LOAN AGREEMENT

                               dated May 5, 1998

                                    between

                        BANK HAPOALIM B.M. (the "Bank")

                                      and

               PEC ISRAEL ECONOMIC CORPORATION (the "Borrower")
<PAGE>

                              TABLE OF CONTENTS


      Clause                  Title
      ------                  -----

      1.                DEFINITIONS
      2.                INTERPRETATION
      3.                AVAILABILITY AND DISBURSEMENT OF THE LOAN
      4.                INTEREST
      5.                REPAYMENT OF THE LOAN
      6.                PREPAYMENT
      7.                DEFAULT INTEREST
      8.                TIME, PLACE AND MANNER OF PAYMENT
      9.                CONDITIONS PRECEDENT
      10.               REPRESENTATIONS AND WARRANTIES
      11.               UNDERTAKINGS
      12.               FINANCIAL UNDERTAKINGS
      13.               EVENTS OF DEFAULT
      14.               CHANGES IN CIRCUMSTANCES
      15.               SET-OFF AND APPLICATION OF PAYMENTS
      16.               THE BORROWER'S DUTY TO NOTIFY
      17.               COMPENSATION FOR BROKEN FUNDING
      18.               REMEDIES AND WAIVERS
      19.               DISCLOSURE OF INFORMATION
      20.               ASSIGNMENT
      21.               ADDITIONAL PROVISIONS
      22.               AUTHORIZED SIGNATORIES
      23.               NOTICES
      24.               GOVERNING LAW AND JURISDICTION
      25.               CURRENCY INDEMNITY
      26.               SEVERABILITY
      27.               AMENDMENTS AND WAIVERS


                                     (i)
<PAGE>

                                   EXHIBITS

      EXHIBIT 1               FORM OF NOTE

      EXHIBIT 2               OPINION OF COUNSEL

      EXHIBIT 3               PENDING LITIGATION

      EXHIBIT 4               FORM OF AUDITOR'S CERTIFICATE


                                     (ii)
<PAGE>

                                LOAN AGREEMENT


THIS LOAN AGREEMENT is dated the 5th day of May, 1998

                           and made by and between:

BANK HAPOALIM B.M., a banking corporation organized and existing under the laws
of the State of Israel, acting through its New York branch at 1177 Avenue of the
Americas, New York, NY 10036 (hereinafter the "Bank").

                                      and

PEC ISRAEL ECONOMIC CORPORATION, a corporation organized and existing under the
laws of the State of Maine, U.S.A. and having its principal office at 511 Fifth
Avenue, New York, NY 10017 (hereinafter the "Borrower").

WHEREAS:

(1)   The Borrower has requested the Bank to grant it a loan in the sum of U.S.
      $20,000,000 (Twenty Million United States Dollars).

(2)   The purpose for which the Loan has been requested is to provide funds for
      working capital.

(3)   The Bank has agreed to make a loan available to the Borrower upon the
      terms and subject to the conditions hereinafter appearing;

NOW IT IS HEREBY AGREED as follows:

1.    DEFINITIONS

      In this Agreement, the following words and expressions shall bear the
      following meanings unless the context otherwise requires:

      "Alternative Rate" shall mean an annual rate of interest equal to the
      Prime Rate plus the Margin.

      "Bank" shall mean Bank Hapoalim B.M. and any of its branches or offices
      existing on the date hereof and/or to be subsequently opened, as well as
      its successors, assignee, or attorneys in fact.

      "Bank's Books" shall be construed so as to include any book, record,
      statement of account and copy of any statement of account, loan agreement,
      deed of undertaking, customers' bill, card index, page, film, means of
      storage and retrieval of data via computer, and any other means of storage
      and retrieval of data.
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                                     -2-

      "Banking Day" shall mean any day on which both (a) banks are regularly
      open for business in New York City and (b) the Branch is open for ordinary
      business, provided that, (1) in the Bank's discretion, the Branch may be
      closed on any Saturday, Sunday, legal holiday or other day on which it is
      lawfully permitted to close; and (2) with respect to any day upon which a
      payment or transfer of funds is to be made under this Agreement, the term
      "Banking Day" shall mean a day on which commercial banks and foreign
      exchange markets are open for business in London and New York.

      "Branch" shall mean the New York Branch of the Bank.

      "Closing Date" shall mean May 5, 1998.

      "Consolidated Net Worth" means the Borrower's stockholder's equity which
      would appear as such on a consolidated balance sheet of the Borrower
      prepared in accordance with GAAP, except that if the Borrower shall no
      longer be subject to the reporting requirements of the Securities Exchange
      Act of 1934 or any successor legislation, Consolidated Net Worth shall
      mean the Borrower's shareholders' equity as set forth on the financial
      statements delivered by the Borrower to the Bank pursuant to Clauses
      11.1(g) and 11.1(h).

      "Consolidated Tangible Net Worth" means (a) Consolidated Net Worth less
      (b) all intangible items reflected therein, including all goodwill, all
      intangible plant expansion costs, all unamortized debt discount and
      expense, unamortized research and development expense, unamortized
      deferred charges, patents, trademarks, service marks, trade names,
      copyrights, unamortized excess cost of investment in subsidiaries over
      equity at dates of acquisition, and all similar items which should
      properly be treated as intangibles in accordance with GAAP.

      "Control" (including the terms "Controlling", "Controlled by" and "Under
      common Control with") means the possession, direct or indirect, of the
      power to direct or cause the direction of management and policies of a
      person, whether through the ownership of voting securities, by contract or
      otherwise.

      "Debt" means, with respect to a Person and at the time of determination
      thereof, all of the following (without duplication): (a) obligations of
      such Person in respect of money borrowed; (b) obligations of such Person
      (other than trade debt incurred in the ordinary course of business), (i)
      represented by notes payable, or drafts accepted, in each case
      representing extensions of credit, (ii) evidenced by bonds, debentures,
      notes or similar instruments, or (iii) constituting purchase money
      indebtedness, conditional sales contracts, title retention debt
      instruments or other similar instruments, upon which interest charges are
      customarily paid or that are issued or assumed as full or partial payment
      for property, it being understood that deferred or contingent payment
      obligations for capital contributions or equity securities in an amount of
      up to $50,000,000 (Fifty
<PAGE>

                                     -3-

      Million Dollars) shall not constitute Debt; (c) obligations of such Person
      in respect of mandatorily redeemable securities issued by such Person; (d)
      capitalized lease obligations of such Person; (e) all reimbursement
      obligations of such Person under any letters of credit or acceptances
      (whether or not the same have been presented for payment); and (f) all
      Debt of other Persons which (i) such Person has guaranteed or (ii) are
      secured by a lien on any property of such Person (whether or not such
      Person has assumed liability with respect to such Debt).

      "Encumbrance" shall mean any mortgage, pledge, lien, charge, assignment,
      hypothecation, security interest, deposit arrangement, encumbrance,
      charge, priority or other security agreement or preferential right or
      trust arrangement or other agreement or arrangement of any kind or nature
      whatsoever (including, without limitation, any conditional sale or title
      retention agreement and any financing lease having substantially the same
      economic effect of any of the foregoing) the effect of any of which is the
      creation of a security interest or lien.

      "Event of Default" shall mean any of the events or circumstances described
      in Clause 13.

      "GAAP" means accounting principles as promulgated from time to time in
      statements, opinions and pronouncements by the American Institute of
      Certified Public Accountants and the Financial Accounting Standards Board
      and in such statements, opinions and pronouncements of such other entities
      with respect to financial accounting of for-profit entities as shall be
      accepted by a substantial segment of the accounting profession in the
      United States.

      "Indebtedness" shall mean any obligation (whether present or future,
      actual or contingent secured or unsecured and whether as principal,
      surety, or otherwise) for the payment or repayment of money.

      "Interest Period" shall mean:

            (i)   a period commencing on the Closing Date and ending 180 days
                  thereafter;

            (ii)  thereafter, each period commencing on the last day of the
                  preceding Interest Period and ending 180 days thereafter;

            provided that,

                  (1)   if any Interest Period would otherwise end on a day that
                        is not a Banking Day, such Interest Period shall be
                        extended to the next succeeding Banking Day unless the
                        result of such extension would be to carry such Interest
                        Period into another calendar month in
<PAGE>

                                     -4-

                        which event such Interest Period shall end on the
                        immediately preceding Banking Day; and

                  (2)   any Interest Period that would otherwise extend beyond
                        the Maturity Date shall end on the Maturity Date.

