Document:

LOAN AGREEMENT

                                     BETWEEN

                       FLEET NATIONAL BANK, AS THE LENDER

                                       AND

                    MEDIS TECHNOLOGIES LTD., AS THE BORROWER

                                            DATED AS OF: DECEMBER 29, 2000

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                             TABLE OF CONTENTS

                                                                                                        PAGE

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ARTICLE 1         DEFINITIONS............................................................................1
---------         -----------
         SECTION 1.1.      DEFINED TERMS.................................................................1
         ------------      -------------
         SECTION 1.2.      ACCOUNTING TERMS..............................................................9
         ------------      ----------------
         SECTION 1.3.      RULES OF INTERPRETATION......................................................10
         ------------      -----------------------

ARTICLE 2         AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENT.......................................10
---------         -----------------------------------------------
         SECTION 2.1.      REVOLVING CREDIT COMMITMENT..................................................10
         ------------      ---------------------------
         SECTION 2.2.      REVOLVING CREDIT NOTE........................................................11
         ------------      ---------------------
         SECTION 2.3.      PROCEDURE FOR BORROWINGS.....................................................11
         ------------      ------------------------
         SECTION 2.4.      RELEASE OF INDIVIDUAL GUARANTORS, MORTGAGE AND ASSIGNMENT OF
         ------------      -------------------------------------------------------------
                           LEASES.......................................................................12
                           ------
         SECTION 2.5.      COMMITMENT FEE...............................................................12
         ------------      --------------
         SECTION 2.6.      REGULATORY CHANGES IN CAPITAL REQUIREMENTS...................................13
         ------------      ------------------------------------------
         SECTION 2.7.      TERMINATION OR REDUCTION OF COMMITMENT.......................................13
         ------------      --------------------------------------
         SECTION 2.8.      RECORDATION OF ASSIGNMENT OF LEASES AND MORTGAGES............................14
         ------------      -------------------------------------------------
         SECTION 2.9.      CONTINUATION AND CONVERSION OF LOANS.........................................14
         ------------      ------------------------------------
         SECTION 2.10.     PREPAYMENT...................................................................15
         -------------     ----------
         SECTION 2.11.     INTEREST PAYMENTS; MANNER OF PAYMENTS; RATE AFTER DEFAULT;
         -------------     -----------------------------------------------------------
                           SCHEDULE TO NOTE.............................................................15
                           ----------------
         SECTION 2.12.     USE OF PROCEEDS..............................................................17
         -------------     ---------------
         SECTION 2.13.     INCREASED COSTS..............................................................17
         -------------     ---------------
         SECTION 2.14.     YIELD MAINTENANCE............................................................18
         -------------     -----------------
         SECTION 2.15.     ALTERNATE RATE OF INTEREST...................................................18
         -------------     --------------------------
         SECTION 2.16.     CHANGE IN LEGALITY...........................................................19
         -------------     ------------------

ARTICLE 3         REPRESENTATIONS AND WARRANTIES........................................................19
---------         ------------------------------
         SECTION 3.1.      FINANCIAL CONDITION..........................................................19
         ------------      -------------------
         SECTION 3.2.      CORPORATE EXISTENCE; COMPLIANCE WITH LAW.....................................20
         ------------      ----------------------------------------
         SECTION 3.3.      CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS......................20
         ------------      -------------------------------------------------------
         SECTION 3.4.      POWER, AUTHORIZATION, ENFORCEABLE OBLIGATIONS OF GUARANTORS..................21
         ------------      -----------------------------------------------------------
         SECTION 3.5.      NO LEGAL BAR.................................................................21
         ------------      ------------
         SECTION 3.6.      NO MATERIAL LITIGATION.......................................................21
         ------------      ----------------------
         SECTION 3.7.      NO DEFAULT...................................................................22
         ------------      ----------
         SECTION 3.8.      NO BURDENSOME RESTRICTIONS...................................................22
         ------------      --------------------------
         SECTION 3.9.      TAXES........................................................................22
         ------------      -----
         SECTION 3.10.     FEDERAL REGULATIONS..........................................................22
         -------------     -------------------
         SECTION 3.11.     ENVIRONMENTAL MATTERS........................................................22
         -------------     ---------------------
         SECTION 3.12.     RESERVED.....................................................................23
         -------------     --------
         SECTION 3.13.     PROPERTIES, PRIORITY OF LIENS................................................23
         -------------     -----------------------------
         SECTION 3.14.     NAME CHANGES, MERGERS, ACQUISITIONS; LOCATION OF COLLATERAL..................23
         -------------     -----------------------------------------------------------
         SECTION 3.15.     CONDITION OF ASSETS..........................................................23
         -------------     -------------------
         SECTION 3.16.     ERISA........................................................................24
         -------------     -----

ARTICLE 4         CONDITIONS PRECEDENT..................................................................25
---------         --------------------
         SECTION 4.1.      CONDITIONS TO INITIAL EXTENSIONS OF CREDIT...................................25
         ------------      ------------------------------------------
         SECTION 4.2.      CONDITIONS TO ALL EXTENSIONS OF CREDIT.......................................27
         ------------      --------------------------------------

ARTICLE 5         AFFIRMATIVE COVENANTS.................................................................28
---------         ---------------------
         SECTION 5.1.      CORPORATE EXISTENCE AND QUALIFICATION........................................28
         ------------      -------------------------------------
         SECTION 5.2.      FINANCIAL INFORMATION AND COMPLIANCE CERTIFICATES............................28
         ------------      -------------------------------------------------
         SECTION 5.3.      INSURANCE....................................................................30
         ------------      ---------
         SECTION 5.4.      PRESERVATION OF PROPERTIES; COMPLIANCE WITH LAW..............................30
         ------------      -----------------------------------------------
         SECTION 5.5.      TAXES........................................................................30
         ------------      -----
         SECTION 5.6.      MAINTAIN OPERATING ACCOUNTS; INVESTMENT OF SUBSEQUENT OFFERING
         ------------      ---------------------------------------------------------------
                           PROCEEDS.....................................................................30
                           --------
         SECTION 5.7.      NOTICE OF LITIGATION.........................................................30
         ------------      --------------------
         SECTION 5.8.      INDEMNITY (ENVIRONMENTAL MATTERS)............................................31
         ------------      ---------------------------------
         SECTION 5.9.      CASH COLLATERAL..............................................................31
         ------------      ---------------

ARTICLE 6         RESERVED 31

ARTICLE 7         NEGATIVE COVENANTS....................................................................31
---------         ------------------
         SECTION 7.1.      INDEBTEDNESS FOR BORROWED MONEY..............................................31
         ------------      -------------------------------
         SECTION 7.2.      MERGERS, ACQUISITIONS AND SALES OF ASSETS....................................32
         ------------      -----------------------------------------
         SECTION 7.3.      INVESTMENTS..................................................................32
         ------------      -----------
         SECTION 7.4.      LIENS........................................................................33
         ------------      -----
         SECTION 7.5.      CONTINGENT LIABILITIES.......................................................33
         ------------      ----------------------
         SECTION 7.6.      DIVIDENDS....................................................................33
         ------------      ---------
         SECTION 7.7.      SALES OF RECEIVABLES; SALE - LEASEBACKS......................................33
         ------------      ---------------------------------------
         SECTION 7.8.      DOUBLE NEGATIVE PLEDGE.......................................................34
         ------------      -----------------------
         SECTION 7.9.      RESERVED.....................................................................34
         ------------      --------
         SECTION 7.10.     NATURE OF BUSINESS...........................................................34
         -------------     ------------------
         SECTION 7.11.     STOCK OF SUBSIDIARIES........................................................34
         -------------     ---------------------
         SECTION 7.12.     ERISA........................................................................34
         -------------     -----
         SECTION 7.13.     ACCOUNTING CHANGES...........................................................34
         -------------     ------------------
         SECTION 7.14.     TRANSACTIONS WITH AFFILIATES.................................................34
         -------------     ----------------------------
         SECTION 7.15.     REGULATION U.................................................................35
         -------------     ------------

ARTICLE 8         EVENTS OF DEFAULT; REMEDIES...........................................................35
---------         ---------------------------
         SECTION 8.1.      EVENTS OF DEFAULT............................................................35
         ------------      -----------------
         SECTION 8.2.      REMEDIES.....................................................................37
         ------------      --------

ARTICLE 9         COLLATERAL SECURITY...................................................................38
---------         -------------------
         SECTION 9.1.      GENERAL LOAN AND COLLATERAL AGREEMENT........................................38
         ------------      -------------------------------------
         SECTION 9.2.      ADDITIONAL COLLATERAL SECURITY...............................................38
         ------------      ------------------------------

ARTICLE 10        MISCELLANEOUS.........................................................................38
----------        -------------
         SECTION 10.1.     NOTICES......................................................................38
         -------------     -------
         SECTION 10.2.     NO WAIVER; CUMULATIVE REMEDIES...............................................39
         -------------     ------------------------------
         SECTION 10.3.     SURVIVAL OF REPRESENTATIONS AND WARRANTIES...................................39
         -------------     ------------------------------------------
         SECTION 10.4.     PAYMENT OF EXPENSES; EXAMINATION.............................................39
         -------------     --------------------------------
         SECTION 10.5.     WAIVER OF JURY TRIAL, SET-OFF AND COUNTERCLAIM...............................40
         -------------     ----------------------------------------------
         SECTION 10.6.     WAIVER OF AUTOMATIC STAY.....................................................41
         -------------     ------------------------
         SECTION 10.7.     LIMITATION OF LIABILITY......................................................41
         -------------     -----------------------
         SECTION 10.8.     MODIFICATION AND WAIVER......................................................42
         -------------     -----------------------
         SECTION 10.9.     SUCCESSORS AND ASSIGNS.......................................................42
         -------------     ----------------------
         SECTION 10.10.    GOVERNING LAW; CONSENT TO JURISDICTION.......................................43
         --------------    --------------------------------------
         SECTION 10.11.    ENTIRE AGREEMENT.............................................................43
         --------------    ----------------
         SECTION 10.12.    INTEREST ADJUSTMENT..........................................................44
         --------------    --------------------
         SECTION 10.13.    PLEDGE TO FEDERAL RESERVE....................................................44
         --------------    -------------------------
         SECTION 10.14.    LOST NOTES...................................................................44
         --------------    ----------
         SECTION 10.15.    EFFECTIVE DATE...............................................................45
         --------------    --------------
         SECTION 10.16.    NO WAIVER ACTION.............................................................45
         --------------    ----------------
         SECTION 10.17.    SEVERABILITY.................................................................45
         --------------    ------------
         SECTION 10.18.    COUNTERPARTS.................................................................46
         --------------    ------------

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EXHIBITS AND SCHEDULES

EXHIBITS

Exhibit A - Form of Revolving Credit Note
Exhibit B - Legal Opinion Matters
Exhibit C - Form of Guarantee
Exhibit D - Form of Assignment of Leases
Exhibit E - Form of Mortgage

SCHEDULES

Schedule 3.1   - Subsidiaries; Capitalization and Owners of Capital Stock
Schedule 3.14 - Name Changes
Schedule 7.13   - Accounting Changes

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         Loan Agreement dated as of December 29, 2000 between MEDIS TECHNOLOGIES
LTD.,  a Delaware  corporation  with its chief  place of  business  at 805 Third
Avenue,  New York,  New York 10022 (the  "Borrower")  and FLEET NATIONAL BANK, a
national banking  association,  1185 Avenue of the Americas,  New York, New York
10036 (the "Bank").

         The parties hereto hereby agree as follows:

ARTICLE 1         DEFINITIONS

         SECTION 1.1. DEFINED TERMS

As used herein the following terms shall have the following meanings:

         "AFFILIATE"  as  applied  to any  Person  shall  mean any other  Person
directly  or  indirectly  through  one  or  more   intermediaries   controlling,
controlled  by, or under common control with,  that Person.  For the purposes of
this  definition,  "control"  (including with  correlative  meanings,  the terms
"controlling",  "controlled by" and "under common control with"),  as applied to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the  management  and policies of that Person,  whether
through the ownership of voting securities or by contract or otherwise.

         "AFFILIATE  ADVANCES"  shall  mean,  as to  the  Borrower,  all  loans,
advances and other  distributions  to and Investments in any officer,  director,
employee, Affiliate and/or Subsidiary of the Borrower.

         "AGREEMENT"  shall mean this Loan  Agreement,  as the same from time to
time may be amended, supplemented or modified.

         "ASSIGNMENT  OF LEASES" shall mean an Assignment of Leases and Rents by
the  Partnership  Guarantor  in favor of the Bank  with  respect  to any and all
leases on the Premises,  including without limitation that certain lease between
the Partnership  Guarantor and the Trump Plaza Hotel and Casino substantially in
the form of Exhibit D hereto, as the same may be amended,  modified,  supplement
or replaced from time to time.

         "BUSINESS DAY" shall mean a day other than a Saturday,  Sunday or other
day on which  commercial  banks in New York are  required or permitted by law to
remain  closed,  except that  "Business  Day" in the context of a specific  city
shall  mean any date on which  commercial  banks are open for  business  in that
city.

         "CAPITAL  STOCK" shall mean, as to any Person,  all shares,  interests,
partnership  interests,  limited  liability company  interests,  participations,
rights in or other  equivalents  (however  designated)  of such Person's  equity
(however  designated) and any rights,  warrants or options  exchangeable  for or
convertible into such shares, interests, participations, rights or other equity.

         "CAPITALIZED  LEASE  OBLIGATIONS"  shall  mean  as to any  Person,  the
obligations  of such  Person to pay rent or other  amounts  under a lease of (or
other agreement  conveying the right to use) real and/or personal property which
obligations  are required to be classified  and accounted for as a capital lease
on a  balance  sheet  of such  Person  under  GAAP  and,  for  purposes  of this
Agreement,  the  amount  of such  obligations  shall be the  capitalized  amount
thereof, determined in accordance with GAAP.

         "CASH  COLLATERAL"  shall  mean any of the  following  property  in the
possession of the Bank and subject to a first  priority  perfected Lien in favor
of the Bank:

                       (i)   cash;

                       (ii)  obligations  issued or guaranteed by the United
States of America with maturities of one year or less;

                       (iii)  certificates of deposit,  bankers acceptances and
other "money market instruments" issued by any bank or trust company organized
under the laws of the United States of America or any State thereof and having
capital and surplus in an aggregate amount of not less than $100,000,000; and

                       (iv)  open market  commercial paper bearing the  highest
credit rating issued by Standard & Poor's  Corporation  or by another nationally
recognized credit rating  agency  maturing  or being due or payable in full not
more than 180 days after the Borrower's acquisition thereof.

         "CASH  COLLATERAL  EFFECTIVE  DATE" shall mean the first  Business  Day
after the consummation of the Subsequent  Offering that the Bank obtains a first
priority  perfected  Lien on Cash  Collateral in an amount not less than 100% of
the then aggregate principal balance of all outstanding Loans.

         "CHANGE OF CONTROL" shall mean any one or more of the following events:
(i) the Individual  Guarantors and their  Affiliates  shall fail to beneficially
own  collectively  at least 15% of the Voting Shares of the  Borrower,  (ii) any
change in the ownership of the Voting Shares of the Partnership Guarantor, (iii)
the Individual  Guarantors and their  Affiliates  shall fail to beneficially own
collectively  at least 90% of the  Voting  Shares of  Stanoff  Corp.,  excluding
transfers  as  gifts,  transfers  to  Affiliates  and  other  transfers  made in
connection with estate  planning;  PROVIDED,  THAT,  after giving effect to such
transfers  the   Individual   Guarantors  and  their   Affiliates   continue  to
beneficially own collectively at least 60% of the Voting Shares thereof, or (iv)
should  Howard  Weingrow  and  Robert  K.  Lifton  both  cease  (whether  due to
retirement,   disability,   death  or  otherwise)  to  exercise  the  managerial
policy-making  responsibilities which on the date hereof they now hold, serve in
or exercise with or on behalf of the Borrower,  the Partnership Guarantor and/or
Stanoff Corp.

         "COLLATERAL"  shall mean the collateral  described in Article 9 of this
Agreement.

         "COMMITMENT" shall mean the obligation of the Bank to make Loans to the
Borrower  during the  Commitment  Period  pursuant  to the terms  hereof as such
Commitment  is  defined in Section  2.1  hereof and as subject to  reduction  in
accordance with the terms hereof.

         "COMMITMENT  PERIOD"  shall mean the period from and including the date
of this Agreement to and including the Termination  Date or such earlier date as
the Commitment shall terminate as provided herein.

         "CONTRACTUAL OBLIGATIONS" shall mean as to any Person, any provision of
any  security  issued  by  such  Person  or  of  any  agreement,  instrument  or
undertaking  to  which  such  Person  is a party  or by  which  it or any of its
property is bound.

         "CONTROLLED" and "CONTROL" shall mean any  partnership,  corporation or
other entity of which the Borrower, alone, or the Borrower and/or one or more of
its Subsidiaries,  either has the power to direct the management  thereof or the
power to direct at least a majority of the voting interests.

         "COST OF FUNDS"  shall  mean the per annum rate of  interest  which the
Bank is  required to pay, or is  offering  to pay,  for  wholesale  liabilities,
adjusted for reserve  requirements and such other requirements as may be imposed
by federal,  state or local government and regulatory agencies, as determined by
the Bank.

         "DEFAULT"  shall mean any of the  events  specified  in this  Agreement
under  "Events of  Default",  whether or not any  requirement  for the giving of
notice, the lapse of time, or both, has been satisfied.

         "DOLLARS"  and "$" shall mean dollars in lawful  currency of the United
States of America.

         "EFFECTIVE  DATE"  shall have the  meaning  set forth in Section  10.15
hereof.

         "ENVIRONMENTAL LAWS" shall mean any federal,  state or local statute or
regulation  relating to hazardous or toxic wastes or  substances  or the removal
thereof.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.

         "EVENT OF  DEFAULT"  shall  mean any of the  events  specified  in this
Agreement  under  "Events of Default",  provided  that any  requirement  for the
giving of notice,  the lapse of time, or both, or any other condition,  has been
satisfied.

         "EXECUTOR  INSTRUCTIONS" shall mean the following writings satisfactory
to the Bank: (i) a letter  executed by each  Individual  Guarantor  whereby each
such  Individual  Guarantor  directs his executor to pledge Cash  Collateral  to
satisfy the  requirements  of Sections  2.1(i)(C)  and 8.1(j) of this  Agreement
prior to making any other distribution  (which letter shall be agreed to by such
executor) under his respective Last Will and Testament,  (ii) a certification to
the Bank whereby each Individual  Guarantor certifies that the executor named in
the letter  provided under  subparagraph  (i) of this  definition is the current
executor of his Last Will and  Testament and (iii) a  certification  to the Bank
whereby each Individual  Guarantor  agrees not to change such executor without a
letter  of the type  described  in  subparagraph  (i) of this  definition  being
furnished to, and agreed to by, such replacement executor.

         "FLUCTUATING  RATE LOANS" shall mean Loans hereunder that bear interest
at a rate of interest based upon the Prime Rate plus the applicable  margin,  if
indicated.

         "GAAP" shall mean generally accepted accounting principles applied in a
manner  consistent  with  that  employed  in the  preparation  of the  financial
statements described in Section 3.1.

         "GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state
or  other  political  subdivision  thereof,  any  entity  exercising  executive,
legislative,  judicial,  regulatory or administrative functions of or pertaining
to government,  and any corporation or other entity owned or controlled (through
stock or capital ownership or otherwise) by any of the foregoing.

         "GUARANTEES" shall mean the guarantees to be executed by the Guarantors
substantially in the form of Exhibit C hereto.

         "GUARANTORS"  shall mean Plaza Hotel Management  Company,  a New Jersey
general partnership (the "Partnership Guarantor") and Howard Weingrow and Robert
K. Lifton (collectively the "Individual Guarantors").

