REPAYMENT

5.1.  Except for the Extended Portion, the Borrower shall repay the Loan in 5
      (five) equal instalments payable on the fourth Interest Payment Date in
      2004 and on each Interest Payment Date in 2005, i.e., in 5 (five)
      instalments of US $7,500,000 (seven million five hundred thousand United
      States Dollars) payable in equal shares to Bank Leumi and Bank Hapoalim.

5.2.  It is agreed, for the removal of doubt, that the Loan, as well as all
      Interest thereon, shall be repaid in US Dollars (except any portion of the
      Loan granted in Euros which, as well as Interest thereon, shall be repaid
      in that currency).

5.3.  All repayments as aforesaid shall be made by transfer thereof to each
      Bank's Facility Account.

5.4.  On the Final Maturity Date, the Borrower shall additionally pay to the
      Banks all other sums then outstanding under the Finance Documents.

5.5.  Except as expressly provided in clause 2.1.2 above, the Borrower shall not
      be entitled to reborrow any amount repaid on account of the Loan.

6.    PREPAYMENT

6.1.  The Borrower may, if it has given to the Banks not less than 7 (seven)
      Business Days' advance written notice to such effect, prepay the Loan (or
      part thereof) on an Interest Payment Date, provided that the minimum
      amount of any such prepayment shall be US $5,000,000 (five million United
      States Dollars) or, in the event the relevant part of the Loan has been
      made in Euros pursuant to clause 32 below, (euro)5,000,000 (five million
      Euros). Amounts prepaid as aforesaid shall be applied pro rata on account
      of settlement of all remaining instalments of the Loan.

6.2.  Any notice of prepayment given by the Borrower pursuant to clause 6.1
      above shall be irrevocable, shall specify the Interest Payment Date upon
      which such prepayment is to be made and the amount of such prepayment and
      shall oblige the Borrower to make such prepayment on such date.
<PAGE>
                                      -47-


6.3.  The Borrower shall not prepay any part of the Loan except in accordance
      with the aforegoing in this clause 6 and pursuant to clauses 7, 9 and 13
      below.

6.4.  The Borrower shall not be entitled to reborrow any amount prepaid on
      account of the Loan.

6.5.  In the event that the Borrower makes a prepayment of the Loan or any part
      thereof pursuant to this clause 6 and shall finance such prepayment by
      obtaining, directly or indirectly, a credit facility (short-term or
      long-term), from another bank or financial institution, the Borrower shall
      pay the Banks a prepayment commission of 0.1% (nought point one percent)
      per annum on the amount of the prepayment, such commission to be
      calculated from the date of prepayment until the date such amount would
      otherwise have become due, having regard to the provisions of the second
      sentence of clause 6.1 above. At the Banks' request, the Borrower shall
      provide the Banks with documentation and information to the Banks'
      satisfaction regarding the source of the funds used by the Borrower to
      finance any prepayment made.

6.6.  All prepayments as aforesaid shall be made by transfer thereof to each
      Bank's Facility Account.

7.    MANDATORY PREPAYMENT

7.1.  All the following amounts shall be applied in mandatory prepayment of the
      Loan on the first Interest Payment Date after receipt thereof by the
      Borrower (pro rata on account of settlement of all outstanding instalments
      of principal due on the Loan):

7.1.1.      all proceeds from time to time received under insurance policies, in
            excess of the amount of US $7,500,000 (seven million five hundred
            thousand United States Dollars) per occurrence, but excluding: (i)
            any proceeds received under policies of credit or marine insurance
            and policies of that kind; (ii) proceeds received under D&O
            Insurance and Manager's Insurance; and (iii) any proceeds applied in
            rebuilding or reinstatement operations required as a consequence of
            the occurrence in respect of which the proceeds were received;

7.1.2.      (a)   in the event of a public offering of shares or other
                  securities in the Borrower for cash consideration, in whole or
                  in part, 20% (twenty percent) of the net cash proceeds of such
                  offering or 10% (ten percent) of the outstanding balance of
                  the Loan on the date the offer is effective, whichever is the
                  higher;
<PAGE>
                                      -48-


            (b)   in the event of a private placement of shares or other
                  securities in the Borrower for cash consideration, in whole or
                  in part, 20% (twenty percent) of the net cash proceeds of such
                  placement; and

7.1.3.      all proceeds from time to time received by the Borrower in
            connection with the nationalisation, expropriation or requisition of
            any of the Borrower's assets.

7.2.  The Borrower shall not be entitled to reborrow any amount mandatorily
      prepaid in accordance with this clause 7 above.

7.3.  Any mandatory prepayment in accordance with this clause 7 above shall be
      made by transfer of the amount to each Bank's Facility Account.

8.    INTEREST

8.1.  The rate of Interest applicable to each of the Advances under the Loan in
      respect of each Interest Period shall be the rate per annum being the sum
      of: (i) the percentage per annum agreed in writing, prior to the date
      hereof or hereafter, between each of the Banks and the Borrower as to that
      part of the Loan owing to such Bank ("Margin"); and (ii) LIBOR on the
      Interest Determination Date for such Interest Period ("Interest Rate"),
      provided that the Margin shall be increased automatically by:

8.1.1.      1% (one percent) per annum in respect of any Interest Period
            commencing on the day following a Ratio Determination Date with
            respect to which the ratio of EBITDA to Debt Service shall be 0.8:1
            or less (except for any part of such Interest Period in respect of
            which interest at the rate specified in clause 17.2 below is due);
            and/or

8.1.2.      2% (two percent) per annum in respect of any Interest Period (or
            part thereof) during which Borrower is not in compliance with the
            provisions of clause 15.28 below (except for any part of such
            Interest Period in respect of which interest at the rate specified
            in clause 17.2 below is due).
<PAGE>
                                      -49-


            It is agreed, for the removal of doubt: (a) that the proviso in the
            previous sentence of this clause 8.1 above shall not derogate from
            the Banks' rights to other remedies and reliefs on the occurrence of
            the events giving rise to an increase in the Margin described in (i)
            and (ii) above ("the Margin-increase events"); (b) that the Margin
            shall be increased by 2% (two percent) per annum as aforesaid with
            respect to periods to which both of the Margin-increase events have
            occurred (and shall not be increased by 3% (three percent) per annum
            with respect to such periods); and (c) it shall be the duty and
            obligation of the Borrower to pay Interest with the increased Margin
            as aforesaid without prior or any notice from the Banks and any
            Interest not so paid on due date shall itself bear Interest at the
            rate specified in clause 17 below.

8.2.  Interest as aforesaid in clause 8.1 above in respect of Advances under the
      Loan shall accrue from day to day, from the date the Advance is actually
      made (or as to the additional Interest due pursuant to the proviso to
      clause 8.1 above, from the commencement of the period in respect of which
      such additional Interest is due) and shall be calculated on the basis of
      the actual number of days elapsed and a 360 (three hundred and sixty) day
      year.

8.3.  Except as otherwise expressly provided herein, all Interest accrued as
      aforesaid in clause 8.2 above on each Advance shall be paid on each
      Interest Payment Date (up to and including the Final Maturity Date).

9.    SUBSTITUTE INTEREST RATES

9.1.  If and whenever, at any time prior to the commencement of any Interest
      Period, the Banks shall have determined that:

9.1.1.      adequate means do not exist for ascertaining LIBOR during such
            Interest Period; or

9.1.2.      deposits in Dollars are not available to any of the Banks in the
            London Interbank market in the ordinary course of business in
            sufficient amounts to fund the relevant Advances for such Interest
            Period or that LIBOR as determined under this Agreement does not
            constitute an accurate base for the determination of the cost to any
            of the Banks of obtaining such deposits, the Banks shall forthwith
            give notice ("a Determination Notice") of such event to the Borrower
            (a Determination Notice to contain particulars of the relevant
            circumstances giving rise to its issue) and, notwithstanding the
            provisions of clause 8 above, the Banks shall designate an
            alternative basis ("the Substitute Basis") for the determination of
            the relevant Interest Rate for such Interest Period. Subject to
            clause 9.2 below, the Substitute Basis shall be binding upon the
            Borrower and shall take effect in accordance with its terms from the
            commencement of the relevant Interest Period.
<PAGE>

                                      -36-


9.2.  Upon receipt of a Determination Notice, the Borrower may prepay the Loan
      in full, provided written notice of prepayment ("the Prepayment Notice")
      is given to the Banks by the Borrower no later than 7 (seven) Business
      Days after receipt of the Determination Notice, such prepayment to be made
      on the first Interest Payment Date after receipt by the Borrower of the
      Determination Notice, if received more than 14 (fourteen) Business Days
      prior to the said Interest Payment Date or otherwise by no later than 7
      (seven) Business Days from the date of the Prepayment Notice. The
      provisions of clause 18 below shall not apply to prepayment pursuant to
      this clause 9.2.

10.   COMMISSIONS, FEES AND EXPENSES

10.1. Deleted.

10.2. The Borrower shall from time to time pay to the Banks or the Trustee, as
      the case may be, on demand:

10.2.1.     all costs and expenses (including legal fees for external counsel,
            expert's fees, consultant's fees, fees of other professionals, all
            whether Israeli or foreign, engaged by the Banks and all reasonable
            out-of-pocket expenses), incurred by the Banks and out-of-pocket
            expenses of the Trustee, in connection with the negotiation,
            preparation, execution and implementation of this Agreement and the
            other Finance Documents (and any amendments thereto) and the
            completion of the transactions therein contemplated; and

10.2.2.     all expenses (including legal fees and reasonable out-of-pocket
            expenses) incurred by the Banks (or any of them) or the Trustee in
            contemplation of, or otherwise in connection with, the enforcement
            of, or preservation of any rights under, this Agreement or any of
            the other Finance Documents or otherwise in respect of the monies
            owing under this Agreement, together with Interest at the rate
            referred to in clause 17 from the date on which such expenses were
            incurred to the date of payment (after as well as before judgment).
<PAGE>
                                      -51-


10.3. The Borrower shall pay all stamp, documentary, registration or other like
      duties or Taxes (including any duties or Taxes payable by the Banks)
      imposed on or in connection with this Agreement, the Loan or any of the
      Finance Documents, such payments to be made within the period required by
      law or the period required by this Agreement or within the period during
      which such payment must be made in order to enable the timely performance
      of other obligations of the Borrower under this Agreement, whichever is
      the shorter.

10.4.

10.4.1.     Without derogating from or limiting the generality of any provision
            of this clause 10, the Borrower shall pay to the Banks on the
            Effective Date: (i) all the costs, expenses and fees referred to in
            clause 10.2.1 above, incurred by the Banks prior to the Effective
            Date; and (ii) an amount equal to all stamp duties payable in
            respect of this Agreement and all other Finance Documents executed
            on or prior to the Effective Date (and not stamped by the Effective
            Date); the Borrower and the Original Subsidiaries hereby authorise
            the Banks to pay all such stamp duties on behalf of the Borrower to
            the relevant authorities.

10.4.2.     If the Majority Banks shall advise the Borrower in writing at any
            time after the Effective Date, that amounts are payable in respect
            of the duties and Taxes referred to in clause 10.3 above (including
            any Interest, penalty, surcharge or the like due as a consequence of
            late payment), the Borrower shall pay the said amounts forthwith
            upon the first written demand of the Majority Banks and, failing
            that and without derogating from other reliefs and remedies
            available to the Banks in such event, the Banks shall be entitled
            (but not obliged) to pay the said amounts on behalf of the Borrower
            and to debit the accounts of the Borrower with such amounts.

10.5. Nothing in this clause 10 shall be construed as derogating from the
      obligations of the Borrower to pay the Banks other commissions, fees and
      reasonable expenses usually payable to banks in connection with banking
      transactions performed in connection with the Facilities.
<PAGE>
                                      -52-


10.6. If any amendment to this Agreement is requested, required or agreed by the
      Borrower in accordance with clause 35 below, then the Borrower shall, on
      demand of the Banks, reimburse the Banks for all costs and reasonable
      expenses (including legal fees) incurred by the Banks in responding to or
      complying with such requests. For the removal of doubt, nothing herein
      contained shall be construed as implying that the Banks have any
      obligation whatsoever to agree to any such request for amendment by the
      Borrower.