      "Libor" in relation to any Interest Period shall mean:

      the rate or rates established by the Branch two Working Days prior to the
      first day of that Interest Period, by applying the following: (i) the
      British Bankers Association ("BBA") Interest Settlement Rates for U.S.
      Dollars, as defined in the BBA official definitions and reflected on the
      Telerate BBA pages, for an amount equal to the principal amount of the
      Loan outstanding from time to time and for the relevant Interest Period,
      which rates reflect the offered rates at which deposits are being quoted
      to prime banks in the London Interbank Market at 11:00 a.m. London Time
      calculated as set forth in said BBA official definition; or (ii) such
      other recognized source of London Eurodollar deposit rates as the Bank may
      determine from time to time. In the event the applicable BBA page or pages
      shall be replaced by another Telerate page or other Telerate pages for
      quoting London Eurocurrency rates, then rates quoted on said replacement
      page or pages shall be applied. If the Bank determines that London
      Eurocurrency rates are no longer being quoted (temporarily or permanently)
      on any Telerate pages or that Telerate is no longer functioning
      (temporarily or permanently) in substantially the same manner as on the
      date hereof, then the Bank shall notify the Borrower of a comparable
      substitute, publicly available reference for the determination of LIBOR.

      "Loan" shall mean the amount of U.S. $20,000,000 to be disbursed to the
      Borrower under the provisions of this Agreement.

      "Margin" shall mean zero point seventy four percent (0.74%) per annum.

      "Note" shall mean the promissory note of the Borrower evidencing the Loan
      in the form set out in Exhibit 1 hereto.

      "Prime Rate" shall mean the Bank's New York Branches stated Prime Rate as
      reflected in its books and records as such Prime Rate may change from time
      to time. The Bank's determination of its Prime Rate shall be conclusive
      and final. The Prime Rate is a reference rate and not necessarily the
      lowest interest rate charged by the Bank.

      "US $" or "United States Dollars" or "U.S. Dollars" or "Dollars" shall
      mean the lawful currency of the United States of America, and in respect
      of all payments to be made under this Agreement, shall mean funds which
      are for same day settlement in the New York Federal Reserve Payment System
      (or such other Dollar funds as may, from time to time, be customary for
      the settlement of international banking transactions denominated in United
      States Dollars).
<PAGE>

                                     -5-

      "Working Day" shall mean a Banking Day on which banks are regularly open
      for business in New York.

2.    INTERPRETATION

      2.1 In this Agreement, unless the context otherwise requires:

            (a)   references to Clauses and Exhibits are to clauses of, and
                  exhibits to this Agreement;

            (b)   references to this Agreement include its Exhibits, and shall
                  be construed as references to this Agreement as the same may
                  be amended, novated or supplemented from time to time;

            (c)   the words "hereof", "hereunder" and similar words shall be
                  construed as references to this Agreement as a whole and not
                  limited to the particular Clause or provision in which the
                  relevant reference appears;

            (d)   the word "person" shall be construed so as to include any
                  person, firm, company, corporation, unincorporated body of
                  persons or any state or government or any agency thereof;

            (e)   a "subsidiary" of a person is a reference to an entity of
                  which that person has Control or owns more than fifty per cent
                  (50%) of the share capital or similar right of ownership;

            (f)   "Taxes" shall be construed so as to include all present and
                  future income and other taxes, levies, imposts, duties,
                  charges, fees, deductions and withholdings whatsoever together
                  with interest thereon and penalties with respect thereto, if
                  any, and any payment of principal, interest charges, fees or
                  other amounts made on or in respect thereof, and "Tax" and
                  "Taxation" and similar words shall be construed accordingly;

            (g)   references to any statute or statutory provision shall be
                  construed as a reference thereto as the same may have been, or
                  may from time to time be, amended or re-enacted;

            (h)   references to times of the day are to New York time unless
                  otherwise specifically indicated to the contrary; and

            (i)   references to the singular shall include the plural and vice
                  versa.

      2.2   The headings in this Agreement and the Table of Contents are
            inserted for convenience only and shall be ignored in the
            interpretation or construction of this Agreement.
<PAGE>

                                     -6-

      2.3   The preamble to this Agreement shall form an integral part thereof.

      2.4   This Agreement forms an integral part of the Borrower's application
            to open an account at the Branch and of the general conditions for
            operating such accounts which have been signed by the Borrower
            (hereinafter the "Application").

      2.5   The Borrower's obligations contained in this Agreement are in
            addition to those contained in the Application and nothing in this
            Agreement shall derogate from any of the Bank's rights provided for
            in the Application.

3.    AVAILABILITY AND DISBURSEMENT OF THE LOAN

      Subject to the terms of this Agreement, and in particular to the
      provisions contained in Clause 9, the Bank shall make the Loan available
      to the Borrower through the Branch on the Closing Date.

4.    INTEREST

      4.1   the Borrower shall pay interest on the outstanding balance of the
            principal amount of the Loan at a rate determined by the Bank to be
            the aggregate of LIBOR and the Margin for each Interest Period, with
            the initial Interest Period commencing on the Closing Date.

      4.2   Interest (other than Default Interest) shall be paid by the Borrower
            to the Bank on the last day of each Interest Period and at maturity
            (whether by acceleration or otherwise).

      4.3   All interest payable under this Agreement shall accrue from day to
            day and shall be calculated on the basis of the actual number of
            days elapsed, and a year of 360 days.

      4.4   Notwithstanding anything to the contrary contained herein, in no
            event shall the Borrower be obligated to pay interest or Default
            Interest in excess of the maximum amount which is chargeable under
            applicable law.

5.    REPAYMENT OF THE LOAN

      The Borrower shall repay the unpaid principal amount of the Loan to the
      Bank in 11 consecutive semi-annual installments of $1,666,666.66 (One
      Million Six Hundred Sixty-Six Thousand Six Hundred and Sixty-Six Dollars
      and Sixty-Six Cents) and a final installment which shall consist of the
      remaining unpaid balance of the Loan. The first such installment shall be
      due on November 5, 2003. Each subsequent installment shall be due on the
      next Interest Payment Date until maturity on May 5, 2009.
<PAGE>

                                     -7-

6.    PREPAYMENT

      6.1   Provided that no Event of Default and/or any event which the lapse
            of time or giving of notice or both would constitute an Event of
            Default, has occurred and is continuing, the Borrower may, on any
            Interest Payment Date, upon giving in each case at least 5 (five)
            Banking Days prior written notice to the Bank (which shall be
            irrevocable and shall constitute the Borrower's undertaking to
            prepay accordingly), prepay the principal amount of the Loan
            outstanding from time to time in whole or in part, being in each
            instance not less than the least of (i) U.S. $1,000,000, (One
            Million Dollars) or (ii) the outstanding principal amount of the
            Loan at such time, together with accrued interest to such date on
            the principal amount of the Loan prepaid.

      6.2   If the Borrower notifies the Bank of its intention to prepay any
            amount under the provisions of this Agreement but does not so prepay
            in accordance with such notification, the Borrower shall indemnify
            the Bank and hold the Bank harmless against any loss or expense
            which the Bank shall certify as actually sustained or incurred by it
            as a consequence of not having been prepaid in accordance with such
            notification, and shall pay to the Bank the full amount so certified
            on demand.

      6.3   The Borrower may not prepay the Loan or any part thereof save as
            expressly provided in this Agreement.

7.    DEFAULT INTEREST

      7.1.  In the event that the Borrower shall not pay any amount payable by
            the Borrower hereunder on its due date, the Bank in its sole
            discretion may determine that such overdue amount shall bear default
            interest from the date due until the date of actual payment at the
            rate determined by the Bank to be 2% (two percent) per annum above
            the Prime Rate ("Default Interest").

      7.2   The Borrower shall pay Default Interest on sums payable by the
            Borrower under this Agreement, such Default Interest being payable
            from the date of the Event of Default or from the date of a demand
            for payment (in respect of sums payable on demand) until the date of
            actual payment.