         "INDEBTEDNESS"  shall  mean,  with  respect  to  any  Person,  (a)  all
obligations  of such Person for  borrowed  money or with  respect to deposits or
advances of any kind,  (b) all  obligations  of such Person  evidenced by bonds,
debentures,  notes or other similar  instruments,  (c) all  obligations  of such
Person for the deferred  purchase price of property or services,  except current
accounts  payable  and  trade  liabilities  arising  in the  ordinary  course of
business and not overdue  beyond such period as is  commercially  reasonable for
such Person's  business,  (d) all  obligations of such Person under  conditional
sale or other title retention  agreements relating to property purchased by such
Person, (e) all payment obligations of such Person with respect to interest rate
or currency  protection  agreements,  (f) all  obligations  of such Person as an
account party under any letter of credit or in respect of bankers'  acceptances,
(g) all  obligations  of any third  party  secured by property or assets of such
Person (regardless of whether or not such Person is liable for repayment of such
obligations),  (h) all guarantees of such Person and (i) the redemption price of
all redeemable  preferred stock of such Person, but only to the extent that such
stock is  redeemable  at the option of the holder or  requires  sinking  fund or
similar payments at any time prior to the Termination Date.

         "INDIVIDUAL   GUARANTORS"  shall  have  the  meaning  set  forth  under
"Guarantors".

         "INTERNAL  REVENUE CODE" shall mean the Internal  Revenue Code of 1986,
as it may be amended from time to time.

         "INTEREST  PERIOD"  shall  mean any  period  during  which a Loan bears
interest at a rate based on LIBOR as elected by the Borrower in accordance  with
the terms of this Agreement.

                  (a)   If  any Interest  Period would otherwise end on a day
which is not a Business Day, that Interest  Period shall be extended to the next
succeeding  Business Day unless such Interest  Period is with respect to a LIBOR
Loan and the result of such  extension  would be to extend such Interest  Period
into another  calendar  month,  in which event such Interest Period shall end on
the immediately preceding Business Day.

                  (b)   No  Interest  Period  shall  extend  beyond  a stated
Maturity Date.

         "INVESTMENTS"  shall  mean any loan or  advance  of  money,  credit  or
property  to or  investment  in (by  capital  contribution,  loan,  purchase  or
otherwise) any firm, corporation, or other Person.

         "LIBOR" shall mean, as applicable to any LIBOR Loan, the rate per annum
(rounded upward, if necessary, to the nearest 1/32 of one percent) as determined
on the basis of the offered rates for deposits in U.S. dollars,  for a period of
time comparable to such LIBOR Loan which appears on the Telerate page 3750 as of
11:00 a.m. London time on the day that is two London Business Days preceding the
first day of such LIBOR Loan;  provided,  however,  if the rate described  above
does not appear on the Telerate System on any applicable interest  determination
date, LIBOR shall be the rate (rounded upwards as described above, if necessary)
for deposits in dollars for a period  substantially equal to the Interest Period
on the  Reuters  Page "LIBO" (or such other page as may replace the LIBO Page on
that service for the purpose of displaying such rates),  as of 11:00 a.m.(London
Time), on the day that is two (2) London Business Days prior to the beginning of
such Interest  Period.  If both the Telerate and Reuters system are unavailable,
then the rate for that date will be determined on the basis of the offered rates
for deposits in U.S.  dollars for a period of time comparable to such LIBOR Loan
which  are  offered  by four  major  banks in the  London  interbank  market  at
approximately 11:00 a.m. London time, on the day that is two (2) London Business
Days  preceding  the first day of such LIBOR Loan as selected  by the Bank.  The
principal London office of each of the four major London banks will be requested
to provide a quotation of its U.S.  dollar deposit offered rate. If at least two
such quotations are provided,  the rate for the date will be the arithmetic mean
of the quotations.  If fewer than two quotations are provided as requested,  the
rate for that date will be determined on the basis of the rates quoted for loans
in U.S.  dollars to leading  European  banks for a period of time  comparable to
such LIBOR Loan offered by major banks in New York City at  approximately  11:00
a.m. New York City time, on the day that is two London  Business Days  preceding
the first day of such LIBOR Loan. In the event that the Bank is unable to obtain
any such quotation as provided above, it will be deemed that LIBOR pursuant to a
LIBOR Loan cannot be determined. In the event that the Board of Governors of the
Federal  Reserve System shall impose a Reserve  Percentage with respect to LIBOR
deposits of the Bank,  then for any period during which such Reserve  Percentage
shall apply,  LIBOR shall be equal to the amount  determined above divided by an
amount equal to 1 minus the Reserve Percentage.  "Reserve Percentage" shall mean
the maximum aggregate reserve  requirement  (including all basic,  supplemental,
marginal  and other  reserves)  which is imposed on member  banks of the Federal
Reserve System against "Euro-currency Liabilities" as defined in Regulation D.

         "LIBOR  LOANS" shall mean Loans  hereunder  that bear  interest for the
Interest Period applicable thereto at a rate of interest based upon LIBOR.

         "LIEN"   shall   mean  any   mortgage,   pledge,   security   interest,
hypothecation,  assignment,  deposit  arrangement,  encumbrance,  or preference,
priority or other security agreement or preferential  arrangement of any kind or
nature whatsoever (including,  without limitation, any conditional sale or other
title retention  agreement,  any financing lease having  substantially  the same
economic  effect  as any of the  foregoing,  and  the  filing  of any  financing
statement   under  the  Uniform   Commercial  Code  or  comparable  law  of  any
jurisdiction).

         "LOAN" or "LOANS"  shall  have the  meaning  set forth in  Section  2.1
hereof.

         "LOAN DOCUMENTS"  shall mean this Agreement,  the Note, the Guarantees,
each Security Document and each document,  agreement and instrument  executed in
connection  herewith or pursuant hereto or in connection with or pursuant to any
of the foregoing,  together with each document, agreement and instrument made by
the Borrower or any Guarantor with or in favor of or owing to the Bank.

         "MANAGING  PERSON"  shall mean with respect to any Person that is (i) a
corporation, its board of directors, (ii) a limited liability company, its board
of control, managing member or members, (iii) a limited partnership, its general
partner,  (iv) a general  partnership or a limited  liability  partnership,  its
managing  partner or executive  committee or (v) any other Person,  the managing
body thereof or other Person analogous to the foregoing.

         "MATURITY  DATE"  shall  mean the date  that  all or a  portion  of the
outstanding principal balance of a Loan is due and payable pursuant to the terms
hereof which shall include without limitation the Termination Date.

         "MORTGAGE"  shall mean a mortgage  with respect to the Premises made by
the  Partnership  Guarantor  in favor of the Bank  substantially  in the form of
Exhibit E hereto (with the exhibits  thereto to be as mutually agreed to in good
faith between the Borrower, Partnership Guarantor and the Bank), as the same may
be amended, modified, supplement or replaced from time to time.

         "MULTIEMPLOYER  PLAN" shall mean a  "multiemployer  plan" as defined in
Section  4001(a)(3) of ERISA to which the Borrower is making,  or is accruing an
obligation  to make,  contributions  or has  made,  or been  obligated  to make,
contributions within the preceding six (6) years.

         "NOTE" shall have the meaning set forth in Section 2.2 hereof.

         "OBLIGATIONS"  shall  mean  any and  all  sums  owing  under  the  Loan
Documents and all other  obligations,  direct or contingent,  joint,  several or
independent,  of the Borrower now or hereafter existing due or to become due to,
or held or to be held by the Bank,  whether  created  directly  or  acquired  by
assignment or otherwise.

         "PARTNERSHIP   GUARANTOR"  shall  have  the  meaning  set  forth  under
"Guarantors".

         "PBGC" shall mean the Pension Benefit Guaranty Corporation.

         "PERSON" shall mean any  individual,  corporation,  partnership,  joint
venture, trust,  unincorporated organization or any other juridical entity, or a
government or state or any agency or political subdivision thereof.

         "PLAN" shall mean any plan of a type  described  in Section  4021(a) of
ERISA (other than a plan  described  in Section  4021(b) of ERISA) in respect of
which the Borrower is an "employer" as defined in Section 3(5) of ERISA.

         "PLEDGE  AGREEMENT"  shall  mean  any and each  pledge  (hypothecation)
agreement, in form and substance satisfactory to the Bank, which grants the Bank
a first priority  perfected Lien on Cash  Collateral as required by Sections 2.1
and  8.1(j)  hereof,  as the  same may be  amended,  modified,  supplemented  or
replaced from time to time, which such Pledge Agreement may be executed in favor
of the  Bank by the  Borrower,  any  Guarantor,  the  estate  of any  Individual
Guarantor and/or any other Person satisfactory to the Bank.

         "POST DEFAULT RATE" shall mean at any time a rate of interest  equal to
4% per annum in excess of the  highest  rate that  would then be  applicable  to
Fluctuating Rate Loans.

         "PREMISES"   shall  mean  that  certain  Real  Property  owned  by  the
Partnership  Guarantor  and located at the  Boardwalk  and  Mississippi  Avenue,
Atlantic City, New Jersey 08401.

         "PREMISES  RECORDING  DATE"  shall  mean any  and/or  all of the  dates
allowing  for the  Assignment  of  Leases  and/or  Mortgage  to be  recorded  in
accordance with Section 2.8 hereof.

         "PRIME  RATE"  shall mean the  variable  per annum rate of  interest so
designated  from time to time by the Bank as its prime rate. The Prime Rate is a
reference rate and does not necessarily  represent the lowest or best rate being
charged to any customer.

         "REAL  PROPERTY"  shall mean any real  property  owned or leased by the
Borrower or any of its  Subsidiaries or the Partnership  Guarantor or any of its
Subsidiaries.

         "REPORTABLE  EVENT" shall mean,  with  respect to any Plan,  any of the
events set forth in Section 4043(c) of ERISA for which the Plan administrator is
required to provide notice to the PBGC pursuant to Section 4043 of ERISA and the
regulations issued thereunder.

         "REQUIREMENTS  OF LAW" shall mean as to any Person,  the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person,  and  any  law,  treaty,  rule or  regulation,  or  determination  of an
arbitrator or a court or other Governmental  Authority,  in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

         "SEC DOCUMENTS" shall mean any and all registration  statements and any
amendments  and  supplements  thereto,  and  any and all  regular  and  periodic
reports,  if any,  filed by the  Borrower  or any of its  Subsidiaries  with any
securities  exchange  or with the  Securities  and  Exchange  Commission  or any
governmental  authority  succeeding  to any or all of the  functions of the said
Commission

         "SECURITY DOCUMENTS" shall mean the Mortgage, the Assignment of Leases,
each Pledge  Agreement,  each Uniform  Commercial Code financing  statements and
each other security  agreement or similar  document with or in favor of the Bank
directly or indirectly providing collateral security for the Obligations.

         "SPECIFIED  PERSON"  shall  mean  either  the  Borrower  or  any of its
Subsidiaries  or the  Partnership  Guarantor or any of its  Subsidiaries  or any
Individual Guarantor.

         "SUBSEQUENT  OFFERING"  shall mean the first  public or private sale of
debt  or  Capital  Stock  of the  Borrower  occurring  after  the  date  of this
Agreement.

         "SUBSIDIARY" or "SUBSIDIARIES" of any Person shall mean any corporation
or  corporations  of which the Person alone, or the Person and/or one or more of
its  Subsidiaries,  owns,  directly  or  indirectly,  at least a majority of the
securities having ordinary voting power for the election of directors.

         "TERMINATION DATE" shall mean December 28, 2002 or, if such date is not
a Business Day, the Business Day next succeeding such date.

         "TERMINATION EVENT" shall mean any one of the following:

         (a)      a "Reportable  Event" described in Section 4043 of ERISA and
the regulations  issued thereunder;

         (b) the  withdrawal  of the Borrower  from a Plan during a plan year in
which it was a "substantial  employer" as defined in Section 4001(a)(2) of ERISA
or was deemed such under Section 4068(f) of ERISA; or

         (c)      the  termination  of a Plan, the filing of a notice of intent
to terminate a Plan or the treatment of a Plan amendment as a termination under
Section 4041 of ERISA;

         (d)      the institution of proceedings to terminate a Plan by the
PBGC;

         (e)      any other event or condition  which would  constitute  grounds
under Section 4042(a) of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan;

         (f)      the partial or complete withdrawal of the Borrower from a
Multiemployer Plan;

         (g)      the  imposition  of a Lien  against  the  Borrower  pursuant
to Section  412 of the Internal Revenue Code or Section 302 of ERISA;

         (h)      any event or  condition  which  results in the  reorganization
or  insolvency  of a Multiemployer Plan under Section 4241 or Section 4245 of
ERISA, respectively; or

         (i) any  event or  condition  which  results  in the  termination  of a
Multiemployer  Plan under Section 4041A of ERISA or the  institution by the PBGC
of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA.

         "VOTING  SHARES"  shall  mean all  outstanding  shares  of any class or
classes (however  designated) of Capital Stock of the applicable Person entitled
to vote generally in the election of members of the Managing Person thereof.

         SECTION 1.2. ACCOUNTING TERMS

     As used in the Loan  Documents  and in any  certificate,  opinion  or other
document made or delivered  pursuant  thereto,  accounting  terms not defined in
Section 1.1, and  accounting  terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP. If any
change  in  GAAP  would  affect  the  computation  of  any  financial  ratio  or
requirement  set  forth  in this  Agreement,  the Bank  and the  Borrower  shall
negotiate  in good  faith to amend  such ratio or  requirement  to reflect  such
change in GAAP,  PROVIDED THAT, until so amended,  (i) such ratio or requirement
shall  continue to be computed in accordance  with GAAP prior to such change and
(ii) the  Borrower  shall  provide to the Bank  financial  statements  and other
documents  required  under this  Agreement  (or such other items as the Bank may
reasonably request) setting forth a reconciliation  between calculations of such
ratio or requirement before and after giving effect to such change.

         SECTION 1.3. RULES OF INTERPRETATION

         (a) Unless expressly  provided in a Loan Document to the contrary,  (i)
the words  "HEREOF",  "HEREIN",  "HERETO" and "HEREUNDER" and similar words when
used in each Loan Document  shall refer to such Loan Document as a whole and not
to any particular provision thereof, (ii) article, section, subsection, schedule
and exhibit  references  contained  therein  shall  refer to  article,  section,
subsection,  schedule and exhibit thereof or thereto,  (iii) the words "INCLUDE"
and  "INCLUDING",   shall  mean  that  the  same  shall  be  "INCLUDED,  WITHOUT
LIMITATION", (iv) any definition of, or reference to, any agreement, instrument,
certificate  or other  document  herein  shall be construed as referring to such
agreement,   instrument  or  other  document  as  from  time  to  time  amended,
supplemented or otherwise modified, (v) any reference herein to any Person shall
be construed to include such  Person's  successors  and assigns,  (vi) the words
"ASSET" and "PROPERTY"  shall be construed to have the same meaning and to refer
to any and all tangible and intangible  assets and  properties,  including cash,
securities,  accounts and contract  rights,  (vii) words in the singular  number
include the plural,  and words used therein in the plural  include the singular,
(viii) any reference to a time shall refer to such time in New York, (ix) in the
computation of periods of time from a specified date to a later  specified date,
the word "FROM" means "FROM AND  INCLUDING"  and the words "TO" and "UNTIL" each
means "TO BUT  EXCLUDING",  and (x) references  therein to a fiscal period shall
refer to that fiscal period of the Borrower.

         (b)  Article  and  Section  headings  have  been  inserted  in the Loan
Documents for convenience only and shall not be construed to be a part thereof.

ARTICLE 2         AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENT

         SECTION 2.1. REVOLVING CREDIT COMMITMENT

         Subject to the terms and  conditions  hereof,  the Bank  agrees to make
revolving  credit  loans to the  Borrower  (each a "Loan" and  collectively  the
"Loans") during the Commitment Period of which the aggregate principal amount of
Loans at any one time outstanding  shall not exceed  $5,000,000,  as such amount
may be reduced as provided in this Agreement (the "Commitment"); PROVIDED, THAT,
(i) at all times prior to the Cash Collateral Effective Date the Bank shall have
no  obligation  to make any Loan to the Borrower  (A) if,  after  giving  effect
thereto,  the aggregate  principal balance of all outstanding Loans shall exceed
$1,000,000,  unless and until the Bank shall have filed the Assignment of Leases
and  shall  have a  first  priority  perfected  Lien on the  Collateral  therein
specified, (B) if the date such Loan is requested is after June 15, 2001, unless
and until the Bank shall have filed the  Mortgage and  Assignment  of Leases and
shall have a first priority  perfected Lien on the Collateral  therein specified
and (C) if any  Individual  Guarantor  shall die and the Bank has been granted a
first Lien on Cash  Collateral in the amount  required by Section 8.1(j) hereof,
unless and until the Bank has obtained a first  priority  perfected Lien on Cash
Collateral (owned by any Person other than the remaining  Individual  Guarantor)
in an  amount  not  less  than 50% of the  aggregate  principal  balance  of all
outstanding  Loans after giving effect to any Loan requested to be made (and the
applicable  Person pledging such Cash Collateral has executed all  documentation
reasonably requested by the Bank in order to effectuate same);  PROVIDED,  THAT,
the pledge of Cash Collateral on behalf of a deceased  Guarantor shall not limit
or otherwise  effect the  unlimited  and  unconditional  nature of the remaining
Guarantor's Guarantee, and (ii) at all times after the Cash Collateral Effective
Date the Bank shall have no obligation  to make any Loan to the Borrower  unless
and  until  the  Bank  has  obtained  a first  priority  perfected  Lien on Cash
Collateral in an amount not less than 100% of the aggregate principal balance of
all outstanding  Loans after giving effect to the Loan requested to be made (and
the  applicable   Person   pledging  such  Cash   Collateral  has  executed  all
documentation  reasonably  requested by the Bank in order to  effectuate  same).
During the  Commitment  Period the Borrower may use the Commitment for obtaining
Loans by borrowing,  paying,  prepaying in whole or in part and reborrowing on a
revolving basis, all in accordance with the terms and conditions hereof.

         SECTION 2.2. REVOLVING CREDIT NOTE

         The Loans made by the Bank to the  Borrower  pursuant  to  Section  2.1
hereof shall be evidenced by a promissory note of the Borrower  substantially in
the form of Exhibit A hereto with appropriate  insertions (the "Note"),  payable
to the order of the Bank and  representing the obligation of the Borrower to pay
the lesser of (a) the amount of the  Commitment  or,  (b) the  aggregate  unpaid
principal  amount of all Loans made by the Bank to the  Borrower,  with interest
thereon as hereinafter prescribed.  The Note shall (i) be dated the date of this
Agreement,  (ii) be  stated to mature  on the  Termination  Date and (iii)  bear
interest with respect to the unpaid principal  balance thereof from time to time
outstanding at a rate per annum to be elected by the Borrower in accordance with
the notice provisions set forth in Section 2.3 hereof,  and in the case of LIBOR
Loans for the  Interest  Period  therein  specified,  equal to either (A) at all
times prior to the Cash Collateral  Effective Date (1) 1.75% in excess of LIBOR,
or (2) the Prime Rate  (which  interest  rate will  change when and as the Prime
Rate changes) and (B) at all times after the Cash Collateral  Effective Date (1)
0.50% in excess of LIBOR, or (2) the Prime Rate (which interest rate will change
when and as the Prime Rate changes).  In all cases interest shall be computed on
the basis of a 360-day  year for  actual  days  elapsed  and shall be payable as
provided in this Agreement.  After the occurrence of any Event of Default and/or
any stated or  accelerated  maturity,  the Note shall bear  interest at the post
default rate set forth in this Agreement.