10.7. The Borrower shall pay the Trustee (in addition to the amounts payable
      pursuant to clause 10.2 above), a trustee fee of US $22,000 (twenty-two
      thousand United States Dollars) per annum plus an additional $2,000 (two
      thousand United States Dollars) per annum for each Bank (in addition to
      the Initial Banks) which shall be Secured Parties under any of the
      Security Documents in such year or any part thereof until the total
      release and discharge of all security arrangements hereunder or under the
      Security Documents or otherwise pursuant hereto involving the Trustee and
      termination of all its functions pursuant to such arrangements and/or in
      the enforcement thereof. The fee shall be paid each year on or before
      February 5 in that year, the payments due in 2003 and 2004 having been
      made.

10.8. All amounts payable pursuant to this clause 10 above shall be paid
      together with VAT (if any) thereon.

10.9. All sums payable by the Borrower under this clause 10 shall be payable in
      the currency stated or, in the case of payment of expenses incurred, in
      the currency in which such sums were incurred by the relevant Bank or the
      Trustee, as the case may be.

11.   TAXES

11.1. All payments to be made by the Borrower to the Banks shall be made free
      and clear of and without deduction or withholding for or on account of
      Tax, unless the Borrower is required by law to make such payment subject
      to the deduction or withholding of Tax, in which case (save where such
      deduction or withholding is in respect of income Tax of a Bank and the
      Borrower shall have delivered to such Bank a receipt as referred to in
      clause 11.3 below) the sum payable by the Borrower in respect of which
      such deduction or withholding is required to be made shall be increased,
      to the extent necessary, to ensure that after the making of the required
      deduction or withholding, such Bank receives and retains (free from any
      liability in respect of any such deduction or withholding) a net sum equal
      to the sum which it would have received and so retained had no such
      deduction or withholding been made or required to be made.
<PAGE>
                                      -53-


11.2. If, at any time, the Borrower is required by law to make any deduction or
      withholding from any sum payable by it hereunder, the Borrower shall, as
      soon as reasonably practicable, notify the relevant Bank.

11.3. If the Borrower makes any payment hereunder in respect of which it is
      required to make any deduction or withholding, it shall pay the full
      amount required to be deducted or withheld to the relevant taxation or
      other authority within the time allowed for such payment under applicable
      law and shall deliver to the relevant Bank, as soon as reasonably
      practicable after it has made such payment to the applicable authority, an
      original receipt (or a certified copy thereof) issued by such authority
      evidencing the payment to such authority of all amounts so required to be
      deducted or withheld in respect of such payment.

12.   INCREASED COSTS

      If by reason of any change in, or the introduction of, or any change in
      the interpretation, administration or application by any competent court,
      authority or organisation in the relevant jurisdiction, of any law,
      regulation or treaty or in or of any official directive or official
      request from, or the rules of, any governmental, fiscal, monetary or
      regulatory (including self-regulatory) authority, organisation or agency
      including the implementation in any jurisdiction the proposals made by the
      Basel Committee on Banking Regulations and Supervisory Practices for the
      international convergence of capital measurements and capital standards
      (whether or not having the force of law but, if not having the force of
      law, being a regulation, treaty, official directive, official request or
      rule which it is the practice of banks in Israel to comply with) after the
      date of this Agreement which affects the Banks or compliance by any of the
      Banks with any such change or introduction, including, in each case, those
      relating to Taxation, reserves, special deposit, cash ratio, liquidity or
      capital adequacy requirements or other forms of banking, fiscal, monetary
      or regulatory controls:

12.1. any of the Banks incurs an increased cost as a result of it having entered
      into and/or performing and/or maintaining and/or funding its obligations
      under, any Finance Document; or

12.2. any amount receivable by any of the Banks under any Finance Document is
      reduced (save to the extent matched by a reduction in the cost of
      providing the Facility) or the effective rate of return to any of the
      Banks under any Finance Document or on its capital employed for the
      purpose of this Agreement is reduced; or
<PAGE>
                                      -54-


12.3. any of the Banks makes any payment or forgoes any Interest or other return
      on, or calculated by reference to, any amount received or receivable by it
      from the Borrower under any Finance Document,

      and such increased cost (or the relevant proportion thereof), reduction,
      payment, forgone Interest or other return is not compensated for by any
      other provision of this Agreement, then and in each such case:

      (a)   such Bank shall notify the Borrower of that event promptly upon it
            becoming aware of the event, including, in reasonable detail,
            particulars of the event; and

      (b)   within 14 (fourteen) Business Days after receipt by the Borrower of
            a demand from time to time by such Bank accompanied by a certificate
            of such Bank specifying the amount of compensation claimed and
            setting out the calculation of the amount in reasonable detail, the
            Borrower shall pay to such Bank such amount as shall compensate such
            Bank for such increased cost, reduction, payment or forgone Interest
            or other return.

      Nothing in this clause 12 shall oblige such Bank to disclose any
      confidential information relating to the organisation of its affairs.

13.   ILLEGALITY

      If any change in or the introduction of any law, regulation, treaty or
      (whether or not having the force of law but, if not having the force of
      law, being one with which it is the practice of banks in Israel to comply)
      official directive or rule of any governmental, fiscal, monetary or
      regulatory authority or agency, having jurisdiction (together in this
      clause 13, "Laws"), or any change in the interpretation, administration or
      application of Laws by a final decision of a competent court or the
      relevant authority or agency or compliance by any of the Banks with any
      such change or introduction of Laws or change in interpretation,
      administration or application of Laws, shall make it unlawful or a breach
      of Laws for such Bank to make available or fund or maintain the Advances
      or any part of the Loan under this Agreement or to give effect to its
      obligations and exercise its rights as contemplated by this Agreement,
      such Bank may, by notice to the Borrower, declare that to the extent
      necessary, to avoid any such illegality or breach of Laws, its obligations
      to the Borrower under the Finance Documents shall be terminated forthwith
      or, if later, on the latest date to which the obligations may remain in
      effect without causing such Bank to be in breach of Laws, whereupon the
      Borrower will forthwith, or by such later date as shall be immediately
      prior to the illegality or breach in question taking effect prepay the
      Loan together with all Interest and other charges accrued thereon to the
      date of the prepayment (as well as all amounts payable under clause 18
      below and all other amounts payable to such Bank under the Finance
      Documents).
<PAGE>
                                      -55-


14.   REPRESENTATIONS AND WARRANTIES

14.1. The Borrower hereby repeats the representations and warranties made by the
      Borrower in the Original Facility Agreement as of the date they were so
      made. Further, the Borrower hereby makes the representations and
      warranties set out in this clause 14 to the Banks, subject to the
      qualifications set out in Schedule 14.1 hereto. The Borrower acknowledges
      that the Banks have entered into this Agreement in full reliance on the
      representations and warranties set out in this clause 14 below (as
      qualified by Schedule 14.1 hereto as aforesaid).

14.2. The Borrower and each of the Original Subsidiaries is a company limited by
      shares, duly incorporated and validly existing under the laws of Israel
      and has the power to own its respective property and assets and carry on
      its business as it is now being and will be conducted. No event has
      occurred with respect to it which would constitute an Event of Default
      under clause 16 below.

14.3. The Borrower and the Original Subsidiaries have the power to enter into
      and perform the Finance Documents to which it or they are party as well as
      all transactions to be implemented pursuant thereto and have taken all
      necessary action to authorise the entry into and performance of those
      documents and transactions.

14.4. Each Finance Document to which the Borrower or any Original Subsidiary is
      at any time a party constitutes its legal, valid, binding and enforceable
      obligations and (without limiting the generality of the aforegoing) each
      Security Document to which the Borrower or any such Original Subsidiary is
      a party validly and effectively creates the Encumbrances which that
      Security Document purports to create or, as the case may be, accurately
      evidences an Encumbrance which has been validly created.
<PAGE>
                                      -56-


14.5. The entry into and performance of each Finance Document and each Material
      Contract by the Borrower and the transactions to be implemented pursuant
      to the aforegoing do not conflict (as to any Material Contract, in any
      material respect) with:

14.5.1.     any law or regulation or any official or judicial order applicable
            to the Borrower, or

14.5.2.     the Borrower's constitutional documents or any of its resolutions
            (having current effect), or

14.5.3.     any agreement or instrument to which the Borrower is a party or
            which is binding upon it or on its assets,

      nor will it result in the creation or imposition of any Encumbrance on any
      of the Borrower's assets (save for any Encumbrance created pursuant to the
      Security Documents).

      Without limiting the generality of the aforegoing, there is no restriction
      or prevention, legal or otherwise, on the creation of the Encumbrances to
      be created pursuant to the Security Documents or, except as may be
      required or stipulated under mandatory provisions of any law, on the
      realisation, sale or assignment of any collateral continuing under any
      such Security Document in the case of an Event of Default or on the
      application by the Banks of any proceeds of any such realisation or sale.

14.6. No Default has occurred and is continuing which has not been waived.

14.7. All consents, approvals, authorisations, exemptions, concessions, permits
      and licences and all filings, registrations and agreements with any
      governmental or other regulatory authority required by any law for or in
      consequence of the entry into and performance by the Borrower or any
      Original Subsidiary of and/or the validity of any of the Finance Documents
      or the transactions to be implemented pursuant to any of the aforegoing
      ("Authorisations"), have been obtained or effected or will be obtained or
      effected prior to the date required by law, save for registrations (except
      for those already made) with the Registrar of Pledges, the Registrar of
      Lands and the Registrar of Companies in Israel (or with corresponding
      authorities in other jurisdictions) which the Borrower will procure will
      be effected within the time provided by law or the time specified herein,
      whichever is the shorter. Without limiting the generality of the
      aforegoing, the Borrower, has received and complied with all the
      Authorisations, if any, listed in Schedule 3.4 hereto (including, to the
      extent required, all Environmental Licences). All the Authorisations are
      in full force and effect, the Borrower is in all material respects in
      compliance with all provisions thereof and the Authorisations are not the
      subject of any pending, or, to the best of their knowledge, threatened
      attack or revocation by any competent authority.
<PAGE>
                                      -57-


14.8. All of the Material Contracts to which the Borrower or any Original
      Subsidiary is a party are in full force and effect and are legal, valid
      and binding upon the parties thereto in accordance with their respective
      terms. The Borrower or the relevant Original Subsidiary has performed, in
      all material respects, all obligations to be performed on or prior to the
      Effective Date under each of the Material Contracts to which it is party.
      No event has occurred which constitutes a material default under or in
      respect of the Material Contracts to which the Borrower or any Original
      Subsidiary is a party and the Borrower is not aware of any matter or
      circumstances which could comprise a cause for the cancellation of, or
      default under, any of the said Material Contracts. There are no material
      disputes subsisting between the Borrower or the relevant Original
      Subsidiary and any other party to any Material Contract and no waivers
      have been granted by or in favour of the Borrower or the relevant Original
      Subsidiary pursuant to any term of any Material Contract in any respect
      which would be reasonably likely to cause a Material Adverse Effect.

14.9. The material properties, material assets, employees, business and
      operations of the Borrower are insured by policies which are in full force
      and effect against such risks, casualties and contingencies and of such
      types and amounts as are reasonable and customary for the size and scope
      of the Borrower's business. All premiums due and payable for policies held
      by the Borrower have been duly paid and such policies or extensions,
      renewals or replacements thereof (on comparable terms to the extent
      available) in such amounts will be outstanding and in full force and
      effect without interruption until at least December 31, 2004. The Borrower
      has not received any notice from any insurer, agent or broker with respect
      to any pending or threatened terminations or increases in premiums, other
      than increases contemplated by existing policies and/or in accordance with
      overall market increases and the consummation of the transactions
      contemplated by this Agreement will not result in the termination of any
      such policy, or cause a material increase in any premiums thereunder,
      pursuant to the express terms of such policy.
<PAGE>
                                      -58-


14.10. (a)  The Accounts most recently delivered to the Banks under clause 15.4
            below have been prepared, save as disclosed in notes to or
            accompanying those Accounts, in accordance with the provisions of
            clause 15.6 below and fairly present in all material respects the
            financial position of the Borrower and the Included Subsidiaries as
            at the date to which the same were prepared and/or (as appropriate)
            the results of operations and (in the case of annual Accounts)
            changes in financial position during the Fiscal Year, subject, in
            the case of half-yearly and quarterly Accounts, to normal year-end
            adjustments made in accordance with GAAP.