      7.3   Default Interest shall be due and payable on demand, and shall be
            compounded monthly and calculated on the basis of the actual number
            of days elapsed and a year of 360 days.
<PAGE>

                                     -8-

8.    TIME, PLACE AND MANNER OF PAYMENT

      8.1   All payments to be paid by the Borrower hereunder shall be made to
            the Bank with the same day value free of any Taxes and without
            set-off or counterclaim, in lawful and freely transferable U.S.
            Dollars and in funds available to the Bank at the Branch or at any
            other place nominated by the Bank in the United States of America.

      8.2   (a)   Any and all payments by the Borrower to the Bank under this
                  Agreement and the Note shall be made free and clear of, and
                  without deduction for, any Taxes, provided that, if the
                  Borrower shall be required by law to deduct any Taxes from any
                  such payments, (i) the sum payable shall be increased as
                  necessary so that after making all required deductions
                  (including deductions applicable to additional sums payable
                  under this Clause) the Bank receives an amount equal to the
                  sum it would have received had no such deductions been made,
                  (ii) the Borrower shall make such deductions, (iii) the
                  Borrower shall pay the full amount deducted to the relevant
                  taxation authority or other authority in accordance with
                  applicable law, and (iv) the Borrower shall furnish to the
                  Bank the original or a certified copy of a receipt evidencing
                  payment thereof.

            (b)   The Borrower agrees to indemnify the Bank for the full amount
                  of Taxes not currently applicable (including, without
                  limitation, any Taxes imposed or asserted by any jurisdiction
                  on amounts payable under this Clause) paid by the Bank with
                  respect to the Loan and any liability (including penalties,
                  interest and expenses) arising therefrom or with respect
                  thereto; provided, however, that the Borrower shall not be
                  required to indemnify the Bank under this Clause for any Taxes
                  imposed on the Bank's income, franchise, branch profits or
                  similar Taxes imposed on it. This indemnification shall be
                  paid within 30 days after the Bank makes written demand
                  therefor (which demand shall identify the nature and the
                  amount of Taxes for which indemnification is being sought).

            (c)   If the Borrower becomes liable to pay any amounts to the Bank
                  pursuant to this Clause 8.2, it shall have the right to prepay
                  the Loan pursuant to Clause 6, but at any time upon notice as
                  provided therein.

      8.3   All payments to be paid by the Borrower to the Bank hereunder shall
            be made on a Banking Day. If any payment is due on a day which is
            not a Banking Day, such payment shall be made on the next succeeding
            Banking Day, in which case the Borrower shall pay interest to the
            Bank on such deferred payment from the date due until the date of
            actual payment at the rate specified in Clause 4.
<PAGE>

                                     -9-

      8.4   All amounts to be paid hereunder shall be paid no later than 2:00
            p.m. on the relevant Banking Day. If any sum is paid after 2:00 p.m.
            it shall be deemed to have been paid at 9:30 a.m. on the next
            succeeding Banking Day.

      8.5   If any sum to be paid hereunder shall be paid by the Borrower on a
            day other than a Banking Day it shall be deemed to have been paid on
            the next succeeding Banking Day.

9.    CONDITIONS PRECEDENT

      The obligation of the Bank to make the Loan available to the Borrower
      shall be subject to the conditions that (a) no Event of Default and/or any
      event which with the giving of notice or the lapse of time or both would
      constitute an Event of Default has occurred or is continuing and (b) that
      on or before the Closing Date, the Borrower shall have fulfilled all the
      conditions and carried out all the acts hereinafter set out to the full
      satisfaction of the Bank and (c) the Borrower shall have delivered to the
      bank the documents hereinafter set out in form and substance satisfactory
      to the Bank:

            (a)   Certified true copies of the resolutions of the Executive
                  Committee of the Board of Directors of the Borrower
                  authorizing the borrowing under this Agreement, authorizing
                  the opening of the Borrower's New York Account and providing
                  for the persons authorized to sign this Agreement and any
                  document or instrument hereunder and thereunder in the name
                  and on behalf of the Borrower;

            (b)   Opinion of the legal counsel of the Borrower acceptable to the
                  Bank, dated as of the date of this Agreement substantially in
                  the form of Exhibit 2 hereto and forming an integral part
                  hereof;

            (c)   the Note duly executed by the Borrower;

            (d)   State Certificates as to the Borrower:

                  (1)   A copy of the Articles of Organization of the Borrower
                        and each amendment, if any, thereto, certified by the
                        Secretary of State of the State of Maine (as of a date
                        reasonably near the Closing Date) as being true and
                        correct copies of such documents on file in his office.

                  (2)   The signed Certificate of the Secretary of State of the
                        State of Maine (dated reasonably near the Closing Date),
                        listing the Articles of Organization of the Borrower and
                        each amendment, if any, thereto, on file in his office
                        and stating that such documents
<PAGE>

                                     -10-

                        are the only constitutive documents of the Borrower on
                        file in his office and that the Borrower is duly
                        organized and in good standing in the State of Maine.

            (e)   Signed Certificate of Secretary of the Borrower dated the
                  Closing Date certifying the incumbency and specimen signatures
                  of the persons authorized to execute the Agreement and the
                  Note;

            (f)   Such additional agreements, opinions, certifications,
                  instruments, documents, orders, consents, financing
                  statements, reports, audits and other information in form and
                  substance reasonably satisfactory to the Bank as the Bank may
                  reasonably request.

10.   REPRESENTATIONS AND WARRANTIES

      10.1 The Borrower represents and warrants to the Bank that:

            (a)   the Borrower is a corporation, duly organized and validly
                  existing and in good standing under the laws of the State of
                  Maine and has the full power, authority and legal right to own
                  its assets and conduct its business as is now being conducted;

            (b)   the Borrower has the full power, authority and legal right to
                  enter into, exercise its rights and perform its obligations
                  under this Agreement;

            (c)   all necessary consents and authorities for the Borrower to
                  enter into and perform its obligations under this Agreement
                  and the Note have been obtained and no further consents or
                  authorities are necessary;

            (d)   the obligations of the Borrower under this Agreement will,
                  when executed by the Borrower, be legal, valid, binding and
                  enforceable against the Borrower in accordance with their
                  terms, subject to (i) applicable bankruptcy, insolvency,
                  reorganization, moratorium or similar laws affecting the
                  enforcement of creditors' rights generally and (ii) general
                  principles of equity;

            (e)   the execution, delivery and performance by the Borrower of its
                  obligations under this Agreement and the Note will not (i)
                  contravene any existing law, regulation or authorization to
                  which the Borrower is subject, (ii) result in any breach of or
                  default under any agreement or other instrument to which the
                  Borrower is a party or is subject or (iii) contravene any
                  provision of the Borrower's constitutional documents;
<PAGE>

                                     -11-

            (f)   the Borrower is not in breach of or in default under any other
                  document or agreement to which it is a party, or by which it
                  is bound, or any permit granted to it which may materially
                  impair its ability to fulfill its obligations hereunder;

            (g)   no action, litigation, arbitration or administrative
                  proceeding is current, pending or threatened against the
                  Borrower except as set forth in Exhibit 3;

            (h)   there is not in existence nor to the Borrower's knowledge is
                  there likely to occur any dispute with any governmental or
                  other authority or any other dispute of any kind which in any
                  such case, may materially adversely affect it or its business
                  or assets;

            (i)   no event has occurred, and is continuing that constitutes, or
                  that with the giving of notice or the lapse of time or both,
                  would constitute, an Event of Default;

            (j)   no Encumbrance exists over all or any part of the assets of
                  the Borrower except for purchase money mortgages or purchase
                  money liens or security interests as described in Clause
                  12.2(a) in the amount of $1,100,000 (One Million One Hundred
                  Thousand United States Dollars);

            (k)   all written information which has been given by or on behalf
                  of the Borrower to the Bank, or to its representatives in
                  connection with, or in the course of the negotiations leading
                  to this Agreement was when given and is now (except to the
                  extent revised by subsequent written notice to the Bank prior
                  to the Closing Date) true, accurate and complete in all
                  material respects and there are no facts relating thereto, the
                  omission of which would render misleading in any material
                  respect any such information supplied to the Bank;