         SECTION 2.3. PROCEDURE FOR BORROWINGS

         The  Borrower  may borrow under the  Commitment  during the  Commitment
Period and may, subject to the limitations set forth in this Agreement,  convert
and continue interest rates, on any Business Day, by giving the Bank irrevocable
notice of a request  therefor (a) in the case of LIBOR Loans three Business Days
before a proposed borrowing or continuation or conversion and (b) in the case of
Fluctuating Rate Loans not less than one nor more than five Business Days before
a proposed borrowing or continuation or conversion, setting forth (i) the amount
of the Loan requested, which shall not be less than $100,000, (ii) the requested
borrowing date or Interest Period  commencement  date, as the case may be, (iii)
whether the borrowing or Interest Period is to be for a LIBOR Loan,  Fluctuating
Rate Loan or a  combination  thereof,  and (iv) if entirely or partially a LIBOR
Loan,  the length of the Interest  Period  therefor,  which shall be one, two or
three  months.  As  used  in this  Section  2.3,  "conversion"  shall  mean  the
conversion  from  one  interest  rate to  another  interest  rate as more  fully
described in this Agreement.  Such notice shall be written  (including,  without
limitation, via facsimile transmission) and shall be sufficient if received by l
p.m.  on the date on which such  notice is to be given.  If any such  request is
sent by  facsimile  it shall be confirmed in writing sent by the Borrower to the
Bank within two  Business  Days  thereafter.  Unless  notification  is otherwise
furnished  by  the  Borrower  to the  Bank  (in a  manner  consistent  with  the
requirements  of this Section),  Loans will be made by credits to the Borrower's
demand deposit account  maintained with the Bank. If the Borrower furnishes such
notice but no election is made as to the type of Loan or the Interest  Period to
be applicable thereto, the Loan will automatically then be made as a Fluctuating
Rate Loan until such  required  information  is furnished  pursuant to the terms
hereof.

         SECTION 2.4. RELEASE OF INDIVIDUAL GUARANTORS,  MORTGAGE AND ASSIGNMENT
OF LEASES

         Within ten Business Days of the Cash Collateral Effective Date, as long
as no Default or Event of Default then exists,  at the request of the  Borrower,
the Bank shall release each Individual  Guarantor from his respective  Guarantee
and  terminate  the  Mortgage and  Assignment  of Leases (and if the Mortgage or
Assignment of Leases has theretofore been recorded, at the cost of the Borrower,
prepare,  execute and cause to be recorded a satisfaction  (discharge) of same);
provided,  that,  the foregoing  release shall not be deemed to release any Cash
Collateral and each Pledge  Agreement with respect to such Cash Collateral shall
remain in full force and effect.

         SECTION 2.5. COMMITMENT FEE

         As additional compensation for the Commitment on the revolving
basis provided for herein,  the Borrower agrees to pay the Bank a commitment fee
for the  Commitment  Period at the rate of .25% per annum on the  average  daily
unused portion of the Commitment hereunder. Such commitment fee shall be payable
quarterly, on the last Business Day of each December,  March, June and September
during the  Commitment  Period  (regardless of whether or not the Effective Date
shall have occurred), commencing March 31, 2001, and on the Termination Date. If
the Borrower so fails to pay any such amount to the Bank the obligations to make
such payment  shall bear  interest  from such date not paid when due at the Post
Default Rate.  The obligation to so pay interest shall not be construed so as to
waive the requirement to pay the commitment fees as hereinabove set forth.

SECTION 2.6.      REGULATORY CHANGES IN CAPITAL REQUIREMENTS

                  If any existing or future law,  regulation or guideline or the
interpretation  thereof by any court or administrative or governmental authority
charged with the  administration  thereof,  or  compliance  by the Bank with any
request  or  directive  (whether  or not  having  the  force of law) of any such
authority, imposes, modifies, deems applicable or results in the application of,
any capital  maintenance,  capital  ratio or similar  requirement  against  loan
commitments  made  by the  Bank  (or  participations  therein)  or the  Bank  in
anticipation of the effectiveness of any capital  maintenance,  capital ratio or
similar   requirement  takes  reasonable  action  to  enable  itself  to  comply
therewith,  and the result  thereof is to impose upon the Bank or  increase  any
capital  requirement  applicable as a result of the making or maintenance of the
Commitment or participations therein (which imposition of or increase in capital
requirements  may be  determined  by the  Bank's  reasonable  allocation  of the
aggregate of such capital  impositions  or increases)  then,  upon demand by the
Bank,  the  Borrower  shall  immediately  pay to the Bank  from  time to time as
specified by the Bank  additional  commitment  fees which shall be sufficient to
compensate   the  Bank  for  such   impositions   of  or  increases  in  capital
requirements,  together with interest on each such amount from the date demanded
until payment in full thereof at the Post Default  Rate. A  certificate  setting
forth in reasonable  detail the amounts  necessary to  compensate  the Bank as a
result of an imposition of or increase in capital requirements  submitted by the
Bank to the Borrower shall be conclusive, absent manifest error or bad faith, as
to the amount  thereof.  For purposes of this Section,  (a) in  calculating  the
amount  necessary to  compensate  the Bank for any  imposition of or increase in
capital  requirements,  the Bank  shall be  deemed to be  entitled  to a rate of
return on capital (after federal, state and local taxes) of fifteen per cent per
annum,  and (b) all  references  to the "Bank"  shall be deemed to  include  any
participant in the Commitment and any corporation controlling the Bank.

         SECTION 2.7. TERMINATION OR REDUCTION OF COMMITMENT

         The Borrower  shall have the right,  upon not less than three  Business
Days'  irrevocable  written notice, to terminate the Commitment or, from time to
time,  to reduce  the  amount  of the  Commitment;  PROVIDED,  THAT (a) any such
reduction (i) shall be in the minimum amount of $500,000 or a multiple  thereof,
(ii) shall reduce  permanently the amount of the Commitment then in effect,  and
(iii) shall be accompanied by prepayment of the Loans outstanding to the extent,
if any, that the Loans then  outstanding  exceed the amount of the Commitment as
then  reduced,  together  with accrued  interest on the amount so prepaid to and
including the dates of each such prepayment and any amounts payable  pursuant to
Section 2.14 in connection  therewith  and the payment of any unpaid  commitment
fee then accrued hereunder, and (b) any such termination of the Commitment shall
be accompanied by prepayment in full of the Loans  outstanding and together with
accrued interest thereon to and including the date of prepayment and any amounts
payable pursuant to Section 2.14 in connection  therewith and the payment of any
unpaid commitment fee then accrued hereunder.

         SECTION 2.8. RECORDATION OF ASSIGNMENT OF LEASES AND MORTGAGES

         (i) The Bank shall not  record the  Mortgage  or  Assignment  of Leases
unless and until the  earlier of (A) the death of either  Individual  Guarantor,
(B)  June  15,  2001 if the  Cash  Collateral  Effective  Date  has not yet then
occurred and if there are any Loans  outstanding  at such time,  or if there are
not Loans  outstanding at such time,  any date  thereafter if the Borrower shall
request a Loan, (C) a Default or Event of Default has occurred,  or (D) the date
of any request for a Loan if the aggregate  principal balance of all outstanding
Loans,  after  giving  effect  to  such  Loan  requested  to  be  made,  exceeds
$1,000,000.   The  Bank's  authority  to  record  the  above-described  Security
Documents  shall be absolute  and upon the  occurrence  of any of the  foregoing
events  the Bank is  authorized,  without  any  further  action on behalf of the
Borrower,  to  record  the  applicable  Security  Document(s)  and all costs and
expenses  associated  therewith or incurred by the Bank in connection  therewith
shall be borne by the Borrower, including without limitation title insurance and
recording fees. Once the Assignment of Leases and/or Mortgage is recorded in the
manner herein  provided,  such Assignment of Leases and/or Mortgage shall not be
released  even if the  aggregate  balance  of  outstanding  Loans  is less  than
$1,000,000  and shall only be released if (A) the  Commitment is terminated  and
all of the  Obligations  are paid in full,  or (B) as set forth in  Section  2.4
hereof.  Notwithstanding  anything to the  contrary  contained  herein or in any
other Loan  Document,  to the extent that either (i) the  facility  described in
this Agreement is terminated and all Loans and other Obligations related to this
Agreement shall have been indefeasibly paid in full, or (ii) the Cash Collateral
Effective Date shall have occurred and the Borrower  shall have fully  satisfied
all of its obligations in connection  therewith,  the Mortgage and Assignment of
Leases shall  automatically  terminate without any further action on the part of
any other party and be of no further  force or effect (and at the request of the
Borrower, the Bank shall provide the Borrower with written confirmation of same,
including a  termination,  cancellation  or  satisfaction  thereof in recordable
form).

         SECTION 2.9. CONTINUATION AND CONVERSION OF LOANS

         The  Borrower  shall  have the  right at any time on prior  irrevocable
written  or telex  notice  to the Bank as  specified  in this  Agreement  (i) to
continue any Loan into a subsequent  Interest Period,  (ii) to convert any LIBOR
Loan into a Fluctuating  Rate Loan,  and (iii) to convert any  Fluctuating  Rate
Loan  into a  LIBOR  Loan  (specifying  the  Interest  Period  to be  applicable
thereto), subject to the following:

         (a) in the case of a  conversion  of less  than all of the  outstanding
Loans, the aggregate  principal amount of Loans converted shall not be less than
$100,000 and shall be an integral multiple thereof;

         (b) no LIBOR Loan shall be  converted at any time other than at the end
of an Interest Period applicable thereto; and

         (c) any  portion of a Loan  maturing  or required to be prepaid in less
than one month may not be converted into or continued as a LIBOR Loan.

In the event that the Borrower  shall not give notice to continue any LIBOR Loan
into a  subsequent  Interest  Period  or  convert  any such  Loan into a Loan of
another type, on the last day of the Interest Period thereof,  such Loan (unless
prepaid)  shall  automatically  be converted  into a Fluctuating  Rate Loan. The
Interest  Period  applicable  to any LIBOR Loan  resulting  from a conversion or
continuation  shall be  specified  by the  Borrower  in the  irrevocable  notice
delivered by the Borrower pursuant to this Agreement;  PROVIDED,  HOWEVER, that,
if such notice does not specify  either the type of Loan or the Interest  Period
to be applicable  thereto,  the Loan shall  automatically  be converted into, or
continued  as, as the case may be, a  Fluctuating  Rate Loan until such required
information is furnished pursuant to the terms hereof.  Notwithstanding anything
to the contrary  contained above, if an Event of Default shall have occurred and
is continuing,  no LIBOR Loan may be continued into a subsequent Interest Period
and no Fluctuating Rate Loan may be converted into a LIBOR Loan.

         SECTION 2.10. PREPAYMENT

         The Borrower may prepay any  Fluctuating  Rate Loan in whole or in part
without premium or penalty;  provided,  however, that each partial prepayment on
account  of any  Fluctuating  Rate  Loan  shall be in an  amount  not less  than
$500,000.  Except as provided otherwise in this Agreement,  the Borrower may not
prepay any LIBOR Loan prior to the last day of the Interest Period therefor. Any
amount  prepaid on account of a Loan may be reborrowed  in  accordance  with the
provisions of Section 2.1 hereof.

         SECTION  2.11.  INTEREST  PAYMENTS;  MANNER  OF  PAYMENTS;  RATE  AFTER
DEFAULT; SCHEDULE TO NOTE

         (a)   Interest   accrued  on  each  Loan  shall  be  payable,   without
duplication, on:

                    (i)  the Maturity Date of such Loan;

                    (ii) with  respect  to any  portion  of any Loan  repaid  or
                         prepaid  pursuant to this  Agreement,  the date of such
                         repayment or prepayment, as the case may be;

                    (iii)with  respect  to all  Loans,  the  first  day of  each
                         month,  commencing  with the first such date  following
                         the date of the making of such Loans;

                    (iv) with  respect  to  that  portion  of  the   outstanding
                         principal  amount  maintained as LIBOR Loans,  the last
                         day of each applicable Interest Period, but in no event
                         more frequently than monthly;

                    (v)  with  respect  to  that  portion  of  the   outstanding
                         principal  amount converted into Fluctuating Rate Loans
                         or  LIBOR  Loans  on a  day  when  interest  would  not
                         otherwise  have been  payable  pursuant to  Subsections
                         (a)(iii) or (a)(iv), the date of such conversion.

         (b) All payments (including  prepayments) to be made by the Borrower on
account of principal or interest  with respect to any Loan or on account of fees
or any other  obligations of the Borrower to the Bank hereunder shall be made to
the Bank at the office of the Bank set forth in Section  10.1  hereof or at such
other  place as the Bank may from time to time  designate  in  writing in lawful
money of the United States of America in immediately  available  funds,  without
counterclaim  or setoff  and free and clear of, and  without  any  deduction  or
withholding  for,  any  taxes or other  payments.  If the  entire  amount of any
required  principal  and/or  interest  is not paid in full  within ten (10) days
after the same is due,  the  Borrower  shall pay to the Bank a late fee equal to
five percent (5%) of the required  payment.  The Borrower hereby  authorizes and
directs the Bank to charge any account of the Borrower  maintained at any office
of the Bank for any such payments. Subject to the provisions of subparagraph (a)
in the  definition  of Interest  Period set forth in Section 1.1 hereof,  if any
payment to be so made hereunder,  or under either Note,  becomes due and payable
on a day other than a Business  Day,  such payment shall be extended to the next
succeeding Business Day and, to the extent permitted by applicable law, interest
thereon shall be payable at the then applicable rate during such extension.  All
payments  shall be applied first to the payment of all fees,  expenses and other
amounts due to the Bank  (excluding  principal  and  interest),  then to accrued
interest,  then on account of outstanding  principal;  provided,  however,  that
after the  occurrence  of an Event of Default,  payments  will be applied to the
obligations  of the  Borrower  to the  Bank as the Bank  determines  in its sole
discretion;  PROVIDED,  FURTHER, THAT, at all times after the Premises Recording
Date, to the extent payments are applied against outstanding principal,  any and
all  such  payments  shall be  deemed  to be  applied  against  the  outstanding
principal  balance of Loans extended prior to the Premises  Recording Date until
the  balance  of all such  Loans  shall  be zero at which  time any and all such
payments shall be applied  against Loans  extended after the Premises  Recording
Date in the manner provided above.

         (c) Upon and following an Event of Default,  all Loans, and any and all
accrued  and  unpaid  interest,  fee or  amount  due  hereunder,  to the  extent
permitted by applicable law, shall bear interest (payable on demand,  and in any
event  on the last  day of each  month,  and  computed  daily on the  basis of a
360-day year for actual days elapsed) (i) in all cases other than LIBOR Loans at
the Post  Default  Rate until paid and (ii) in the case of LIBOR Loans at a rate
which shall be the greater of the Post Default Rate or 4% per annum in excess of
the rate  applicable  to such LIBOR Loan until the  expiration  of the  Interest
Period  applicable  to such Loan, at which time the Loan will  automatically  be
converted into a Fluctuating Rate Loan and until paid shall bear interest at the
Post Default Rate. In no event, however,  shall interest payable hereunder be in
excess of the maximum  rate of interest  permitted  under  applicable  law.  The
obligation  to so pay interest  upon any  obligation of the Borrower to the Bank
shall not be  construed so as to waive the  requirement  for payment on the same
date that payment is to be made to the Bank as set forth in this Agreement.

         (d) The Borrower hereby expressly  authorizes the Bank to record on the
schedule  attached  to the Note the amount  and date of each  Loan,  the rate of
interest  thereon,  the date and  amount of each  payment of  principal  and the
unpaid principal  balance;  provided,  however,  that the failure of the Bank to
make any such  notation  shall not in any manner  affect the  obligation  of the
Borrower  to  repay  any Loan in  accordance  with the  terms  hereof.  All such
notations shall be presumed to be correct.

         SECTION 2.12. USE OF PROCEEDS

         The proceeds of Loans  hereunder shall be used to bridge the Borrower's
working  capital needs until it consummates  the  Subsequent  Offering and it is
expressly  acknowledged  and  agreed  by  the  Borrower  that  proceeds  of  the
Subsequent  Offering shall be utilized as Cash Collateral in the manner provided
in this Agreement.  Furthermore,  it is expressly agreed that the Loans shall be
utilized for the Borrower's  working  capital  purposes in an manner  consistent
with Borrower's working capital needs in its most recent fiscal year;  PROVIDED,
THAT,  in no event  shall any Loans be used to fund  construction  of any of the
Borrower's  (or its  Affiliate's)  manufacturing  plants  or to pay  fees to any
Person in connection with the Subsequent Offering.

         SECTION 2.13. INCREASED COSTS

         If the  Bank  determines  that  the  effect  of any  applicable  law or
government  regulation,  guideline or order or the interpretation thereof by any
Governmental  Authority  charged with the  administration  thereof (such as, for
example, a change in official reserve requirements which the Bank is required to
maintain in respect of loans or deposits  or other  funds  procured  for funding
such loans) is to increase  the cost to the Bank of making or  continuing  LIBOR
Loans  hereunder or to reduce the amount of any payment of principal or interest
receivable by the Bank thereon, then the Borrower will pay to the Bank on demand
such  additional  amounts as the Bank may determine to be required to compensate
the Bank for such additional  costs or reduction.  Any additional  payment under
this section will be computed from the effective  date at which such  additional
costs have to be borne by the Bank. A certificate as to any  additional  amounts
payable  pursuant  to this  Section  setting  forth  the  basis  and  method  of
determining  such amounts shall be conclusive,  absent manifest error, as to the
determination  by the Bank set  forth  therein  if made  reasonably  and in good
faith.  The Borrower shall pay any amounts so certified to it by the Bank within
10 days of receipt of any such  certificate.  For purposes of this Section,  all
references  to the "Bank"  shall be deemed to  include  any  participant  in the
Commitment and/or the Loans.

         SECTION 2.14. YIELD MAINTENANCE

         The  Borrower  shall pay to the Bank,  upon  request of the Bank,  such
amount or amounts as shall be sufficient (in the reasonable opinion of the Bank)
to compensate it for any loss, cost, or expense incurred as a result of: (i) any
payment of a LIBOR Loan on a date other than the last day of the Interest Period
for such Loan;  (ii) any  failure by Borrower to borrow a LIBOR Loan on the date
specified by Borrower's  written notice;  (iii) any failure of Borrower to pay a
LIBOR Loan on the date for  payment  specified  in  Borrower's  written  notice.
Without limiting the foregoing,  Borrower shall pay to Bank a "yield maintenance
fee" in an amount  computed  as  follows:  The  current  rate for United  States
Treasury  securities  (bills on a discounted  basis shall be converted to a bond
equivalent)  with a maturity  date  closest to the term  chosen  pursuant to the
Fixed Rate Election as to which the prepayment is made, shall be subtracted from
LIBOR in effect at the time of  prepayment.  If the result is zero or a negative
number,  there  shall be no yield  maintenance  fee. If the result is a positive
number,  then the resulting  percentage shall be multiplied by the amount of the
principal  balance being prepaid.  The resulting  amount shall be divided by 360
and  multiplied by the number of days  remaining in the term chosen  pursuant to
the Fixed Rate Election as to which the prepayment is made. Said amount shall be
reduced to present value calculated by using the above referenced  United States
Treasury  securities  rate and the number of days  remaining  in the term chosen
pursuant  to the  Fixed  Rate  Election  as to which  prepayment  is  made.  The
resulting amount shall be the yield maintenance fee due to Bank upon the payment
of a LIBOR Loan. Each reference in this paragraph to "Fixed Rate Election" shall
mean the  election by Borrower of Loan to bear  interest  based on LIBOR.  If by
reason of an Event of Default,  the Bank elects to declare the Loans  and/or the
Note to be  immediately  due and payable,  then any yield  maintenance  fee with
respect  to a LIBOR  Loan shall  become  due and  payable in the same  manner as
though the Borrower has exercised such right of prepayment.