       (b)  Nothing has occurred since the date of the Accounts referred to in
            (a) above which constitutes a Material Adverse Effect.

14.11. Except as specified in Schedule 14.11 hereto, no litigation, arbitration
       or administrative or regulatory proceeding or investigation involving
       liability or potential liability (per proceeding) in excess of US
       $1,000,000 (one million United States Dollars) for the Borrower or any
       Original Subsidiary or any other subsidiary wholly-owned by the Borrower
       (hereinafter, collectively, in this clause 14.11, "Subsidiaries") and for
       which process, a claim or notice has been served on the Borrower or any
       Subsidiary is current and, to the Borrower's knowledge, no litigation,
       arbitration, administrative or regulatory proceeding involving it or any
       Subsidiary and involving liability or potential liability in excess of US
       $1,000,000 (one million United States Dollars) (per proceeding) as
       aforesaid is pending or threatened. In particular, no claims are being
       asserted against the Borrower or any Subsidiary with respect to Taxes.
       The Borrower is and all the Subsidiaries are not overdue in the filing of
       any Tax returns required to be filed by them and the Borrower and all the
       Subsidiaries have paid all Taxes shown to be due on any Tax returns
       required to be filed by them or on any assessments made against them for
       non-payment.

14.12. No Encumbrance exists over any of the Borrower's assets or over the
       assets of any Original Subsidiary, save for the Encumbrances under the
       Security Documents and except for the Existing Encumbrances. The maximum
       Indebtedness secured under each of the Existing Encumbrances is limited
       to the amounts specified for such Existing Encumbrance in the last column
       of Schedule 1.1.60 hereto or, for the purpose of clause 4.1.5 above and
       clause 14.23 below, the said amounts--as increased, if increased--as
       permitted under clause 15.3 below.
<PAGE>
                                      -59-


14.13. The Borrower has good title to or valid leases or licences of or is
       otherwise lawfully entitled to use all material assets necessary to
       conduct its business as and to the extent conducted by it at such time.

14.14. The Borrower, to its best knowledge, owns or has the legal right to use
       all the Intellectual Property Rights which are material for the carrying
       on of its business and, as far as it is aware, the Borrower does not, in
       carrying on its business, infringe any Intellectual Property Rights of
       any third party.

14.15. The Borrower has at all times complied in all material respects with all
       applicable Environmental Laws, which, if not complied with, would have a
       Material Adverse Effect and, to the best of the knowledge of the
       Borrower, there is no Environmental Claim pending or threatened against
       the Borrower.

14.16. The Borrower and the Included Subsidiaries do not have any Borrowings of
       whatsoever nature, save for: (i) Borrowings as detailed in Schedule 14.16
       hereto (or for the purpose of clause 4.1.5 above and clause 14.23 below,
       the said Borrowings--as increased, if increased--as permitted under
       clause 15.7 below), which includes Borrowings in respect of or secured by
       the Existing Encumbrances; and (ii) its obligations under the Finance
       Documents.

14.17. The documents delivered to the Banks by the Borrower pursuant to clause 3
       and under any other provision of the Finance Documents were genuine, or,
       in the case of copies, were true, complete and accurate copies in all
       respects of originals which have not been amended, varied, supplemented
       or superseded in any way.

14.18. The security conferred by the Security Documents constitutes a priority
       security interest of the type therein described (subject to statutory
       preferences which may rank ahead of the security created thereunder) over
       the security assets therein referred to, such assets are not subject to
       any prior or other Encumbrances and the said security is not liable to be
       set aside on insolvency of the Borrower or any Original Subsidiary, as
       the case may be.

14.19. The share capital of the Borrower is owned, as of the date of signature
       hereof, as shown in Schedule 14.19.
<PAGE>
                                      -60-


14.20. The Borrower repeats the warranties and representations given in the
       Veraz Letter and in the Waveinno Letter as of the date they were made.

14.21. Reserved

14.22. The sales turnover of the Foreign Subsidiaries constitutes at least 80%
       (eighty percent) of the aggregate sales turnover of all Borrower's
       subsidiaries incorporated outside Israel.

14.23. The representations and warranties set out in this clause 14 shall
       survive the execution of this Agreement and shall be deemed to be
       repeated on the Effective Date, on the date of each Drawdown Request and
       on each Drawdown Date, subject to the qualifications set out in Schedule
       14.1 hereto which may be updated on each such repetition with respect to
       the representations and warranties given in clause 14.7 (as to
       Environmental Authorisations) clause 14.9, clause 14.11 and clause 14.19
       above, provided that neither the right to update nor the updating itself,
       as aforesaid, shall be deemed to permit or to constitute acquiescence by
       the Banks to any Default or Material Adverse Effect or any waiver of any
       of the rights of the Banks hereunder, including their rights in the event
       of Default or any Material Adverse Effect.

15.    UNDERTAKINGS

       The Borrower undertakes to the Banks that so long as any sum remains
       payable to the Banks under any Finance Document:

15.1.  The Borrower will comply in all material respects with all
       applicable laws.

15.2.  The Advances will be used exclusively for the purpose specified in clause
       2.3 above.

15.3.

15.3.1.     The Borrower shall not create or permit to subsist and shall procure
            that no Included Subsidiary shall create or permit to subsist, any
            Encumbrance on the whole or any part of its assets, business or
            undertaking, save: (a) for the Encumbrances under the Security
            Documents, (b) the Existing Encumbrances, provided that the
            Indebtedness secured by the Existing Encumbrances shall not at any
            time exceed US $11,000,000 (eleven million United States Dollars) in
            aggregate; and (c) Encumbrances created as permitted by clauses
            15.7.2(b) and 27 below.
<PAGE>
                                      -61-


15.3.2.     Without derogating from the Negative Pledges or clause 15.7 below
            and in addition thereto, but subject to clause 15.7.2 below, the
            Borrower shall not obtain a loan or credit facility of any kind from
            any bank or other financial institution, directly or indirectly, if
            such loan or credit facility is secured and/or supported, directly
            or indirectly, by guarantee and/or any other collateral of any kind
            provided by any Subsidiary.

15.4. The Borrower shall furnish and shall procure that the Excluded Subsidiary
      shall furnish to each of the Banks:

15.4.1.     as soon as practicable (and, in any event, within 90 (ninety) days
            after the end of each Fiscal Year in the case of consolidated
            Accounts (including the Exclusion Statement) of the Borrower or 120
            (one hundred and twenty) days after the end of each Fiscal Year in
            the case of the Accounts of the Excluded Subsidiary), the audited
            annual Accounts of the Borrower (including the Exclusion Statement)
            and the audited annual Accounts of the Excluded Subsidiary for that
            Fiscal Year;

15.4.2.     as soon as practicable (and, in any event, within 60 (sixty) days
            after the end of each Quarter of each Fiscal Year in the case of
            Accounts (including the Exclusion Statement) relating to the
            Borrower or 90 (ninety) days after the end of each Fiscal Year in
            the case of the Accounts of the Excluded Subsidiary), the unaudited,
            reviewed Accounts (including the Exclusion Statement) of the
            Borrower and the unaudited reviewed Accounts of the Excluded
            Subsidiary for that Quarter (or with respect to the second Quarter,
            for the relevant half-year or, with respect to the third Quarter,
            for the relevant 9 (nine) months) and also the consolidated,
            unaudited reviewed separate financial statements relating to the
            Borrower, for that Quarter (or half-year or 9 (nine) months, as
            applicable), if such Accounts are prepared; and
<PAGE>
                                      -62-


15.4.3.     at the same time as the Accounts (including the Exclusion Statement)
            are delivered pursuant to clauses 15.4.1 or 15.4.2 above, a
            certificate (in the form of the Compliance Certificate--form I
            attached as Schedule 15.4.3(A)) signed by the Chief Executive
            Officer, Chief Financial Officer, either of their deputies or the
            Controller or Auditor of the Borrower: (a) certifying that the
            relevant Accounts were prepared in accordance with GAAP,
            consistently applied, unless the Accounts contain a certification to
            that effect by the Auditors and that the relevant Accounts of HETC
            were prepared in accordance with the requirements of its
            jurisdiction of incorporation and the format attached as Schedule
            15.4.3(B) hereto; (b) certifying the amount of the Cash Balance for
            the purpose of clause 15.28 below at the end of the Fiscal Year or
            the Quarter to which the said Accounts relate, such certificate to
            be supported by suitable documentation setting out in detail all
            data relevant for determination of the Cash Balance as aforesaid and
            to include express confirmation that all assets included in Cash
            Balance were not subject to a specific right of set-off; (c)
            certifying that the Financial Undertakings specified in clause 15.24
            below have been fulfilled, having regard to the period to which the
            Accounts relate and/or as of the date ending that period (to the
            extent applicable for such period and/or as of such date), or if
            not, in what respect and to what extent the said financial
            undertakings have not been fulfilled, such certificate to be
            supported by suitable financial statements setting out in detail all
            data relevant for determination of compliance with the Financial
            Undertakings; (d) specifying the current shareholders holding over
            5% (five percent) of the issued and outstanding share capital in the
            Borrower and certifying that no Change of Ownership has occurred in
            the Borrower; and (e) specifying that no Default has occurred and is
            continuing, or, if a Default has occurred and is continuing,
            specifying the Default and the steps, if any, being taken to remedy
            it.

15.5. The Borrower shall furnish to each of the Banks:

15.5.1.     promptly, all notices, reports or other documents required by law to
            be dispatched by the Borrower to its shareholders generally (or any
            class of them) or to holders of any other securities in the Borrower
            and all notices, reports or other documents relating to the
            financial difficulties or debt obligations of the Borrower
            dispatched by or on behalf of the Borrower to its creditors
            generally or to any class of its creditors;

15.5.2.     (a)   as soon as the same are instituted or, to the Borrower's
                  knowledge, threatened, details of any litigation, arbitration
                  or administrative proceedings involving it which, if adversely
                  determined, would have a Material Adverse Effect; and
<PAGE>
                                      -63-


            (b)   promptly, on issue thereof, a copy of the quarterly statement
                  of pending claims issued by the legal advisor to the Borrower;

15.5.3.     promptly, such further information regarding the Borrower's
            financial condition, business and assets (including any requested
            amplification or explanation of any item in any Accounts, forecasts,
            projection or other material provided by the Borrower hereunder) as
            the Banks may reasonably request from time to time, unless
            disclosure of such information to the Banks shall contravene NASDAQ
            regulations applicable to the Borrower or which would be applicable
            to the Borrower if it were a US entity, provided that if such
            otherwise contravening disclosure would be permissible against an
            undertaking by the Banks to maintain in confidence and/or not to use
            the information disclosed in connection with the trading of shares
            on NASDAQ, such disclosure shall be made against such undertaking;

15.5.4.     without derogating from clause 15.11 below, promptly, upon being
            notified of the same, details of the occurrence of a Change of
            Ownership or details of any proposed Change of Ownership of which
            the Borrower is aware;

15.5.5.     promptly, on request, certificates (in the form of the Compliance
            Certificate--form II attached as Schedule 15.5.5) as to compliance
            by the Borrower and/or any Original Subsidiary with the Finance
            Documents, Security Documents and Material Contracts and as to the
            absence of any Default thereunder;

15.5.6.     promptly, notice of any Default and the steps being taken to remedy
            same;

15.5.7.     commencing on June 30, 2001 and every 6 (six) months thereafter,
            details of any Material Contracts entered into during such
            six-monthly period;

15.5.8.     without derogating from any other provisions hereof, promptly,
            notice of non-performance or cancellation of any Material Contracts
            or any other contracts to which the Borrower is party, if--as to
            such other contracts--such non-performance and/or cancellation would
            constitute a Material Adverse Effect; and
<PAGE>
                                      -64-


15.5.9.     promptly, notice of any Material Adverse Effect.