            (l)   the audited financial statements to be delivered to the Bank
                  from time to time will have been prepared in accordance with
                  generally accepted accounting principles and practices in the
                  United States of America, will be prepared on a consistent
                  basis, and the audited and unaudited financial statements will
                  fairly present the financial position of the Borrower for the
                  period in respect of which they were prepared, subject, with
                  respect to the unaudited financial statements, to normal
                  year-end adjustments and subject to the provisions of Clauses
                  11.1(g) and 11.1(h);

            (m)   the choice by the Borrower of New York law to govern this
                  Agreement and the submission by the Borrower in this Agreement
                  to the jurisdiction of the competent state and federal courts
                  sitting in the State of New York are valid and binding;
<PAGE>

                                     -12-

            (n)   neither the Borrower nor any of its assets is entitled to
                  immunity on the grounds of sovereignty or otherwise from any
                  legal action or proceeding (which shall include, without
                  limitation, suit, attachment before or after judgment,
                  execution or other enforcement);

            (o)   the Borrower is not an "investment company" within the meaning
                  of the Investment Company Act of 1940, as amended, by reason
                  of the provisions of Section 3(b)(2) of such Act. The Borrower
                  is not subject to regulation under any federal or state
                  statute or regulations that limits its ability to incur
                  indebtedness;

            (p)   the making of the Loan pursuant to this Agreement does not
                  contravene Regulation U of the Board of Governors of the
                  Federal Reserve System as in effect on the date hereof;

            (q)   the Borrower is not engaged principally in the business of
                  extending credit for the purpose of purchasing or carrying any
                  "Margin Stock" as defined in Regulation U of the Federal
                  Reserve Board;

            (r)   the Borrower's principal office is located at 511 Fifth
                  Avenue, New York, NY 10017.

      10.2  The representations and warranties of the Borrower contained in
            Clause 10.1 in this Agreement shall be deemed to be repeated by the
            Borrower on each day from the date of this Agreement until all
            monies due or owing under this Agreement and the Note have been
            repaid and paid in full as if made with reference to the facts and
            circumstances existing on each such day except that Borrower may
            incur purchase money mortgages or other purchase money liens or
            security interests as permitted by Clause 12.2(a).

11.   UNDERTAKINGS

      11.1  The Borrower undertakes with the Bank that so long as any monies are
            owing under this Agreement or the Note it will:

            (a)   obtain or cause to be obtained and maintain in full force and
                  effect and comply or cause to be complied in all material
                  respects with the conditions and restrictions (if any) imposed
                  in, or in connection with, every consent, authorization,
                  license or approval of governmental or public bodies or
                  authorities or courts and do, or cause to be done, all other
                  acts and things, which may from time to time be necessary or
                  desirable under applicable law for the continued due
                  performance of all its obligations under this Agreement and
                  the Note;
<PAGE>

                                     -13-

      (b)   upon becoming aware that the same may be threatened in an amount
            exceeding Ten Million Dollars or pending in any amount and in any
            case immediately after the commencement thereof give to the Bank
            notice in writing of all litigation or administrative or arbitration
            proceedings before or of any court, tribunal, arbitrator or other
            relevant authority affecting it or its assets of the type described
            in Clause 10.1(g) and of all disputes of the type described in
            Clause 10.1(h);

            (c)   upon any Vice President or more senior officer of the Borrower
                  becoming aware of the same promptly, and in any event not
                  later than ten (10) days thereafter, give written notice to
                  the Bank of the occurrence of any Event of Default or any
                  event which with the giving of notice or the lapse of time or
                  both may constitute an Event of Default and at the same time
                  inform the Bank of any action taken or proposed to be taken in
                  connection therewith;

            (d)   pay when due all Taxes for which it is liable other than any
                  Taxes which are contested by the Borrower in good faith for
                  which adequate reserves have been set aside on the books of
                  the Borrower;

            (e)   so long as borrower remains subject to reporting requirements
                  under the Securities Exchange Act of 1934 or any successor
                  legislation thereto, prepare a consolidated balance sheet of
                  the Borrower and its subsidiaries and the related consolidated
                  statements of income, cash flows and changes in stockholder's
                  equity for the period in accordance with generally accepted
                  accounting principles and practices in the United States
                  consistently applied annually in respect of each fiscal year
                  and cause such annual statements to be certified without
                  qualification or exception by independent certified public
                  accountants of nationally recognized standing (it being
                  acknowledged by the Bank that each of the firms Price
                  Waterhouse LLP and Haft & Gluckman LLP are independent
                  certified public accountants of nationally recognized
                  standing) and deliver a copy of the same to the Bank, as soon
                  as practicable, but in each case not later than 90 (ninety)
                  days after the end of the period to which they relate;

            (f)   so long as borrower remains subject to reporting requirements
                  under the Securities Exchange Act of 1934 or any successor
                  legislation thereto, prepare an unaudited consolidated balance
                  sheet of the Borrower and its subsidiaries and the related
                  consolidated statements of income for each quarterly period
                  (other than the last quarterly period in any fiscal year) in
                  accordance with generally accepted accounting principles and
                  practices in the United States consistently applied for such
                  quarter in respect of each fiscal quarter and certified by the
                  Chief Financial Officer of the Borrower as being fairly stated
                  in all material respects (subject to normal year-end
                  adjustments) and deliver a copy of the same to the Bank, as
                  soon as practicable, but in each case not later than sixty
                  (60) days after the end of the period to which they relate;
<PAGE>

                                     -14-

            (g)   in the event Borrower shall no longer be subject to reporting
                  requirements pursuant to the Securities Exchange Act of 1934
                  or any successor legislation, prepare a consolidated balance
                  sheet of Borrower and its subsidiaries and the related
                  statements of income, cash flows and changes in stockholders
                  equity for the period in accordance with generally accepted
                  accounting principles and practices in the United States,
                  except that investments in securities shall be carried at
                  their market value if they are publicly traded and at their
                  fair value as reasonably determined in good faith by
                  management of the Borrower if they are not publicly traded,
                  rather than based upon Borrower's equity in the ownership of
                  investee companies, consistently applied annually in respect
                  of each fiscal year and cause such annual statements to be
                  certified according to the form of report set forth as Exhibit
                  4 by independent certified public accountants of nationally
                  recognized standing and deliver a copy of same to the Bank, as
                  soon as practicable, but in each case not later than 90
                  (Ninety) days after the end of the period to which they
                  relate;

            (h)   under the circumstances described in Clause 11(g) prepare an
                  unaudited consolidated balance sheet of the Borrower and its
                  subsidiaries and the related consolidated statements of income
                  for each quarterly period (other than the last quarterly
                  period in any fiscal year) following the same methodology as
                  set forth in Clause 11(g) and certified by the Chief Financial
                  Officer of Borrower in the manner set forth in Clause 11(f)
                  and deliver same to the Bank as provided in Clause 11(f);

            (i)   under the circumstances described in Clauses 11(g) and 11(h),
                  prepare a certificate setting forth a valuation of investments
                  of the Borrower, utilizing market value with respect to
                  marketable securities that are publicly traded and fair value
                  as reasonably determined in good faith by the management of
                  Borrower with respect to investments that are not publicly
                  traded, with respect to each fiscal year (as to which the
                  accountants described in Clause 11(g) shall certify that, in
                  their opinion the valuations are fairly stated) and with
                  respect to each fiscal quarter except the last quarterly
                  fiscal period in each year (as to which the Chief Financial
                  Officer of Borrower shall certify that the valuations are
                  fairly stated) and deliver copies of same to the Bank at the
                  times set forth in Clauses 11(g) and 11(h), as applicable;

            (j)   provide the Bank with such financial and other information
                  concerning the Borrower and its affairs, as the Bank may from
                  time to time reasonably require.
<PAGE>

                                     -15-

            (k)   simultaneously with the delivery of each set of financial
                  statements pursuant to Clauses 11(e), 11(f), 11(g) and 11(h)
                  above, provide to the Bank a certificate of Borrower's Chief
                  Financial Officer to the effect that nothing has come to his
                  attention to cause him to believe that an Event of Default
                  existed on the date of each of such statements.