         SECTION 2.15. ALTERNATE RATE OF INTEREST

         In the event,  and on each occasion,  that on the day two Business Days
prior to the  commencement  of any  Interest  Period for a LIBOR Loan,  the Bank
shall have  determined  (i) that dollar  deposits in the amount of the requested
principal  amount of such LIBOR Loan are not  generally  available in the London
Interbank  Market,  (ii) that the rate at which such dollar  deposits  are being
offered will not adequately and fairly reflect the cost to the Bank of making or
maintaining  such  LIBOR  Loan  during  such  Interest  Period,  or  (iii)  that
reasonable means do not exist for ascertaining LIBOR, the Bank shall, as soon as
practicable  thereafter,  give written or telex notice of such  determination to
the Borrower.  In the event of any such  determination,  until the circumstances
giving  rise to such  notice  no  longer  exist,  no  LIBOR  Loans  will be made
hereunder.  Each  determination by the Bank hereunder shall be conclusive absent
manifest error.

         SECTION 2.16. CHANGE IN LEGALITY

         (a) Notwithstanding  anything to the contrary herein contained,  if any
change  in  any  law  or  regulation  or in the  interpretation  thereof  by any
governmental authority charged with the administration or interpretation thereof
shall make it unlawful for the Bank to make or maintain any LIBOR Loan, then, by
written notice to the Borrower, the Bank may:

                    (i)  declare that LIBOR Loans will not thereafter be made by
                         the Bank  hereunder,  whereupon  the Borrower  shall be
                         prohibited  from  requesting  LIBOR Loans from the Bank
                         hereunder   unless  such  declaration  is  subsequently
                         withdrawn; and

                    (ii) require that all outstanding  LIBOR Loans made by it be
                         converted to Fluctuating Rate Loans, in which event (x)
                         all such LIBOR Loans shall be  automatically  converted
                         to  Fluctuating  Rate Loans as of the effective date of
                         such notice as provided in paragraph  (b) below and (y)
                         all payments and  prepayments of principal  which would
                         otherwise  have been  applied  to repay  the  converted
                         LIBOR  Loans  shall  instead  be  applied  to repay the
                         Fluctuating Rate Loans resulting from the conversion of
                         such LIBOR Loans.

         (b) For purposes of this  Section,  (i) a notice to the Borrower by the
Bank pursuant to paragraph (a) above shall be effective,  if lawful, on the last
day of the then current Interest Period;  in all other cases,  such notice shall
be effective on the day of receipt by the  Borrower and (ii) all  references  to
the "Bank" shall be deemed to include any  participant in the Commitment  and/or
the Loans.

         ARTICLE 3 REPRESENTATIONS AND WARRANTIES

         In order to induce  the Bank to enter into this  Agreement  and to make
the financial accommodations herein provided for, the Borrower hereby covenants,
represents and warrants to the Bank that:

         SECTION 3.1. FINANCIAL CONDITION

         The  condensed  consolidated  balance  sheet  of  the  Borrower  as  of
September 30, 2000 and the consolidated  statements of operations and cash flows
of the Borrower  for its fiscal year ended on December  31, 1999  reported on by
Grant  Thornton  LLP,  and the tax  return of the  Partnership  Guarantor  as at
December  31,  1999  reported  on by Grant  Thornton  LLP,  copies of which have
heretofore  been  furnished  to the Bank,  are  complete and correct and present
fairly in all material respects the financial condition of the Borrower and such
Partnership  Guarantor  as at such dates,  and the  results of their  respective
operations  and changes in  financial  position  for the fiscal year then ended.
Such certified financial statements, including schedules and notes thereto, have
been  prepared in  accordance  with GAAP  applied  consistently  throughout  the
periods  reflected therein (except as approved by such accountants and disclosed
therein).  Neither the Borrower nor the  Partnership  Guarantor has any material
contingent  obligations,   contingent  liabilities  or  liabilities  for  taxes,
long-term  leases or unusual  forward or  long-term  commitments,  which are not
reflected in the foregoing certified statements or in the notes thereto, or with
respect  to  the  Borrower,  in  any  SEC  Document.   Since  the  date  of  the
aforementioned  financial statements,  there has been no material adverse change
in the  business  operations,  assets or  financial  or other  condition  of the
Borrower or the Partnership  Guarantor.  Schedule 3.1 sets forth each direct and
indirect Subsidiary of the Borrower.

         SECTION 3.2. CORPORATE EXISTENCE; COMPLIANCE WITH LAW

         The Borrower,  the Partnership Guarantor and each of their Subsidiaries
(a) is duly organized,  validly  existing and in good standing under the laws of
the  jurisdiction of its  organization,  (b) has the power and authority and the
legal  right to own and  operate its  property,  and to conduct the  business in
which it is currently engaged,  (c) is duly qualified as a foreign  organization
and in good standing under the laws of each jurisdiction  where its ownership or
operation of property or the conduct of its business require such qualification,
and (d) is in compliance with all Requirements of Law; except to the extent that
the failure to so qualify as a foreign organization as required by clause (c) of
this Section or to comply with all Requirements of Law as required by clause (d)
of this Section would not, in the  aggregate,  be reasonably  expected to have a
material  adverse effect on the business,  operations,  property or financial or
other condition of any such Person,  and would not materially  adversely  affect
the  ability of (i) the  Borrower  to  perform  its  obligations  under the Loan
Documents  to which it is a party or (ii) the  Partnership  Guarantor to perform
its obligations under the Loan Documents to which it is a party.

         SECTION 3.3. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS

         The Borrower has the corporate  power and authority and the legal right
to make,  execute,  deliver and perform its obligations under the Loan Documents
to which it is a party,  and to borrow  hereunder  and has  taken all  necessary
corporate  action to authorize the borrowings on the terms and conditions of the
Loan Documents and to authorize the execution,  delivery and  performance of the
Loan Documents to which it is a party.  No consent or  authorization  of, filing
with, or other act by or in respect of any other Person (including  stockholders
and creditors of such Borrower) or any  Governmental  Authority,  is required in
connection  with  the  borrowings  hereunder  or with the  execution,  delivery,
performance,  validity  or  enforceability  of the Loan  Documents  to which the
Borrower is a party. The Loan Documents to which the Borrower is a party will be
duly executed and  delivered on behalf of the Borrower and such Loan  Documents,
when executed and  delivered,  will each  constitute a legal,  valid and binding
obligation of the Borrower  enforceable  against the Borrower in accordance with
its terms,  except as  enforceability  may be limited by applicable  bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally.

         SECTION  3.4.   POWER,   AUTHORIZATION,   ENFORCEABLE   OBLIGATIONS  OF
GUARANTORS

         The  Partnership  Guarantor  has the power and  authority and the legal
right to make, deliver and perform the Loan Documents to which it is a party and
the transactions  contemplated  thereby and has taken all necessary  partnership
action  to  authorize  the  execution,  delivery  and  performance  of the  Loan
Documents to which it is a party. No consent or  authorization  of, filing with,
or other act by or in respect of any other Person  (including  stockholders  and
creditors  of the  Partnership  Guarantor)  or  any  Governmental  Authority  is
required in connection with the execution,  delivery,  performance,  validity or
enforceability of such Loan Documents,  other than the recording of the Mortgage
and  Assignment  of Leases.  Each  Guarantee and each other Loan Document that a
Guarantor is a party to will be duly  executed and  delivered by the  respective
parties  thereto,  and,  when  executed and  delivered,  each such document will
constitute a legal,  valid and binding  obligation of the  respective  Guarantor
enforceable  against such  Guarantor  in  accordance  with its terms,  except as
enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization,   moratorium  or  similar  laws  affecting  the  enforcement  of
creditor's rights generally.

         SECTION 3.5. NO LEGAL BAR

         The execution,  delivery and performance of the Loan Documents to which
the Borrower is a party and the borrowings hereunder and the use of the proceeds
thereof by the Borrower and the execution,  delivery and performance of the Loan
Documents  to which the  Guarantors  are a party,  will not violate any material
Requirement of Law or any material Contractual Obligation of the Borrower or the
Guarantors,  and will not result in, or require,  the creation or  imposition of
any Lien on any of its properties or revenues pursuant to any Requirement of Law
or Contractual Obligation except those in favor of the Bank provided herein.

         SECTION 3.6. NO MATERIAL LITIGATION

         No litigation,  investigation or proceeding of or before any arbitrator
or  Governmental  Authority  is pending by or against  any  Specified  Person or
against  any of  their  properties  or  revenues  (a) with  respect  to any Loan
Document or any of the transactions contemplated hereby or thereby, or (b) which
if adversely determined, could be reasonably expected to have a material adverse
effect on the business, operations,  property or financial or other condition of
the Borrower and its Subsidiaries or of the Guarantors.

         SECTION 3.7. NO DEFAULT

         No  Specified  Person  is in  default  under  or  with  respect  to any
Contractual  Obligation in any respect which could  reasonably be expected to be
materially adverse to the business,  operations,  property or financial or other
condition of the Borrower or any of its  Subsidiaries or of the  Guarantors,  or
which  could be  reasonably  expected to  materially  and  adversely  affect the
ability of the Borrower or the Guarantors to perform its respective  obligations
under the Loan Documents to which it is a party.  No Default or Event of Default
has occurred and is continuing.

         SECTION 3.8. NO BURDENSOME RESTRICTIONS

         No Contractual Obligation of any Specified Person and no Requirement of
Law  materially  adversely  affects,  or insofar as the Borrower may  reasonably
foresee may so affect, the business, operations,  property or financial or other
condition of any such Specified Person.

         SECTION 3.9. TAXES

         The  Borrower and the  Guarantors  have filed or caused to be filed all
tax returns which to the knowledge of the Borrower are required to be filed, and
have  paid all  taxes  shown to be due and  payable  on said  returns  or on any
assessments  made against them or any of their  property;  PROVIDED,  THAT, with
respect to real estate taxes regarding the Premises the foregoing representation
is only made to the best of the Borrower's knowledge.

         SECTION 3.10. FEDERAL REGULATIONS

         The Borrower is not engaged nor will it engage,  principally  or as one
of its important activities, in the business of extending credit for the purpose
of "purchasing" or "carrying" any "margin stock" within the respective  meanings
of each of the quoted terms under  Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect. No part
of the  proceeds  of any  Loans  hereunder  will be  used  for  "purchasing"  or
"carrying"  "margin stock" as so defined or for any purpose which  violates,  or
which would be  inconsistent  with,  the  provisions of the  Regulations of such
Board of Governors.

         SECTION 3.11. ENVIRONMENTAL MATTERS

         (a) To the  Borrower's  best  knowledge,  none  of  the  Real  Property
contains,  or  has  previously  contained,  any  hazardous  or  toxic  waste  or
substances  or  underground  storage  tanks  except in  commercially  reasonable
amounts in compliance with applicable laws and regulations.

         (b)  To  the  Borrower's  best  knowledge,  the  Real  Property  is  in
compliance in all material respects with all applicable federal, state and local
environmental standards and requirements affecting such Real Property, and there
are  no  material  environmental  conditions  which  could  interfere  with  the
continued use of the Real Property.

         (c) To the Borrower's best  knowledge,  neither the Borrower nor any of
its  Subsidiaries  nor any  Guarantor  has received any notices of violations or
advisory action by regulatory agencies regarding  environmental  control matters
or permit compliance.

         (d) To the  Borrower's  best  knowledge,  hazardous  waste has not been
transferred from any of the Real Property to any other locations which is not in
compliance  with  all  applicable  environmental  laws,  regulations  or  permit
requirements.

         (e) To  the  Borrower's  best  knowledge,  with  respect  to  the  Real
Property,  there are no  proceedings,  governmental  administrative  actions  or
judicial  proceedings  pending or, threatened under any federal,  state or local
law regulating the discharge of hazardous or toxic  materials or substances into
the environment,  to which the Borrower or any of its Subsidiaries is named as a
party.

         SECTION 3.12. RESERVED

         SECTION 3.13. PROPERTIES, PRIORITY OF LIENS

         All of  the  properties  and  assets  owned  by the  Borrower  and  the
Partnership Guarantor are owned by each of them, respectively, free and clear of
any Lien of any  nature  whatsoever,  except  as  provided  for in the  Security
Documents,   and  as   permitted   by  Section  7.4  hereof.   The  Liens  that,
simultaneously  with  the  execution  and  delivery  of this  Agreement  and the
consummation of the initial Loans, have been created and granted by the Security
Documents,  upon recording, in the case of the Mortgage and Assignment of Leases
and upon  receipt to the Cash  Collateral  in the case of the Pledge  Agreement,
will constitute valid perfected first Liens on the properties and assets covered
by the applicable Security  Documents,  subject to no prior or equal Lien except
as permitted by Section 7.4 hereof.

         SECTION  3.14.  NAME  CHANGES,  MERGERS,   ACQUISITIONS;   LOCATION  OF
COLLATERAL

         Except as set forth on Schedule  3.14,  the Borrower has not within the
six-year  period  immediately  preceding the date of this Agreement  changed its
name, been the surviving entity of a merger or consolidation, or acquired all or
substantially all of the assets of any Person.

         SECTION 3.15. CONDITION OF ASSETS

         All of the assets and  properties of the Borrower,  that are reasonably
necessary  for the  operation of its  business,  are in good working  condition,
ordinary  wear and tear  excepted,  and are able to serve the function for which
they are currently being used.

         SECTION 3.16. ERISA

         (a) No Plan  exists  or has  ever  existed  and the  Borrower  is not a
participating  employer  in any  Plan in which  more  than  one  employer  makes
contributions  as described in Sections 4063 and 4064 of ERISA. The Borrower has
no contingent  liability with respect to any  post-retirement  benefit under any
Employee  Welfare  Benefit  Plan which is a welfare  plan (as defined in Section
3(1) of ERISA),  other than  liability  for health  plan  continuation  coverage
described  in Part 6 of Title I of ERISA,  which  would not  result in  material
liability to the Borrower.  The Borrower has given to the Bank true and complete
copies  of all  the  following:  (i)  each  Plan  and  related  trust  agreement
(including all amendments  and  commitments  with respect to such Plan or trust)
which the Borrower  maintains or is  committed to  contribute  to as of the date
hereof  and  the  most  recent  summary  plan  description,   actuarial  report,
determination  letter issued by the Internal Revenue Service and Form 5500 filed
in  respect of each such  Plan;  and (ii) a listing of all of the  Multiemployer
Plans to which the Borrower  contributes  or is committed to contribute  and the
aggregate amount of the most recent annual contributions  required to be made to
each such  Multiemployer  Plan,  together  with any  information  which has been
provided to the Borrower regarding  withdrawal liability under any Multiemployer
Plan and the collective bargaining agreement pursuant to which such contribution
is required to be made.

         (b) Each Plan  complies,  in both form and  operation  in all  material
respects, with its terms, ERISA and the Internal Revenue Code including, without
limitation,  Internal  Revenue Code Section  4980B,  and no condition  exists or
event has  occurred  with  respect  to any such Plan which  would  result in the
incurrence  by the  Borrower of any  material  liability,  fine or penalty.  The
Borrower has not incurred any  liability to the PBGC which  remains  outstanding
other than the payment of premiums,  and there are no premiums which have become
due which are unpaid.  The  Borrower  has not engaged in any  transaction  which
could subject it to liability  under  Section 4069 or Section  4212(c) of ERISA.
Each Plan,  related trust agreement,  arrangement and commitment of the Borrower
is  legally  valid  and  binding  in full  force and  effect.  Each Plan that is
intended to be qualified  under Section 401(a) of the Internal  Revenue Code has
been  determined by the Internal  Revenue  Service to be so qualified,  and each
trust related to such plan has been determined to be exempt under Section 501(a)
of the Internal  Revenue Code.  To the  knowledge of the  Borrower,  nothing has
occurred  or is  expected  to occur that would  adversely  affect the  qualified
status of the Plan or any  related  trust  subsequent  to the  issuance  of such
determination letter. No Plan is being audited or investigated by any government
agency or subject to any pending or threatened claim or suit.

         (c) Each Plan currently meets and has at all times within the preceding
six years met the minimum  funding  standard of Section 302 of ERISA and Section
412 of the Internal  Revenue Code (without  regard to any funding  waiver).  All
contributions  or  payments  due and owing as  required by Section 302 of ERISA,
Section 412 of the Internal Revenue Code or the terms of any Plan have been made
by the due  date  for such  contributions  or  payments.  With  respect  to each
Multiemployer Plan, the Borrower has paid or accrued all contributions  pursuant
to the terms of the applicable  collective  bargaining  agreement required to be
paid or accrued by it.  With  respect to each Plan,  the market  value of assets
(exclusive  of any  contribution  due to the Plan) equals or exceeds the present
value of benefit  liabilities as of the latest actuarial valuation date for such
Plan (but not prior to 12 months prior to the date  hereof),  determined  on the
basis of a shutdown of the company in accordance with actuarial assumptions used
by the PBGC in  single-employer  plan  terminations and since its last valuation
date,  there have been no amendments to such Plan that materially  increased the
present value of accrued  benefits nor any other material adverse changes in the
funding status of such Plan. The Borrower is not required to provide security to
a Plan  pursuant to Section 307 of ERISA or Section  401(a)(29)  of the Internal
Revenue Code.

         (d) Neither the Borrower nor any fiduciary of any Plan has engaged in a
prohibited  transaction  under  Section  406 of  ERISA  or  Section  4975 of the
Internal  Revenue Code. The execution,  delivery and performance of the terms of
any  agreements  that are  related to this  transaction  will not  constitute  a
prohibited transaction under the aforementioned sections.

         (e) No  Termination  Event has  occurred or is  reasonably  expected to
occur.

         (f) None of the following  "Reportable  Events" has occurred within the
preceding six years:  (i) an inability to pay benefits when due, (ii) bankruptcy
or insolvency of the sponsor of the Plan,  (iii)  liquidation  or dissolution of
the sponsor of the Plan, (iv) a failure to meet the minimum  funding  standards,
or (v) certain transactions involving a change of employer. The Borrower has not
received  any notice from the PBGC that any of the Plans is being  involuntarily
terminated or from the Secretary of the Treasury of the United States of America
that any partial or full  termination  of any of the Plans has  occurred  and no
event  shall  have  occurred,  and there  shall  exist as of the date  hereof no
condition  or  set  of  circumstances  which  present  a  material  risk  of the
involuntary termination of any of the Plans.

         (g) There are no agreements which will provide payments to any officer,
employee,  shareholder or highly compensated individual which will be "parachute
payments" under Section 280G of the Internal Revenue Code that are nondeductible
to the Borrower  and which will be subject to the tax under  Section 4999 of the
Internal  Revenue Code for which the Borrower would have a material  withholding
liability.

         ARTICLE 4 CONDITIONS PRECEDENT

         SECTION 4.1. CONDITIONS TO INITIAL EXTENSIONS OF CREDIT

         The  obligation of the Bank to make the initial  extension of credit to
the  Borrower  hereunder  is  subject  to  the  satisfaction  of  the  following
conditions precedent:

         (a) NOTE.  The Bank shall have  received  the Note,  conforming  to the
requirements hereof and duly executed by the Borrower.

         (b)  GUARANTEES.  The Bank shall have received  each of the  Guarantees
substantially  in the form of  Exhibit  C hereto  duly  executed  by each of the
Guarantors.

         (c)  SECURITY  DOCUMENTS.  The Bank  shall have  received  (i) the duly
executed Mortgage,  (ii) the duly executed Assignment of Leases, and (iii) UCC-1
financing statements executed by the Partnership Guarantor in favor of the Bank.