15.6.             The Borrower will ensure that:

15.6.1.     the annual Accounts and the annual Accounts of any Excluded
            Subsidiary incorporated in Israel to be delivered to the Banks
            pursuant to clause 15.4 above are audited by KPMG Somekh Chaikin or
            another leading firm of independent Israeli auditors affiliated to
            one of the big four internationally recognised firms of auditors;

15.6.2.     the Borrower and the Included Subsidiaries shall at all times have
            duly appointed auditors;

15.6.3.     unless otherwise required by GAAP, the Borrower and the Included
            Subsidiaries will not change their financial year-end without the
            prior written consent of the Banks;

15.6.4.     all Accounts (including the consolidated financial statements) shall
            be prepared in accordance with GAAP (consistently applied) or shall
            indicate in notes to or accompanying such Accounts (including the
            consolidated financial statements) any material departures from
            GAAP;

15.6.5.     each set of Accounts (including the consolidated financial
            statements) delivered to the Banks is prepared on substantially the
            same basis as was used in the preparation of the Accounts (including
            the consolidated financial statements) previously delivered to the
            Banks;

15.6.6.     in the event that any Accounts (including the consolidated financial
            statements) are delivered which are not prepared on a substantially
            consistent basis to Accounts (including the consolidated financial
            statements) previously delivered hereunder, such Accounts (including
            the consolidated financial statements) are accompanied by an
            explanation of any changes to the accounting basis used;

15.6.7.     all Accounts (including the consolidated financial statements) shall
            fairly present in all material respects (subject to adjustments
            which fall to be made at the end of the financial year in accordance
            with GAAP), the financial position and results of operations of the
            Borrower and of the Included Subsidiaries, as at the end of and for
            the Accounting Period to which they relate;
<PAGE>
                                      -65-


15.6.8.     copies of all notices, reports, financial statements and all other
            documents to be furnished by the Borrower to the Banks under this
            Agreement or under any other Finance Document shall be delivered to
            each of the Banks; and

15.6.9.     the annual and quarterly consolidated Accounts of the Borrower shall
            include, at least, the Borrower and all Original Subsidiaries.

15.7.

15.7.1.     Without derogating from the Negative Pledges, the Borrower will
            procure: (a) that the Borrower and the Included Subsidiaries will
            not have or incur in aggregate Borrowings in excess of, US
            $400,000,000 (four hundred million United States Dollars) in
            aggregate (including the Loan and Additional Credit Facilities) of
            which no more than US $250,000,000 (two hundred and fifty million
            United States Dollars) shall constitute cash credit facilities
            (including the Loan and Cash Credit Facilities) from any banks,
            financial institutions or other sources. It is expressly agreed, for
            the removal of doubt, that the Banks shall have no duty to monitor
            compliance with this clause 15.7.1 and the making of any Advance
            hereunder by any Bank or the provision by any Bank of Additional
            Credit Facilities, whether or not it has the effect of causing
            non-compliance with the provisions hereof, shall not be deemed
            agreement by any Bank to such non-compliance or a waiver of the
            Banks' right to compliance with such obligation by the Borrower.

15.7.2.     The Borrower will procure that

            (a)   the total Borrowings from all banks and financial institutions
                  at any time of each Foreign Subsidiary shall not exceed US
                  $5,000,000 (five million United States Dollars); and

            (b)   the total amount secured at any time by the pledge of assets
                  of the Foreign Subsidiaries (taking all the Foreign
                  Subsidiaries together) shall not exceed US $7,500,000 (seven
                  million five hundred thousand United States Dollars).
<PAGE>
                                      -66-


15.7.3.     At the request of any Bank from time to time, the Borrower will
            provide the requesting Bank with written confirmation of the amounts
            of the Borrowings and of the value of the assets pledged by the
            Foreign Subsidiaries, so as to verify compliance with the limits
            specified in clauses 15.7.2(a) and (b) above.

15.8.  The Borrower will deliver to the Banks, within 60 (sixty) days of the end
       of each Quarter during this Agreement, a certificate in the form of
       Compliance Certificate form III attached as Schedule 15.8 from the Chief
       Financial Officer of the Borrower confirming compliance with the
       provisions of clause 15.7 above.

15.9.  Without derogating from the provisions of the Security Documents or from
       the securities provided thereunder, the Borrower undertakes that its
       obligations under or pursuant to this Agreement rank and will at all
       times rank at least pari passu in right and priority of payment and in
       priority of security with all its other present and future unsecured and
       unsubordinated obligations, other than obligations which are mandatorily
       preferred by law applying to companies generally.

15.10. The Borrower shall not make any Distribution and shall procure that no
       Included Subsidiary shall make or resolve to make any Distribution
       (including any dividend or other similar payment (in cash or in kind) on
       or in respect of any share capital or equivalent of the Included
       Subsidiary), except to the Borrower and to any other shareholder(s) in
       the Included Subsidiary making the Distribution.

15.11. (a)  The Borrower shall procure that there will be no Change in Ownership
            in the Borrower, save with the prior written consent of the Banks.

       (b)  Without derogating from clause 15.11(a) above, the Borrower
            undertakes that, without the Majority Banks' consent which may be
            granted, or granted subject to conditions or refused in the
            discretion of the Majority Banks: (i) it shall not issue any shares
            or other securities or rights realisable into any shares; (ii) it
            shall not transfer any shares or other rights realisable into shares
            in any Original Subsidiary; and (iii) it shall procure that none of
            the Original Subsidiaries shall issue any shares or other securities
            or rights realisable into shares, whether by way of public offer,
            private placement or otherwise (any issue or transfer pursuant to
            subparagraphs (i), (ii) and (iii) above, collectively, hereinafter
            an "issue"), unless:
<PAGE>
                                      -67-


            (1)   the issue is for fair market value;

            (2)   the Banks shall, not later than 1 (one) month (and not earlier
                  than 3 (three) months) prior to the making of such issue, have
                  received notice of the Borrower's or the Original Subsidiary's
                  intention to make such issue);

            (3)   the Banks shall have received all information that they have
                  requested relating to such issue; and

            (4)   if the consideration for such issue shall not be in cash, in
                  whole or in part, the Banks shall have given their prior
                  written approval to the terms and conditions of such issue;

                  provided that the provisions of this clause 15.11(b) shall not
                  prevent the Borrower from issuing shares pursuant to any new
                  or existing incentive option schemes or any other similar
                  arrangements.

15.12. The Borrower will:

15.12.1.    make such registrations and pay such fees and similar amounts as are
            necessary to keep those registered Intellectual Property Rights
            owned by the Borrower: (a) which are material to the business of the
            Borrower; or (b) except to the extent such registration or payment
            is not warranted in the Borrower's commercial judgment, reasonably
            exercised, over which the Banks have been granted security pursuant
            to the Security Documents (if any), in force and to record its
            interest in those Intellectual Property Rights;

15.12.2.    take such steps as are necessary and commercially reasonable
            (including the institution of legal proceedings) to prevent third
            parties infringing those Intellectual Property Rights referred to in
            clause 15.12.1 above and (without prejudice to clause 15.12.1 above)
            take such other steps as are reasonably practicable to maintain and
            preserve its interests in those rights;
<PAGE>
                                      -68-


15.12.3.    promptly upon being required to do so by the Banks, comply with all
            proper instructions of the Banks which the Banks are entitled to
            give (if any) under the Security Documents in respect of its
            Intellectual Property Rights referred to in clause 15.12.2 above;

15.12.4.    not sell, transfer, lease, license on an exclusive basis or
            otherwise dispose of all or any part of its interest in any of the
            Intellectual Property Rights referred to in clause 15.12.1 above
            (whether in a single transaction or in a series of transactions
            whether related or not and whether voluntary or involuntary), save
            for any transaction in respect of those rights for fair market value
            and in the ordinary course of business and which do not, or are not
            reasonably likely to, have a Material Adverse Effect; and

15.12.5.    not permit, other than in the reasonable exercise of the Borrower's
            commercial judgment, any registration of any of the Intellectual
            Property Rights referred to in clause 15.12.1 above to be abandoned,
            cancelled or lapsed or to be liable to any claim of abandonment for
            non-use or otherwise.

15.13. The Borrower will: (i) obtain all requisite Environmental Licences; (ii)
       comply in all material respects with the terms and conditions of all
       Environmental Licences applicable to it; (iii) comply in all material
       respects with all other applicable Environmental Laws; (iv) use its best
       endeavours to prevent any Environmental Contamination; and (v) remedy all
       Environment damage caused by it or them.

15.14.

15.14.1.    The Borrower will insure and keep insured all the properties and
            assets of the Borrower, with reputable insurance companies or
            underwriters, to such extent, at such times and against such risks,
            as shall be commercially reasonable.

15.14.2.    The Borrower will promptly after becoming aware of the relevant
            requirement, effect and maintain all insurances required by the
            terms of any applicable law or any contract binding on it.

15.14.3.    At the Banks' reasonable request from time to time, the Borrower
            shall provide the Banks, promptly following such request, with
            copies of all insurance policies held by the Borrower and any
            Included Subsidiary at such time.
<PAGE>
                                      -69-


15.14.4.    The Borrower shall promptly notify the Banks of any insurance claim
            where the amount of such claim exceeds US $1,000,000 (one million
            United States Dollars) (or its equivalent, on the date on which the
            claim is made, in the currency in which such claim is made).

15.15. The Borrower will not enter into any merger or consolidation or transfer
       its business or part thereof.

15.16. The Borrower will obtain every Authorisation required to conduct its
       business or perform this Agreement and will use its best efforts to
       ensure that: (i) none of the Authorisations is revoked, cancelled,
       suspended, withdrawn, terminated, expires or is not renewed or otherwise
       ceases to be in full force and effect; and (ii) no Authorisation is
       modified and that it does not commit any breach of the terms or
       conditions of any Authorisation.

15.17. (a)  The Borrower shall comply in all material respects with the terms of
            each of the Material Contracts.

       (b)  The Borrower shall not without the prior written consent of the
            Banks, amend, cancel, supplement, supersede or waive any term of a
            Material Contract, if such action would have a Material Adverse
            Effect.

       (c)  The Borrower shall take all reasonable action necessary to perfect,
            preserve and enforce all of its material rights under the Material
            Contracts.

15.18. (a)  If the Borrower wishes to change its auditors, the Borrower will
            notify the Banks as to the reasons for any such proposed change and
            if the Banks so request, will instruct the audit partner of each of
            the outgoing firm of auditors and the replacement firm of auditors
            to discuss the financial position of the Borrower with the Banks.

       (b)  The Borrower will authorise the auditors to discuss the Borrower's
            financial position with the Banks on the Banks' reasonable request,
            at the expense of the Borrower.

15.19. The Borrower shall not: (i) acquire, without the prior written consent of
       the Banks (by subscription or otherwise), any shares or equity-related
       securities in any other entity at an aggregate cost in excess of US
       $30,000,000 (thirty million United States Dollars) in any Fiscal Year
       (such aggregate cost not to include more than US $15,000,000 (fifteen
       million United States Dollars in cash); and/or (ii) expend more than US
       $2,000,000 (two million United States Dollars) (by way of investment in
       equity or provision of loans or guarantees) in any Financial Year in the
       acquisition and/or establishment of any entity controlled by the Borrower
       upon its acquisition or establishment, other than any such entity, which
       upon its acquisition or establishment (as the case may be) as aforesaid
       is, and remains other than with the prior written consent of the Banks, a
       wholly-owned subsidiary of the Borrower. "Control" in this clause 15.19
       means the holding of more than 50% of the issued share capital and/or
       voting rights in the controlled entity and/or the ability to appoint the
       majority of the directors of the controlled entity.
<PAGE>
                                      -70-


15.20. The Borrower shall permit any professional adviser to the Banks or
       representative of the Banks to have access to books, records, accounts,
       documents, computer programmes, data or other information in the
       possession of or available to it subject to any reasonable
       confidentiality undertaking required by it and to take such copies as may
       be considered appropriate by such representative or professional adviser
       acting reasonably.