12.   FINANCIAL UNDERTAKINGS

      12.1  The Borrower undertakes with the Bank that the Borrower will
            maintain an excess of consolidated total assets over consolidated
            total liabilities (exclusive of liabilities subordinated in terms of
            payment to the Loan) in an amount of not less than $300,000,000
            (Three Hundred Million Dollars.)

      12.2  The Borrower undertakes with the Bank that from the date of this
            Agreement and so long as any monies are owing under this Agreement
            and the Note, without the prior written consent of the Bank (in the
            case of paragraphs (b) and (c) below, such consent not to be
            unreasonably withheld or delayed):

            (a)   it will not create, effect or permit to subsist any
                  Encumbrance over all or any part of its assets (or right to
                  recourse thereto); except for purchase money mortgages or
                  other purchase money liens or security interests (including,
                  without limitation, finance leases) upon any fixed or capital
                  assets hereafter acquired, or mortgages, liens, or security
                  interests (including, without imitation, finance leases) on
                  any such assets hereafter acquired existing at the time of
                  acquisition thereof, whether or not assumed, provided that (i)
                  no such mortgage, lien, or security interest shall extend to
                  or cover any other property of Borrower or its subsidiaries,
                  and (ii) the principal amount of the indebtedness secured by
                  any such mortgage, lien, or security interest, together with
                  all other indebtedness (other than to the Bank) secured by
                  mortgages, liens, or security interests on such property,
                  shall not exceed $50,000,000 (Fifty Million Dollars);

            (b)   it will not merge or consolidate with any other entity (unless
                  the Consolidated Net Worth of the combined entities is not
                  less than the Consolidated Net Worth of the Borrower prior to
                  the merger or consolidation); and

            (c)   it will not use any portion of the Loan, directly or
                  indirectly, in a manner that would violate or result in the
                  violation of Regulation U of the Federal Reserve Board.

      12.3  The Borrower undertakes with the Bank that the Borrower will
            maintain a Debt to Consolidated Tangible Net Worth ratio below or
            equal to 0.75 to 1.00.
<PAGE>

                                     -16-

13.   EVENTS OF DEFAULT

      13.1 There shall be an Event of Default if:

            (a)   the Borrower fails to pay any sum due to be paid by it under
                  this Agreement and such payment is not made within a period of
                  5 Banking Days after notice thereof shall have been given by
                  the Bank to the Borrower; or

            (b)   the Borrower commits any breach of or fails to observe any of
                  the obligations, undertakings or other provisions contained in
                  this Agreement and, where such breach or failure is capable of
                  being remedied, it is not remedied to the Bank's satisfaction
                  within a period of 20 days after notice thereof shall have
                  been given by the Bank to the Borrower, provided however that
                  where such breach or failure is not capable of being remedied,
                  the Bank shall reasonably determine that such breach or
                  failure may have a material adverse effect on the financial
                  condition of the Borrower and/or the ability of the Borrower
                  to fulfill its obligations hereunder or on the rights of the
                  Bank pursuant hereto; or

            (c)   any representation or warranty made or deemed to be made or
                  repeated by or in respect of the Borrower pursuant to or in
                  connection with this Agreement, or any other document
                  submitted to the Bank is, or proves to have been incorrect or
                  untrue when made or repeated; provided, however that where
                  such position is not capable of being remedied, the Bank shall
                  reasonably determine that such breach or failure may have a
                  material adverse effect on the financial condition of the
                  Borrower and/or the ability of the Borrower to fulfill its
                  obligations hereunder and/or on the rights of the Bank
                  pursuant hereto;

            (d)   any consent, authorization, license or approval of, or
                  registration with or declaration to governmental or public
                  bodies or authorities or courts required by the Borrower to
                  authorize, or required by the Borrower in connection with the
                  execution, delivery, validity, enforceability or admissibility
                  in evidence (upon payment of stamp duty, if required) of this
                  Agreement or the performance by the Borrower of its
                  obligations under this Agreement is modified or is not granted
                  or is revoked or terminated or expires and is not renewed, or
                  otherwise ceases to be in full force and effect and the
                  position is not remedied, when capable of being remedied, to
                  the Bank's reasonable satisfaction within a period of 30 days
                  after notice thereof shall have been given by the Bank to the
                  Borrower, provided, however that where such position is not
                  capable of being remedied, the Bank shall reasonably determine
                  that such breach or failure may have a material adverse effect
                  on the financial condition of the Borrower and/or the ability
                  of the Borrower to fulfill its obligations hereunder; or
<PAGE>

                                     -17-

            (e)   a creditor attaches or takes possession of, or a distress,
                  execution, sequestration or other process is levied, or
                  enforced upon or against a material part of the property,
                  undertakings, assets, rights or revenues of the Borrower and
                  such attachment or other similar order shall remain
                  undischarged or unstayed for a period in excess of 30 days; or

            (f)   the Borrower takes any action, or any decision, order or writ
                  is made or given by any court or competent authority for (1)
                  the Borrower to be adjudicated or found bankrupt or insolvent;
                  (2) the winding-up or dissolution of the Borrower, unless upon
                  such winding-up or dissolution the assets are to be
                  transferred to, and the liabilities are to be assumed by, an
                  entity whose Consolidated Net Worth after such transfer and
                  assumption is not less than the Consolidated Net Worth of the
                  Borrower prior to the transfer and assumption; (3) the
                  appointment of a liquidator, whether provisional or otherwise,
                  administrator, trustee, receiver or similar offices in respect
                  of the Borrower and/or in respect of the whole or any part of
                  its undertakings, assets, rights or revenues; or (4) the
                  Borrower to enter into any general arrangement or composition
                  for the benefit of its creditors or any class of them; or

            (g)   any legal proceedings are started or other steps are taken by
                  any third party before any court of law for: (i) the Borrower
                  to be adjudicated or found bankrupt or insolvent; (ii) the
                  winding-up or dissolution of the Borrower in the event that it
                  has not been released from all obligations under by the Bank;
                  (iii) the appointment of a liquidator, whether provisional or
                  otherwise, administrator, trustee, receiver or similar officer
                  in respect of the whole or any part of the Borrower's
                  undertakings, assets, rights or revenues; or (iv) the Borrower
                  to enter into any general arrangement or composition for the
                  benefit of its creditors or any class of them; provided
                  however that the same shall not constitute an Event of
                  Default, if the Borrower shall contest any such proceedings or
                  other steps in good faith within 10 days, and further provided
                  that legal counsel to the Borrower (who shall be acceptable to
                  the Bank) shall render within such 10 days his opinion in
                  writing, that there is a reasonable chance that such
                  proceeding or other steps will be rejected or dismissed by the
                  court before which they were instituted; or

            (h)   any event occurs or proceeding is taken with respect to the
                  Borrower in any jurisdiction to which it is subject which is
                  analogous to, or has an effect equivalent or similar to any of
                  the events mentioned in Clauses 13.1(f) or (g) and subject to
                  grace periods set forth in those Clauses, as applicable; or
<PAGE>

                                     -18-

            (i)   all or a material part of the undertakings, assets, rights or
                  revenues of the Borrower are seized, nationalized,
                  expropriated or compulsorily acquired by, or under the
                  authority of, any government or local or other authority and
                  any such action is not resolved within 30 days; or

            (j)   it becomes unlawful at any time for the Borrower to perform
                  all or any of its obligations under this Agreement and the
                  Bank shall reasonably determine that such event may have a
                  material adverse effect on the financial condition of the
                  Borrower and/or on the rights of the Bank pursuant hereto; or

            (k)   the Borrower repudiates this Agreement or does or causes or
                  permits to be done any act or thing evidencing an intention to
                  repudiate this Agreement; or

            (l)   the Borrower has and/or shall have committed a breach of any
                  of its undertakings and/or obligations under any other
                  documents or agreements to which it is a party or by which it
                  is bound and the Bank shall reasonably determine that such
                  breach may have a material adverse effect on the financial
                  condition of the Borrower and/or the ability of the Borrower
                  to fulfill its obligations hereunder and/or on the rights of
                  the Bank pursuant hereto; or

            (m)   an event deemed to be an event of default and/or an event
                  which gives the Bank the right to demand early repayment of
                  any amount owed to the Bank by the Borrower exists or occurs
                  or is threatened under any other agreement or document for the
                  extension of credit or any other banking facilities by the
                  Bank to the Borrower.