         (d) LEGAL OPINION.  The Bank shall have received a favorable opinion of
counsel to the Borrower and  Guarantors  substantially  in the form set forth in
Exhibit B hereto.  Such opinion shall also cover such other matters  incident to
the  transactions  contemplated  by this Agreement as the Bank shall  reasonably
require.

         (e)  CERTIFICATES  AND  RESOLUTIONS.  The Bank shall have  received (i)
copies of the resolutions of the board of directors of the Borrower  authorizing
the  execution,  delivery and  performance  of this Agreement and the other Loan
Documents  to which it is a party  certified  by the  Secretary  or an Assistant
Secretary of such  corporation  and copies of the resolutions of the partners of
the Partnership Guarantor authorizing the execution, delivery and performance of
its  respective  Guarantee  and  other  Loan  Documents  to which it is a party,
certified  respectively by an authorized officer of each such Person; and (ii) a
certificate  of the  Secretary or an  Assistant  Secretary of the Borrower and a
certificate of the partners of the  Partnership  Guarantor  certifying the names
and true  signatures of the officers of each such Person  authorized to sign any
and all  documents  to be  delivered  by each  such  Person  or as  required  or
contemplated hereunder.

         (f)  ORGANIZATIONAL   DOCUMENTS.  The  Bank  shall  have  received  the
organizational   documents  of  the  Borrower  and  the  Partnership  Guarantor,
including,  without limitation, the articles or certificate of incorporation and
the By-laws of the Borrower  and the  partnership  agreement of the  Partnership
Guarantor all of which shall be in form and substance reasonably satisfactory to
the Bank.

         (g) GOOD  STANDING  CERTIFICATES.  The Bank  shall have  received  good
standing  certificates  as of the dates not more than  twenty (20) days prior to
the date of the initial Loan with  respect to the  Borrower and the  Partnership
Guarantor,   from  the  Secretary  of  State  of  their  respective   states  of
organization and each state in which each of them is qualified to do business.

         (h) INTENTIONALLY OMITTED.
             ---------------------

         (i)  FEES.  The  Borrower  shall  have  paid to the Bank (i) a  $50,000
origination  fee and  (ii) all  reasonable  out of  pocket  costs  and  expenses
incurred  by the Bank in  connection  with the  closing  of the Loan  Documents,
including,  without  limitation,  legal  expenses,  title  fees,  due  diligence
expenses and filing expenses.

         (j) EXECUTOR  INSTRUCTIONS.  With respect to each Individual Guarantor,
the Bank  shall  have  received  true and  complete  originals  of the  Executor
Instructions for such each Individual Guarantor.

         (k)  CAPITALIZATION  OF BORROWER AND ITS  SUBSIDIARIES.  The Bank shall
have received a certificate from a duly authorized  officer of the Borrower that
indicates  the  capitalization  and owners of the Capital Stock of the Borrower,
each of its Subsidiaries  and of the Partnership  Guarantor and same shall be in
form and substance reasonably satisfactory to the Bank.

         (l)  INSURANCE.  The Borrower  shall have  delivered  to the Bank:  (A)
copies of, or certificates of the issuing companies with respect to, policies of
insurance owned by the Borrower and the Partnership Guarantor covering or in any
manner relating to the Collateral together with endorsements thereto that comply
with the terms of the Security Documents and are otherwise in form and substance
reasonably  satisfactory to the Bank,  naming the Bank, in its capacity as such,
as  additional  insured as its  interests  may appear;  and (B)  evidence of the
Borrower's and Partnership Guarantor's liability insurance policies;

         (m) LIEN SEARCHES. The Bank shall have received the results of searches
of Uniform  Commercial  Code and other Lien filings with respect to the Borrower
and  Partnership  Guarantor  and a title report with respect to the Premises and
such searches shall disclose no Liens on any assets encumbered, except for Liens
permitted  under Section 7.4, or if unpermitted  Liens are  disclosed,  the Bank
shall have received reasonable satisfactory evidence of release of such Liens.

         (n)  PERSONAL  LINES OF  CREDIT.  The  personal  lines of  credit  held
available by the Bank for Robert K. Lifton and Howard  Weingrow  shall each have
been  reduced  by  $500,000  pursuant  to  documentation  in form and  substance
reasonably satisfactory to the Bank.

         (o)  ADDITIONAL  MATTERS.  All other  documents  and legal  matters  in
connection  with  the  transactions  contemplated  by this  Agreement  shall  be
reasonably satisfactory in form and substance to the Bank and its counsel.

         SECTION 4.2. CONDITIONS TO ALL EXTENSIONS OF CREDIT

         The  obligation  of the Bank to make any Loan  (including  the  initial
Loan) to be made by it hereunder is subject to the satisfaction of the following
conditions precedent:

         (a) REPRESENTATIONS AND WARRANTIES.  The representations and warranties
made by the Borrower herein or which are contained in any certificate,  document
or financial  or other  statement  furnished at any time under or in  connection
herewith, shall be correct, in all material respects, on and as of the borrowing
date for such  extension of credit as if made on and as of such date;  PROVIDED,
HOWEVER,  that  notwithstanding  anything  herein to the contrary,  this Section
4.2(a) shall be deemed to have been  satisfied even if such  representations  or
warranties  are not so correct  unless the  failure of such  representations  or
warranties to be so correct,  individually  or in the aggregate,  has had, or is
reasonably   likely  to  have,  a  material  adverse  effect  on  the  business,
operations,  property or  financial  or other  condition  of the Borrower or any
Guarantor,  or would materially  adversely affect the ability of the Borrower or
any  Guarantor  to perform its or his  obligations  under the Loan  Documents to
which it or he is a party.

         (b) NO  DEFAULT  OR EVENT OF  DEFAULT.  No  Default or Event of Default
shall have  occurred and be  continuing on the date an extension of credit is to
be made or after  giving  effect to the  extension  of credit to be made on such
date.

         (c) CASH COLLATERAL. To the extent applicable,  the conditions for Cash
Collateral  set forth in Section 2.1 and/or  8.1(j)  shall be  satisfied  to the
satisfaction of the Bank and the Bank shall have received a duly executed Pledge
Agreement in connection therewith.

Each borrowing by the Borrower  hereunder shall constitute a representation  and
warranty  by the  Borrower  as of the  date  of each  such  borrowing  that  the
conditions in clauses (a), (b) and (c) of this Section have been satisfied.

         ARTICLE 5 AFFIRMATIVE COVENANTS

         The Borrower  hereby agrees that, so long as the Commitment  remains in
effect,  the Note remains or remain  outstanding and unpaid, or any other amount
is owing to the Bank hereunder,  the Borrower will and will cause each Specified
Person as applicable to:

         SECTION 5.1. CORPORATE EXISTENCE AND QUALIFICATION

         Take the necessary  steps to preserve its  corporate  existence and its
right to conduct  business  in all  states in which the  nature of its  business
requires  qualification  to do  business.  In the event of dispute  between  the
Borrower and the Bank as to when qualification is necessary, the decision of the
Bank shall control.

         SECTION 5.2. FINANCIAL INFORMATION AND COMPLIANCE CERTIFICATES

         (a) Keep its  books of  account  in  accordance  with  good  accounting
practices and furnish to the Bank (i) within 120 days after the last day of each
of its fiscal years,  the  consolidated  balance  sheets of the Borrower and its
Subsidiaries as at such last day of the fiscal year and statements of operations
and cash  flows for such  fiscal  year each  prepared  in  accordance  with GAAP
consistently  applied and certified by a firm of  independent  certified  public
accountants  reasonably  satisfactory to the Bank; (ii) within 60 days after the
close of each of the first  three  quarters  of each  fiscal  year  consolidated
balance sheets, statements of operations and cash flows of such Borrower and its
Subsidiaries  as of the last day of and for such  quarter  and for the period of
the  fiscal  year  ended as of the  close of the  particular  quarter,  all such
quarterly  statements to be in reasonable  detail,  prepared in accordance  with
GAAP  consistently  applied and  certified  by a firm of  independent  certified
public  accountants  reasonably  satisfactory  to the Bank  (subject to year-end
adjustments)  and (iii) promptly after filed,  the annual tax return  (including
schedules) of the Partnership Guarantor filed with the Internal Revenue Service.

         (b) At the same time as it delivers the financial statements called for
by Section  5.2(a),  deliver to the Bank a  certificate  of the president or the
chief financial or accounting  officer of the Borrower stating that in each case
except as disclosed in such certificate,  the person making such certificate has
no knowledge of any Default or Event of Default. Together with their delivery of
annual  certified  financial   statements,   the  Borrower's   certified  public
accountants  shall also deliver such a certificate,  which shall be addressed to
the Borrower and the Bank.

         (c) Promptly upon their becoming available,  deliver to the Bank copies
of any: (i) financial  statements,  projections,  non-routine  reports,  notices
(other than routine correspondence),  requests for waivers and proxy statements,
in each  case,  delivered  by the  Borrower  or any of its  Subsidiaries  to any
lending institution other than the Bank; (ii) correspondence or notices received
by the Borrower from any federal,  state or local  governmental  authority  that
regulates the operations of the Borrower or any of its Subsidiaries, relating to
an actual or threatened  change or development that would be materially  adverse
to any  Borrower or any  Subsidiary;  (iii) any and all SEC  Documents  and (iv)
letters  of  comment  or  correspondence  sent  to  the  Borrower  or any of its
Subsidiaries by any such  securities  exchange or such Commission in relation to
the Borrower or any of its Subsidiaries.

         (d) On or before each May 30th of each calendar  year,  with respect to
each Individual Guarantor,  deliver to the Bank (i) such Individual  Guarantor's
current annual  financial  statement (on the Bank's  standard form) and (ii) all
statements  received  by such  Individual  Guarantor  from  brokers  and similar
Persons with respect to all investments made by, and each investment account of,
such Individual Guarantor .

         (e) Promptly after filed, deliver to the Bank a copy of each tax return
(including all schedules  thereto) of each  Individual  Guarantor filed with the
Internal Revenue Service.

         (f) Within five days of any officer of the Borrower obtaining knowledge
of any  Default,  if such  Default  is then  continuing,  furnish  to the Bank a
certificate of the chief financial or accounting officer of the Borrower setting
forth  the  details  thereof  and the  action  which the  Borrower  is taking or
proposes to take with respect thereto.

         (g) On or  before  each June 30th and  December  31st of each  calendar
year, deliver to the Bank a certificate  executed by each Individual  Guarantor,
in form and substance  satisfactory to the Bank, certifying as to their combined
liquid net worth or that they  collectively own  unencumbered  liquid assets of,
and that they have combined liquid net worth of, at least $7,000,000.

         (h) With  reasonable  promptness,  furnish  such  other  data as may be
reasonably requested by the Bank.

         SECTION  5.3.   INSURANCE

         Maintain insurance with responsible and reputable  insurance  companies
or associations in such amounts and covering such risks as is usually carried by
companies  engaged in similar  businesses and owning  similar  properties in the
same  general  areas in which the  Borrower  operates  and naming the Bank as an
additional insured and loss payee thereon as its interest may appear.

         SECTION 5.4. PRESERVATION OF PROPERTIES; COMPLIANCE WITH LAW

         Maintain and preserve all of its properties which are used or which are
material to the conduct of its  business in good  working  order and  condition,
ordinary wear and tear excepted and comply with all material Requirements of Law

         SECTION 5.5. TAXES

         Duly pay and  discharge  all taxes or other claims which might become a
lien upon any of its property except to the extent that any thereof are being in
good faith appropriately contested with adequate reserves provided therefor.

         SECTION 5.6.  MAINTAIN  OPERATING  ACCOUNTS;  INVESTMENT  OF SUBSEQUENT
OFFERING PROCEEDS

         Maintain all of its primary operating and investment  accounts with the
Bank and commencing  with the  consummation of the Subsequent  Offering,  invest
with or  through  the  Bank or one of its  Affiliates  substantially  all of the
unused net proceeds of such Subsequent Offering.

         SECTION 5.7. NOTICE OF LITIGATION

         Promptly notify the Bank in writing of any litigation, legal proceeding
or dispute,  other than disputes in the ordinary  course of business or, whether
or not in the  ordinary  course  of  business,  involving  amounts  in excess of
$100,000,  affecting the Borrower or any Subsidiary whether or not fully covered
by insurance, and regardless of the subject matter thereof (excluding,  however,
any actions  relating  to  workers'  compensation  claims or  negligence  claims
relating to use of motor  vehicles,  if fully covered by  insurance,  subject to
deductibles).

         SECTION 5.8. INDEMNITY (ENVIRONMENTAL MATTERS)

         Indemnify  the Bank  against any  liability,  loss,  cost,  damage,  or
expense (including, without limitation, reasonable attorneys' fees) arising from
(i) the  imposition  or  recording  of a lien by any  local,  state,  or federal
government or  governmental  agency or authority  pursuant to any  Environmental
Laws; (ii) claims of any private parties  regarding  violations of Environmental
Laws; and (iii) costs and expenses  (including,  without limitation,  reasonable
attorneys'  fees and fees  incidental to the securing of repayment of such costs
and expenses)  incurred by any Specified  Person or the Bank in connection  with
compliance by any Specified  Person or the Bank with any statute,  regulation or
order issued pursuant to any Environmental  Laws by any local,  state or federal
government or governmental agency or authority.

         SECTION 5.9. CASH COLLATERAL

         (a) Within three  Business Days of the  consummation  of the Subsequent
Offering,  ensure  that  the Bank has a first  priority  perfected  Lien on Cash
Collateral  in an  amount  not less than  100% of the then  aggregate  principal
balance of all outstanding Loans.

         (b) At all times after the Cash Collateral  Effective Date, ensure that
the Bank has a first priority perfected Lien on Cash Collateral in an amount not
less than 100% of the aggregate principal balance of all outstanding Loans.

         ARTICLE 6 RESERVED

         ARTICLE 7 NEGATIVE COVENANTS

         The Borrower  hereby agrees that, so long as the Commitment  remains in
effect, the Note remains outstanding and unpaid, or any other amount is owing to
the Bank  hereunder it will not, nor will it permit any of its  Subsidiaries  or
the  Partnership  Guarantor or any of its  Subsidiaries  to nor, with respect to
Sections 7.1, 7.5 or 7.8 will it permit any Individual Guarantor to:

         SECTION 7.1. INDEBTEDNESS FOR BORROWED MONEY

         Incur, or permit to exist,  any  Indebtedness for borrowed money except
(i) Indebtedness  incurred pursuant to borrowings  hereunder and under any other
loans  made by the  Bank in its  discretion  to the  Borrower,  the  Partnership
Guarantor or any Subsidiary,  (ii) Indebtedness  existing on the date hereof and
reflected in the financial  statements referred to in Section 3.1 hereof,  (iii)
unsecured  Indebtedness  incurred  in the  ordinary  course  of their  business,
consistent  with past  practices,  in an amount  not to exceed  $250,000  in the
aggregate at any one time outstanding,  (iv) Indebtedness incurred in connection
with the exercise of  outstanding  options to purchase (A) the 7% of the Capital
Stock of More Energy Ltd.  that the Borrower does not already own and (B) 50% of
the Capital Stock of New Devices  Engineering A.K.O. Ltd.;  PROVIDED,  THAT, the
aggregate  amount of  Indebtedness  outstanding  pursuant  to this  subparagraph
"(iv)"  shall  not at any one  time  exceed  $600,000  and  (v)  the  Subsequent
Offering.

         SECTION 7.2. MERGERS, ACQUISITIONS AND SALES OF ASSETS

         Enter into any merger or consolidation or liquidate, windup or dissolve
itself or sell, transfer or lease or otherwise dispose of all or any substantial
part of its assets (other than sales of inventory and  obsolescent  equipment in
the  ordinary  course of  business)  or acquire by  purchase  or  otherwise  the
business or assets of, or stock of,  another  business  entity;  except that any
Subsidiary  may merge into or  consolidate  with any other  Subsidiary  which is
wholly-owned  by the Borrower and any Subsidiary  which is  wholly-owned  by the
Borrower  may merge with or  consolidate  into the  Borrower  provided  that the
Borrower is the surviving corporation.

         SECTION 7.3. INVESTMENTS

         Make,  or suffer to exist,  any  Investment  in any Person,  including,
without  limitation,  any  shareholder,  director,  officer or  employee  of the
Borrower, except Investments in:

         (i)  obligations  issued or  guaranteed by the United States of America
with maturities of one year or less;

         (ii)  certificates  of deposit,  bankers  acceptances  and other "money
market instruments" issued by any bank or trust company organized under the laws
of the United  States of America or any State  thereof  and having  capital  and
surplus in an aggregate amount of not less than $100,000,000;

         (iii) open market  commercial  paper bearing the highest  credit rating
issued by  Standard & Poor's  Corporation  or by another  nationally  recognized
credit rating agency  maturing or being due or payable in full not more than 180
days after the Borrower's acquisition thereof;

         (iv) repurchase  agreements entered into with any bank or trust company
organized  under the laws of the United  States of America or any State  thereof
and  having  capital  and  surplus  in an  aggregate  amount  of not  less  than
$100,000,000  relating  to  United  States  of  America  government  obligations
maturing  or being  due or  payable  in full not more  than 180 days  after  the
Borrower's acquisition thereof;

         (v) shares of "money market funds",  each having net assets of not less
than  $100,000,000  maturing  or being due or  payable in full not more than 180
days after the Borrower's acquisition thereof;

         (vi)  accounts  receivable  arising  out of sales of  inventory  in the
ordinary course of business;

         (vii) Investments  described on Schedule 3.1 (including the exercise of
the options therein described); and

         (viii) other  Investments  consistent with the Borrower's past business
practices;  PROVIDED,  THAT,  (A)  each  such  Investment  relates  to a line of
business  substantially similar to the Borrower's existing lines of business and
(B) such Investments do not result in Indebtedness in an amount in excess of the
limitations of Section 7.1 hereof.

         SECTION 7.4. LIENS

         Create,  assume or permit to exist,  any Lien on any of its property or
assets now owned or  hereafter  acquired  except (i) Liens in favor of the Bank;
(ii) other Liens  incidental  to the conduct of its business or the ownership of
its property and assets which were not incurred in connection with the borrowing
of money or the  obtaining  of  advances  or credit and which do not  materially
impair the use thereof in the operation of its  business;  (iii) Liens for taxes
or other  governmental  charges  which  are not  delinquent  or which  are being
contested in good faith and for which a reserve shall have been  established  in
accordance with GAAP and (iv) Liens permitted by the Security Documents.

         SECTION 7.5. CONTINGENT LIABILITIES

         Assume,  endorse,  be or become liable for or guarantee the obligations
of any Person excluding however,  the endorsement of negotiable  instruments for
deposit  or  collection  in the  ordinary  course  of  business  and  contingent
obligations in favor of the Bank.

         SECTION 7.6. DIVIDENDS

         Declare or pay any dividends on its Capital Stock (other than dividends
payable solely in shares of its own common stock), or purchase,  redeem,  retire
or otherwise  acquire any of its Capital Stock at any time  outstanding,  except
any Subsidiary wholly owned by the Borrower may declare and pay dividends to the
Borrower.

         SECTION 7.7. SALES OF RECEIVABLES; SALE - LEASEBACKS

         Sell,  discount or otherwise dispose of notes,  accounts  receivable or
other  obligations owing to the Borrower,  with or without recourse,  except for
the purpose of collection in the ordinary course of business;  or sell any asset
pursuant to an  arrangement  to  thereafter  lease such asset from the purchaser
thereof.

         SECTION 7.8. DOUBLE NEGATIVE PLEDGE.

         Enter into any agreement  which  prohibits or limits the ability of the
applicable Person to create,  incur, assume or suffer to exist any Lien upon any
of its property or revenues, whether now owned or hereafter acquired.

         SECTION 7.9. RESERVED

         SECTION 7.10. NATURE OF BUSINESS

         Materially alter the nature of its business.