15.21. The Borrower will procure that the Borrower and the Included
       Subsidiaries, taken together, will not acquire any Fixed Assets, save
       for: (a) Fixed Assets needed for maintenance; and (b) other Fixed Assets,
       the aggregate amount of which does not exceed US $60,000,000 (sixty
       million United States Dollars) in any Fiscal Year.

15.22. The Borrower will not make any loans or give any credit save for: (a)
       normal employee loans; (b) customer credit customary in the industry
       which is given in the ordinary course of business; (c) customary advances
       to suppliers; and (d) the loan to be secured by the Veraz Loan Pledge and
       Assignment (provided that instrument has been duly executed to the
       satisfaction of the Banks), except that the Borrower may make loans to
       the Included Subsidiaries of a portion of any part of the Loan advanced
       to the Borrower hereunder.

15.23. The Borrower shall not amend its Articles of Association or other
       documents of incorporation in any respect materially adverse to the
       interests of the Banks without the prior written consent of the Banks.
<PAGE>
                                      -71-


15.24. The Borrower confirms and undertakes that as of the Ratio Determination
       Date at the end of the Second Quarter in 2003 and at all times during the
       term of this Agreement, the Borrower and the Included Subsidiaries, taken
       together on a consolidated basis, have complied and will comply with the
       financial undertakings, calculated by reference to the Accounts, set out
       below (herein "the Financial Undertakings"):

15.24.1.    the ratio of Tangible Equity to Total Liabilities shall continue to
            be no less than 1:1;

15.24.2.    for the year 2003, there shall be no minimum requirement for the
            ratio of EBITDA to Debt Service;

15.24.3.    for the first, second and third Quarters in the year 2004, the ratio
            of EBITDA to Debt Service shall be no less than 1:1, 1.1:1 and
            1.15:1, respectively. For each Quarter thereafter (i.e., commencing
            the fourth Quarter of the year 2004), the ratio of EBITDA to Debt
            Service shall be no less than 1.2:1;

15.24.4.    for the year 2003, there shall be no minimum requirement for the
            ratio of EBITDA to Borrowings. Thereafter, on every Ratio
            Determination Date, the ratio of EBITDA to Borrowings shall be no
            less than 1:5;

15.24.5.    the ratio of Current Assets to Current Liabilities on each Ratio
            Determination Date shall be no less than 1.5:1;

15.24.6.    for the year 2003 and the first three quarters of 2004, the Borrower
            and the Included Subsidiaries shall maintain a positive quarterly
            cash flow (on an accumulated basis commencing 1 January 2003) from
            operations, provided that failure to do so during the year 2004
            shall not constitute a Default if the following condition is
            fulfilled on the relevant Ratio Determination Date:

                  The ratio of A:B shall be at least 1.7:1, where:

                        A     is the total of cash, cash equivalents, short term
                              investments, inventories and trade receivables;
                              and

                        B     is the total of short term credit (excluding
                              current maturity of long term debt from banks)
                              plus trade payables.
<PAGE>
                                      -72-


15.25. The Borrower undertakes that it shall not sell or otherwise dispose of
       any material assets, except:

       (a)  in the ordinary course of its business or, otherwise, for fair
            market value;

       (b)  as permitted in clause 15.11(b) (which shall govern the
            subject-matter thereof exclusively);

       (c)  as to the assets listed in Schedule 15.25, sale of such assets not
            resulting in a Material Adverse Effect for cash consideration for
            fair market value not exceeding, in aggregate, US $5,000,000 (five
            million United States Dollars); or

       (d)  as to other assets not being assets listed in Schedule 15.25, sale
            of such assets not resulting in a Material Adverse Effect for cash
            consideration for fair market value not exceeding, in any Fiscal
            Year, US $5,000,000 (five million United States Dollars).

15.26. Deleted

15.27. The Borrower will obtain and submit to the Banks valuations including a
       securities schedule (nispach bitchonot) in customary format and otherwise
       in form and of scope satisfactory to the Banks by a licensed land valuer
       acceptable to the Banks of all the land and rights in land which are the
       subject of the Mortgages, such valuations to be provided by no later than
       July 2004. The fees and expenses of the land valuer shall be borne by the
       Borrower.

15.28. The Borrower shall at all times maintain a Cash Balance in an aggregate
       amount of at least: (i) US $15,000,000 (fifteen million United States
       Dollars) plus the amount equal to the aggregate of all cash credit
       facilities owing by the Borrower and the Included Subsidiaries (including
       the Loan and all Cash Credit Facilities); or (ii) 150% (one hundred and
       fifty percent) of the amount equal to the aggregate of all cash credit
       facilities owing by the Borrower and the Included Subsidiaries (including
       the Loan and all Cash Credit Facilities), whichever of (i) and (ii) is
       the lower. At its own initiative or at the request of the Majority Banks
       from time to time, the Borrower shall cause the Chief Financial Officer
       of the Borrower to provide the Borrower with an up-to-date version of the
       certificate to be provided pursuant to clause 15.4.3(b) above. Further,
       the Borrower shall advise the Banks by notice in writing forthwith upon
       the Borrower ceasing to be in compliance with the aforegoing provisions
       of this clause 15.28. The provisions of the previous sentence shall not
       derogate from the Banks' rights to other remedies and reliefs in the
       event of breach by the Borrower of its obligations pursuant to this
       clause 15.28 above.
<PAGE>
                                      -73-


15.29. The Borrower will provide the Banks with immediate written reports on the
       occurrence of any event making it likely that a demand will be on any
       Bank with respect to any Off Balance-Sheet Item issued by such Bank and
       shall provide the Banks with all additional information relating to such
       matter as the Borrower shall receive and/or as the Banks shall request,
       from time to time.

16.    DEFAULT

16.1.  Each of the events set out in clause 16.2 to clause 16.17 is an Event of
       Default (whether or not caused by any reason outside the control of the
       Borrower or of any other person).

16.2.  The Borrower does not pay on the due date any amount of principal or
       Interest on the Loan payable by it under any Finance Document at the
       place designated and in the funds expressed to be payable or the Borrower
       does not pay within 3 (three) days of the due date any other amount
       payable by it under any Finance Document at the place designated and in
       the funds expressed to be payable.

16.3.  (a)  There is any breach of the provisions of any of clause 2.3, clause 3
            (with respect to actions specified therein and permitted (if any) to
            be performed after the Effective Date), clauses 10.4, 15.2, 15.3,
            15.5.4, 15.7, 15.9, 15.10, 15.11, 15.15, 15.19 or 15.21- 15.29
            (inclusive).

       (b)  The Borrower or any Original Subsidiary or any Foreign Subsidiary
            fails to comply with any undertaking or obligation contained in any
            Finance Document (other than an undertaking referred to in (a) above
            in respect of which there shall be no cure period) and/or of any
            undertaking or obligation contained in any document, including
            standard terms and conditions, signed by the Borrower or any
            Included Subsidiary, in connection with the provision of any Credit
            Facilities and, if such default is capable of remedy within such
            period, within 14 (fourteen) days after the earlier of the party in
            breach becoming aware of such default and receipt by such party of
            written notice from the Banks requiring the default to be remedied,
            the said party shall have failed to cure such default. For the
            removal of doubt, this clause 16.3 shall not be construed as
            derogating from any other provision of this clause 16 and, without
            limiting the generality of the aforegoing, the 14 (fourteen) day
            cure period specified in this clause 16.3 above shall be applicable
            only with respect to defaults specified in this clause 16.3(b) and
            not to any other provision of this clause 16.
<PAGE>
                                      -74-


16.4.  Any representation or warranty made or repeated by or on behalf of the
       Borrower in any Finance Document, or in any certificate or statement
       delivered by or on behalf of the Borrower or under any Finance Document
       is incorrect or misleading in any material respect when made or deemed to
       be made or repeated.

16.5.  Any of the Finance Documents shall cease to be in full force and effect
       in any respect or shall cease to constitute the legal, valid, binding and
       enforceable obligation of the Borrower or the relevant Subsidiary or in
       the case of any Security Document, fail to provide effective perfected
       security in favour of the Banks over the assets over which security is
       intended to be given by that Security Document.

16.6.  The Borrower is unable to pay its debts, including its debts to any other
       bank or financial institution, as they fall due or admits inability to
       pay its debts as they fall due, commences negotiations with any one or
       more of its creditors with a view to the general readjustment or
       rescheduling of its Indebtedness or makes a general assignment for the
       benefit of or a composition with its creditors.

16.7.  The Borrower takes any corporate action or other steps are taken or legal
       proceedings are started or are consented to or any order is made for its
       winding-up, liquidation, bankruptcy, dissolution, administration or
       re-organisation (or for the suspension of payments generally or any
       process giving protection against creditors) or for the appointment of a
       liquidator, receiver, administrator, administrative receiver or similar
       officer of it or of all or any part of its revenues or assets or such a
       person is appointed, which action, steps, proceedings or order are not
       cancelled or withdrawn within 60 (sixty) days of the occurrence or
       institution thereof.

16.8.  Any distress, execution, attachment, sequestration or other process
       arising out of any claim by any third party against the Borrower, save
       where: (a) the Borrower is in good faith on reasonable grounds,
       contesting the distress, execution, attachment, sequestration or other
       process by appropriate proceedings diligently pursued; (b) the Banks are
       satisfied that the ability of the Borrower to comply with its respective
       obligations under the Finance Documents will not be adversely affected
       whilst such distress, execution, attachment, sequestration or other
       process is being so contested; and (c) such process as aforesaid is
       cancelled or withdrawn not later than 45 (forty-five) days after the
       institution thereof.
<PAGE>
                                      -75-


16.9.  The Borrower fails to comply with any material undertaking or obligation
       contained in any Material Contract and, if such default is capable of
       remedy under the terms of such Material Contract and failure to remedy
       could reasonably result in a Material Adverse Effect, the Borrower shall
       have failed to cure such default within the time provided therefor in
       such Material Contract.

16.10. The Material Contracts specified in Schedule 16.10 hereto shall cease to
       be in full force and effect or shall cease to be legal, valid and binding
       upon the parties thereto and such cessation is likely to have a Material
       Adverse Effect; or (b) any change having a Material Adverse Effect is
       made to the terms of any of such Material Contracts, without the prior
       written consent of the Banks.

16.11. By or under the authority of the government of Israel or any other
       competent Israeli authority any law is introduced after the date hereof
       imposing restrictions on the free exchange of NIS for Dollars or Euro or
       of Dollars or Euro for NIS and such restriction is likely to prevent the
       due and timely performance of the Borrower's obligations under this
       Agreement.

16.12. There is instituted or commenced any litigation, dispute, arbitration,
       administrative, regulatory or other proceedings or enquiry concerning or
       involving the Borrower which is likely to have a Material Adverse Effect.

16.13. (a)  Any Authorisation necessary for the Borrower to comply with its
            obligations under the Finance Documents or under any of the Material
            Contracts:

            (i)   is not obtained or is surrendered, terminated, withdrawn,
                  suspended, cancelled or revoked or does not remain in full
                  force and effect or otherwise expires and is not renewed prior
                  to its expiry (in each case, without replacement by permits,
                  consents or authorisations, as applicable, having equivalent
                  effect); or

            (ii)  is modified in any material respect or breached.
<PAGE>
                                      -76-


       (b)  The Borrower becomes aware of any event which is reasonably likely
            to give rise to the revocation, termination, cancellation or
            suspension of the Authorisations or any of them (without
            replacement) and the Borrower is unable to demonstrate to the
            reasonable satisfaction of the Banks within 30 (thirty) days of such
            event occurring that such revocation, termination, cancellation or
            suspension will not occur.