      13.2  The Bank may, without prejudice to any of its other rights, by
            notice in writing to the Borrower at any time upon or after the
            occurrence of an Event of Default, so long as the same is
            continuing:

                  (a)   declare the Loan and all interest accrued and all other
                        sums payable under this Agreement to have become due and
                        payable, whereupon the same shall, immediately or at any
                        time thereafter in accordance with such notice, become
                        due and payable;

                  (b)   declare that the Loan and all other sums payable under
                        this Agreement shall bear interest at the rate of
                        Default Interest, as if such sums had not been paid on
                        their due date, whereupon such interest shall,
                        immediately or at any time thereafter in accordance with
                        the terms of such notice, become due and payable.
<PAGE>

                                     -19-


      13.3  The Borrower shall pay to the Bank all losses, costs and expenses,
            including, without limitation, reasonable attorney fees and
            expenses, suffered or incurred by the Bank as a result of any Event
            of Default and in connection with the enforcement of any of the
            Bank's rights hereunder.

14.   CHANGES IN CIRCUMSTANCES

      14.1. Increased Costs

            If by reason and as a result of a) any change in or the introduction
            of any law, regulation, treaty or official directive or any change
            in the interpretation or application thereof including without
            limitation by the central banking authorities of the U.S.A or Israel
            or b) compliance by the Bank or the Branch with any future
            directive, demand, order, request or requirement (whether or not
            having the force of law) of the central banking authorities of the
            U.S.A. or Israel or any other central bank or any governmental,
            fiscal, monetary or other authority (including without limitation a
            directive, demand, order, request or requirement which affects the
            manner in which the Bank or the Branch allocates capital in support
            of its assets or liabilities or contingent liabilities or deposits
            with it or for its account or advances or commitments made by it):

            (i)   the Bank incurs a cost or costs as a result of performing its
                  obligations under this Agreement or the Note or maintaining
                  its commitment to disburse the Loan or maintaining the
                  outstanding balance of the Loan; or

            (ii)  the cost to the Bank of making, funding or maintaining the
                  Loan or any of the outstanding balance thereof is directly or
                  indirectly increased; or

            (iii) the Bank becomes liable to make any payment not currently
                  applicable on account of tax or otherwise (not being a tax
                  imposed on the net income of its lending office in the
                  jurisdiction in which it is incorporated or in which its
                  lending office is situated or contemplated pursuant to Clause
                  8.2 of this Agreement) on or calculated by reference to the
                  outstanding balance of the Loan or by reference to any sum
                  received or receivable by it hereunder, or if any such sum
                  received or receivable by the Bank hereunder or the effective
                  return to the Bank hereunder is reduced;

                  then and in each such case:

                  a)    the Bank shall notify the Borrower in writing of the
                        occurrence of such event upon the Bank becoming aware of
                        the same;

                  b)    the Borrower shall from time to time pay to the Bank on
                        demand such amount or amounts as the Bank may specify to
                        be necessary 
<PAGE>

                                     -20-

                        to compensate the Bank for such cost, increased costs,
                        payment, reduction in payment, loss of return or other
                        liability;

                  c)    the Bank shall as soon as reasonably practicable deliver
                        to the Borrower a certificate as to any of the matters
                        referred to in this Clause, specifying the amount of
                        such compensation, and setting out in reasonable detail
                        its calculation of the relevant amount. The said
                        certificate shall be conclusive save for manifest error;

                  d)    subject to the provisions of Clause 6 hereof, the
                        Borrower may, after receipt of the Bank's notification
                        as aforesaid, so long as the circumstances giving rise
                        to such compensation continue and subject to its giving
                        the Bank no less than five (5) Banking Days written
                        notice thereof (which shall be irrevocable) notify the
                        Bank at any time that it will prepay to the Bank the
                        whole (but not part only) of the outstanding balance of
                        the Loan together with accrued interest thereon and all
                        other amounts owing to the Bank provided that such
                        notice on the part of the Borrower is given within 30
                        (thirty) days of the Bank's notification as aforesaid.

      14.2. Unlawfulness

            This Agreement has been made in accordance with legal, regulatory,
            fiscal and monetary measures currently in force and in accordance
            with current market conditions. If the making or the continuation of
            the Loan by the Bank becomes impossible or unlawful, or the Bank is
            required to reduce the volume of its loans due to any change, after
            the date of this Agreement, in any applicable law or governmental
            regulation or order or in any requirement of any monetary authority,
            or in the interpretation of the same, then and in any such event the
            Bank may give written notice to the Borrower and the Borrower agrees
            to prepay the full amount of the Loan then outstanding as well as
            interest accrued thereon, or such lesser amount as the Bank shall
            determine is required to be prepaid so that no impediment continues
            to subsist, within 60 (sixty) days or any shorter period of time
            required by any such change.

      14.3. Substitute Basis

            If the Bank determines (i) that at anytime (a) by reason of
            circumstances affecting the London Interbank Market generally,
            adequate and fair means do not exist for ascertaining an applicable
            LIBOR rate or it is impractical for the Bank to fund or continue to
            fund the then outstanding balance of the principal amount of the
            Loan at the LIBOR rate during the applicable Interest Period, or (b)
            quotes for funds in United States Dollars in sufficient amounts
            comparable to the said outstanding 
<PAGE>

                                     -21-

            balance and for the duration of the applicable Interest Period would
            not be available to the Bank in the London Interbank Market, or (c)
            quotes for funds in United States Dollars in the London Interbank
            Market would not accurately reflect the cost to the Bank of funding
            the said outstanding balance on the London Interbank Market during
            the applicable Interest Period, or (ii) that at any time the making
            or funding of loans, or charging of interest at rates, based on
            LIBOR shall be unlawful or unenforceable for any reason, then as
            long as such circumstances(s) shall continue, interest on the
            outstanding balance of the principal amount of the Loan shall accrue
            at the Alternative Rate.

15.   SET-OFF AND APPLICATION OF PAYMENTS

      15.1. All monies held or received by the Bank for or on account of the
            Borrower, regardless whether such monies may have been intended by
            the Borrower or any third party to be appropriated for or on account
            of any other amount, may be applied by the Bank in or towards
            satisfaction of any amount then due and owing by the Borrower under
            this Agreement or the Note, and if so applied, shall be applied in
            the following order of priority:

            (i)   first, all costs, charges or expenses, including, inter alia,
                  those incurred by the Bank in enforcing its rights hereunder

            (ii)  secondly, accrued and unpaid interest and/or Default Interest
                  owing in respect of the Loan; and

            (iii) thirdly, on account of the unpaid principal of the Loan.

16.   THE BORROWER'S DUTY TO NOTIFY

      16.1  The Borrower hereby undertakes to notify the Bank immediately of any
            of the events enumerated in Clause 13.1.

17.   COMPENSATION FOR BROKEN FUNDING

      17.1. If the Loan or any part thereof or any interest thereon is for any
            reason whatsoever repaid, paid or recovered by the Bank (whether
            from the Borrower or any third Party) under any security or
            otherwise, on any day other than the last day of any Interest Period
            or the Maturity Date, as the case may be, the Borrower shall upon
            demand pay to the Bank such amount or amounts as may be necessary to
            compensate the Bank for any actual loss incurred by it (after
            redeployment of funds) on account of funds borrowed in order to
            make, fund or maintain the Loan with respect to which repayment,
            payment or recovery is made and/or for interest differential caused
            thereby, provided that the Borrower shall not be required to
<PAGE>

                                     -22-

            make any payment under this Clause 17.1 or otherwise to pay any
            penalty or breakage fee in the event of a repayment of all or any
            part of the Loan on the last day of any Interest Period pursuant to
            Clause 6.1 above and liability for compensation pursuant to a
            prepayment under Clause 8.2(c) shall be shared equally between the
            Bank and the Borrower.