         SECTION 7.11. STOCK OF SUBSIDIARIES

         Without the prior written  consent of the Bank (which consent shall not
be unreasonably  withheld),  sell or otherwise dispose of any Subsidiary (except
in connection with a merger or  consolidation  of a Subsidiary into the Borrower
or another  Subsidiary) or permit a Subsidiary to issue any additional shares of
its Capital Stock except pro rata to its  stockholders,  excluding Capital Stock
issued by Subsidiaries  that are not directly or indirectly  wholly-owned by the
Borrower;   PROVIDED,  THAT,  such  Capital  Stock  is  issued  pursuant  to  an
outstanding commitment, stock option plan or similar plan or agreement.

         SECTION 7.12. ERISA

         (i) Terminate any Plan so as to result in any material liability to the
PBGC,  (ii)  engage  in or  permit  any  person  to  engage  in any  "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Internal
Revenue  Code of 1954,  as amended)  involving  any Plan which  would  subject a
Borrower to any material tax, penalty or other liability,  (iii) incur or suffer
to exist any material  "accumulated  funding  deficiency" (as defined in Section
302 of  ERISA),  whether or not  waived,  involving  any Plan,  or (iv) allow or
suffer  to exist any event or  condition,  which  presents  a  material  risk of
incurring a material liability to the PBGC by reason of termination of any Plan.

         SECTION 7.13. ACCOUNTING CHANGES

         Except as set forth on Schedule 7.13, make, or permit any Subsidiary to
make any change in their accounting  treatment or financial  reporting practices
except as required or permitted by GAAP in effect from time to time.

         SECTION 7.14. TRANSACTIONS WITH AFFILIATES

         Except as otherwise  specifically  set forth in this  Agreement,  or as
otherwise  permitted  pursuant to the  applicable  rules and  regulations of the
National  Association  of  Securities  Dealers,  Inc.,  directly  or  indirectly
purchase,  acquire or lease any property  from,  or sell,  transfer or lease any
property to, or enter into any other  transaction,  with any Affiliate except in
the ordinary course of business and at prices and on terms not less favorable to
it than those which would have been obtained in an arm's-length transaction with
a non-affiliated third party.

         SECTION 7.15. REGULATION U

         Use any of the  proceeds  of any  Loan,  in whole  or in part,  for the
purpose of purchasing or carrying any "margin  stock" as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System.

         ARTICLE 8 EVENTS OF DEFAULT; REMEDIES

         SECTION 8.1. EVENTS OF DEFAULT

         Each of the  following  events shall  constitute  an "Event of Default"
under this Agreement:

         (a) The Borrower  shall fail to pay any principal of the Note when due;
or the  Borrower  shall fail to pay any interest on the Note or any other amount
payable hereunder within five days of when due, or the Borrower or any Guarantor
shall default under any other Loan Document; or

         (b) Any  representation or warranty made or deemed made by the Borrower
herein or which is contained in any certificate,  document or financial or other
statement furnished at any time under or in connection with this Agreement shall
prove to have been  false in any  material  respect on or as of the date made or
deemed made; or

         (c) Borrower  shall  default in the  observance or  performance  of any
covenant or  provision  contained in Article 2, Section 5.9 or Article 7 hereof;
or

         (d) Borrower  shall  default in the  observance or  performance  of any
other  provision  contained in this  Agreement and such default  shall  continue
unremedied  for a period of 10 days after written notice thereof is given to the
Borrower by the Bank; or

         (e) Any  Specified  Person  shall (i)  default  in any  payment  of any
indebtedness  for  borrowed  money  (other  than the Note)  beyond the period of
grace,  if any,  provided  in the  instrument  or  agreement  under  which  such
indebtedness  was created;  or (ii) default in the  observance or performance of
any other agreement or condition  relating to any such indebtedness or contained
in any instrument or agreement  evidencing,  securing or relating thereto or any
other  event shall occur or  condition  exist,  in each case the effect of which
default or other event or  condition is to cause or permit the holder or holders
of such indebtedness (or a trustee or agent on behalf of such holder or holders)
to cause such indebtedness to become due prior to its stated maturity; or

         (f) (i) Any  Specified  Person shall  commence any case,  proceeding or
other action (A) under any existing or future law of any jurisdiction,  domestic
or foreign,  relating to  bankruptcy,  insolvency,  reorganization  or relief of
debtors,  seeking to have an order for  relief  entered  with  respect to it, or
seeking to  adjudicate it a bankrupt or  insolvent,  or seeking  reorganization,
arrangement,  adjustment, winding-up, liquidation,  dissolution,  composition or
other relief with respect to it or its debts,  or (B) seeking  appointment  of a
receiver,  trustee, custodian or other similar official for it or for all or any
substantial  part of its assets,  or any  Specified  Person shall make a general
assignment  for the benefit of its  creditors;  or (ii) there shall be commenced
against any  Specified  Person any case,  proceeding or other action of a nature
referred  to in clause (i) above  which (A) results in the entry of an order for
relief or any such  adjudication  or  appointment  or (B)  remains  undismissed,
undischarged  or  unbonded  for a period  of 60 days;  or (iii)  there  shall be
commenced  against any  Specified  Person any case,  proceeding  or other action
seeking  issuance of a warrant of  attachment,  execution,  distraint or similar
process against all or any  substantial  part of its assets which results in the
entry of an  order  for any  such  relief  which  shall  have not been  vacated,
discharged,  or stayed or bonded  pending  appeal  within 20 days from the entry
thereof;  or (iv) any Specified  Person shall take any action in furtherance of,
or indicating its consent to, approval of, or  acquiescence  in, any of the acts
set  forth in  clause  (i),  (ii) or (iii) of this  Section  8.1(f);  or (v) any
Specified  Person shall  generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or

         (g)  (i)  any  Specified   Person  shall  engage  in  any   "prohibited
transaction"  (as defined in Section  406 of ERISA or Section  4975 of the Code)
involving any Plan,  (ii) any  "accumulated  funding  deficiency" (as defined in
Section 302 of ERISA),  whether or not waived,  shall exist with  respect to any
Plan, (iii) a Reportable Event shall occur with respect to, or proceedings shall
commence  to have a trustee  appointed,  or a  trustee  shall be  appointed,  to
administer or to terminate,  any Plan,  which Reportable Event or institution of
proceedings is, in the reasonable  opinion of the Bank,  likely to result in the
termination of such Plan for purposes of Title IV of ERISA,  and, in the case of
a Reportable  Event, the continuance of such Reportable Event unremedied for ten
days after notice of such Reportable Event pursuant to Section  4043(a),  (d) or
(e) of ERISA is given or the continuance of such  proceedings for ten days after
commencement  thereof,  as the case may be,  (iv) any Plan shall  terminate  for
purposes  of Title IV of ERISA,  and in each case in clauses  (i)  through  (iv)
above, such event or condition could subject the Borrower to any tax, penalty or
other  liabilities  in the  aggregate  material  in  relation  to the  business,
operations or property of the Borrower; or

         (h)  the  rendition  by any  court  of a  final  judgment  against  any
Specified  Person involving in the aggregate (with respect to all such Specified
Persons) a  liability  in excess of $100,000  which shall not be  satisfactorily
stayed,  discharged,  vacated or set aside within 60 days of the making thereof;
or the  attachment  of any property of any  Specified  Person which has not been
released or provided for to the  reasonable  satisfaction  of the Bank within 60
days after the making thereof; or

         (i) any Guarantee of any Guarantor  shall cease to be in full force and
effect; or

         (j) any  Individual  Guarantor  shall die prior to the Cash  Collateral
Effective Date, unless, with respect to each such Individual  Guarantor that has
died prior to the Cash Collateral Effective Date, within five days of such death
the Bank is granted a first  priority  perfected  Lien on Cash  Collateral in an
amount  not  less  than  50% of the  aggregate  principal  balance  of all  then
outstanding  Loans (and the applicable  Person pledging such Cash Collateral has
executed  all  documentation  reasonably  requested  by the  Bank  in  order  to
effectuate same); or

         (k) once  same  has been  recorded,  in the  case of the  Mortgage  and
Assignment of Leases and once the Bank has received any Cash Collateral,  in the
case of the Pledge  Agreement,  any of the Liens created and granted pursuant to
the applicable  Security  Document(s) shall fail to be valid,  first,  perfected
Liens  subject to no prior or equal Lien except as permitted by this  Agreement;
or

         (l) any of the Executor Instructions shall be revoked,  modified and/or
not complied with in any material respect; or

         (m) the occurrence of a Change of Control; or

         (n) at any  time  prior  to the  Cash  Collateral  Effective  Date  the
Individual  Guarantors do not collectively have  unencumbered  liquid assets of,
and combined liquid net worth of, at least $7,000,000; or

         (o) the Bank shall have  determined in its sole  discretion that one or
more conditions  exist or events have occurred which have resulted or may result
in a material adverse change in the business,  properties or financial condition
of the Borrower.

         SECTION 8.2. REMEDIES

         Upon the occurrence and during the  continuance of any Event of Default
specified in Section 8.1(f),  without declaration or notice to the Borrower, all
of the Commitments shall immediately and  automatically  terminate,  and all the
Loans, all accrued and unpaid interest thereon and all other amounts owing under
the Loan  Documents  shall  immediately  become  due and  payable,  and upon the
occurrence and during the  continuance  of any other Event of Default,  then, in
any such event,  any or all of the following  actions may be taken: (a) the Bank
may, at its option, declare the Commitment to be terminated forthwith, whereupon
the  Commitment  and all  obligations  to the Bank to make Loans to the Borrower
shall immediately terminate;  (b) the Bank may, at its option, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement  and the Note to be due and  payable  and the same,  and all  interest
accrued  thereon,  shall forthwith  become due and payable without  presentment,
demand, protest or notice of any kind, all of which are hereby waived,  anything
contained  herein or in any  instrument  evidencing  the  Loans to the  contrary
notwithstanding.

         ARTICLE 9 COLLATERAL SECURITY

         SECTION 9.1. GENERAL LOAN AND COLLATERAL AGREEMENT

         As collateral security for the payment of the Obligations, the Borrower
and each Guarantor  hereby grant to the Bank a lien on and security  interest in
and right of setoff to any and all  deposits or other sums at any time  credited
by or due from the Bank or any Affiliate of the Bank to the Borrower  and/or any
Guarantor,  whether now  existing or  hereafter  arising,  whether in regular or
special  depository  accounts  or  otherwise,  and any and all  monies,  credit,
collateral,  securities and other property of the Borrower and/or any Guarantor,
whether now existing or hereafter  arising,  and the  proceeds  thereof,  now or
hereafter  held or received by or in transit to the Bank or any Affiliate of the
Bank from or for the Borrower  and/or any  Guarantor,  whether for  safekeeping,
custody,  pledge,  transmission,  collection or otherwise.  At any time, without
demand or notice,  the Bank may set off the same or any part  thereof  and apply
the same to any of the  Obligations  of the Borrower  and/or any Guarantor  even
though unmatured and regardless of the adequacy of any other collateral securing
the  Loans.  ANY AND ALL RIGHTS TO REQUIRE  THE BANK TO  EXERCISE  ITS RIGHTS OR
REMEDIES WITH RESPECT TO ANY OTHER  COLLATERAL  WHICH  SECURES THE  OBLIGATIONS,
PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH  DEPOSITS,  CREDITS
OR OTHER  PROPERTY  OF THE  BORROWER  OR ANY  GUARANTOR,  ARE HEREBY  KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.

         SECTION 9.2. ADDITIONAL COLLATERAL SECURITY

         In  addition to the  collateral  described  in Section 9.1 hereof,  (i)
payment of the Obligations  shall also be secured by a first priority  perfected
Lien on Cash  Collateral  (as such Cash  Collateral is required to be pledged to
the Bank pursuant to the terms of this  Agreement),  as more fully  described in
one or  more  Pledge  Agreements  with  or in  favor  of the  Bank,  which  Cash
Collateral  shall secure all of the Borrower's  Obligations to the Bank and (ii)
the Guarantee of the Partnership  Guarantor shall be secured by the Mortgage and
the  Assignment  of Leases (to be  recorded  only as  permitted  by Section  2.8
hereof),  which Mortgage and Assignment of Leases shall,  subject to Section 2.8
hereof, secure all of the Partnership Guarantor's obligations to the Bank.

         ARTICLE 10 MISCELLANEOUS

         SECTION 10.1. NOTICES

         All  notices,  requests and demands to or upon the  respective  parties
hereto to be effective shall be in writing unless otherwise  expressly  provided
herein  and shall be deemed to have been duly  given or made when  delivered  by
hand,  or by telegram or telecopy,  or when  deposited in the mail  addressed as
follows,  or to such  address  as may be  hereafter  notified  in writing by the
respective parties hereto and any future holders of the Note:

         The Borrower:       Medis Technologies Ltd.
                             805 Third Avenue
                             New York, New York 10022
                             Att: Howard Weingrow, President
                             Fax Number: 212-935-9216

         with a copy to:     Sonnenschein Nath & Rosenthal
                             1221 Avenue of the Americas
                             New York, New York 10020
                             Att: Ira I. Roxland, Esq.
                             Fax Number 212-768-6800

         The Bank:           Fleet National Bank
                             1185 Avenue of the Americas
                             New York, New York 10036
                             Att: Paul Chau, Senior Vice President
                             Fax Number: 212-819-4120

         with a copy to:     Emmet Marvin & Martin, LLP
                             120 Broadway
                             New York, New York 10271
                             Att: Richard M. Skoller, Esq.
                             Fax Number: 212-238-3100

         SECTION 10.2. NO WAIVER; CUMULATIVE REMEDIES

         No failure to exercise and no delay in  exercising,  on the part of the
Bank, any right,  remedy, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege  hereunder  preclude  any other or  further  exercise  thereof  or the
exercise of any other right.

         SECTION 10.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES

         All  representations and warranties made hereunder and in any document,
certificate or statement  delivered  pursuant  hereto or in connection  herewith
shall survive the execution and delivery of this Agreement and the Note.

         SECTION 10.4. PAYMENT OF EXPENSES; EXAMINATION

         (a) The Borrower  agrees to pay or reimburse the Bank for all its costs
and expenses (including, without limitation, the reasonable fees and expenses of
attorneys  for  the  Bank)   incurred  in  connection   with  the   preparation,
administration,  default,  collection,  waiver or  amendment  of any of the Loan
Documents, or in connection with Bank's exercise, preservation or enforcement of
any of its rights, remedies or options hereunder,  including, without limitation
in connection  with (i) the enforcement or preservation of any rights under this
Agreement  or the Note or any other Loan  Document  or any other  instrument  or
agreement entered into in connection  herewith or therewith  including,  without
limitation,  the reasonable  fees and  disbursements  of attorneys for the Bank;
(ii) any claim or action  threatened,  made or brought  against the Bank arising
out of or relating to any extent to this Agreement,  the Security Agreement, the
Note or Loan Documents or any instrument or agreement entered into in connection
with the transactions  contemplated  hereby or thereby;  (iii) the perfection of
any security interest in the Collateral or in the maintenance of the Collateral;
(iv) any amendment or modification of any Loan Document;  (v) the payment of any
tax,  assessment,  recording fee or similar charge; (vi) any waiver of any right
of the  Bank  under  any  Loan  Document  and  (vii)  the  reasonable  fees  and
disbursements  of any outside  counsel to the Bank and/or the allocated costs of
in-house  legal  counsel  incurred  from  time to time in  connection  with  the
transactions contemplated by this Agreement,  accounting,  consulting, brokerage
or  other  similar  professional  fees or  expenses,  and any  fees or  expenses
associated with travel or other costs relating to any appraisals or examinations
conducted in connection  with the  Obligations or any Collateral  therefor.  All
such fees and  expenses  shall be  Obligations  secured by the  Collateral  and,
commencing ten days after demand therefore,  shall, until paid, bear interest at
the Post Default Rate.

         (b) The Borrower agrees that at any time and from time to time the Bank
may conduct,  during reasonable  business hours, at the Borrower's  expense,  an
examination of the Borrower's  books and records.  The  obligations set forth in
this Section 10.4 shall be in addition to any other  obligations  or liabilities
of the  Borrower  to the Bank  hereunder  or at  common  law or  otherwise.  The
provisions  of this Section  10.4 shall  survive the payment of the Note and the
termination of this Agreement.

         SECTION 10.5. WAIVER OF JURY TRIAL, SET-OFF AND COUNTERCLAIM

         THE BORROWER AND THE BANK (BY ACCEPTANCE OF THE NOTE)  MUTUALLY  HEREBY
KNOWINGLY,  VOLUNTARILY AND INTENIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY, AND
THE BORROWER WAIVES THE RIGHT TO INTERPOSE ANY SETOFF OR  COUNTERCLAIM,  IN EACH
CASE  IN  RESPECT  OF ANY  CLAIM  BASED  HEREON,  ARISING  OUT OF,  UNDER  OR IN
CONNECTION  WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS  CONTEMPLATED
TO BE  EXECUTED  IN  CONNECTION  HEREWITH  OR ANY COURSE OF  CONDUCT,  COURSE OR
DEALINGS,  STATEMENTS  (WHETHER  VERBAL OR  WRITTEN)  OR  ACTIONS  OF ANY PARTY,
INCLUDING,  WITHOUT  LIMITATION,  ANY  COURSE OF  CONDUCT,  COURSE OF  DEALINGS,
STATEMENTS  OR ACTIONS OF THE BANK RELATING TO THE  ADMINISTRATION  OF THE LOANS
AND/OR ANY OTHER  CREDIT  FACILITIES  HEREUNDER OR THE  ENFORCEMENT  OF THE LOAN
DOCUMENTS AND AGREE THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE  ANY SUCH ACTION
WITH ANY OTHER ACTION IN WHICH JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.

         SECTION 10.6. WAIVER OF AUTOMATIC STAY

         THE BORROWER AGREES THAT, IN THE EVENT THAT THE BORROWER, THE GUARANTOR
OR ANY OF THE PERSONS OR PARTIES  CONSTITUTING  THE  BORROWER  OR THE  GUARANTOR
SHALL (a) FILE WITH ANY  BANKRUPTCY  COURT OF COMPETENT  JURISDICTION  OR BE THE
SUBJECT OF ANY PETITION UNDER TITLE 11 OF THE U.S. CODE, AS AMENDED ("BANKRUPTCY
CODE"),  (b) BE THE SUBJECT OF ANY ORDER FOR RELIEF ISSUED UNDER THE  BANKRUPTCY
CODE,  (c) FILE OR BE THE SUBJECT OF ANY  PETITION  SEEKING ANY  REORGANIZATION,
ARRANGEMENT,  COMPOSITION,  READJUSTMENT,  LIQUIDATION,  DISSOLUTION, OR SIMILAR
RELIEF  UNDER ANY  PRESENT  OR FUTURE  FEDERAL OR STATE ACT OR LAW  RELATING  TO
BANKRUPTCY,  INSOLVENCY,  OR  OTHER  RELIEF  FOR  DEBTORS,  (d) HAVE  SOUGHT  OR
CONSENTED  TO OR  ACQUIESCED  IN  THE  APPOINTMENT  OF  ANY  TRUSTEE,  RECEIVER,
CONSERVATOR,  OR LIQUIDATOR,  OR (e) BE THE SUBJECT OF ANY ORDER,  JUDGMENT,  OR
DECREE ENTERED BY ANY COURT OF COMPETENT JURISDICTION APPROVING A PETITION FILED
AGAINST   SUCH   PARTY  FOR  ANY   REORGANIZATION,   ARRANGEMENT,   COMPOSITION,
READJUSTMENT,  LIQUIDATION,  DISSOLUTION, OR SIMILAR RELIEF UNDER ANY PRESENT OR
FUTURE FEDERAL OR STATE ACT OR LAW RELATING TO BANKRUPTCY, INSOLVENCY, OR RELIEF
FOR DEBTORS,  THE BANK SHALL THEREUPON BE ENTITLED AND THE BORROWER  IRREVOCABLY
CONSENTS TO IMMEDIATE AND  UNCONDITIONAL  RELIEF FROM ANY AUTOMATIC STAY IMPOSED
BY SECTION 362 OF THE BANKRUPTCY CODE, OR OTHERWISE,  ON OR AGAINST THE EXERCISE
OF THE RIGHTS AND  REMEDIES  OTHERWISE  AVAILABLE  TO THE BANK AS  PROVIDED  FOR
HEREIN, IN THE NOTE, OTHER LOAN DOCUMENTS  DELIVERED IN CONNECTION  HEREWITH AND
AS OTHERWISE  PROVIDED BY LAW, AND THE BORROWER  HEREBY  IRREVOCABLY  WAIVES ANY
RIGHT TO OBJECT  TO SUCH  RELIEF  AND WILL NOT  CONTEST  ANY  MOTION BY THE BANK
SEEKING  RELIEF FROM THE AUTOMATIC STAY AND THE BORROWER WILL COOPERATE WITH THE
BANK, IN ANY MANNER  REQUESTED BY THE BANK, IN ITS EFFORTS TO OBTAIN RELIEF FROM
ANY SUCH STAY OR OTHER PROHIBITION.