16.14. Any event or series of events occur which, in the reasonable opinion of
       the Majority Banks is likely to have a Material Adverse Effect,
       including, any material adverse change in the business or financial
       condition of the Borrower or on the ability of the Borrower to perform
       its obligations under the Finance Documents or under the Material
       Contracts.

16.15. Any material insurance policy to be obtained by the Borrower pursuant to
       the provisions hereof and obtained is cancelled and not restored within
       60 (sixty) days of such cancellation and before any material damage
       insured thereunder has occurred.

16.16. Any government or governmental authority: (a) nationalises, seizes or
       expropriates all or any substantial or material part of the assets of the
       Borrower, or its share capital; or (b) assumes custody or control of such
       assets, or of the business or operations of the Borrower, or of its share
       capital; or (c) takes any action for the dissolution of the Borrower, or
       (d) takes any action that would prevent the Borrower or its officers from
       carrying on its business or operations or a substantial or material part
       thereof.

16.17. It is or becomes unlawful for the Borrower to perform: (i) any of its
       obligations under the Finance Documents; or (ii) any of its material
       obligations under any of the Material Contracts, if such non-performance
       of such obligation under a Material Contract would have a Material
       Adverse Effect.

16.18. Upon the occurrence of an Event of Default and at any time thereafter
       while the same is continuing, the Banks may, by notice to the Borrower:

16.18.1.    declare that an Event of Default has occurred; and/or

16.18.2.    declare that the Loan together with all Interest accrued on the Loan
            and all other amounts (including amounts due under clause 18 below,
            to the extent applicable) payable by the Borrower under the Finance
            Documents from time to time, shall thenceforth be repayable on
            demand being made by the Banks (and in the event of any such demand,
            the Loan, such Interest and such other amounts shall be immediately
            due and payable); and/or
<PAGE>
                                      -77-


16.18.3.    declare the Loan immediately due and payable, whereupon it shall
            become immediately due and payable, together with all Interest
            accrued on the Loan (or part thereof as aforesaid) and all other
            amounts payable by the Borrower or under the Finance Documents
            (including, amounts due under clause 18, to the extent applicable).

16.19. If, pursuant to clause 16.18.2 the Banks declare the Loan (or part
       thereof as aforesaid) to be due and payable on demand then, and at any
       time thereafter so long as any Event of Default is continuing or has not
       been waived, the Banks may by written notice to the Borrower require
       repayment of the Loan (or part thereof as aforesaid) on such date as the
       Banks may specify in such notice (whereupon the same shall become due and
       payable on such date together with accrued Interest thereon and any other
       sums then owed by the Borrower hereunder) or withdraw such declaration
       with effect from such date as they may specify in such notice.

16.20. In the event of acceleration of the Loan (or part thereof as aforesaid)
       pursuant to clauses 16.18.3 or 16.19 above, then, without derogating from
       any other remedies or relief available to the Banks under law or under
       any of the Finance Documents, the Banks shall be entitled to take all
       steps as they deem fit in order to collect all sums owed by the Borrower
       to the Banks, including, to realise all or any of the assets secured
       under the Security Documents, all at the expense of the Borrower and to
       utilise the sums received to repay in part or in full all amounts owed by
       the Borrower hereunder.

16.21. The Borrower shall indemnify the Banks against any losses, charges or
       expenses which the Banks may sustain or incur as a consequence of:

16.21.1.    the occurrence of any Event of Default or Default; or

16.21.2.    the operation of clauses 16.18, 16.19 or 16.20 above, including, any
            losses, charges or expenses on account of funds acquired, contracted
            for or utilised to fund any amount payable under this Agreement or
            any amount repaid or prepaid. A certificate of the relevant Bank as
            to the amount of any such loss or expense shall be prima facie
            evidence in the absence of manifest error.
<PAGE>
                                      -78-


17.    DEFAULT INTEREST

17.1.  If any sum due and payable by the Borrower hereunder (including any
       amount becoming payable pursuant to the provisions of clauses 16.18
       and/or 16.19 above) is not paid on the due date therefor in accordance
       with the provisions of this Agreement ("unpaid sum"), the period
       beginning on such due date and ending on the date upon which the
       obligation of the Borrower to pay the unpaid sum is discharged, shall be
       divided into successive periods, each of which (other than the first)
       shall start on the last day of such preceding period and the duration of
       each of which shall (except as otherwise provided in this clause 17) be
       selected by the Banks (such periods selected as aforesaid "Interest
       Periods").

17.2.  During each such Interest Period as is mentioned in clause 17.1 above, an
       unpaid sum shall bear Interest at the rate per annum which is the sum
       from time to time of: (a) 3% (three percent); (b) the Margin; and (c)
       LIBOR on the Interest Determination Date for such Interest Period,
       provided that, if, for any such Interest Period LIBOR cannot be
       determined, the rate of Interest applicable to such unpaid sum shall be
       the rate per annum which is the sum of: (i) 3% (three percent); (ii) the
       Margin; and (iii) a rate certified by the Banks in accordance with clause
       9 above.

17.3.  Any Interest which shall have accrued under clause 17.2 above in respect
       of an unpaid sum shall accrue from day to day from the commencement of
       the period in which such Interest is due, shall be calculated on the
       basis of the actual number of days elapsed and a 360 (three hundred and
       sixty) day year and shall be due and payable and shall be paid by the
       Borrower at the end of the period by reference to which it is calculated
       or on such other dates as the Banks may specify by written notice to the
       Borrower.

18.    BROKEN FUNDING INDEMNITY

       Except as otherwise expressly provided herein, if any Bank receives or
       recovers all or any part of the Loan otherwise than on the scheduled date
       of repayment of such amount relating to the Loan, the Borrower shall pay
       to such Bank an amount equal to the amount (if any) by which: (i) the
       additional amount of Interest which would, in accordance with the terms
       of this Agreement, have been payable on the amount so received or
       recovered had it been received or recovered on the relevant Interest
       Payment Date exceeds (ii) the amount of Interest which, in the reasonable
       opinion of such Bank, would have been payable to such Bank on the last
       day of such Interest Period in respect of a deposit in Dollars, of an
       amount equal to the amount so received or recovered, had such an amount
       been placed by it with a prime bank in London for a period starting on
       the date of such receipt or recovery and ending on the relevant Interest
       Payment Date.
<PAGE>
                                      -79-


19.    PAYMENTS

       All payments to be made by the Borrower to the Banks under this Agreement
       shall be made in same day funds. All payments required to be made by the
       Borrower under the Finance Documents shall be calculated without
       reference to any set-off or counterclaim and shall be made free and clear
       of, and without any deduction for or on account of, any set-off or
       counterclaim.

20.    SET-OFF

20.1.  Each Bank may (but shall not be obliged to) set-off against any
       obligation of the Borrower due and payable by it to or for the account of
       such Bank under this Agreement and not paid on the due date or within any
       applicable grace period, any moneys held by such Bank for the account of
       the Borrower at any office of such Bank anywhere and in any currency,
       whether or not matured. For that purpose, such Bank may: (i) break or
       alter the amounts of all or any deposit of the Borrower; or (ii) effect
       such currency exchanges as are appropriate to implement the set-off and
       any usual charges in relation to such currency exchanges shall be paid by
       the Borrower and such Bank shall not be liable to the Borrower for any
       penalties, losses or other damage resulting from any such breakage,
       alteration or currency exchange. The Banks shall give notice to the
       Borrower of any such set-off on or prior to the date of making such
       set-off.

20.2.  Each Bank shall be entitled (but not obliged): (i) to debit any of the
       Borrower's accounts at such Bank with any amount needed to pay any amount
       payable by the Borrower to such Bank under this Agreement and whether
       such amount is credited or overdrawn or will become overdrawn as a result
       of such debiting; and (ii) to credit any amount received from the
       Borrower or for its account to such account of the Borrower at such Bank
       as it deems fit. The Borrower shall be notified of any action taken
       pursuant to this clause 20.2 in the manner in which the crediting or
       debiting of an account is usually notified by each Bank to its clients.
<PAGE>
                                      -80-


21.    APPLICATION OF PAYMENTS

21.1.  If any Bank receives a payment insufficient to discharge all the amounts
       then due and payable by the Borrower to it under the Finance Documents,
       such Bank shall apply that payment towards the obligations of the
       Borrower under the Finance Documents in the following order or in such
       other order as such Bank may deem fit:

21.1.1.     firstly, in or towards payment of any unpaid fees, costs and
            expenses of such Bank or any Receiver (as defined in any Security
            Document) under the Finance Documents; and

21.1.2.     secondly, in or towards payment of any other amount due to such Bank
            but unpaid under this Agreement or any other Finance Document, other
            than principal (including, Interest, damages, commissions, fees,
            broken funding indemnity fees and all other costs), the above in
            such order as such Bank deems fit; and

21.1.3.     thirdly, in or towards payment to such Bank on account of the
            principal of the Loan.

21.2.  If, notwithstanding the obligations of the Borrower under this Agreement
       (and without derogating from such obligations), any sum is received by
       any Banks in a currency ("the first currency") other than the currency
       ("the second currency") in which the relevant amount is to be paid
       pursuant to the provisions of this Agreement, then such sum shall be
       converted into the second currency at the buying rate of the second
       currency in the first currency prevailing at such Bank at the close of
       business on the date of receipt thereof.

22.    CALCULATIONS AND EVIDENCE OF DEBT

22.1.  Each Bank shall maintain in accordance with its usual practice accounts
       evidencing the amounts from time to time lent by and owing to it
       hereunder.

22.2.  In any legal action or proceeding arising out of or in connection with
       this Agreement the entries made in the accounts maintained pursuant to
       clause 22.1 above shall, in the absence of manifest or proven error, be
       prima facie evidence of the existence and amounts of the specified
       obligations of the Borrower.
<PAGE>
                                      -81-


22.3.  A certificate of a Bank as to: (a) the amount by which a sum payable to
       it hereunder is to be increased under clause 11.1; or (b) the amount for
       the time being required to indemnify it against any such cost, payment or
       liability as is mentioned in clause 12 above shall, in the absence of
       manifest or proven error, be prima facie evidence of the existence and
       amounts of the specified obligations of the Borrower.

23.    SHARING BETWEEN BANKS

23.1.  If a Bank ("the Sharing Bank") receives or recovers (including by way of
       set-off) any sum in respect of an amount due to it from the Borrower
       under this Agreement or any of the other Finance Documents, the Sharing
       Bank shall treat the amount paid to it as if it were a payment by the
       Borrower on account of amounts due from the Borrower under this Agreement
       for distribution to the Sharing Bank and all or any of the other Banks if
       the Intercreditor Agreement or the New Intercreditor Agreement shall so
       require.

23.2.  Any payment made by the Sharing Bank under clause 23.1 above shall
       (whether or not stated to be so subject) be subject to the condition
       that, if the Intercreditor Agreement or the New Intercreditor Agreement
       shall so require, each of the Banks (other than the Sharing Bank) shall
       repay to the Sharing Bank the amount which the Sharing Bank distributed
       to that Bank.

23.3.  In the event of any dispute as to the proper implementation of this
       clause 23, including any dispute as to the proper interpretation of the
       Intercreditor Agreement or the New Intercreditor Agreement, the decision
       of the Majority Banks shall bind all the parties hereto.

24.    ASSIGNMENTS AND TRANSFERS

24.1.  This Agreement shall be binding upon and enure to the benefit of each
       party hereto and its or any subsequent permitted successors, transferees
       and permitted assigns.

24.2.  The Borrower shall not be entitled to assign or transfer all or any of
       its rights, benefits and obligations under any of the Finance Documents.
<PAGE>
                                      -82-


24.3.  Any Bank may, at any time, assign all or any of its rights, benefits and
       obligations under the Finance Documents to any bank or financial
       institution (including, benefit funds): (i) being an Affiliate of the
       Banks; or (ii) with the prior consent of the Borrower (not to be
       unreasonably withheld), any other banking corporation or financial
       institution, Israeli or foreign. Any Bank may also sell participations in
       the Loan to such bank or financial institution as such Bank may deem fit,
       provided that such Bank remains liable for its obligations under this
       Agreement.