18.   REMEDIES AND WAIVERS

      18.1. No delay or omission on the part of the Bank in exercising any
            right, power, privilege or remedy pursuant to this Agreement shall
            impair such right, power, privilege or remedy or be construed as a
            waiver thereof, nor shall any single or partial exercise of any such
            right, power, privilege or remedy preclude any other or further
            exercise thereof, or the exercise of any other power, right or
            remedy.

      18.2. The rights and remedies of the Bank provided in this Agreement are
            cumulative, and are not exclusive of any rights or remedies provided
            by law.

19.   DISCLOSURE OF INFORMATION

      Any branch of the Bank administering the Loan may disclose to the Head
      Office of the Bank, to any financial institution within the Bank Hapoalim
      group which is an assignee or potential assignee of all or part of the
      Loan or to the Bank of Israel, the Examiner of the Banks, the Controller
      of Foreign Exchange or any person acting under their authority or to any
      other regulatory authority having jurisdiction over the Bank or over the
      Head Office of the Bank, or to the Head Office of the Bank for delivery by
      the latter to any such regulatory authorities, such information about the
      Borrower, or the Loan as may be required by such regulatory authorities or
      as the branch or the Head Office of the Bank may deem appropriate.

20.   ASSIGNMENT

      20.1. The Bank may at any time at its own discretion and without the
            Borrower's consent being required, assign or transfer its rights in
            relation to the Loan and/or arising from this Agreement, in whole or
            in part, to any bank within the Bank Hapoalim group, and any such
            assignee may also reassign or transfer the said rights to any such
            bank without any consent being required from the Borrower (or to any
            other financial institution, with the prior consent of the Borrower,
            which consent shall not be unreasonably withheld), provided in each
            case that such assignment does not result in any increased cost or
            liability to the Borrower (including, without limitation, any tax).
            Such assignment may be effected in any manner in which the Bank or
            any subsequent assignor may deem fit.
<PAGE>

                                     -23-

      20.2. Except as otherwise permitted by this Agreement, the Borrower shall
            not assign or transfer any of its rights or obligations under this
            Agreement without the prior written consent of the Bank (which
            consent shall not be unreasonably withheld).

21.   ADDITIONAL PROVISIONS

      21.1  The Bank agrees that no judgment or recourse shall be sought or
            enforced for the payment of any of the Borrower's obligations
            hereunder or under the Note or under any document delivered by the
            Borrower in connection herewith against any officer, director,
            shareholder, manager, member or other affiliate of the Borrower or
            any of their respective assets or property.

      21.2. The Borrower hereby confirms that the Bank's books, accounts and
            entries shall be binding on the Borrower, shall be deemed to be
            correct, absent manifest error and shall be prima facie evidence
            against the Borrower in all their particulars.

22.   AUTHORIZED SIGNATORIES

      22.1. The Borrower hereby agrees that until the Bank receives a certified
            copy of any subsequent resolution of the Executive Committee of the
            Board of Directors of the Borrower providing otherwise, any two of
            the President, the Executive Vice President, or the Treasurer,
            signing jointly shall be deemed authorized to act on behalf of the
            Borrower in connection with all matters relating to the execution,
            delivery and performance of this Agreement to which the Borrower is
            a party and the terms and conditions thereof.

23.   NOTICES

      23.1. All notices, requests, demands or other communications to be made
            under this Agreement shall be made in writing, and unless otherwise
            stated, may also be made by facsimile transmission. All notices,
            requests, demands or other communications sent by mail shall be by
            certified mail.

      23.2. All such notices, etc. to be made or delivered by one party to this
            Agreement to the other party to this Agreement (unless that other
            party has by fifteen (15) days' written notice specified another
            address) be made or delivered to such other party, addressed as
            follows:
<PAGE>

                                     -24-

      [i]   if to the Borrower at:

            PEC Israel Economic Corporation
            511 Fifth Avenue
            New York, New York 10017
            Attention: Frank Klein, President
            Fax No: (212) 599-6281

            with a copy to:

            IDB Development Corporation Ltd.
            "The Tower"
            3 Daniel Frisch Street
            Tel Aviv 64731, Israel
            Fax No: 011-972-3-695-2069

            [ii]  if to the Bank at:

            Bank Hapoalim B.M.
            1177 Avenue of the Americas
            New York, New York 10036
            Attention: Eli Eisdorfer
            Fax No: (212) 782-2170

      23.3. All such notices etc., shall be deemed to have been made or
            delivered the next Banking Day after dispatch (in the case of any
            communication made by any form of facsimile transmission) or in the
            case of any communication made by letter the next Banking Day after
            being physically left at the address as referred to above.

24.   GOVERNING LAW AND JURISDICTION

      (a)   This Agreement shall be governed by and construed in accordance with
            the laws of the State of New York, without regard to the choice of
            law provisions thereof

      (b)   The Borrower hereby submits to the nonexclusive jurisdiction of the
            United States District Court for the Southern District of New York
            and of any New York State court sitting in New York City for
            purposes of all legal proceedings arising out of or relating to this
            Agreement, the Note or transactions contemplated hereby. The Bank
            hereby submits to the exclusive jurisdiction of the United Stated
            District Court for the Southern District of New York and any New
            York State court sitting in New York City, for purposes of all legal
            proceedings arising out of or relating to this Agreement, the Note
            or the transaction contemplated hereby.
<PAGE>

                                     -25-

      (c)   The submission by the parties hereto to the jurisdiction to such
            courts as are referred to in Clause 26(b) hereof shall not (and
            shall not be construed so as to) limit the right of the Bank to take
            proceedings against the Borrower in any other court of competent
            jurisdiction, whether in Israel or in any other country, including
            without prejudice to the generality of the foregoing, any country
            where the Borrower has offices, interests or assets, nor shall the
            taking of proceedings in any one or more jurisdictions preclude the
            taking of proceedings in any other jurisdiction, whether
            concurrently or not.

      (d)   Each of the parties hereto irrevocably waives any objections which
            it may have now or hereafter to such courts as are referred to in
            this Clause, and irrevocably waives any claim that any such court is
            not a convenient or appropriate forum.

      (e)   THE BORROWER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
            JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
            AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

25.   CURRENCY INDEMNITY

      The Borrower agrees to indemnify the Bank against any loss incurred by it
      as a result of any judgment or order being given or made for the payment
      of any amount due under this Agreement and of such judgment or order being
      expressed in a currency other than the currency in which such amount is
      payable and as a result of any variation having occurred in the rates of
      exchange between the date on which any such amount becomes due under this
      Agreement and the date of actual payment thereof. The foregoing indemnity
      shall constitute a separate and independent obligation of the Borrower and
      shall apply irrespective of any indulgence granted to the Borrower from
      time to time and shall continue in full force and effect notwithstanding
      any such judgment or order.

26.   SEVERABILITY

      If at any time any provision of this Agreement or the Note is or becomes
      invalid, illegal or unenforceable in any respect under the laws of the
      State of New York neither the legality, validity or the enforceability of
      the remaining provisions hereof shall in any way be affected or impaired
      thereby.
<PAGE>

                                     -26-

27.   AMENDMENTS AND WAIVERS

      Any provision of this Agreement or the Note may be amended or waived if,
      but only if, such amendment or waiver is in writing and is duly signed by
      the Borrower and the Bank.

In Witness whereof the Borrower and the Bank have caused this Agreement to be
duly executed and delivered in New York, New York on the date first above
written.


BANK HAPOALIM B.M.

By:      /s/ Shlomo Braun
         -----------------------------
Name:    Shlomo Braun
Title:   Senior Vice President and Branch Manager


By:      /s/ Eli Eisdorfer
         -----------------------------
Name:    Eli Eisdorfer
Title:   First Vice President

PEC ISRAEL ECONOMIC CORPORATION


By:      /s/ Frank J. Klein
         -----------------------------
Name:    Frank J. Klein
Title:   President


By:      /s/ James Edelson
         -----------------------------
Name:    James Edelson
Title:   Executive Vice President
<PAGE>

                                     -27-
                                                                     EXHIBIT I
                                  Form of Note

$20,000,000                                                 New York, New York
                                                            May 5, 1998

FOR VALUE RECEIVED, the undersigned, PEC Israel Economic Corporation, a
corporation organized and existing under the laws of the State of Maine (the
"Borrower), hereby promises to pay the principal sum of Twenty Million United
States Dollars (US$20,000,000) to the order of Bank Hapoalim B.M. (the "Bank"),
at its New York office, at 1177 Avenue of the Americas, New York, New York,
10036 in 11 consecutive installments of $1,666,666.66 (One Million Six Hundred
Sixty-Six Thousand Six Hundred and Sixty-Six Dollars and Sixty-Six Cents) on
November 5, 2003 and semi-annually thereafter, with the final payment of the
balance of the principal amount to be paid at maturity on May 5, 2009, in lawful
money of the United States of America in immediately available funds, and to pay
interest from the date hereof on such principal amount hereof from time to time
outstanding, in like funds, at said office, at a rate or rates per annum and
payable semi-annually on the dates determined pursuant to the Loan Agreement
dated May 5, 1998 between the Borrower and the Bank (the "Agreement".)