         SECTION 10.7. LIMITATION OF LIABILITY

         EXCEPT AS  PROHIBITED  BY LAW, THE BORROWER  HEREBY WAIVES ANY RIGHT IT
MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY,  PUNITIVE
OR  CONSEQUENTIAL  DAMAGES OR ANY DAMAGES  OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. THE BORROWER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
BANK HAS  REPRESENTED,  EXPRESSLY OR OTHERWISE,  THAT THE BANK WOULD NOT, IN THE
EVENT  OF  LITIGATION,  SEEK  TO  ENFORCE  THE  FOREGOING  WAIVER.  THIS  WAIVER
CONSITUTES  A MATERIAL  INDUCEMENT  FOR THE BANK TO ACCEPT THIS  AGREEMENT,  THE
NOTE, THE OTHER LOAN DOCUMENTS AND TO EXTEND CREDIT TO THE BORROWER.

         SECTION 10.8. MODIFICATION AND WAIVER

         No  modification or waiver of, or with respect to any provision of this
Agreement or any document or instrument  delivered in connection therewith shall
be effective unless and until it shall be in writing and signed by the Bank, and
then  such  modification  or  waiver  shall be  effective  only in the  specific
instance  and for the  purpose  for which  given.  No notice to or demand on the
Borrower in any case shall, of itself, entitle it to any other or further notice
or demand in similar or other circumstances.

         SECTION 10.9. SUCCESSORS AND ASSIGNS

         (a) This  Agreement  shall be binding  upon and inure to the benefit of
the  Borrower,  the Bank,  all  future  holders  of a Note and their  respective
successors and assigns,  except that the Borrower may not assign or transfer any
of its rights  under this  Agreement  without the prior  written  consent of the
Bank. The term "Bank" as used herein shall be deemed to include the Bank and its
successors, endorsees and assigns.

         (b) The Bank shall have the unrestricted right at any time or from time
to time, and without Borrower's or any Guarantor's consent, to assign all or any
portion of its rights and  obligations  hereunder  to one or more banks or other
financial  institutions  (each,  an  "Assignee"),  and  the  Borrower  and  each
Guarantor agree that it shall execute, or cause to be executed,  such documents,
including  without  limitation,  amendments  to this  Agreement and to any other
documents,  instruments  and agreements  executed in connection  herewith as the
Bank shall deem necessary to effect the foregoing.  In addition,  at the request
of the Bank and any such  Assignee,  the  Borrower  shall  issue one or more new
promissory  notes,  as  applicable,  to any such  Assignee  and, if the Bank has
retained any of its rights and obligations  hereunder following such assignment,
to the Bank,  which new promissory  notes shall be issued in replacement of, but
not in discharge of, the liability  evidenced by the promissory note held by the
Bank prior to such  assignment  and shall  reflect the amount of the  respective
commitments  and loans held by such Assignee and the Bank after giving effect to
such  assignment.  Upon the  execution  and delivery of  appropriate  assignment
documentation,  amendments and any other  documentation  required by the Bank in
connection  with such  assignment,  and the payment by Assignee of the  purchase
price agreed to by the Bank, and such  Assignee,  such Assignee shall be a party
to this  Agreement and shall have all of the rights and  obligations of the Bank
hereunder (and under any and all other  guaranties,  documents,  instruments and
agreements  executed in connection  herewith) to the extent that such rights and
obligations   have  been  assigned  by  the  Bank  pursuant  to  the  assignment
documentation between the Bank and such Assignee, and the Bank shall be released
from its obligations hereunder and thereunder to a corresponding extent.

         (c) The Bank  shall  have the  unrestricted  right at any time and from
time to time,  and  without  the  consent  of or notice to the  Borrower  or any
Guarantor,  to grant to one or more banks or other financial institutions (each,
a  "Participant")  participating  interests  in the  Bank's  obligation  to lend
hereunder  and/or  any or all of the Loans  held by the Bank  hereunder.  In the
event  of  any  such  grant  by  the  Bank  of  a  participating  interest  to a
Participant,  whether or not upon notice to the Borrower,  the Bank shall remain
responsible for the  performance of its  obligations  hereunder and the Borrower
shall continue to deal solely and directly with the Bank in connection  with the
Bank's rights and  obligations  hereunder.  The Bank may furnish any information
concerning  the  Borrower  in its  possession  from time to time to  prospective
Assignees  and  Participants,  provided  that the Bank  shall  require  any such
prospective  Assignee  or  Participant  to  agree in  writing  to  maintain  the
confidentiality of such information.

         SECTION 10.10. GOVERNING LAW; CONSENT TO JURISDICTION

         THIS AGREEMENT, THE NOTE AND ANY DOCUMENTS AND INSTRUMENTS DELIVERED IN
CONNECTION  HEREWITH  AND  THEREWITH  AND THE RIGHTS  AND DUTIES OF THE  PARTIES
HEREUNDER AND THEREUNDER  SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (EXCLUDING THE LAWS APPLICABLE
TO  CONFLICTS  OR  CHOICE OF LAW).  THE  BORROWER  AGREES  THAT ANY SUIT FOR THE
ENFORCEMENT  OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT
IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING  THEREIN AND
CONSENTS TO THE  NONEXCLUSIVE  JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS
IN ANY SUCH SUIT BEING MADE UPON THE  BORROWER  BY MAIL AT THE ADDRESS SET FORTH
IN THIS  AGREEMENT.  THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT
IS BROUGHT IN AN INCONVENIENT FORUM.

         SECTION 10.11. ENTIRE AGREEMENT

         This Agreement and the other Loan Documents are intended by the parties
as the final,  complete and exclusive  statement of the  transactions  evidenced
thereby. All prior or contemporaneous  promises,  agreements and understandings,
whether oral or written,  are deemed to be superceded by this Agreement and such
other  Loan  Documents,  and no party is relying on any  promise,  agreement  or
understanding  not set forth in this  Agreement  or such other  Loan  Documents.
Neither this  Agreement  nor any of such other Loan  Documents may be amended or
modified   except  by  a  written   instrument   describing  such  amendment  or
modification executed by the Borrower and the Bank.

         SECTION 10.12. INTEREST ADJUSTMENT.

         All agreements  between Borrower and Guarantors and the Bank are hereby
expressly  limited so that in no  contingency  or event  whatsoever,  whether by
reason of  acceleration  of maturity  of the  indebtedness  evidenced  hereby or
otherwise, shall the amount paid or agreed to be paid to the Bank for the use or
the  forbearance  of  the  indebtedness  evidenced  hereby  exceed  the  maximum
permissible  under  applicable law. As used herein,  the term  "applicable  law"
shall mean the law in effect as of the date hereof  provided,  however,  that in
the event  there is a change in the law which  results  in a higher  permissible
rate of interest,  then the Loan Documents  shall be governed by such new law as
of its  effective  date. In this regard,  it is expressly  agreed that it is the
intent of Borrower and the Bank in the  execution,  delivery and  acceptance  of
this  Agreement to contract in strict  compliance  with the laws of the State of
New York  from  time to time in  effect.  If,  under  or from any  circumstances
whatsoever,  fulfillment of any provision hereof or of any of the Loan Documents
at the  time of  performance  of such  provision  shall  be due,  shall  involve
transcending  the limit of such validity  prescribed by applicable law, then the
obligation to be fulfilled shall  automatically be reduced to the limits of such
validity,  and if under or from  circumstances  whatsoever  the Bank should ever
receive as interest an amount which would exceed the highest  lawful rate,  such
amount which would be excessive  interest  shall be applied to the  reduction of
the  principal  balance  evidenced  by a Note  (in such  manner  as the Bank may
determine  in its sole  discretion)  and not to the  payment of  interest.  This
provision  shall control  every other  provision of all  agreements  between the
Borrower, Guarantors and the Bank.

         SECTION 10.13. PLEDGE TO FEDERAL RESERVE

         The Bank may at any time pledge all or any portion of its rights  under
the loan documents  including any portion of the  promissory  note to any of the
twelve (12)  Federal  Reserve  Banks  organized  under  Section 4 of the Federal
Reserve Act, 12 U.S.C.  Section 341. No such pledge or enforcement thereof shall
release Bank from its obligations under any of the loan documents.

         SECTION 10.14. LOST NOTES

         Upon  receipt of an affidavit of an officer of the Bank as to the loss,
theft,  destruction  or  mutilation of the Note or any other  security  document
which  is not of  public  record,  and,  in the case of any  such  loss,  theft,
destruction or mutilation, upon surrender and cancellation of such Note or other
security document,  the Borrower will issue, in lieu thereof, a replacement Note
or other security document in the same principal amount thereof and otherwise of
like tenor.

         SECTION 10.15. EFFECTIVE DATE

         This Agreement shall be effective upon its execution by all the parties
hereto and the  delivery  of this  Agreement,  together  with all  Exhibits  and
Schedules  hereto,  to  the  Bank  (the  "Effective  Date");   PROVIDED,   THAT,
notwithstanding  such  Effective  Date the Bank shall have no obligation to make
any Loan  hereunder or in any way extend any credit to the  Borrower  unless and
until each of the  conditions  precedent  required to have been  satisfied on or
before the first  extension of credit  hereunder  pursuant to Section 4.1 hereof
shall have been satisfied (to the reasonable satisfaction of the Bank) or waived
(whether temporarily or otherwise) in writing by the Bank.

         SECTION 10.16. NO WAIVER ACTION

         Any waiver or consent respecting any representation, warranty, covenant
or other term or provision of this Agreement or any other Loan Document shall be
effective only in the specific  instance and for the specific  purpose for which
given and shall not be deemed, regardless of frequency given, to be a further or
continuing  waiver or  consent.  The  failure or delay of a party at any time or
times to require  performance or, or to exercise its rights with respect to, any
representation,  warranty, covenant or other term or provision of this Agreement
or other Loan  Document in no manner  (except as  otherwise  expressly  provided
herein) shall affect its right at a later time to enforce any such provision. No
notice to or demand on a party in any case shall entitle such party to any other
or further  notice or demand in the same,  similar or other  circumstances.  The
acceptance by the Bank of (a) any partial or late payment shall not constitute a
satisfaction  or waiver of the full  amount then due or the  resulting  Event of
Default or (b) any payment  during the  continuance of an Event of Default shall
not  constitute a waiver or cure thereof;  and the Bank may accept or reject any
such payment without affecting any of its rights, powers,  privileges,  remedies
and  other  interests  under  this  Agreement,  the  other  Loan  Documents  and
applicable law. All rights, powers, privileges,  remedies and other interests of
the parties  hereunder  are  cumulative  and not  alternatives,  and they are in
addition to and shall not limit (except as otherwise  expressly provided in this
Agreement) any other right,  power,  privilege,  remedy or other interest of the
parties under this Agreement, any other Loan Document or applicable law.

         SECTION 10.17. SEVERABILITY

         Every provision of the Loan Documents is intended to be severable,  and
if any term or provision thereof shall be invalid,  illegal or unenforceable for
any  reason,  the  validity,   legality  and  enforceability  of  the  remaining
provisions  thereof  shall  not  be  affected  or  impaired  thereby,   and  any
invalidity,  illegality or unenforceability in any jurisdiction shall not affect
the validity,  legality or  enforceability  of any such term or provision in any
other jurisdiction.

         SECTION 10.18. COUNTERPARTS

         This  Agreement  may be signed in any number of  counterparts  with the
same  effect  as if the  signatures  thereto  and  hereto  were  upon  the  same
instrument.

         [Balance of page intentionally left blank.]

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly  executed  and  delivered  in New York,  New York by their  proper and duly
authorized officer as of the day and year first above written.

                               MEDIS TECHNOLOGIES LTD.

                               By:    /s/ Howard Weingrow
                                      ---------------------------------------
                                      Name:  Howard Weingrow
                                      Title: President

                               FLEET NATIONAL BANK

                               By:    /s/ Paul Chau
                                      ---------------------------------------
                                      Name: Paul Chau
                                      Title: Senior Vice President

<PAGE>

                                    EXHIBIT A

                                  FORM OF NOTE

<PAGE>

                              REVOLVING CREDIT NOTE

$5,000,000.00                                                 New York, New York
                                                              December __, 2000

                                              .

         MEDIS  TECHNOLOGIES LTD, a Delaware  corporation (the "Borrower"),  for
value received,  hereby promises to pay to the order of FLEET NATIONAL BANK (the
"Bank")  on the  Termination  Date (as  defined  in the Loan  Agreement  defined
below),  at the  office  of the  Bank  specified  in  Section  10.1 of the  Loan
Agreement  dated as of December __, 2000,  between the Borrower and the Bank, as
amended from time to time (as so amended the  "Agreement";  terms defined in the
Agreement  shall have their defined  meanings when used in this Note), in lawful
money of the United  States of America and in  immediately  available  funds the
principal amount of FIVE MILLION AND 00/100 DOLLARS  ($5,000,000.00) or, if less
than such principal  amount,  the aggregate unpaid principal amount of all Loans
made by the Bank to the Borrower  pursuant to Section 2.1 of the Agreement.  The
Borrower  further promises to pay interest in like money on the unpaid principal
balance of this Note from time to time outstanding at an annual rate as selected
by the Borrower  pursuant to the terms of Article 2 of the  Agreement.  Interest
shall be  computed on the basis of a 360-day  year for actual  days  elapsed and
shall be  payable  as  provided  in the  Agreement.  All Loans  made by the Bank
pursuant to  subsection  2.1 of the  Agreement and all payments of the principal
thereon  may be  endorsed  by the  holder of this Note on the  schedule  annexed
hereto,  to which the holder may add additional  pages. The aggregate net unpaid
amount of Loans set forth in such schedule shall be presumed to be the principal
balance hereof.  After the stated or any accelerated  maturity hereof, this Note
shall bear interest at a rate as set forth in the Agreement,  payable on demand,
but in no event in  excess  of the  maximum  rate of  interest  permitted  under
applicable law.

         This Note is the Note referred to in the Agreement,  and is entitled to
the benefits thereof and may be prepaid, and is required to be prepaid, in whole
or in part  (subject to the  indemnity  provided in the  Agreement)  as provided
therein.

         Upon  the  occurrence  of any  one or  more of the  Events  of  Default
specified in the Agreement,  all amounts then remaining  unpaid on this Note may
be declared to be immediately due and payable as provided in the Agreement. This
Note is secured by the collateral described in each Security Document.

         This Note shall be  construed  in  accordance  with and governed by the
laws of the State of New York.

                                   MEDIS TECHNOLOGIES LTD.

                                   By:
                                        --------------------------------------
                                        Name:
                                        Title:

<PAGE>

                   SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
             TO REVOLVING CREDIT NOTE DATED AS OF DECEMBER __, 2000
                             MEDIS TECHNOLOGIES LTD.
                                       TO
                               FLEET NATIONAL BANK

                                Last Day                  Balance
        Amount     Interest    of Interest   Principal   Remaining   Notation
Date   of Loan     Period        Period        Paid        Unpaid     Made By
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<PAGE>

                                    EXHIBIT B

                            OUTLINE OF LEGAL OPINIONS

<PAGE>

                           OUTLINE OF LEGAL OPINIONS

In  connection  with the Loan  Agreement  dated as of December __, 2000,  by and
among Medis  Technologies  Ltd. (the  "BORROWER")  and Fleet  National Bank (the
"Bank") (as the same may be amended,  supplemented  or otherwise  modified  from
time to time, the "LOAN  AGREEMENT"),  set forth below is an outline of opinions
(the  "OPINION")  to be  included  in, or covered  by,  the legal  opinion to be
delivered to the Bank,  pursuant to Section 4.1 of the Loan Agreement by counsel
to the Borrower and Guarantors.  Capitalized terms used in the Opinion and which
are not otherwise  defined therein shall have the respective  meanings  ascribed
thereto in the Loan Agreement.

         l. The Borrower is validly existing and in good standing under the laws
of the State of Delaware and the Partnership  Guarantor is validly  existing and
in  good  standing  under  the  laws of the  State  of  _________,  each is duly
qualified and in good standing in each jurisdiction wherein the conduct of their
business  or the  ownership  of  property,  each as known to us,  requires  such
qualification  and is in  compliance  with all  Requirements  of Law known to us
currently in effect having  applicability to the Borrower and/or  Guarantor,  as
the case may be.

         2. (a) The Borrower has the corporate power,  legal right and authority
to own and use its property and to conduct the business in which it is currently
engaged and to make,  execute,  deliver and perform under the Loan  Documents to
which it is a party and to borrow thereunder on the terms and conditions thereof
and has  taken  all  necessary  corporate  action  to  borrow  on the  terms and
conditions of such Loan Documents and to authorize the  execution,  delivery and
performance of such Loan Documents.

         (b)  To our  knowledge,  no  consent  of any  other  Person  (including
stockholders and creditors of the Borrower), and no consent,  license,  approval
or  authorization  of, or  registration  or declaration  with, any  Governmental
Authority,  bureau or agency  is  required  in  connection  with the  borrowings
thereunder  or  with  the  execution,  delivery  and  performance  of and by the
Borrower under the Loan Documents to which it is a party.

         3. (a) Each of the  Guarantors  has the legal right and capacity to own
its property and to make execute,  deliver and perform under the  Guarantees and
Security Documents to which such Guarantor a party and the Partnership Guarantor
has taken all  necessary  partnership  action to enter  into its  Guarantee  and
Security  Documents on the terms and  conditions  of such Loan  Documents and to
authorize the execution, delivery and performance of such Loan Documents.

         (b)  To our  knowledge,  no  consent  of any  other  Person  (including
creditors and stockholders of any Guarantor),  and no consent license,  approval
or  authorization  of, or  registration  or dedication  with,  any  Governmental
Authority,  bureau or agency  is  required  in  connection  with the  execution,
delivery and  performance of and by the  Guarantors  under the Guarantees or the
Security Documents to which such Guarantor is a party.

         4.  The  execution  and  delivery  of and  performance  under  the Loan
Documents by the Borrower to which it is a party and the  borrowings  thereunder
and the use of the  proceeds  thereof  will not  violate  any  provision  of any
Requirements  of Law,  or violate  or  contravene  or cause a default  under any
Contractual  Obligation  known to us and  will not  result  in the  creation  or
imposition  of any Lien on any of its  properties  or  revenues  pursuant to any
Contractual  Obligation (known to us), or,  Requirements of Law, except those in
favor of the Bank.