24.4.  The Banks may at any time disclose to each other, as well as to any
       actual or potential assignee or transferee or participant (or other party
       entering into contractual arrangements to assume risks in relation to the
       Facility) in respect of the Finance Documents, such information about the
       Finance Documents and the Borrower and/or the Subsidiaries as the Banks
       shall consider appropriate, provided that such disclosure (except between
       the Banks themselves) shall be subject to the signature of an undertaking
       of confidentiality by the disclosee in such reasonable form and substance
       as the disclosing Bank shall determine. The Banks may also disclose any
       such information to the Bank of Israel, the Supervisor of Banks and any
       person acting on their behalf or any other governmental authority to
       which the Banks are subject, upon receipt by such Bank of a demand for
       such information from any such person or governmental authority.

25.    CASH CREDIT FACILITIES

25.1.  Pursuant to clauses 2.1.2 and 5.5 above, Bank Hapoalim and Bank Leumi
       hereby confirm to the Borrower and not to any other person or body that
       subject to Completion, the following Cash Credit Facilities, under which
       any credit granted will be repayable by no later than June 30, 2004
       (unless extended by the relevant lender), will be provided to the
       Borrower:

25.1.1.     US $15,000,000 (fifteen million United States Dollars) by Bank
            Hapoalim; and

25.1.2.     US $15,000,000 (fifteen million United States Dollars) by Bank
            Leumi;

       provided that the provision of the said Cash Credit Facilities by each of
       Bank Hapoalim and Bank Leumi shall be subject to agreement on the
       specific terms thereof between the Borrower and such Bank.
<PAGE>
                                      -83-


26.    BORROWER'S DEBENTURE; ADDITIONAL LENDERS

26.1.  It is agreed that subject to the terms and conditions of the Borrower's
       Debenture and clause 31 below, the Borrower's Debenture shall serve as
       security for:

26.1.1.     the Cash Credit Facilities to be provided by Bank Leumi and Bank
            Hapoalim (if provided) pursuant to clause 25 above, as extended (if
            extended) by the relevant lender;

26.1.2.     the Loan (including any part of the Loan provided by Bank Leumi and
            Bank Hapoalim pursuant to clause 29 below), in addition to the
            securities already provided for the Loan;

26.1.3.     all outstanding Off Balance-Sheet Facilities provided by Bank
            Hapoalim and Bank Leumi from time to time (including such facilities
            already provided on the date hereof); and

26.1.4.     the Additional Credit Facilities provided by Additional Lenders,
            subject to and in accordance with the provisions of clauses 26.2,
            26.3 and 26.4 below.

26.2.  It is understood and agreed that a new intercreditor agreement ("the New
       Intercreditor Agreement") will be entered into between Bank Hapoalim,
       Bank Leumi and the Trustee governing the Borrower's Debenture and the
       rights of the Secured Parties secured under the Borrower's Debenture. The
       New Intercreditor Agreement shall not contain any provisions regarding,
       inter alia, the status of Additional Lenders entitled to the benefit of
       the Borrower's Debenture that conflict with those specifically provided
       for in clauses 26.3 and 26.4 below.

26.3.  Any bank other than Bank Hapoalim and Bank Leumi ("an Additional Lender")
       providing the Borrower with Additional Credit Facilities of US $8,000,000
       (eight million United States Dollars) or more, of which at least US
       $3,000,000 (three million United States Dollars) is by way of Cash Credit
       Facilities, may (subject to clause 26.4 below) take the benefit of the
       Borrower's Debenture as security for such Additional Credit Facilities
       and become a Secured Party thereunder, subject to such bank becoming a
       party to the New Intercreditor Agreement, it being agreed that such
       Additional Credit Facilities shall include such facilities provided prior
       to the Additional Lender becoming a party to the Borrower's Debenture and
       still outstanding at that time.
<PAGE>
                                      -84-


26.4.  The New Intercreditor Agreement will provide, inter alia:

26.4.1.     that a Secured Party under the Borrower's Debenture shall only be
            entitled to benefit from the proceeds of any enforcement of the
            Borrower's Debenture if: (a) either: (i) the Borrower shall at such
            time have facilities outstanding secured under the Borrower's
            Debenture in excess of US $3,000,000 (three million United States
            Dollars) from such Secured Party; or (ii) if the amount of the
            facilities outstanding by the Borrower from such Secured Party and
            secured under the Borrower's Debenture shall be at least 331/3%
            (thirty-three and one-third percent) of the total amount of the
            facilities outstanding by Borrower from all Secured Parties and
            secured under the Borrower's Debenture; and (b) the other relevant
            terms and conditions of the New Intercreditor Agreement shall have
            been fulfilled; and

26.4.2.     that a Secured Party (or group of Secured Parties) under the
            Borrower's Debenture shall only be entitled to require the Trustee
            to commence proceedings for enforcement of the Borrower's Debenture
            if the Borrower shall have at such time facilities secured under the
            Borrower's Debenture and outstanding in excess of US $3,000,000
            (three million United States Dollars) from such Secured Party or
            group of Secured Parties, as the case may be, and such outstanding
            facilities shall constitute or include either: (i) 331/3%
            (thirty-three and one-third percent) of the aggregate of the
            Additional Credit Facilities held by the Borrower and outstanding at
            that time which are secured by the Borrower's Debenture as well as
            331/3% (thirty-three and one-third percent) of the aggregate Cash
            Credit Facilities included in the Credit Facilities held by the
            Borrower and outstanding at that time which are secured by the
            Borrower's Debenture; or (ii) 331/3% (thirty-three and one-third
            percent) of the aggregate of all facilities held by the Borrower
            secured under the Borrower's Debenture and outstanding at that time.

26.5.  It is understood and agreed further that the parties to the New
       Intercreditor Agreement shall agree a mechanism therein whereby a Secured
       Party under the Borrower's Debenture will release its interest therein,
       provided that all of the outstanding cash credit facilities owed to that
       Secured Party and secured under the Borrower's Debenture have been repaid
       and that the total value of the Off Balance-Sheet Facilities issued by
       such Secured Party and secured under the Borrower's Debenture and
       outstanding do not exceed US $10,000,000 (ten million United States
       Dollars), provided that the Borrower shall provide alternative securities
       in the form of pledged cash deposits or bank guarantees (from banks and
       in a form acceptable to such Secured Party) or such other securities to
       the full satisfaction of such Secured Party to secure the said
       outstanding Off Balance-Sheet Facilities and provided always that the
       creation by the Borrower of any Encumbrance (including the pledging of
       cash deposits or the giving of such other securities as aforesaid) in
       favour of such creditor shall require the prior written consent of Bank
       Hapoalim and Bank Leumi. Should the Borrower create such Encumbrance in
       favour of Bank Hapoalim and Bank Leumi, then only the consent of the
       other said bank shall be required. The provisions of this clause 26.5 do
       not derogate from the provisions of clause 27 below. For the purpose of
       this clause 26, "outstanding Off Balance-Sheet Facilities" shall be
       determined according to the exposure of the issuing bank in connection
       therewith, as determined by that bank.
<PAGE>
                                      -85-


27.    PLEDGE OF CASH DEPOSITS

       It is agreed that the Borrower shall be entitled, notwithstanding the
       terms of the Borrower's Debenture, to pledge cash deposits in order to
       secure buyers' credit (including, inter alia, interbank lines of credit)
       and discounting of receivables, invoices, bills or notes or of other
       similar financial assets, provided that:

27.1.       the amount of the pledged cash deposit for any such transaction
            shall not exceed 30% (thirty percent) of the value of such
            transaction; and

27.2.       the aggregate amount of the cash deposits pledged for all such
            transactions at any time shall not exceed US $25,000,000 (twenty
            five million United States Dollars).

28.    INSTRUCTIONS TO COLLATERAL AGENT

       The Banks shall procure that the Collateral Agent under the Borrower's
       Debenture shall issue notices pursuant to clauses 1.1.3, 1.1.4 and 1.1.12
       of the Borrower's Debenture as shall be appropriate, having regard to the
       provisions of this Agreement and the Security Documents, upon the written
       request of the Borrower or the written request of the Banks. It is
       understood that the Encumbrances referred to in clause 26.5 above and the
       pledge of cash deposits referred to in clause 27 above are intended to be
       "Excluded Security Interests" and the liabilities secured thereby are
       intended to be "Excluded Liabilities" for the purposes of the Borrower's
       Debenture. On the written request of any Bank from time to time, the
       Borrower shall furnish the requesting Bank with documentation and
       information necessary to ascertain that the pledge of cash deposits
       referred to in clause 27 above is in accordance with the provisions and
       limitations specified in that clause. It is understood further that the
       Encumbrances created prior hereto to secure the Borrower's liabilities
       under the Facility Agreement are also "Excluded Security Interests" for
       the purposes of the Borrower's Debenture.
<PAGE>
                                      -86-


29.    EXTENSION OF AVAILABILITY

29.1.  Bank Leumi and Bank Hapoalim each hereby agree to extend availability to
       the Borrower under the Facility of up to US $15,000,000 (fifteen million
       United States Dollars) ("the Extended Portion"), on the terms and
       conditions of this Agreement, subject to the following provisions of this
       clause 29 and provided that neither Bank shall be obliged to make
       available any part of the said US $15,000,000, if the provision of such
       financing would result in the total amount outstanding to such Bank under
       the Facility exceeding US $25,000,000 (twenty five million United States
       Dollars).

29.2.

29.2.1.     For the purpose of clause 4.1.8 above, compliance with the Financial
            Undertaking relating to the ratio between EBITDA and Debt Service
            shall be deemed to have been achieved if the ratio of EBITDA to Debt
            Service, assuming that the Advance has been made, shall be no less
            than 1.2:1 on the Ratio Determination Rate last occurring prior to
            the delivery of the Drawdown Request and the average of the ratio of
            EBITDA to Debt Service, assuming that the Advance has been made, on
            the last 2 (two) Ratio Determination Dates prior to the delivery of
            the Drawdown Request shall be no less than 1.1:1. Except for the
            purpose specified in this clause 29.2.1 above, the Financial
            Undertakings specified in clause 15.24 shall be those relevant for
            all purposes of the Agreement.

29.2.2.     Notwithstanding any other provisions of this Agreement, it is agreed
            that for the purposes of and with reference to the Extended Portion:
<PAGE>
                                      -87-


            (a)   the Availability Period shall mean the period commencing on
                  the Effective Date and ending on the Termination Date (as that
                  term is defined in paragraph (d) below of this clause 29.2.2);

            (b)   the Commitment of Bank Hapoalim and Bank Leumi shall be US
                  $15,000,000 (fifteen million United States Dollars) each;

            (c)   the Final Maturity Date shall mean the last Business Day of
                  the fourth Quarter of 2006;

            (d)   the Termination Date shall mean December 31, 2004;

            (e)   notwithstanding clause 4.3 above, the total of the Advances
                  from the Extended Portion made on any Drawdown Date shall be
                  deemed to constitute a separate loan and shall be repaid
                  separately as provided in paragraph (f) below of this clause
                  29.2.2 (and not combined with any other portion of the Loan on
                  any Termination Date; and

            (f)   notwithstanding the provisions of clause 4.6 above, the total
                  of the Advances from the Extended Portion made on any Drawdown
                  Date shall be repayable (half to each of Bank Leumi and Bank
                  Hapoalim) in equal instalments on each of the Quarter Days in
                  the period between the Drawdown Date and the Final Maturity
                  Date (as defined in paragraph (c) above) (including the
                  Quarter Day falling on the Final Maturity Date (as defined in
                  paragraph (c) above)).