The Borrower promises to pay interest, payable on demand, on any overdue
principal and, to the extent permitted by law, overdue interest from their due
dates at a rate or rates determined as set forth in the Agreement.

The Borrower hereby waives diligence, presentment, demand, protest and notice of
any kind whatsoever except as provided in the Agreement. The non-exercise by the
holder of any of its rights hereunder in any particular instance shall not
constitute a waiver thereof in that or any subsequent instance.

The Loan evidenced by this Note and all payments and prepayments of the
principal hereof and interest hereon on the respective dates thereof shall be
inscribed or otherwise entered on the books and records of the Bank, provided,
however, that the failure of the Bank to make such inscriptions of entries or
any error therein shall not in any manner affect the obligation of the Borrower
to repay the Loan in accordance with the terms hereof.

This Note is the Note referred to in the Agreement which, among other things,
contains provisions for the acceleration of the maturity hereof upon the
happening of certain events, for optional prepayment of the principal hereof
prior to the maturity thereof and for the amendment and waiver of certain
provisions of the Agreement, all upon the terms and conditions therein
specified. This Note shall be construed in accordance with and governed by the
laws of the State of New York and any applicable laws of the United States of
America.

PEC ISRAEL ECONOMIC CORPORATION


By:
     ------------------------------
Name:    Frank J. Klein
Title:   President


By:
     ------------------------------
Name:    James Edelson
Title:   Executive Vice President
<PAGE>

                                                EXHIBIT 2

                                             May __, 1998

Bank Hapoalim B.M.
1177 Avenue of the Americas
New York, New York 10036
Attention: Lawrence Lefkowitz

Ladies and Gentlemen:

      I am the Executive Vice President and General Counsel of PEC Israel
Economic Corporation (the "Borrower"), a party to the Loan Agreement dated May
5, 1998 between Bank Hapoalim B.M. (the "Bank") and the Borrower (the "Loan
Agreement") and to the Promissory Note dated May 5, 1998 made by the Borrower
payable to the order of the Bank in the principal amount of $20,000,000 (the
"Note"), and have acted as counsel to the Borrower with respect to the loan made
available by the Bank to the Borrower pursuant to the Loan Agreement and
evidenced by the Note. This opinion is delivered pursuant to Clause 9(b) of the
Loan Agreement. The Loan Agreement and the Note are collectively referred to as
the "Documents".

      In making my examination of executed documents, I have assumed the legal
capacity of all natural persons, the genuineness of all signatures other than of
the Borrower, the authenticity of all documents submitted to me as originals,
the conformity to original documents submitted to me as photostatic copies and
the authenticity of the originals of such latter documents. In my examination, I
have assumed that the parties thereto other than the Borrower had the power,
corporate or other, to enter into and perform all obligations thereunder. I have
also assumed the due authorization by all requisite action, corporate or other,
execution and delivery by such parties other than the Borrower of such documents
and the validity and binding effect of such documents on such parties other than
the Borrower. As to any fact material to my opinion, I have relied upon the
representations made in the Loan Agreement, upon oral or written statements and
representations of officers and other representatives of the Borrower and upon
certificates of public officials. I have also examined such corporate documents
and
<PAGE>

records and other certificates, and have made such investigations, as I have
deemed necessary in order to render the opinion hereinafter set forth.

      Based upon and subject to the foregoing, my opinion is as follows:

      1. The Borrower has been duly organized, validly existing and in good
standing as a corporation under the laws of the State of Maine. The Borrower is
duly qualified to do business and is in good standing as a foreign corporation
in all states wherein the nature of the business transacted by it makes it
necessary to qualify to do business as a foreign corporation.

      2. The Borrower has all corporate power, authority and legal right to, and
all necessary licenses and permits to, execute, deliver and consummate the
transactions contemplated to be performed by the Borrower under, and to perform
its obligations under, each of the Documents.

      3. The execution, delivery and performance by the Borrower of each of the
Documents and the consummation by Borrower of the transactions contemplated by
the Documents have been duly authorized by all necessary corporate action on the
part of the Borrower.

      4. Each of the Documents has been duly and validly executed and delivered
by the Borrower and constitutes a legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights and remedies
generally and to general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity).

      5. The execution and delivery of the Documents by the Borrower, and the
consummation by the Borrower of the transactions contemplated by the Documents,
does not and will not (a) conflict with or result in a breach of any law,
decree, rule or regulation of any court or any governmental agency or body
having jurisdiction over the Borrower, (b) result in the creation or imposition
of any lien, charge or encumbrance upon the property of the Borrower pursuant to
any agreement or instrument known to me, or (c) conflict with the Articles of
Incorporation and by-laws of the Borrower or any material agreement, indenture
or other instrument known to me to which the Borrower is a party.
<PAGE>

      6. The Borrower is not in default under any agreement, indenture or
instrument known to me to which it is a party or by which it or any of its
property is bound, or with respect to any order, writ, injunction, decree or
demand known to me of any court or other governmental or regulatory authority
rendered in a matter to which the Borrower was subject and in which it was named
a party, which default could have a material adverse effect on the business,
operations, financial condition or properties of the Borrower to perform its
obligations under the Documents.

      7. No consent, approval or authorization of or registration,
qualification, designation, declaration or filing of or with any governmental
authority or person not previously obtained is required to be obtained by the
Borrower in connection with the execution, delivery and performance by the
Borrower of its obligations under the Documents or the consummation by the
Borrower of the transactions contemplated by the Documents.

      8. To the best of my knowledge, there is no action, suit, proceeding or
arbitration pending or threatened against the Borrower before any court,
administrative or governmental body, or arbitration panel, which if determined
against the Borrower would affect the Borrower's ability to execute the
Documents or materially adversely affect the Borrower's ability to fulfill its
obligations under the Documents.

      The opinion set forth herein is limited to the laws of the State of New
York and the federal laws of the United States. This opinion is rendered to you
and is solely for your benefit in connection with the transactions contemplated
by the Documents. This opinion may not be relied upon by you for any other
purpose or furnished to, quoted or relied upon by any other person, firm or
corporation for any purpose without my prior written consent.

                                          Very truly yours,
<PAGE>

                                          Exhibit 3

      The Borrower is a defendant in a class action titled Nemser v. PEC Israel
Economic Corporation, et. al filed on April 3, 1998 in the Supreme Court of the
State of New York, County of New York. A copy of the class action complaint has
been delivered by the Borrower to the Bank.

<PAGE>

                                                                       Exhibit 4

                          Independent Auditor's Report

Addressee:

We have audited the accompanying special-purpose statement of assets and
liabilities of PEC Israel Economic Corporation (the "Company") as of December
31, ________, and the related special-purpose statements of revenues and
expenses and of cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion.

The accompanying special-purpose statements were prepared for the purpose of
complying with Clause 11.1(g) of a loan agreement dated May 5, 1998 between Bank
Hapoalim B.M. and the Company as described in Clause 11.1(g), and are not
intended to be a presentation in conformity with generally accepted accounting
principles.

In our opinion, the special-purpose financial statements referred to above
present fairly, in all material respects, the assets and liabilities of the
Company as of December 31, _____, and the revenues, expenses and cash flows for
the year then ended, on the basis of accounting described in Clause 11.1(g).

This report is intended solely for the information and use of the boards of
directors and managements of the Company and Bank Hapoalim B.M. and should not
be used for any other purpose.

[Signature]

[Date]