         5. The execution and delivery of and  performance  under the Guarantees
by each Guarantor will not violate any provision of any  Requirements of Law, or
violate or contravene or cause a default under any Contractual  Obligation known
to us and will not result in the  creation or  imposition  of any Lien on any of
its properties or revenues pursuant to any Contractual Obligation (known to us),
or, Requirements of Law, except those in favor of the Bank.

         6. There is no litigation and no administrative proceeding of or before
any Governmental  Authority currently pending against the Borrower or any of the
Guarantors,  or, to our  knowledge,  their  respective  properties the result of
which would, in my opinion,  have any materially adverse effect on the financial
position or operation results of the Borrower or any of the Guarantors,  nor, to
our knowledge is any such litigation or proceeding  currently threatened against
the Borrower or any of the Guarantors or their respective properties.

         7. The Loan  Documents  to which the Borrower is a party have been duly
executed  and  delivered  by  duly  authorized  officers  of  the  Borrower  and
constitute the valid, legal and binding obligations of the Borrower.

         8. The  Guarantees  and  Security  Documents  to which a Guarantor is a
party have each been duly executed and delivered by the respective Guarantor and
each  constitute  the valid,  legal and binding  obligations  of the  respective
Guarantor.

         9. The Executor  Instructions are valid, legal and binding  obligations
of the Individual Guarantor and such Individual  Guarantor's Estate and upon the
death  of  any   applicable   Individual   Guarantor,   assuming  such  Executor
Instructions  have  not been  revoked  or  otherwise  modified  in any  material
respect,  such  Executor  Instructions  shall be  binding  on the Estate of such
deceased  Individual  Guarantor  and such  Estate  of such  deceased  Individual
Guarantor  shall be required to honor such Executor  Instructions  in accordance
with their terms.

         10. To our  knowledge,  neither the Borrower nor any of the  Guarantors
are in default  under,  or with respect to, any  Contractual  Obligation  in any
respect which would be materially adverse to the business, operations,  property
or financial or other  condition  of the  Borrower or any of the  Guarantors  or
which would  materially and adversely  affect the ability of the Borrower or any
Guarantor to perform its  obligations  under the Loan Documents to which it is a
party.

         11. To our knowledge, no Contractual Obligation of any Specified Person
and no Requirement of Law materially  adversely  affects,  or to the best of our
knowledge after due inquiry may so affect, the business, operations, property or
financial or other condition of any such Specified Person.

<PAGE>

                                    EXHIBIT C

                                FORM OF GUARANTEE

<PAGE>

                                    EXHIBIT D

                          FORM OF ASSIGNMENT OF LEASES

<PAGE>

                                    EXHIBIT E

                                FORM OF MORTGAGE

<PAGE>

                                  SCHEDULE 3.1

Subsidiaries of the Borrower:

Medis Inc. (direct 100% interest)
CDS Distributor, Inc. (direct 100% interest)
Medis El Ltd. (indirect 100% interest, through Medis Inc.)
More Energy Ltd. (indirect 93% interest, through Medis El Ltd.)
New Devices Engineering A.K.O. Ltd. (indirect 25% interest, through Medis El
  Ltd.)

The  Borrower  has an option to purchase  the  remaining 7% of More Energy Ltd.,
expiring November 9, 2004.

The  Borrower  has an  option  to  purchase  an  additional  50% of New  Devices
Engineering A.K.O. Ltd., expiring June 30, 2001.

<PAGE>

                                  SCHEDULE 3.14

The Borrower changed its name on June 30, 1999 from Cell Diagnostics, Inc.

On June 5, 2000, the Borrower  consummated  the exchange of shares of its common
stock  for the 36% of the  outstanding  ordinary  shares  of Medis  El Ltd.  not
already owned by the  Borrower,  giving the Borrower a 100% interest in Medis El
Ltd.

<PAGE>

                                  SCHEDULE 7.13

The Borrower intends to restate its financial statements as of June 30, 2000 and
for the six and three month period then ended, primarily to include the value of
vested Medis El Ltd.  options in the purchase price of Medis El Ltd.'s  ordinary
shares in the  exchange  offer  consummated  on June 5, 2000.  The  Borrower has
estimated  that the effect on its  financial  statements as of June 30, 2000 and
for the six  and  three  month  period  then  ended  to be an  increase  in both
intangible  assets  and  shareholders'   equity  of  approximately   $4,170,000.
Additionally,  the Borrower  intends to restate its  financial  statements as of
June 30,  2000 and for the six and three  month  period then ended to reflect an
increase  of  approximately  $487,000  in the  value  of  warrants  issued  to a
consultant,  which  resulted in an increase in net loss of a like amount for the
six and three month periods ended June 30, 2000.COOPERATION AGREEMENT

     This COOPERATION AGREEMENT (hereinafter the "Agreement") is entered into on
this 6th day of  February  2001,  by and between  Medis  Technologies,  Ltd.,  a
company located in New York, Now York, USA,  (hereinafter  "Medis"),  of the one
part,  and SAGEM SA,  Defence and  Security  Division,  a Company  existing  and
organized under the laws of France,  whose registered office is 6, avenue d'lena
75783  PARIS  Cedex  16,  France,   hereinafter   referred  to  as  "SAGEM  SA,"
(hereinafter "SAGEM SA"), of the other part.

     WHEREAS, SAGEM SA is an international  industrial company, and, inter alia,
makes various consumer  electronics,  including in particular,  cellular phones,
handheld and manportable electronic devices called hereafter "application".

     WHEREAS,  Medis'  lower  tier  subsidiary,  More  Energy  Ltd.,  of Israel,
("More")  has  developed  certain  unique   proprietary   technologies  for  the
development of fuel cells,  in particular in the area of direct liquid  methanol
fuel cells,  and Medis is interested in arranging for the  collaborating by More
with OEM companies in the  development of specific  applications  for More's DLM
fuel cell technologies;

     WHEREAS,  SAGEM SA is  interested  in a DLM fuel cell  application  for its
power pack and other potential  applications and desires to cooperate with Medis
and More in that  effort  and  Medis  agrees  to cause  More to  carry-out  such
cooperation, all on the terms hereinafter set forth.

     NOW Therefore the Parties agree as follows:

1.   BASIC NATURE OF COOPERATION

     1.1.  The Parties  agree that their  cooperation  hereunder is motivated by
their mutual  interest to realize a DLM fuel cell power pack which will serve as
a secondary power source for SAGEM SA's application,  and effort will be carried
out on a best efforts basis.  Each Party will be responsible  for all of its own
expenses connected with the implementation of this cooperation and neither Party
will have any  liability  to the other  regarding  the success of this effort or
otherwise. In addition neither Party is undertaking to work exclusively with the
other in the area of fuel cell or battery  technologies  and they both retain to
themselves the right to work alone or with others  regarding such  technologies,
provided however this in no way derogates from the Parties obligations under the
provisions of Section 4 ("Confidential Information").

     1.2. It is further  understood  that More will be  developing an individual
fuel cell  which  will then be  incorporated  in a larger  assembly  which  will
constitute a power pack secondary  power source and that this  application  will
require  a  number  of  such   individual   fuel  cells.   The  integration  and
qualification  of the power pack shall be managed by a joining team  composed by
representatives  of SAGEM  SA and More  able to take  decisions  concerning  the
contents  of the  test  plan  and the  location  where  the  test  plan  will be
performed.

     1.3. Should the development effort by More to develop a DLM fuel cell power
pack as a secondary  power source for the SAGEM SA application  be  successfully
achieved  hereunder,  the Parties may negotiate a further  agreement under which
SAGEM SA could  purchase  DLM fuel cell power  packs from More or be licensed by
More to manufacture same for the sole use with the SAGEM SA application  against
which it was  developed.  Should  either  Party  not wish to enter  into  such a
further agreement or fail to agree on the terms thereof, neither Party will have
any  liability  to the other  and their  cooperation  will end  pursuant  to the
termination provisions of this Agreement.

2.   EVALUATION OF INDIVIDUAL CELL

     The Parties will each  designate a senior  engineer as the Project  manager
for the  respective  Party and those two  individuals  will be authorized by the
Parties to make all  necessary  technical  decisions in  implementation  of this
agreement for their respective company.

     SAGEM SA shall  provide to More a test plan  concerning  the  evaluation of
state of the art individual fuel cell with the purpose to better  understand the
More current  technology and to anticipate the key issues for the integration of
such devices in a portable equipment. This test plan will be carried out by More
under the SAGEM SA supervision.
<PAGE>

3.   DESIGN OF A POWER PACK PROTOTYPE

     With  better  knowledge  of system  considerations,  outputs of ss. 2, this
phase will  address the  manufacturing  process and cost for a future power pack
dedicated to SAGEM SA application.  SAGEM SA dealing with high technologies with
a large engineering  expertise agrees to undertake some engineering work jointly
with More to design a powerpack.

     The outputs of this phase is to design a power pack prototype able to drive
an application, to be manufactured and tested in step ss. 4. For this purpose, a
technical  specification  will be raised by SAGEM SA, taking into account system
considerations and the identified physical barriers.

     It is understood  that the individual cell being part of the powerpack will
consider the last technical improvements achieved from the evaluation phase.

4.   DEVELOPMENT, MANUFACTURING & TESTING OF A POWERPACK PROTOTYPE

     More and SAGEM SA undertake the  development  of a DLM powerpack  prototype
following  a design  output  from ss. 3. The  powerpack  casing and  accessories
required for the system  operation will be  manufactured  by SAGEM SA, More will
integrate the  individual  fuel cells.  The powerpack  prototype  will be tested
first by More at More Facility  after final  assembly under a specific test plan
mutually agreed. The optimized prototype will then be tested at SAGEM SA under a
specific  mutually  agreed  test  plan.  The  purpose  of these test plans is to
understand the behavior of the powerpack connected to a representative  load, to
optimize the interface  electronic circuit and to establish the management rules
of the powerpack in the different operational scenario.

     It is understood  that the individual cell being part of the powerpack will
consider the last  technical  improvements  achieved  from the  beginning of the
evaluation phase.

     An  optimization  phase will follow this work so that a definitive  concept
could be selected for the next phase dedicated to a proven powerpack.

5.   DEVELOPMENT, MANUFACTURING AND TESTING OF A PROVEN POWERPACK

     More and SAGEM SA undertake the  development  of a DLM powerpack  following
the optimized  design output from ss. 4. The  powerpack  casing and  accessories
required for the system operation will be designed and manufactured by SAGEM SA,
More  will  integrate  the  optimized  individual  fuel  cells and will test the
complete units under mutually agreed acceptance test procedures.

     It is understood  that the individual cell being part of the powerpack will
consider the last  technical  improvements  achieved  from the  beginning of the
evaluation phase.

     Few units will be manufactured and tested in appropriate  conditions agreed
mutually  by each  party.  The  achievements  of this phase will  condition  the
introduction  of the  demonstrators  at the end user  level for  evaluation  and
promotion.

     It is  understood  by SAGEM SA that  this  effort  is to  achieve  a proven
prototype  of the DLM fuel cell  power pack as a  secondary  power  source.  The
effort  hereunder does not include  production  engineering  for such individual
fuel cell or DLM fuel cell power  pack.  A  production  engineering  effort,  if
desired by SAGEM SA, would require a separate agreement  mutually  acceptable to
the Parties.

6.   PRIMARY POWER SOURCE

     Upon  successful   fulfillment  of  the  effort  hereunder   regarding  the
Powerpack,  the Parties will define a continuing development effort between them
for a primary power source for mutually agreed SAGEM SA applications  based upon
a design and  development  effort  similar  to the one set forth  herein for the
Powerpack.

7.   SCHEDULE

     A development plan is attached to this cooperation  agreement at the end of
the document. This particular plan is dedicated to a cell phone application.
<PAGE>

8.   CONFIDENTIAL INFORMATION

     8.1. The term  "Confidential  Information"  as used in this Agreement shall
mean all trade secrets and information  which is proprietary to either Party (In
the case of More,  fuel cell  technology and in the case of SAGEM SA, cell phone
technology)  including.   but  not  limited  to,  type  design  data,  drawings,
photographs,    specifications,    models,   prototypes,   designs,   materials,
construction or assembly, computer hardware and software, technical,  commercial
and  operational   information   concerning  products,   information  concerning
manufacturing methods and techniques, quality control and test methods, cost and
pricing  data and  product  applications.  Information  disclosed  in other than
written form shall be  considered  Confidential  Information  only to the extent
that the disclosing Party summarizes the same in written form, which clearly and
conspicuously  identifies the  Confidential  Information.  Such summary shall be
transmitted  to the  receiving  Party within  thirty (30)  calendar  days of the
non-written disclosures.

     8.2.  More hereby  acknowledges  that it is not  presently in possession of
know how or technology  related to the design or manufacture of cellular  phones
and SAGEM SA hereby  acknowledges that it is not presently in possession of know
how or technology  for a DLM fuel cell.  Each Party shall hold all  Confidential
Information  disclosed to it in strict  confidence  and will not disclose or use
the Confidential Information for its benefit or the benefit of any other company
or entity  anywhere in the world or any other purpose other than for the purpose
of  carrying  out the  cooperation  as  expressly  set forth in this  Agreement.
Notwithstanding the foregoing,  each Party may disclose Confidential Information
of the other  Party if and only to the  extent  required  pursuant  to any legal
process or order issued by any court,  provided (a) prior notice is given to the
other Party before any such  disclosure is made in order to enable such Party to
seek to obtain a protective  order,  and (b) that any such disclosure  shall not
result  in  such  Confidential  Information  becoming  subject  to  any  of  the
exceptions listed in paragraph 4.3 below.

     8.3. The  restrictions on Confidential  Information  shall not apply if the
receiving Party demonstrates that the:

          8.3.1  information  was  already in the  public  domain at the time of
     disclosure; or

          8.3.2 information, which though originally confidential,  subsequently
     becomes part of the public domain through no fault of the receiving Party.

In each case, the receiving  Party shall notify the disclosing  Party in writing
of its intent to make any disclosure based on one of the above-listed exceptions
at least 30 days in advance  (including a description  of the  information to be
disclosed and the basis for the claimed exception).

     8.4. The receiving Party shall maintain all Confidential Information in the
same manner that such Party maintains its own Confidential Information, provided
that the  standard  of care  required  shall be at least a  reasonable  industry
standard.

     8.5. Any  disclosure of  Confidential  Information  shall be limited to the
receiving  Party's  employees  who  have a strict  need  for  such  Confidential
Information in performance of this  Agreement.  The receiving Party shall advise
its employees of its  obligations  pursuant to this  Agreement in regards to the
nature and treatment of Confidential Information.

     8.6. All Confidential Information disclosed by More in connection with this
Agreement and all of the resulting  know how,  technology,  data, or information
resulting  from  the  development  of the DLM fuel  cell  and/or  DLM fuel  cell
secondary power source  application  hereunder is and shall remain the exclusive
property of More. SAGEM SA acknowledges that the More fuel cell technology is of
an extremely  sensitive  proprietary nature and therefore SAGEM SA shall refrain
from  disassembling  any fuel cell delivered to SAGEM SA hereunder and shall not
make or allow any other  party to make any attempt to reverse  engineer  the DLM
fuel cell technology of More.
<PAGE>

     8.7. At any time that the disclosing  Party may request,  but no later than
seven (7) calendar days after such request, the receiving Party shall return the
Confidential  Information to the  disclosing  Party and shall certify in writing
that all copies thereof in the receiving Party's possession have been destroyed.

     8.8.  If the  disclosing  Party at any time  does not  require  performance
and/or  enforcement  of any  provision  of this  Agreement,  this  shall  not be
construed  as a waiver  of its  rights  under  this  Agreement,  nor  shall  the
disclosing  Party not taking any action  affect its rights at some later date to
enforce these rights under this  Agreement for a breach of any of the provisions
of this Agreement.

     8.9.  Each  Party  acknowledges  that a  breach  of any  provision  of this
Agreement  will  result  in  irreparable  injury  and  continuing  damage to the
disclosing  Party's for which  there will be no  adequate  remedy at law. In the
event  of any  alleged  or  anticipated  breach  by the  receiving  Party of any
provision  of  this  Agreement,  the  disclosing  Party  shall  be  entitled  to
injunctive relief,  without the necessity of proof or actual damage, and to such
other and further relief as may be proper.

     8.10.  This Section 7 shall survive any  expiration or  termination of this
Agreement.

9.   TERMINATION

     Either Party may cancel this Cooperation Agreement by giving written notice
to the other Party hereto. Upon such cancellation, each Party will return and/or
destroy any  Confidential  Information  of the other Party in its possession and
other  than the  provisions  of  Section 4 above,  neither  Party  will have any
further obligation or liability vis-a-vis the other Party hereunder.

10.  APPLICABLE LAW

     This Cooperation  Agreement is governed in all respects by the federal laws
of Switzerland.  All disputes arising in connection with this Agreement shall be
exclusively  and finally  settled by arbitration in accordance with the rules of
arbitration  of the  international  chamber  of  commerce  by three  arbitrators
appointed in accordance with the said rules.  The place of arbitration  shall be
Geneva,  Switzerland.  The arbitral  procedure shall be conducted in the English
language. The arbitration award shall be final and binding on the parties.

11.  ASSIGNMENT

     Neither this Cooperation  Agreement nor any activity set forth herein,  may
be delegated,  assigned,  or otherwise transferred in any manner by either Party
without the prior express written consent of the other Party hereto.

12.  NON-WAIVER

     Any  failure  by either  Party to  enforce  any of the  provisions  of this
Cooperation  Agreement  or to require at any time the  performance  by the other
Party of any of the  provisions  hereof,  shall in no way affect the validity of
this  Cooperation  Agreement  or any part  hereof,  or the right of either Party
thereafter to enforce each and every such provision.

13.  NOTICES

     All notices and other communications required or authorized hereunder shall
be given in writing by  personal  delivery,  registered  air mail or telex,  and
shall be addressed to the respective Party as follows:

         To SAGEM SA
         Attention:        Patrick CURLIER

         To More
         Attention:        Zvi REHAVI

In  connection   with  the  Cooperation   Agreement   between  Sagem  and  Medis
Technologies,  both parties agree to maintain the existence of the Agreement and
the work to performed under the Projects  thereunder in confidence and shall not
disclose  same  by way of  any  public  announcements  and/or  other  publicity,
including without limitation at conferences,  congresses etc., without the other
Parties'  prior  written  consent,  which  consent  shall  not  be  unreasonably
withheld, provided that any disclosure required to be made by either Party under
law shall be made only after  consultation  with the other  Party as to the form
and content of such disclosure.
<PAGE>

     Such  notices/communications  shall  be  deemed  received  (in the  case of
personal delivery) on the date personally delivered/sent, as the case may be, or
(in the case of registered airmail  communications) within fourteen (14) days of
mailing.

14.  ENTIRE AGREEMENT

     This  Cooperation  Agreement  shall  constitute  the  entire  and  complete
agreement between the Parties regarding the subject matter hereof and supersedes
all prior communications and/or agreements between the Parties in respect of any
of the Parties'  rights and/or  obligations set forth  hereunder.  Any additions
and/or  amendments  and/or  changes  and/or   modifications  to  the  terms  and
conditions of this Cooperation Agreement shall be in writing and shall be signed
by duly authorized representatives of both Parties.

     IN WITNESS  WHEREOF,  the Parties  hereto have signed this AGREEMENT on the
day and year first hereinabove written.

       SAGEM SA                                 MEDIS TECHNOLOGIES LTD.
By:    /s/ Jacques Paccard               By:    /s/ Robert K. Lifton
       -----------------------------            ------------------------------

Name:  Jacques Paccard                   Name:  Robert K. Lifton
       -----------------------------            ------------------------------

       Managing Director
Title: Defense and Security Division     Title: Chairman and CEO
       ------------------------------           ------------------------------

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