29.2.3.     In implementing the provisions of clause 5.4 above, the reference to
            "Final Maturity Date" therein shall mean: (a) December 31, 2005 for
            the purpose of all "other sums" (within the meaning of that term in
            clause 5.4) then owing and due by the Borrower under the Finance
            Documents (other than sums owing and due on or with respect to the
            Extended Portion); and (b) December 31, 2006 for the purpose of all
            "other sums" (within the meaning of that term in clause 5.4) then
            owing and due by the Borrower under the Finance Documents on or with
            respect to the Extended Portion.
<PAGE>
                                      -88-


30.    INFORMATION

       The Borrower agrees that the Banks may at any time, amongst themselves,
       disclose to each other any information in respect of: (i) Drawdown
       Requests received, commitments made, Advances made and payments received
       from or by the Borrower, as the case may be, under the Facilities; and
       (ii) any other information in respect of the Finance Documents, the
       Material Contracts and obligations as the Bank, disclosing the same,
       deems appropriate.

31.    SUNDRY PROVISIONS REGARDING COLLATERAL

31.1.  Until discharge of all the Borrower's liabilities in respect of the
       Facility, the Long Term Security Documents shall serve only as security
       for the performance of the said liabilities. Following discharge as
       aforesaid and as provided in the Borrower's Debenture, the assets charged
       under the Long Term Security Documents (and any surplus of the proceeds
       of the realisation thereof not needed in satisfaction of obligations
       under the Facility) will become subject to the Borrower's Debenture.

31.2.  The Borrower's Debenture shall serve as security for the liabilities
       specified in clause 26.1 above.

31.3.  Subject to the provisions of clauses 31.1 and 31.2 above, the entitlement
       of each Bank to the proceeds of the realisation of the securities under
       any Security Document shall be pro rata to the amounts owing by the
       Borrower to the Banks and secured by such securities at the time of any
       distribution of such proceeds, except as otherwise provided in the
       Intercreditor Agreement or the New Intercreditor Agreement.

31.4.  Subject to clause 31.5 below, sale by the Borrower of any asset subject
       to a specific charge under the Security Documents shall be subject to the
       prior written consent of the Majority Banks, provided that if the
       Borrower shall wish to sell all or any of the said assets and shall
       propose alternative securities satisfactory to the Majority Banks or
       shall agree to pay the entire proceeds of the sale to the Banks in
       repayment of amounts secured by the charge on the said shares and the
       Majority Banks shall be satisfied that the position of the Banks is not
       materially adversely affected by such sale, the Majority Banks shall give
       the required consent.
<PAGE>
                                      -89-


31.5.

31.5.1.     The Borrower hereby warrants, represents and confirms that pursuant
            to and in accordance with the conditions of the letter agreement
            dated April 22, 2004, a copy of which is attached as Schedule 31.5.1
            hereto ("the ECtel Consent Letter"), the Borrower has duly
            distributed to its shareholders by way of a dividend 7,600,000
            (seven million six hundred thousand) shares in ECtel previously held
            by the Borrower and the parties record that pursuant to the ECtel
            Consent Letter and in reliance on the representation, warranty and
            confirmation of the Borrower that the said shares have been duly
            distributed to the Borrower's shareholders as aforesaid, the Banks
            have agreed by Deed of Amendment, attached as Schedule 1.1.48(c)
            hereto, to the release of the said shares from the ECtel Share
            Debenture.

31.5.2.     The sale of the balance of the Borrower's shares in ECtel following
            the distribution set out in the ECtel Consent Letter shall be
            subject to the prior written consent of the Majority Banks and such
            consent shall be given, if the Majority Banks have confirmed in
            writing that they are satisfied, that in the event of such sale, 75%
            (seventy-five percent) of the proceeds will be applied in prepayment
            of the Loan and the remaining 25% (twenty-five percent) for the
            benefit of the Borrower's current activities.

31.6.  Notwithstanding the provisions of the Borrower's Debenture or any other
       provision of this Agreement, the Borrower shall be entitled to sell all
       of its rights pursuant to the GVT Tranche A Agreement and the GVT Tranche
       B Agreement, provided that the Borrower has submitted to the Banks a
       certificate, in form and content satisfactory to the Majority Banks, that
       the price of such sale is both no less than 85% (eighty-five percent) of
       the value of those rights as stated in the Borrower's books and also no
       less than US $70,000,000 (seventy million United States Dollars).

31.7.  Notwithstanding the provisions of the Veraz Letter, it is agreed that the
       Veraz Loan Pledge and Assignment, shall be created by no later than the
       grant by the Borrower of the credit facility referred to in clause (b)(i)
       of the Veraz Letter and as a condition thereto.

32.    EURO FACILITIES

       Notwithstanding the references in clauses 25.1 and 29.1 above to the
       provision of Facilities in US Dollars, it is agreed that if the Borrower
       should so request, from any Bank, the references in such clauses to US
       Dollars shall be read, in whole or in part, for the purpose of Facilities
       to be provided by such Bank, as references to Euros, provided that such
       Bank shall have determined, in its absolute discretion and has so
       confirmed in writing to the Borrower, that it has the necessary sources
       for the required Euro funds and, provided further, that all the other
       conditions for the provision of such Facility shall have been fulfilled
       to the satisfaction of such Bank.
<PAGE>
                                      -90-


33.    REMEDIES AND WAIVERS

       No failure to exercise, nor any delay in exercising, on the part of the
       Banks, or of the Borrower, of any right or remedy hereunder shall operate
       as a waiver thereof, nor shall any single or partial exercise of any
       right or remedy prevent any further or other exercise thereof or the
       exercise of any other right or remedy. No waiver shall be effective
       unless made in writing on behalf of the waiving party by the authorised
       signatories of that party. The rights and remedies herein provided are
       cumulative and not exhaustive of any rights or remedies provided by law.

34.    NOTICES

34.1.  Notices to be given hereunder shall be in writing and may be given
       personally, by facsimile or, if not available, as required by clause 34.2
       below. Any notice to be given to the Banks must be given during normal
       banking hours of the Banks to the person and at the address designated
       below. If notice is sent by facsimile during normal banking hours as
       aforesaid, it shall be deemed to have been served when confirmation of
       receipt by the intended recipient has been received. All notices given by
       facsimile shall be confirmed by letter despatched in the manner provided
       in clause 34.2 within 24 (twenty-four) hours of transmission.

34.2.  Any other notices to be given hereunder shall be served on a party by
       prepaid express registered letter (or nearest equivalent) to its address
       given below or such other address as may from time to time be notified
       for this purpose and any notice so served shall be deemed to have been
       served within 5 (five) days after the time at which such notice was
       posted and in proving such service, it shall be sufficient to prove that
       the notice was properly addressed and posted:
<PAGE>
                                      -91-


34.2.1.     to the Borrower at:          ECI Telecom Ltd.
                                         30 Hasivim Street
                                         Petach Tiqva 49517
                                         Israel
                                         Facsimile:  (03) 926 6700
                                         Attention:  Chief Financial Officer

34.2.2.                                  to ECI-NGTS at: ECI
                                         Telecom-NGTS Ltd. 30 Hasivim
                                         Street
                                         Petach Tiqva 49517
                                         Israel
                                         Facsimile:  (03) 926 6700
                                         Attention:  Chief Financial Officer

34.2.3.     to ECI-Optical at:           Lightscape Networks Ltd.
                                         30 Hasivim Street
                                         Petach Tiqva 49517
                                         Israel
                                         Facsimile:  (03) 926 6700
                                         Attention:  Chief Financial Officer

34.2.4.     to ECI-Transport at:         Enavis Networks Ltd.
                                         30 Hasivim Street
                                         Petach Tiqva 49517
                                         Israel
                                         Facsimile:  (03) 926 6700
                                         Attention:  Chief Financial Officer

34.2.5.     to Waveinno at:              ECI Waveinno
                                         Ltd.
                                         4 Hashiloach Street
                                         Petach Tiqva 49104
                                         Israel
                                         Facsimile:  (03) 926 6700
                                         Attention:  Chief Financial Officer

34.2.6.     to Bank Leumi at:            Corporate Division
                                         32 Yehuda Halevi Street
                                         Tel-Aviv
                                         Facsimile:  (03) 514 9017
                                         Attention:  Head of Technology and
                                         Telecommunications Sector

34.2.7.     to Bank Hapoalim at:         Corporate Banking Division
                                         Zion Building
                                         41-45 Rothschild Boulevard
                                         Tel-Aviv
                                         Facsimile:  (03) 567 3849
                                         Attention:  Tzahi Cohen
<PAGE>
                                      -92-


35.    AMENDMENTS

       Any addition, variation, modification or amendment to this Agreement
       shall not be effective unless any such addition, variation, modification
       or amendment is in writing and signed by the authorised signatories of
       the Banks and the Borrower.

36.    COUNTERPARTS

       This Agreement may be executed in any number of counterparts and all of
       such counterparts taken together shall be deemed to constitute one and
       the same instrument.

37.    GOVERNING LAW AND JURISDICTION

       This Agreement shall be governed by and shall be construed in accordance
       with Israeli law and the courts of Tel-Aviv-Jaffa shall have exclusive
       jurisdiction to hear any matters, provided that the Banks shall be
       entitled to sue the Borrower in any jurisdiction in which it has an
       office or holds assets.

38.    ENTIRE AGREEMENT

       With effect from Completion, this Agreement constitutes the entire
       agreement between the parties with respect to the subject-matter hereof
       and supersedes any prior agreement, or arrangement amongst the parties,
       including the Letter Agreement, except for the Security Documents and
       except for the Veraz Letter and the Waveinno Letter. The Original
       Facility Agreement continues to govern the period prior to Completion
       (subject, as to the period after signature of the Letter Agreement, to
       the amendments made thereto pursuant to the Letter Agreement) and, except
       as expressly otherwise provided in clause 3.11 above, no waiver of any
       rights of action under the Original Facility Agreement (as amended as
       aforesaid) is made by Bank Leumi or Bank Hapoalim. Any addition or
       amendment to this Agreement shall not be effective unless in writing
       signed by the authorised signatories of both the parties. In the event of
       any conflict between the Veraz Letter and this Agreement or between the
       Waveinno Letter and this Agreement, the terms of this Agreement shall
       govern.
<PAGE>
                                      -93-


IN WITNESS WHEREOF, the parties have signed this Amending and Restating
Agreement on the date first mentioned above.

for:   ECI TELECOM LTD.                  for:  ECI-WAVEINNO LTD.


By:    /s/ S. Gitlin                     By: /s/ S. Gitlin
       ------------------------------        -----------------------------------
Title:                                   Title:
       ------------------------------           --------------------------------


for:   INOVIA TELECOMS LTD.              for:  ECI TELECOM-NGTS LTD.

By:    /s/ S. Gitlin                     By: /s/ S. Gitlin
       ------------------------------        -----------------------------------
Title:                                   Title:
       ------------------------------           --------------------------------


for:   LIGHTSCAPE NETWORKS LTD.          for:  ENAVIS NETWORKS LTD.


By:    /s/ S. Gitlin                     By: /s/ S. Gitlin
       ------------------------------        -----------------------------------
Title:                                   Title:
       ------------------------------           --------------------------------

Certificate of Counsel

I, the undersigned, M. Borenstein, Advocate, hereby certify (i) that all
approvals and actions necessary for the entering into and performance of the
Amended and Restating Agreement above ("the Agreement") by ECI Telecom Ltd.,
Invoia Telecoms Ltd., ECI Telecom NGTS Ltd., Lightscape Networks Ltd., Enavis
Networks Ltd. and ECI-Waveinno Ltd. ("the Companies") have been duly obtained
and taken and (ii) that the person who has signed the Agreement above on behalf
of each of the Companies has been duly authorised to do so and his signature
above binds the Company on behalf of which he has signed.


                                         /s/ M. Borenstein
                                             Marc Borenstein Adv.

for:   BANK LEUMI LE-ISRAEL B.M.              for:  BANK HAPOALIM B.M.

By: /s/indecipherable /s/indecipherable  By: /s/indecipherable /s/indecipherable
   ------------------------------------  ---------------------------------------
Title:                                   Title:
       ------------------------------           --------------------------------